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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
Of the Securities Exchange Act of 1934
For the Quarter Ended September 30, 1999
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MALIBU ENTERTAINMENT WORLDWIDE, INC.
717 North Harwood, Suite 1650
Dallas, Texas 75201
(214) 210-8701
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<TABLE>
<S> <C> <C>
Incorporated in Georgia SEC File No.: 0-22458 IRS Employer Id. No.: 58-1949379
</TABLE>
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The Company (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and
(2) has been subject to such filing requirements for the past 90 days.
At November 11, 1999, 52,508,625 shares of the Company's Common Stock were
outstanding.
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MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
1999 DECEMBER 31,
(UNAUDITED) 1998
------------- -------------
<S> <C> <C>
ASSETS
Current
Cash and cash equivalents $ 1,095,005 $ 237,336
Restricted cash 1,724,894 1,388,396
Inventories 1,330,698 1,153,923
Current portion of notes receivable 28,753 17,000
Assets held for sale 1,073,000 1,615,217
Prepaid expenses 718,502 1,007,459
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Total current assets 5,970,852 5,419,331
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Property and equipment, less accumulated depreciation 97,221,013 108,843,304
------------- -------------
Other noncurrent
Investments in and advances to limited partnerships 189,602 335,836
Notes receivable -- 26,405
Other assets 152,314 154,965
Debt issuance costs, less accumulated amortization 854,789 1,655,784
Intangible assets, less accumulated amortization 963,179 995,365
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Total other noncurrent assets 2,159,884 3,168,355
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$ 105,351,749 $ 117,430,990
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of notes payable $ 622,814 $ 22,182,802
Current portion of notes payable to shareholder -- 8,000,000
Accounts payable 2,504,585 4,249,065
Accrued expenses 8,801,195 9,406,008
Accrued expenses related to assets held for sale 542,601 812,152
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Total current liabilities 12,471,195 44,650,027
Line of credit 7,500,000 7,500,000
Term loan revolver 9,334,080 10,000,000
Notes payable to shareholder -- 57,809,603
Notes payable 2,551,450 3,012,691
Accrued interest due to shareholder -- 5,394,524
Dividends payable on preferred stock 1,485,427
Other accrued expenses 2,208,839 1,785,811
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Total liabilities 35,550,991 130,152,656
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Commitments and contingencies
Shareholders' equity
Preferred stock, 6,000,000 shares authorized with no par value;
$100,000 liquidation value
Series AA, 5,000 shares authorized; 120.25 outstanding 12,024,678 --
Series BB, 5,000 shares authorized; 327.12 outstanding 26,711,089 --
Series CC, 5,000 shares authorized; 500.58 outstanding 50,058,192 --
Series F, 2,700,000 shares authorized; none outstanding
Series G, 213,551 shares authorized; none outstanding
Common stock, 100,000,000 shares authorized with no par
value; 52,508,625 and 46,502,625 shares issued and outstanding 143,281,180 136,386,360
Outstanding warrants 1,335,100 1,974,600
Accumulated deficit (163,609,481) (151,082,626)
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Total shareholders' equity 69,800,758 (12,721,666)
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$ 105,351,749 $ 117,430,990
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</TABLE>
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MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Operating revenues
Entertainment revenue $ 12,865,221 $ 14,066,130 $ 33,630,939 $ 37,209,422
------------- ------------- -------------- -------------
OPERATING EXPENSES
Entertainment expenses 10,220,315 11,689,027 27,426,984 32,884,454
General and administrative expenses 1,245,163 1,688,899 3,888,554 5,253,403
Other expenses 142,769 175,597 329,030 531,503
Depreciation and amortization 2,190,535 2,547,057 6,305,030 7,505,250
------------- ------------- -------------- -------------
Total operating expenses 13,798,782 16,100,580 37,949,598 46,174,610
------------- ------------- -------------- -------------
Operating loss (933,561) (2,034,450) (4,318,659) (8,965,188)
OTHER (EXPENSE) INCOME
Interest expense (1,012,334) (3,313,895) (6,624,744) (9,289,802)
Interest income 11,626 113,071 28,950 391,985
Other, net (194,609) (26,419) (126,975) 12,971
------------- ------------- -------------- -------------
Net loss $ (2,128,878) $ (5,261,693) $ (11,041,428) $ (17,850,034)
============= ============= ============== =============
Preferred dividends 1,485,428 -- 1,485,428 --
------------- ------------- -------------- -------------
Net loss to common shareholders $ (3,614,306) (5,261,693) $ (12,526,856) $ (17,850,034)
============= ============= ============== =============
Basic and diluted loss per share of common stock $ (0.07) $ (0.11) $ (0.26) (0.37)
============= ============= ============== =============
Weighted average number of shares of
common stock used in calculating
net loss per share 51,204,277 48,483,386 48,091,043 48,483,386
============= ============= ============== =============
</TABLE>
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MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
1999 1998
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<S> <C> <C>
Operating activities:
Net loss $ (11,041,428) $ (17,850,034)
Adjustments to reconcile net loss to
net cash used by operating activities
Depreciation and amortization 6,305,030 7,505,250
Interest expense associated with amortization of loan costs 800,995 1,140,627
Non-cash compensation expense 255,320 --
Gain on sale of property and equipment (76,087) (36,868)
Changes in assets and liabilities
(Increase) decrease in inventories (176,775) 78,539
Decrease (increase) in prepaid expenses and other assets 291,608 (668,770)
Increase in debt issuance costs
and intangible assets -- (8,174)
Decrease in accounts payable (1,744,480) (2,851,750)
Increase (decrease) in accrued expenses 1,272,957 (289,864)
Increase in accrued interest due shareholder 3,409,899 3,163,544
Decrease in accrued expenses related to assets
held for sale (269,551) (323,158)
---------------- ---------------
Cash used in operating activities (972,512) (10,140,658)
---------------- ---------------
Investing activities:
Purchases of property and equipment (3,805,639) (6,482,531)
Proceeds from sale of property and equipment 900,448 1,568,287
Proceeds from sale-leaseback of property 8,872,942 --
Principal receipts under notes receivable 14,652 11,925
Decrease (increase) in investments in and advances to
limited partnerships 146,234 (208,916)
Increase in restricted cash (336,498) (326,540)
---------------- ---------------
Cash provided by (used in) investing activities 5,792,139 (5,437,775)
---------------- ---------------
Financing activities:
Proceeds from borrowings 8,398,793 11,195,177
Payments of borrowings (12,810,751) (701,853)
Issuance of preferred stock 450,000 --
Issuance of common stock -- 395,000
Increase in interest receivable on notes receivable from employees -- (310,890)
---------------- ---------------
Cash (used in) provided by financing activities (3,961,958) 10,577,434
---------------- ---------------
Increase (Decrease) in cash and cash equivalents 857,669 (5,000,999)
Cash and cash equivalents, beginning of period 237,336 5,270,843
---------------- ---------------
Cash and cash equivalents, end of period $ 1,095,005 $ 269,844
================ ===============
Cash Paid for Interest $ 1,397,522 $ 4,099,623
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</TABLE>
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MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(UNAUDITED)
1. 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,
therefore, operating results for the nine month period ended September 30, 1999
are not necessarily indicative of the results that may be expected for the year
ending December 31, 1999.
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, 1998.
2. THE RECAPITALIZATION
On July 20,1999 the Company completed its previously announced
recapitalization and the land sale and leaseback transaction (together, the
"Recapitalization") relating to its Willowbrook, Texas and Puente Hills,
California entertainment parks (the "Sale and Leaseback").
The principal components of the Recapitalization were as follows:
o Repayment of $11.4 million to one of the Company's principal lenders.
$9.1 million of the $11.4 million came from the proceeds of the Sale and
Leaseback with the balance being provided by an entity related to the
Company's largest shareholder.
o This lender, which held $21.4 million of secured debt of a subsidiary of
the Company and $21.0 million of other indebtedness advanced through the
Company's largest shareholder as an accommodation to the Company, also
exchanged the remaining $33.0 million of debt (including $2.0 million of
accrued interest) for non-convertible preferred stock of the Company.
The lender also received 6,000,000 of the Company's common shares. If
the Company has not redeemed the non-convertible preferred stock by
December 31, 2000, the lender will be entitled to an additional
2,000,000 of the Company's common shares plus 4,000,000 of common shares
from the Company's largest shareholder.
o The elimination of $500,000 per month principal amortization payment
under the Company's debt to its next largest lender that would have been
payable had the Recapitalization not been completed.
o Conversion of $50.0 million of debt (including $8.0 million of accrued
interest) to the Company's largest shareholder into preferred stock of
the Company that is convertible into Company common stock at any time at
$2.50 per common share. In addition, $12.0 million of debt (including
$400,000 of accrued interest) to an entity related to the Company's
largest shareholder was converted into preferred stock of the Company
which is convertible into Company common stock at any time after
September 30, 2000 at a per common share price of the lower of $2.50 or
120% of market at the time of conversion. This convertible preferred
stock has the right to vote with the Company common stock on a "as
converted" basis.
The Company's total indebtedness was reduced by $106.4 million (including
accrued interest) in the Recapitalization.
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3. SALE OF PARTNERSHIP INTEREST
On September 24, 1999 the Company sold all but a small fraction of its
interest in one of its limited partnerships and its interest in a construction
receivable from the partnership for a consideration of $0.5 million and the
indemnification from a $1.6 million loan guaranty and recorded a gain from such
sales of $0.4 million. The proceeds from the sale were used to reduce the
principal balance to the Company's primary lender.
4. ASSETS HELD FOR SALE
In January, 1999, the Company sold one property held for sale for $0.7
million and recorded a gain of $0.1 million. As of September 30, 1999, the
Company is holding one property for sale that has an aggregate book value of
$1.1 million.
5. PREFERRED STOCK
On July 20, 1999, in connection with the Recapitalization, the Company
issued 115.75 shares of Series AA Preferred Stock ("Series AA"), 327.12 shares
of Series BB Preferred Stock ("Series BB") and 500.58 shares of Series CC
Preferred Stock ("Series CC").
At any time prior to January 1, 2004, 9% per annum cumulative dividends
will be payable quarterly on Series AA in cash or in kind at the Company's
option. Dividends will not be paid in kind on or after January 1, 2004 unless
the Company so elects and the holders of the Series AA agree. Series AA is
senior in dividend and liquidation preference to all other capital stock at
$100,000 per share plus accrued and unpaid dividends. Series AA is redeemable by
the Company at liquidation value plus accrued dividends until January 1, 2001.
Thereafter, Series AA is redeemable as follows: (i) between January 1, 2001 and
January 1, 2002 at 105% of liquidation value plus accrued and unpaid dividends
and (ii) during each of the next 4 one year periods thereafter, at a premium to
liquidation value that decreases 1% each year plus accrued and unpaid dividends.
Beginning September 30, 2000, Series AA is convertible at any time at the
holder's option into the Company common stock at 120% of market at the time of
the conversion, calculated on the volume weighted trading price for the 20 day
period prior to conversion, but not to exceed $2.50 per share.
At any time prior to January 1, 2002, 9% per annum cumulative dividends
will be payable quarterly on Series BB in cash or in kind at the Company's
option. Dividends may not be paid in kind on or after January 1, 2002 unless the
Company so elects and the holders of the Series BB agree. Series BB is senior in
dividend and liquidation preference to all other capital stock except Series AA
at $100,000 per share plus accrued and unpaid dividends. Series BB is redeemable
by the Company at liquidation value plus accrued dividends until January 1,
2001. Thereafter, Series BB is redeemable as follows: (i) between January 1,
2001 and January 1, 2002 at 105% of liquidation value plus accrued and unpaid
dividends and (ii) during each of the next 4 one year periods thereafter, at a
premium to liquidation value that decreases 1% each year plus accrued and unpaid
dividends. Unless waived by a majority of the holders of Series AA, no shares of
Series BB may be redeemed if any Series AA remains outstanding. The Company has
committed to issue an additional 2 million shares of common stock and the
majority shareholder of the Company has committed to issue an additional 4
million shares of common stock to the holder of Series BB if the Series BB has
not been redeemed prior to December 31, 2000.
At any time prior to January 1, 2002, 7% per annum cumulative dividends
will be payable quarterly on Series CC in cash or in kind at the Company's
option. Dividends may not be paid in kind on or after January 1, 2002 unless the
Company so elects and the holders of the Series CC agree. Series CC is junior to
Series AA and Series BB but senior to all other capital stock at $100,000 plus
accrued and unpaid dividends. Series CC is redeemable by the Company at
liquidation value plus accrued dividends until January 1, 2001. Thereafter,
Series CC is redeemable as follows: (i) between January 1, 2001 and January 1,
2002 at 105% of liquidation value plus accrued and unpaid dividends and (ii)
during each of the next 4 one year periods thereafter, at a premium to
liquidation value that decreases 1% each year plus accrued and unpaid dividends.
Unless waived by a majority of the holders of each of the Series AA and Series
BB, no Series CC may be redeemed if any Series AA or Series BB remains
outstanding. Series CC is convertible into common stock at $2.50 per share.
3
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Recent Developments; Liquidity and Capital Resources
On July 20, 1999, the Company completed the Recapitalization. The basic
terms of the Recapitalization are described in Note 2 of the notes to the
Company's consolidated financial statements in Item 1 of this Report.
At September 30, 1999, the Company had $1.1 million of unrestricted cash on
hand and negative working capital of $6.5 million (compared to negative working
capital of $39.2 million at December 31, 1998).
The Company's principal uses of cash during the nine months ended September
30, 1999 were to fund operations ($1.0 million), pay debt ($12.8 million) and
capital investment ($3.8 million). The Company's capital investment included
deferred maintenance on a number of parks. This investment was intended to
protect existing revenue streams and, to a lesser degree, enhance revenues at
some parks on a go-forward basis. During the nine months ended September 30,
1999, the Company financed its operations primarily through a combination of the
sale-leaseback of land on two of the locations ($8.9 million), debt financing
provided by an entity related to the Company's largest shareholder ($8.4
million) and the sale in January 1999, of a property previously being held for
sale for $0.7 million.
Under an agreement entered into in connection with the Recapitalization, an
entity related to the Company's largest shareholder agreed to purchase, upon
request by the Company, up to $2.4 million worth of additional shares of
preferred stock of the Company. As of September 30, 1999, the entity related to
the Company's largest shareholder had purchased, upon the Company's request
$450,000 worth of preferred shares, and currently has a remaining obligation, at
the Company's request, to purchase up to an additional $1.95 million worth of
preferred shares. That entity and the Company's largest shareholder have the
right, but not the obligation, to purchase up to $7.0 million worth of
additional shares of preferred stock of the Company.
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 presently expects that it will not have sufficient
cash resources to fund its operations through the end of December and the rest
of the winter season unless it is able to generate cash through asset sales or
some other transaction. The Company has historically funded its operations and
capital expenditures principally through external financing, including financing
from its largest shareholder, and cash flow from operations. At the time of the
Recapitalization, the Company's largest shareholder informed the Company that
the shareholder would not invest additional capital in the Company, except as
required by the terms of agreements entered into in connection with the
Recapitalization as described above.
In these circumstances, the Company is seeking to sell certain assets and
has entered into contracts to sell two of its family entertainment centers
(FECs) that, if completed, could result in cash proceeds sufficient to cover
expected cash deficiencies. These contracts are subject to significant
contingencies and the sales are not expected to be completed until late-December
and mid-2000, respectively. The Company will require certain accommodations from
its primary lender to complete the sales transaction, including the lender's
agreement that a portion of the net proceeds from the transactions can be
retained by the Company. In addition, the timing of any cash payment required to
settle the Top Eliminator dispute described in Part II, Item 1 - "Legal
Proceedings," or as a result of an adverse decision in such dispute, could have
a material adverse effect on the Company's liquidity.
If the Company is unsuccessful in implementing the above-described measures
or in obtaining other financing, the Company will be required to take
extraordinary steps to preserve cash and satisfy its obligations or to
restructure its obligations, including seeking to curtail normal operations at
various facilities, liquidating assets or otherwise significantly altering its
operations. There can be no assurance that the Company will be able to take such
actions or, if so, as to the timing, terms or effects thereof.
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Seasonality
The business of the Company is seasonal. Approximately two-thirds of the
Company's revenues have historically been generated during the six-month period
of April through September. As a result, the Company's operating income can be
expected to be substantially lower in the first and last quarters of the year
than the second and third quarters. Furthermore, since many of the attractions
at the parks involve outdoor activities, prolonged periods of inclement weather
result in a substantial reduction of revenues during such periods. Accordingly,
the Company believes that the results of operations for the nine months ended
September 30, 1999 are not necessarily indicative of the Company's future
results of operations.
Results of Operations
For the three months ended September 30, 1999, the Company had a net loss to
common shareholders of $3.6 million ($0.07 per common share), compared to a net
loss of $5.3 million ($0.11 per common share) for the comparable period last
year. For the nine months ended September 30, 1999, the Company had a net loss
to common shareholders of $12.5 million ($0.26 per common share) as compared to
a net loss of $17.9 million ($0.37 per common share) in the comparable period in
the prior year. All per share amounts in the foregoing are calculated on a
fully-diluted basis.
Entertainment revenue decreased by $1.2 million (or 9%) and $3.6 million (or
10%) respectively, for the three and nine months ended September 30, 1999 from
$14.1 million and $37.2 million for the three and nine months ended September
30, 1998 to $12.9 million and $33.6 million for the three and nine months ended
September 30, 1999. The decrease in revenue is primarily due to the decrease in
entertainment revenue from the FECs that were closed in 1998 ($0.6 million and
$1.7 million for the three and nine months, respectively) and decreased
customer traffic resulting from cutbacks in advertising in 1999.
Entertainment expenses decreased by $1.5 million (or 13%) and $5.5 million
(or 17%) respectively, for the three and nine months ended September 30, 1999
from $11.7 million and $32.9 million for the three and nine months ended
September 30, 1998 to $10.2 million and $27.4 million for the three and nine
months ended September 30, 1999. This was due to better aligning payroll with
revenue and staff reductions ($0.4 million and $2.6 million for the three and
nine months, respectively), reductions in other operating costs ($0.1 million
and $1.2 million for the three and nine months, respectively) and decreases in
expenses from the FECs that were closed in 1998 ($0.4 million and $1.0 million
for the three and nine months, respectively).
General and administrative expenses decreased $0.4 million (or 26%) and $1.4
million (or 26%) for the three and nine months ended September 30, 1999,
primarily as a result of a reduction in professional expenses ($.4 million and
$1.0 million for the three and nine months, respectively).
Depreciation and amortization for the quarter ended September 30, 1999
decreased by $0.4 million and $1.2 million, respectively, for the three and nine
months ended September 30, 1999 due principally to acceleration of depreciation
in 1998.
Interest expense decreased by $2.3 million and $2.7 million for the three
and nine months ended September 30, 1999, respectively, as compared to the
comparable periods in the prior year due to the recapitalization described in
Note 2 of the notes to the Company's consolidated financial statements appearing
in Item 1 of this Report.
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Amex Listing Requirements
The Company's common shares are listed for trading on the American Stock
Exchange ("AMEX"). Based on its historical results of operations, the Company
has been notified that it does not currently meet the published guidelines of
the AMEX for continued listing. However, as discussed above, the Company's
recently completed Recapitalization is intended to improve the Company's
financial position and results of operations. Accordingly, the Company has
requested that AMEX continue to list the Company's common shares for trading and
the AMEX has agreed to continue the listing pending the review of this Form 10-Q
and its satisfaction that the Company has made favorable progress in satisfying
the AMEX guidelines for continued listing. There can be no assurance that the
AMEX will continue the Company's listing.
If the AMEX were to delist the Company's common shares, it is possible that
the shares would continue to trade in the over-the-counter market or that price
quotations would be reported by other sources. The public market for the
Company's common shares and the availability of such quotations would, however,
depend on the number of holders of Company common shares at that time and the
interest in maintaining a market for the common stock on the part of securities
firms. Accordingly, there can be no assurance that there would be a market for
the shares or that any securities firm would maintain a market in or quote
prices for the shares. If the AMEX were to delist the Company's common shares,
the market for the shares could be adversely affected.
The Company's common shares are currently "margin securities," as that term
is defined under the rules of the Board of Governors of the Federal Reserve
System. Because they are margin securities, among other things, brokers are
allowed to extend credit on the collateral of the shares. If the shares were to
be delisted by the AMEX and were not otherwise publicly traded or quoted, it is
possible that the shares would no longer constitute margin securities and,
therefore, could no longer be used as collateral for loans made by brokers.
Impact of Year 2000 Issues
The Company will be required to modify or replace portions of its computer
software and certain hardware so that those systems will properly utilize dates
beyond December 31, 1999. The cost of those modifications and replacements is
described below. The Company believes that, with modifications or replacements
of existing software and certain hardware, the year 2000 issue can be solved.
However, if such modifications and replacements are not completed timely, the
year 2000 issue could have a material adverse impact on the operations of the
Company.
The Company relies on a significant number of computer programs and computer
technologies (collectively, "IT") and non-IT systems for its key operations,
including point of sales systems, race car timing and safety systems and finance
and various administrative functions. The Company engaged a year 2000 consultant
to evaluate the current systems and prepare a plan for addressing compliance,
which was completed during 1998.
The consultant requested confirmation from all vendors of their products'
status relative to year 2000 compliance. The consultant reviewed the Company's
systems and provided a report to the Company identifying information, compliance
requirements and criticality of each system. As of September 30, 1999, ninety
percent of all mission critical systems were upgraded and tested for compliance.
The remaining systems are scheduled for completion in October and November 1999.
Additionally, the initial cost projections for compliance have been reduced from
$300,000 to approximately $115,000 due primarily to cost savings on hardware,
projected travel expenses, the reduction of the number of parks to refit and
reduction in installation fees by using in-house personnel. Costs incurred to
date are $77,000, which include $55,000 of deferred costs of leasing computers.
In the event that the Company does not complete the remaining phases of its
year 2000 plan, the Company would have to manually track sales until the problem
is resolved. In addition, disruptions in the economy generally resulting from
year 2000 issues could also materially adversely affect the Company. The amount
of lost revenue cannot be reasonably estimated at this time. The ability of
third parties with which the Company transacts business to adequately address
its 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A portion of the Company's long-term debt as of September 30, 1999 bore
interest at variable rates and the Company is exposed to market risk from
changes in interest rates primarily through its borrowing activities, which are
described in the "Notes Payable" section to the Financial Statements included in
the Company's 1998 Form 10-K which is incorporated herein by reference. At
September 30, 1999, the Company did not hold any derivatives related to interest
rate exposure for any of its debt facilities and it
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<PAGE> 10
does not use financial instruments for trading or other speculative purposes.
Based on the terms and outstanding amounts of the Company's borrowings at
September 30, 1999, the Company has determined that there is no material
interest rate risk exposures to the Company's financial position, results of
operations or cash flows as of such date.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Due to the nature of the attractions at the Company's entertainment 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, other than described below,
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 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.
The Company is currently involved in a dispute with the manufacturer of its
Top Eliminator(R) attraction relating to past and future orders of the
attraction. The Company currently believes that it is very near a settlement of
the dispute but there can be no assurance that it will be able to reach such a
settlement on terms acceptable to the Company and the manufacturer. If such a
settlement is not reached, a binding arbitration has been scheduled for January
2000. The manufacturer has claimed damages of $10.5 million. If a cash payment
is required by the terms of such a settlement and in the event of an adverse
arbitration decision requiring a cash payment, the timing of such a payment
could materially adversely affect the Company's liquidity and could result in
the other effects described in Part 1, Item 2 - Management's Discussion and
Analysis of Financial Condition and Results of Operations - "Liquidity and
Capital Resources."
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On July 20, 1999, in connection with the Recapitalization, the Company
issued 6,000,000 shares of common stock to one of its principal lenders. The
Company also issued non-convertible preferred stock to this lender in exchange
for $33.0 million of debt.
In the Recapitalization, the Company issued convertible preferred stock to
the Company's largest shareholder and a related entity in exchange for an
aggregate of $62.0 million of debt held by those entities on the terms described
in Note 2 of the notes to the Company's consolidated financial statements in
Item 1 of this Report. These securities were exempt from registration with the
Securities and Exchange Commission pursuant to Section 4 (2) of the Securities
Act of 1933 as amended.
ITEM 5. OTHER INFORMATION
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 the management of the
Company. When used herein, words such as "anticipate," "believe," "estimate,"
"expect," "intend" and similar expressions, as they relate to the Company or the
Company's management, identify forward-looking statements. Such statements
reflect the current views of the Company's management with respect to future
events and are subject to certain risks, uncertainties and assumptions relating
to the Company's ability to obtain additional capital resources and/or working
capital, the Company's operations and results of operations of the Company and
the success of the Company's business and plan, competitive factors and pricing
pressures; general economic conditions; the failure of market demand for the
types of entertainment opportunities the Company provides or plans to provide in
the future and for family entertainment in general to be commensurate with
management's expectations or past experience; impact of present and future laws;
ongoing need for capital improvements; changes in operating expenses; adverse
changes in governmental rules or policies; changes in demographics, economics
and other factors. 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.
7
<PAGE> 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No. Description
3.1 Certificate of Designations for Series AA Preferred Stock dated
July 20, 1999
3.2 Certificate of Designation for Series BB Preferred Stock dated
July 20, 1999
3.3 Certificate of Designation for Series CC Preferred Stock dated
July 20, 1999
10.1 Second Amended and Restated Recapitalization Agreement, dated
July 20, 1999, by and among Malibu Entertainment Worldwide, Inc.,
Malibu Centers, Inc., Nomura Asset Capital Corporation,
Partnership Acquisition Trust V, MEI Holdings, L.P., and S.Z.
Capital, L.P. (incorporated by reference to Amendment No. 21 to
the Schedule 13D-1 filed by MEI Holdings on July 20, 1999)
10.2 Registration Rights Agreement, dated July 20, 1999, by and
between Malibu Entertainment Worldwide and SZ Capital, L.P.
(incorporated by reference to Amendment No. 21 to the Schedule
13D-1 filed by MEI Holdings on July 20, 1999)
10.3 Registration Rights Agreement, dated July 20, 1999, by and
between Malibu Entertainment Worldwide and MEI Holdings
(incorporated by reference to Amendment No. 21 to the Schedule
13D-1 filed by MEI Holdings on July 20, 1999)
10.4 Registration Rights Agreement, dated July 20, 1999, by and
between Malibu Entertainment Worldwide and Nomura Capital Asset
Corporation
10.5 Mutual Release between Malibu Entertainment Worldwide, Inc.,
Malibu Centers, Inc., MEI Holdings, L.P., SZ Capital, L.P. and
Nomura Asset Capital Corporation (incorporated by reference to
Amendment No. 21 to the Schedule 13D-1 filed by MEI Holdings on
July 20, 1999)
27 Financial Data Schedule (for SEC purposes only)
(b) No reports of Form 8-K were filed during the period covered by this
report.
8
<PAGE> 12
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/ R. SCOTT WHEELER
-----------------------------------
R. Scott Wheeler
Chief Financial Officer
November 15, 1999
<PAGE> 13
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
3.1 Certificate of Designations for Series AA Preferred Stock dated
July 20, 1999
3.2 Certificate of Designation for Series BB Preferred Stock dated
July 20, 1999
3.3 Certificate of Designation for Series CC Preferred Stock dated
July 20, 1999
10.1 Second Amended and Restated Recapitalization Agreement, dated
July 20, 1999, by and among Malibu Entertainment Worldwide, Inc.,
Malibu Centers, Inc., Nomura Asset Capital Corporation,
Partnership Acquisition Trust V, MEI Holdings, L.P., and S.Z.
Capital, L.P. (incorporated by reference to Amendment No. 21 to
the Schedule 13D-1 filed by MEI Holdings on July 20, 1999)
10.2 Registration Rights Agreement, dated July 20, 1999, by and
between Malibu Entertainment Worldwide and SZ Capital, L.P.
(incorporated by reference to Amendment No. 21 to the Schedule
13D-1 filed by MEI Holdings on July 20, 1999)
10.3 Registration Rights Agreement, dated July 20, 1999, by and
between Malibu Entertainment Worldwide and SZ Capital, L.P.
(incorporated by reference to Amendment No. 21 to the Schedule
13D-1 filed by MEI Holdings on July 20, 1999)
10.4 Registration Rights Agreement, dated July 20, 1999, by and
between Malibu Entertainment Worldwide and Nomura Capital Asset
Corporation
10.5 Mutual Release between Malibu Entertainment Worldwide, Inc.,
Malibu Centers, Inc., MEI Holdings, L.P., SZ Capital, L.P. and
Nomura Asset Capital Corporation (incorporated by reference to
Amendment No. 21 to the Schedule 13D-1 filed by MEI Holdings on
July 20, 1999)
27 Financial Data Schedule (for SEC purposes only)
</TABLE>
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF DESIGNATIONS OF SERIES AA PREFERRED STOCK
ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION
OF
MALIBU ENTERTAINMENT WORLDWIDE, INC.
(A GEORGIA CORPORATION)
In accordance with Section 14-2-1006 of the Georgia Business
Corporation Code (the "Code"), Malibu Entertainment Worldwide, Inc., a Georgia
corporation (the "Corporation"), hereby certifies as follows:
I.
The name of the corporation is Malibu Entertainment Worldwide, Inc.
II.
No shares of the Corporation's Series F Preferred Stock, as designated
by the Articles of Amendment to the Corporation's Articles of Incorporation
filed on August 23, 1996 with respect to the designation of the terms of the
Series F Preferred Stock of the Corporation, have been issued by the
Corporation.
No shares of the Corporation's Series G Preferred Stock, as designated
by the Articles of Amendment to the Corporation's Articles of Incorporation
filed on March 25, 1997 with respect to the designation of the terms of the
Series G Preferred Stock of the Corporation, have been issued by the
Corporation.
Effective the date hereof, Subsections 2.6 and 2.7 of Article III of
the Articles of Incorporation are hereby amended such that all references to the
number of authorized shares in each series or class designated therein shall be
replaced with references to the number zero ("0").
III.
Also effective the date hereof, Section 2 of Article III of the
Articles of Incorporation is hereby amended to add the following Subsection 2.8:
"2.8. Series AA Preferred Stock. Five thousand shares of
Preferred Stock, no par value, of the Corporation are designated as
"Series AA Preferred Stock" having the voting powers, preferences and
relative participating, optional and other special rights, and the
qualifications, limitations or restrictions thereof, as are set forth
below (the "Series AA Preferred"). Shares of Series AA Preferred shall
not be sold for consideration that is less than the liquidation
preference of such shares.
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<PAGE> 2
2.8.1. Dividends and Distributions.
(a) The holders of shares of Series AA Preferred, in
preference to the holders of the Common Stock, no par value per share
(the "Common Stock"), and of any and all other classes or series of
preferred or other capital stock of the Corporation (collectively, the
"Series AA Junior Stock"), will be entitled to receive dividends, when
and as declared by the Board out of funds legally available therefor,
at an annual rate of $9,000 per share, payable quarterly in arrears on
the 1st day of each of January, April, July and October of each year
(except that if any such date is not a Business Day (as defined below),
then such dividend will be payable on the next day that is a Business
Day) (the "Dividend Payment Date"), commencing with the date of the
first issuance of any shares of the Series AA Preferred (the "Initial
Issuance Date"), prior and in preference to any declaration or payment
of any dividend on Series AA Junior Stock (other than (i) a dividend or
distribution on Series AA Junior Stock solely in shares of Series AA
Junior Stock and then only if all accrued but unpaid dividends on the
Series AA Preferred have been or are concurrently being paid as
provided herein and (ii) a dividend or distribution on Series AA Junior
Stock in cash with Series AA Approval (as defined below) prior thereto
as provided in Section 2.8.2(b)). Such dividends will be cumulative and
accrue with respect to each share of Series AA Preferred from the date
of issuance of such share of Series AA Preferred (the "Dividend
Commencement Date"), whether or not declared by the Board and whether
or not there are funds of the Corporation legally available for payment
of such dividends. No accrued or accumulated dividends on the Series AA
Preferred will bear interest. For purposes hereof, "Business Day" means
any day other than a Saturday, Sunday or any other day on which
national banks in Dallas, Texas are not open for business.
(b) Any dividends that accrue and are payable shall be paid
(i) by the issuance as of the Dividend Payment Date of additional
shares of fully paid, nonassessable Series AA Preferred having an
aggregate liquidation preference equal to the amount of such accrued
dividends or (ii) in cash, with the determination of whether dividends
are to be paid in cash or by issuance of additional shares to be made
by the Board, in its sole discretion; provided, however, that any
dividends that first accrue on or after January 1, 2003 may not be paid
by the issuance of additional shares of Series AA Preferred unless the
Corporation has first obtained Series AA Approval in writing prior to
the applicable Dividend Payment Date. In the event that dividends are
declared and paid by the issuance of additional shares of Series AA
Preferred as provided in the previous sentence, such dividends will be
deemed paid in full and will not accumulate. The Corporation will
deliver certificates representing shares of Series AA Preferred issued
pursuant to this Section 2.8.1(b) promptly after the Dividend Payment
Date.
(c) Each dividend will be payable to holders of record as
they appear on the stock books of the Corporation on the record date
which shall be the last day of a fiscal quarter of the Corporation.
2
<PAGE> 3
2.8.2. Voting Rights.
(a) Except as otherwise required by law, and in addition to
the rights provided in Sections 2.8.2(b) and 2.8.3, each share of
Series AA Preferred shall entitle the holder thereof to vote on each
matter submitted to a vote of the shareholders of the Corporation
(including with respect to the election of "Outside Directors" of the
Corporation pursuant to Section 2.9.3 of the Certificate of
Designations of the Series BB Preferred Stock, no par value, of the
Corporation (the "Series BB Preferred")) at the record date for the
determination of shareholders entitled to vote on such matter or, if no
such record date is established, at the date such vote is taken or any
written consent of shareholders becomes effective. Each holder of
Series AA Preferred shall be entitled to cast the number of votes per
share thereof as equals the number of votes which could be cast by the
holders of the number of shares of Common Stock into which such share
of Series AA Preferred could then be converted pursuant to Section
2.8.7 (regardless of whether the Series AA Preferred is then
convertible) immediately prior to the taking of such vote. Except as
otherwise required by law or expressly provided in the Charter, the
holders of shares of Common Stock and Series AA Preferred (and of any
other class or series of Series AA Junior Stock that is entitled to
vote on a matter) shall vote together and not as separate classes or
series.
(b) In addition to the voting rights provided in Sections
2.8.2(a) and 2.8.3, the affirmative vote or consent of holders of a
majority of the then-outstanding shares of Series AA Preferred, voting
together as a single voting group (a "Series AA Approval"), will be
required in order for the Corporation to:
(i) Amend the Charter in any way, whether by amending the
terms of this Section 2.8 or any other provision of the Charter,
that adversely affects any of the powers, designations,
preferences and relative, participating, optional and other
special rights of the Series AA Preferred (provided that any such
amendment that adversely changes the dividend payable on or
liquidation preference of the Series AA Preferred shall require
the affirmative vote or consent of all holders of Series AA
Preferred);
(ii) Subject to Section 2.8.1(a), declare or pay any cash or
other dividends on, or make any other distributions in respect
of, any other shares of capital stock of the Corporation,
including any Series AA Junior Stock;
(iii) Redeem or purchase or otherwise acquire for
consideration any shares of any Series AA Junior Stock (except
(A) in connection with the exercise of employee stock options,
(B) in connection with the repurchase of Series BB Preferred
pursuant to Section 2.8.8 below and Section 2.9.7 of the
Certificate of Designations of Series BB Preferred Stock and (C)
in connection with the repurchase of up to $2,500,000 in
liquidation preference of Series CC Preferred Stock, no par
value, of the Corporation (the "Series CC Preferred"), plus an
amount equal to all accrued but unpaid dividends thereon during
each calendar year pursuant to Section 2.10.9 of the Certificate
of Designations of Series CC Preferred Stock);
3
<PAGE> 4
(iv) Authorize or issue any shares of capital stock ranking
prior or superior to, or on parity with, the Series AA Preferred
with respect to dividends or other distributions or upon
liquidation, dissolution or winding up of the Corporation (except
to SZ Capital, L.P. or its successors or assigns in accordance
with the terms of the Second Amended and Restated
Recapitalization Agreement, dated July 1999, among the
Corporation, Malibu Centers, Inc., Nomura Asset Capital
Corporation ("Nomura"), Partnership Acquisition Trust V, MEI
Holdings, L.P. ("MEIH") and SZ Capital, L.P. (the "SZ") (the
"Recapitalization Agreement"));
(v) Pay any dividends on the Series AA Preferred that first
accrue on or after January 1, 2003 by the issuance of additional
shares of Series AA Preferred;
(vi) Issue any shares of Series AA Preferred other than the
shares issued to SZ on the date of the Recapitalization Agreement
or as payments of dividends on shares of Series AA Preferred as
provided herein;
(vii) Amend Section 2.9.7 of the Certificate of Designations
of Series BB Preferred Stock or Section 2.10.9 of the Certificate
of Designations of Series CC Preferred Stock; or
(viii) In one or a series of related transactions,
consolidate or merge with or into (whether or not the Corporation
is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its
properties or assets to, another person or entity or adopt a plan
relating to the liquidation or dissolution of the Corporation
unless (1) either (I) the Corporation shall be the surviving or
continuing entity or (II) the entity (if other than the
Corporation) formed by or surviving any such consolidation or
merger or to which such sale, assignment, transfer, lease,
conveyance or other disposition has been made shall be a
corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia; (2) the
Series AA Preferred shall be converted into or exchanged for and
shall become shares of the successor, transferee or resulting
entity, having in respect of such successor, transferee or
resulting entity substantially the same powers, preferences and
relative participating, optional or other special rights, and the
qualifications, limitations or restrictions thereon, that the
Series AA Preferred had immediately prior to such transaction;
(3) the Corporation or such successor, transferee or resulting
entity as applicable, shall have a Consolidated Net Worth
(immediately after such transaction but prior to any purchase
accounting adjustments for such transaction) equal to or greater
than the Consolidated Net Worth of the Corporation immediately
prior to such transaction; and (4) the Corporation delivers to
the holders of the Series AA Preferred prior to the consummation
of the proposed transaction an officer's certificate or an
opinion of counsel reasonably satisfactory to the holders of the
Series AA Preferred to the combined effect that such sale,
4
<PAGE> 5
assignment, transfer, lease, conveyance or other disposition
complies with the terms of the Articles of Incorporation of the
Corporation, including without limitation, the Articles of
Amendment thereto that include this Certificate of Designations,
and that all conditions precedent to such sale, assignment,
transfer, lease, conveyance or other disposition have been
satisfied. Notwithstanding the foregoing, the consent of the
holders of the Series AA Preferred shall not be required to
authorize or approve the merger of any wholly-owned subsidiary of
the Corporation with and into the Corporation.
For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series
of related transactions) of properties or assets of one or more
subsidiaries of the Corporation which, if all properties and
assets of such subsidiaries were held directly by the
Corporation, would constitute a transfer of all or substantially
all of the properties and assets of the Corporation shall be
deemed to be a transfer of all or substantially all of the
properties and assets of the Corporation.
"Consolidated Net Worth" means the net worth of the Corporation
and its subsidiaries determined by the Corporation's auditors
based on the consolidated balance sheet of the Corporation
prepared in accordance with GAAP. As used herein, "GAAP" means
the generally accepted accounting principles in the United
States.
(c) The Corporation will not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could
purchase or otherwise acquire such shares at such time and in such
manner in accordance with the foregoing restrictions.
2.8.3. Voting Rights in Certain Circumstances.
(a) (i) Except as otherwise set forth in this Section 2.8.3,
if for any reason (x) on January 1, 2003, the Corporation has not
paid either by cash or the issuance of additional shares of
Series AA Preferred in accordance with and as permitted by the
provisions of this Section 2.8, all dividends that are accrued
and payable for all quarterly periods ending prior to January 1,
2003, or (y) at any time on and after January 1, 2003, the Board
does not declare or the Corporation does not pay all dividends
first accruing on or after January 1, 2003 in full in cash for
any two quarters (a "Series AA Board Representation Event"), then
if the Board Representation Requirement (as defined below) is not
then satisfied the holders of Series AA Preferred will be
entitled, at any annual meeting of the shareholders or any
special meeting called for such purpose (which meeting will be
called upon the request of the holders of at least 20% of the
then-outstanding shares of Series AA Preferred as provided
below), to elect a number of directors (the "Series AA
Directors") equal to the Series AA Board Representation Number
(as defined below) (the right to elect such directors is
sometimes referred to herein as the "Board Representation
Requirement"). All directors on the Board at the time of the
Series AA Board Representation Event who are Affiliates of MEIH
or SZ will be deemed Series AA Directors for purposes of
satisfying the Board Representation Requirements if at such time
SZ, MEIH or any Affiliate thereof collectively own a majority of
the then-outstanding shares of Series AA Preferred.
(ii) "Affiliate" means, with respect to any person or
entity, any other person or entity that, directly or indirectly
through one or more
5
<PAGE> 6
intermediaries, controls or is controlled by, or is under common
control with, such person or entity. The "Series AA Board
Representation Number" shall be equal to (x) the number of
directors constituting the entire Board of Directors of the
Corporation minus three, divided by (y) 2; provided that if such
calculation produces a fraction, such fraction shall be rounded
downward to the next nearest whole number to determine the Series
AA Board Representation Number.
(iii) The Corporation will notify all holders of Series AA
Preferred as promptly as possible after the occurrence of a
Series AA Board Representation Event of such occurrence and the
material facts relating thereto. In the event that the
Corporation obtains a Series AA Approval to pay a dividend that
first accrues on or after January 1, 2003 by issuance of
additional shares of Series AA Preferred in lieu of cash and the
Corporation agrees to pay such dividend in shares of Series AA
Preferred, the receipt of such approval by the Corporation and
subsequent delivery of certificates representing shares of the
Series AA Preferred issued in full payment of such dividend shall
constitute a waiver of the voting rights specifically provided in
this Section 2.8.3(a) for the quarter in which such dividends
were required to be declared by the Board and paid by the
Corporation. Under no circumstances shall such waiver by the
holders of Series AA Preferred in one quarter constitute a waiver
for subsequent quarters.
(b) (i) Whenever the right to elect directors of the
Corporation has accrued to the holders of Series AA Preferred,
the Corporation may, and upon the written request of the holders
of record of at least 20% of the then-outstanding shares of
Series AA Preferred will, promptly satisfy the Board
Representation Requirement by increasing the size of the Board
and/or using reasonable efforts to secure the resignations of
such number of directors as is necessary to enable the Series AA
Directors (together with any Series BB Preferred designees and
any Outside Directors required to be elected pursuant to the
Certificate of Designations of Series BB Preferred Stock of the
Corporation) to promptly be elected to the Board. If the Board
Representation Requirement is not so satisfied, then, at any time
after the right to elect directors has vested in the Series AA
Preferred pursuant to this Section 2.8.3, the Secretary of the
Corporation may, and, upon the written request of the holders of
record of at least 20% of the then-outstanding shares of the
Series AA Preferred, addressed to the Secretary at the principal
office of the Corporation, will, call a special meeting of the
holders of Series AA Preferred for the election of the Series AA
Directors to be held within 30 calendar days after such call and
at the place and upon the notice provided by law and in the
Bylaws of the Corporation for the holding of meetings of
shareholders. If any such special meeting required to be called
as above provided has not been called by the Secretary within 30
calendar days after receipt of any such request, then the holders
of record of at least 20% of the then-outstanding Series AA
Preferred may designate in writing one of their number to call
such meeting, and the person so designated may call such meeting
to be held at the place and upon the notice above provided, and
for that purpose will have access to the stock ledger of the
Corporation. If any such special meeting has been called by the
Secretary of the Corporation or by the holders of the Series AA
Preferred as above provided, and if the holders of at
6
<PAGE> 7
least a majority of the then-outstanding shares of Series AA
Preferred and entitled to vote at such meeting are present or
represented by proxy at such meeting or any adjournment thereof,
then, by vote of the holders of at least a majority of such
shares of Series AA Preferred present or so represented at such
meeting, the then-authorized number of directors of the
Corporation will be increased by such number of directors as is
necessary to enable the Series AA Directors to promptly be
elected to the Board, and at such meeting, the holders of the
Series AA Preferred will be entitled to elect the additional
Series AA Directors so provided for, such that the holders of
Series AA Preferred shall have elected a number of Series AA
Directors equal to the Series AA Board Representation Number, but
any directors so elected will hold office only until their
respective successors are duly elected and qualified at the
annual meeting of shareholders or special meeting held in place
thereof next succeeding their election, at which time their
successors will be elected by vote of the holders of Series AA
Preferred present or so represented at such meeting. The
foregoing remedy will not be deemed exclusive, and shall be in
addition to all other rights and remedies available at law or
equity to the holders of Series AA Preferred. Except for the
waiver described in Section 2.8.3(a), the failure to exercise, or
any delay in exercising any rights under this Section 2.8.3 as to
a particular Series AA Board Representation Event will not
diminish or otherwise affect the rights hereunder.
(c) Upon the occurrence of a Series AA Board Representation
Event, each holder of a share of the Series AA Preferred will be
entitled to receive the same prior notice of any shareholders' meeting
as provided to the holders of Common Stock in accordance with the
Bylaws of the Corporation, as well as prior notice of all shareholder
actions to be taken by legally available means in lieu of meeting, and
will vote separately as a class to the extent herein provided.
Fractional votes will be permitted, and any fractions will be counted
in computing voting rights. Any action which may be taken by the
holders of Series AA Preferred may be taken without a meeting of Series
AA Preferred shareholders upon the execution of written consents to
such action by holders of the number of shares of Series AA Preferred
that would be required to vote in favor of taking such action at any
meeting of holders of Series AA Preferred at which all such holders
were present and voting.
(d) Following a Series AA Board Representation Event,
whenever all arrears in dividends on the Series AA Preferred then
outstanding for the quarterly periods that gave rise to the Series AA
Board Representation Event have been paid and dividends thereon for the
current quarterly dividend period shall have been declared by the Board
and paid by the Corporation, then the right of holders of the Series AA
Preferred to satisfy the Board Representation Requirement shall cease
(but subject always to the same provisions for the occurrence of a
Series AA Board Representation Event that causes the vesting of the
Board Representation Requirement specifically set forth in Section
2.8.3(a)), and one month after all such dividends are paid to the
holders of the Series AA Preferred (i) the term of office of the Series
AA Directors pursuant to Section 2.8.3 shall terminate in the event
that such director(s) were elected to fill seat(s) on the Board created
to satisfy this Section 2.8.3 and/or (ii) the holders of Series AA
Preferred will use reasonable efforts to secure the resignation(s) of
the Series AA Directors.
7
<PAGE> 8
(e) For so long as the Board Representation Requirement is in
effect, then the holders of Series AA Preferred shall at all times be
entitled to elect a number of directors equal to the Series AA Board
Representation Number, including in the event the size of the Board is
increased to satisfy any similar board representation requirements held
by any other classes or series of Preferred Stock.
(f) Shares of Series AA Preferred owned by the Corporation or
any subsidiary of the Corporation will not be counted as outstanding
for any purpose of these Articles of Amendment to Articles of
Incorporation of the Corporation.
(g) For so long as the Board Representation Requirement is in
effect, any vacancies among the directorships relating to the directors
to be elected solely by vote of the holders of Series AA Preferred
pursuant to their rights to elect a number of Series AA Directors may
be filled by the majority vote of such Series AA Directors then in
office. For so long as the Board Representation Requirement is in
effect, any vacancies among the Outside Directors may be filled by
majority vote of the entire Board of Directors then in office; provided
that a majority of the Series AA Directors then in office shall have
voted in favor of so filling such vacancy. Notwithstanding the
foregoing, any action taken by the Board of Directors or members
thereof to fill vacancies pursuant to this paragraph shall not detract
from the rights of holders of Series AA Directors to elect and remove,
at any time, the Series AA Directors.
2.8.4. Reacquired Shares. If permitted by law, any shares of
Series AA Preferred that are issued and thereafter cease to be issued
and outstanding for any reason will be restored to the status of
authorized but unissued shares of preferred stock of the Corporation,
including shares of Series AA Preferred, and may be reissued as part of
a new series of preferred stock of the Corporation subject to the
conditions and restrictions on issuance set forth herein (including
without limitation Section 2.8.2 hereof) or in any other certificate of
designations creating a series of preferred or any similar stock of the
Corporation.
2.8.5. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no
distribution will be made to the holders of shares of Series AA Junior
Stock unless, prior thereto, the holders of shares of Series AA
Preferred shall have received $100,000 per share plus accrued and
unpaid dividends. Neither a consolidation or merger of the Corporation
with another corporation or other legal entity, nor a sale or transfer
of all or part of the Corporation's assets for cash, securities or
other property will be considered a liquidation, dissolution or winding
up of the Corporation.
8
<PAGE> 9
2.8.6. Redemption.
(a) Redemption Price. Shares of Series AA Preferred may be
redeemed (to the extent not previously redeemed or converted and as to
which no Conversion Notice has been delivered to the Corporation on or
before the date fixed for redemption) by the Corporation, at its sole
option, at any time after issuance and:
(i) prior to or on January 1, 2001, at a price per share of
$100,000 plus accrued and unpaid dividends through the date such
redemption price is paid ("Accrued Dividends");
(ii) after January 1, 2001 and prior to or on January 1,
2002, at a price per share of $105,000 plus Accrued Dividends;
(iii) after January 1, 2002 and prior to or on January 1,
2003, at a price per share of $104,000 plus Accrued Dividends;
(iv) after January 1, 2003 and prior to or on January 1,
2004, at a price per share of $103,000 plus Accrued Dividends;
(v) after January 1, 2004 and prior to or on January 1,
2005, at a price per share of $102,000 plus Accrued Dividends;
(vi) after January 1, 2005 and prior to or on January 1,
2006, at a price per share of $101,000 plus Accrued Dividends;
and
(vii) after January 1, 2006, at a price per share of
$100,000 plus Accrued Dividends.
(b) Redemption Procedures. At least 30 calendar days and not
more than 60 calendar days prior to the date fixed for any redemption
of Series AA Preferred, written notice ("Redemption Notice") will be
given by the Corporation by first class mail, postage prepaid, to each
holder of record of Series AA Preferred on the record date fixed for
such redemption by the Board at such holder's address as it appears on
the stock books of the Corporation, provided that no failure to give
such notice nor any deficiency therein will affect the validity of the
procedure for redemption of any shares of Series AA Preferred except as
to the holder or holders to whom the Corporation has failed to give
such notice or whose notice was defective. The Redemption Notice will
state:
(i) the redemption price;
(ii) whether all or fewer than all of the outstanding shares
of Series AA Preferred are to be redeemed and the total number of
shares of Series AA Preferred being redeemed;
(iii) the date fixed for redemption by the Board, which date
will occur within the applicable redemption period specified in
clause (a) above (the "Redemption Date");
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<PAGE> 10
(iv) the place or places and manner in which the holder is
to surrender his or her certificate(s) to the Corporation; and
(v) that dividends on the shares of Series AA Preferred to
be redeemed will cease to accumulate on the Redemption Date
unless the Corporation defaults in payment in full of the
applicable redemption price.
(c) Upon surrender of the certificate(s) representing shares
of Series AA Preferred that are the subject of redemption pursuant to
Section 2.8.6(a), duly endorsed (or otherwise in proper form for
transfer, as determined by the Corporation), in the manner and at the
place designated in the Redemption Notice and on the Redemption Date,
the full redemption price for such shares will be paid in cash to the
person or entity whose name appears on such certificate(s) as the owner
thereof, and each surrendered certificate will be canceled and retired.
In the event that fewer than all of the shares represented by any one
certificate are redeemed, a new certificate will be issued representing
the unredeemed shares.
(d) On and after the Redemption Date, unless the Corporation
defaults in the payment in full of the applicable redemption price,
dividends on the Series AA Preferred to be redeemed will cease to
accumulate, and all rights of the holders thereof will terminate with
respect thereto on the Redemption Date, other than the right to receive
the redemption price, provided, however, that if a Redemption Notice
has been given as provided in Section 2.8.6(b) and the funds necessary
for redemption (including an amount in cash in respect of all dividends
that will accumulate to the Redemption Date) have been irrevocably
deposited in trust with a bank having an aggregate shareholders' equity
of at least $5.0 billion for the equal and ratable benefit of all
holders of shares of Series AA Preferred that are to be redeemed, then,
at the close of business on the day on which such funds are deposited
in trust, dividends on the Series AA Preferred to be redeemed will
cease to accumulate and the holders thereof will cease to be
shareholders of the Corporation and be entitled only to receive the
redemption price.
(e) If (i) the funds of the Corporation legally available for
redemption of shares of Series AA Preferred on the date scheduled for a
redemption are insufficient to redeem the total number of shares of
Series AA Preferred to be redeemed on such date or (ii) the Corporation
elects to redeem fewer than all of the then-outstanding shares of
Series AA Preferred, then the Corporation shall redeem outstanding
shares of Series AA Preferred ratably among the holders of such shares
to be redeemed based on their holdings of Series AA Preferred. The
shares of Series AA Preferred not redeemed will remain outstanding and
entitled to all the rights and preferences provided herein. If the
funds of the Corporation legally available for redemption of shares of
Series AA Preferred on the date scheduled for a redemption are
insufficient to redeem the total number of shares of Series AA
Preferred to be redeemed on such date, then at any time thereafter when
additional funds of the Corporation become legally available, such
funds will immediately be used to redeem the balance of the shares that
the Corporation has become obligated to redeem on any scheduled
redemption date that it has not redeemed.
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2.8.7. Conversion.
(a) Conversion Rate. Subject to Section 2.8.7(k) below, at
any time on or after September 30, 2000, each share of the Series AA
Preferred will be convertible, at the option of the holder thereof,
into the number of fully paid and nonassessable shares of Common Stock
determined, subject to adjustment as described below, by dividing
$100,000 plus the total accrued and unpaid dividends thereon through
the date of conversion by the Conversion Price. As used herein,
"Conversion Price" means the lesser of (i) $2.50 (the "Conversion Rate
Cap") and (ii) 1.2 multiplied by the Sales Price for the 20 consecutive
Trading Days ending two full Trading Days prior to the date that a
Conversion Notice with respect thereto is received by the Corporation;
"Conversion Rate" means the number of shares of Common Stock into which
each share of Series AA Preferred may be converted; "Sales Price" with
respect to any period of time means the (x) volume times the sales
prices for each regular way trade during the measurement period divided
by the total volume during such period (referred to as the "volume
weighted average" on the Bloomberg News Service and derived therefrom,
or, if such service no longer publishes such information or ceases to
exist, such alternative similar service as the Board may select in good
faith) or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system,
quotation system or such other similar system of the Stock Exchange as
reported on the Bloomberg News Service, or, if such service no longer
publishes such information or ceases to exist, such alternative similar
service as the Board may select in good faith, (y) if on any such date
the Common Stock is not traded or quoted by any Stock Exchange, the
average of the closing bid and asked prices furnished by a professional
market maker making a market in the Common Stock selected by the Board
in good faith, or (z) if no market maker is making a market in the
Common Stock, the fair market value of such shares on such date as
determined by the Board in good faith; "Stock Exchange" means the
principal national securities exchange on which the shares of Common
Stock are listed or admitted to trading or, if the shares are not
listed or admitted to trading on any national securities exchange, the
National Association of Securities Dealers, Inc. Automated Quotation
System or any similar national system on which the Common Stock is
quoted or traded; and "Trading Day" means any day on which the Stock
Exchange is open for trading or, if the Common Stock is not listed or
quoted or admitted to trading on any Stock Exchange, any day other than
a Saturday, Sunday or a day on which banking institutions in the State
of New York are authorized or obligated by law or executive order to
close.
(b) No Fractional Shares. No fractional shares of Common
Stock will be issued upon conversion of Series AA Preferred and, if any
shares of Series AA Preferred surrendered by a holder, in the
aggregate, for conversion would otherwise result in a fractional share
of Common Stock, then such fractional share will be redeemed at the
then-effective Conversion Price per share, payable as promptly as
possible when funds are legally available therefor.
(c) Mechanics of Conversion. Before any holder of shares of
Series AA Preferred will be entitled to convert the same into shares of
Common Stock, such holder must deliver a written notice (a "Conversion
Notice") to the attention of the Secretary or Treasurer of the
Corporation at the Corporation's principal place of business
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<PAGE> 12
of its desire to exercise its rights to convert, specifying the number
of shares of Series AA Preferred to be converted and the holder's
calculation of the Conversion Rate. Such computation will be deemed
correct for all purposes hereof absent manifest error. In the event of
any disagreement between the Corporation and the holder as to the
correct Conversion Price, the Conversion Price will be finally
determined by an investment banking or brokerage firm selected by the
Corporation, the fees and expenses of which will be borne equally by
the Corporation and such holder. Such conversion will be deemed to
have been made as of the close of business on the fifth Business Day
after such notice has been so delivered or such other date as the
holder exercising such conversion right and the Corporation agree (the
"Conversion Date"). The Corporation will, promptly upon receipt of all
certificates representing Series AA Preferred as have been issued to
such holder that are to be converted, issue the appropriate number of
shares of Common Stock to such holder. All certificates issued upon
the exercise of the conversion will contain a legend governing
restrictions upon the disposition of such shares imposed by applicable
securities laws. Such legend will be removed by the Corporation by
delivery of substitute certificates without such legend in the event
that such legend is no longer required for purposes of applicable
securities laws upon receipt by the Corporation of an opinion of
holder's counsel to the effect that such legend is no longer so
required.
(d) Adjustment for Subdivisions or Combinations of Common
Stock. In the event that the Corporation at any time or from time to
time after the Initial Issuance Date effects a subdivision or
combination of its outstanding Common Stock into a greater or lesser
number of shares, then and in each such event the Conversion Rate Cap
will be increased or decreased proportionately.
(e) Adjustments for Dividends, Distributions on Common Stock.
In the event the Corporation at any time or from time to time after the
Initial Issuance Date makes or issues, or fixes a record date for the
determination of holders of Common Stock entitled to receive a dividend
or other distribution (a "Common Stock Distribution") payable in
additional shares of Common Stock or other securities or rights (other
than the rights, options or warrants offered to Series AA Preferred
pursuant to Section 2.8.7(g)) that are convertible into or entitling
the holder thereof to receive additional shares of Common Stock (such
other securities or rights, "Common Stock Equivalents") without payment
of any consideration by such holder of such Common Stock Equivalents
for the additional shares of Common Stock, without a proportionate and
corresponding dividend or other distribution to holders of Series AA
Preferred calculated as if all of the Series AA Preferred had been
converted in accordance with the terms hereof as of the record date for
such dividend or other distribution, then and in each such event, the
Conversion Rate Cap will be decreased as of the time of such issuance
or, in the event such a record date will have been fixed, as of the
close of business on such record date, by multiplying the Conversion
Rate Cap by a fraction,
(i) the numerator of which will be the total number of (A)
shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such
record date, plus (B) the maximum number of shares of Common
Stock (not including any shares described in clause (ii)(B)
immediately below) issuable upon conversion or exercise of all
outstanding Common Stock Equivalents as of immediately prior to
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<PAGE> 13
the time of such issuance or the close of business on such record
date (the sum of the shares described in clauses (A) and (B)
immediately above, the "Outstanding Shares"); and
(ii) the denominator of which will be the total number of
(A) Outstanding Shares, plus (B) the number of shares of Common
Stock issuable in payment of such dividend or distribution or
upon conversion or exercise of such Common Stock Equivalents;
provided, however, (i) if such record date shall have been fixed and
such dividend is not fully paid or if such distribution is not fully
made on the date fixed therefor, the Conversion Rate Cap will be
recomputed accordingly as of the close of business on such record date
and thereafter the Conversion Rate Cap will be adjusted pursuant to
this Section 2.8.7(e) as of the time of actual payment of such
dividends or distributions; (ii) if such Common Stock Equivalents
provide, with the passage of time or otherwise, for any decrease or
increase in the number of shares of Common Stock issuable upon
conversion or exercise thereof, the Conversion Rate Cap computed upon
the original issue thereof, and any subsequent adjustments based
thereon, will, upon any such decrease or increase becoming effective,
be recomputed to reflect such decrease or increase insofar as it
affects the rights of conversion or exercise of the Common Stock
Equivalents then outstanding; (iii) upon the expiration of any rights
of conversion or exercise under any unexercised Common Stock
Equivalents, the Conversion Rate Cap computed upon the original issue
thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, will, upon such
expiration, be recomputed as if the only additional shares of Common
Stock issued were the shares of such stock, if any, actually issued
upon the conversion or exercise of such Common Stock Equivalents; or
(iv) in the event of issuance of Common Stock Equivalents which expire
by their terms not more than 60 calendar days after the date of
issuance thereof, no adjustments of the Conversion Rate Cap will be
made until the expiration or exercise of all such Common Stock
Equivalents, whereupon such adjustment will be made in the manner
provided in this Section 2.8.7(e). The adjustments provided for in this
Section 2.8.7(e) will be made successively whenever any such dividend
or distribution is made. Notwithstanding anything contained in the
foregoing to the contrary, no adjustment to the Conversion Rate Cap
will be made in connection with the issuance of Common Stock to Nomura
or its affiliates pursuant to Section 3.4 of the Recapitalization
Agreement.
(f) Reorganization, Merger, Consolidation or Sale of Assets.
If at any time or from time to time there shall be a capital
reorganization of the Common Stock (other than a subdivision,
combination, reclassification or exchange of shares provided for
elsewhere in this Section 2.8.7) or a merger or consolidation of the
Corporation with or into another corporation or other legal entity, or
the sale of all or substantially all of the Corporation's properties
and assets to any other person which is effected so that holders of
Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or
in exchange for Common Stock, then, as a part of such capital
reorganization, merger, consolidation or sale, proper provision will be
made so that the holders of the Series AA Preferred will thereafter be
entitled to receive upon conversion of the Series AA Preferred the
number of shares of stock, securities or assets of the Corporation, or
of the successor
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<PAGE> 14
corporation or other legal entity resulting from such merger or
consolidation or sale, to which a holder of the Common Stock
deliverable upon conversion of Series AA Preferred would have been
entitled on such capital reorganization, merger, consolidation or sale
at the Conversion Rate then in effect (regardless of whether the
Series AA Preferred is then convertible). In any such case,
appropriate adjustment will be made in the application of the
provisions of this Section 2.8.7 with respect to the rights of the
holders of the Series AA Preferred after the reorganization, merger,
consolidation or sale such that the provisions of this Section 2.8.7
(including adjustment of the Conversion Price then in effect and the
number of shares purchasable upon conversion of the Series AA
Preferred) will be applicable after that event as nearly equivalent as
may be practicable. This provision will apply to successive capital
reorganizations, mergers, consolidations or sales.
(g) Rights Offering. If at any time or from time to time the
Corporation shall offer to all of the holders of Common Stock any
right, option or warrant to acquire additional shares of capital stock
of the Corporation, then each holder of a share of then-outstanding
Series AA Preferred will be entitled to receive rights, options or
warrants to acquire such number of additional shares of capital stock
of the Corporation as such holder would have been entitled to receive
had such holders of Series AA Preferred been converted immediately
prior to the record date for the offering of such rights, options or
warrants, at the Conversion Rate then in effect (regardless of whether
the Series AA Preferred is then convertible).
(h) No Adjustment. Anything herein to the contrary
notwithstanding, the Corporation shall not be required to make any
adjustment to the Conversion Rate Cap in case of the issuance of any
securities or shares of Common Stock or other securities pursuant to
the Recapitalization Agreement including, without limitation, the
issuance of Common Stock to Nomura or its affiliates pursuant to
Section 3.4 of the Recapitalization Agreement, or in the event that the
Corporation shall grant options or other equity incentive awards to
purchase the Corporation's Common Stock or other securities pursuant to
a bona fide employee stock option, equity incentive, stock purchase or
non-employee director plan duly adopted by its shareholders. In
addition, no adjustment to the Conversion Rate Cap will be made if such
adjustment would result in a change in the Conversion Rate Cap of less
than one cent ($0.01). Any adjustment of less than one cent ($0.01)
which is not made will be carried forward and will be made at the time
of and together with any subsequent adjustment which, on a cumulative
basis, amounts to an adjustment of one cent ($0.01) or more in the
Conversion Rate Cap.
(i) Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Conversion Rate Cap pursuant to
this Section 2.8.7, the Corporation at its expense will promptly
compute such adjustment or readjustment in accordance with the terms
hereof and cause independent public accountants selected by the
Corporation to verify such computation and prepare and furnish to each
holder of Series AA Preferred a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Corporation will, upon
the written request at any time of any holder of Series AA Preferred,
furnish or cause to be furnished to such holder a like certificate
setting forth (i) such adjustments and readjustments, (ii) the
Conversion Rate at that time in effect, and
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<PAGE> 15
(iii) the number of shares of Common Stock and the amount, if any, of
other property which at that time would be received upon the
conversion of Series AA Preferred.
(j) Reservation of Stock Issuable Upon Conversion. The
Corporation will at all times reserve and keep available out of its
authorized but unissued shares of Common Stock solely for the purpose
of effecting the conversion of the shares of the Series AA Preferred
such number of its shares of Common Stock as will from time to time be
sufficient to effect the conversion of all then-outstanding shares of
the Series AA Preferred; and if at any time the number of authorized
but unissued shares of Common Stock will not be sufficient to effect
the conversion of all then-outstanding shares of the Series AA
Preferred, the Corporation will take such corporate action as may, in
the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as will be
sufficient for such purpose.
(k) American Stock Exchange Limitations. If on the Conversion
Date applicable to any conversion of any shares of Series AA Preferred,
(i) the Common Stock is then listed for trading on the American Stock
Exchange, (ii) the Conversion Price then in effect is such that the
aggregate number of (A) shares of Common Stock that would then be
issuable upon conversion of all shares of Series AA Preferred and
Series CC Preferred issued pursuant to the Recapitalization Agreement
that are currently subject to a Conversion Notice, (B) any shares of
Common Stock previously issued upon conversion of shares of Series AA
Preferred and Series CC Preferred issued pursuant to the
Recapitalization Agreement, (C) any shares of Common Stock previously
issued pursuant to the Recapitalization Agreement and any shares of
Common Stock which are or may become issuable pursuant to Section 3.4
of the Recapitalization Agreement, and (D) any shares of Common Stock
issued upon conversion of shares of Series AA Preferred and Series CC
Preferred issued in payment of dividends hereunder or in payment of
dividends under the Certificate of Designations for the Series CC
Preferred, would equal or exceed 20% of the number of shares of Common
Stock outstanding on the Initial Issuance Date (the "Issuable
Maximum"), and (iii) the Corporation has not previously obtained
Shareholder Approval (as defined below), then, in the event that the
American Stock Exchange has requested that the Corporation obtain
Shareholder Approval prior to the issuance of such shares of Common
Stock, the Corporation shall issue to the converting holder of Series
AA Preferred a number of shares of Common Stock equal to the Issuable
Maximum less the number of shares of Common Stock issued pursuant to
clauses (ii)(B), (C) and (D) above and, with respect to any shares of
Common Stock that would be issuable to such holder in respect of the
Conversion Notice at issue in excess of the Issuable Maximum, the
converting holder shall have the option to require the Corporation, as
promptly as possible, but in no event later than 60 days after such
Conversion Date, to convene a meeting of the holders of the Common
Stock and obtain the Shareholder Approval. "Shareholder Approval" means
the approval by a majority of the total votes cast on the proposal, in
person or by proxy, at a meeting of the shareholders of the Corporation
or such other procedure as shall be permissible under the Code, all
held in accordance with the Corporation's Charter and by-laws, of the
issuance by the Corporation of shares of Common Stock exceeding the
Issuable Maximum as a consequence of the conversion of shares of Series
AA Preferred into Common Stock as and to the extent required pursuant
to Section 713 of the American Stock Exchange Guide (or any successor
or
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<PAGE> 16
replacement provision thereof). Any shares referenced in clauses
(ii)(A), (B), (C) or (D) above that are issued at a price less than the
greater of the book or market value of the Common Stock on the Initial
Issuance Date shall reduce the number of shares constituting the
Issuable Maximum.
2.8.8. Repurchase Upon Change in Control.
(a) In the event of the occurrence of a Change in Control, or
if the Corporation enters into a definitive agreement providing for a
transaction that, upon consummation, would result in a Change in
Control, the Corporation will, within 30 calendar days after such
Change in Control or the execution of such an agreement, offer to
purchase each then-outstanding share of Series AA Preferred for an
amount per share equal to $100,000 plus accrued and unpaid dividends
through the date of purchase. Within 10 calendar days after such Change
in Control or the execution of such an agreement, the Corporation will
provide written notice (a "Repurchase Notice") to each holder of Series
AA Preferred at such holder's address as it appears on the stock books
of the Corporation. The Repurchase Notice will state (i) the repurchase
price, (ii) the commencement date of such offer and the expiration date
of such offer (which shall be no less than 20 Business Days after the
commencement date), (iii) the Repurchase Date (as defined below) on
which shares tendered during the offer period will be repurchased by
the Corporation, (iv) the place or places and manner in which the
holder is to surrender his or her certificate(s) to the Corporation,
and (v) that dividends on the shares of Series AA Preferred that are
tendered for repurchase will cease to accumulate on the Repurchase Date
unless the Corporation defaults in payment in full of the applicable
repurchase price. The Corporation will comply with the requirements of
all applicable securities laws and regulations in connection with such
a transfer. The Corporation will purchase any shares tendered to the
Corporation during such offer period on the applicable Repurchase Date.
The term "Repurchase Date" shall mean (i) with respect to a Change in
Control that has already occurred, the expiration date of the offer
period, as set forth in the Repurchase Notice, and (ii) with respect to
a Change in Control that will result upon consummation of an agreement
executed by the Corporation, the date on which the transactions
contemplated by such agreement are consummated; provided, that, if the
agreement referenced in the preceding clause (ii) is terminated prior
to closing or the transactions contemplated thereby are not otherwise
consummated, then the Repurchase Date shall not be deemed to have
occurred and the Corporation shall not have any obligation to
consummate the repurchase of shares pursuant to this Section 2.8.8 and
the Corporation, by subsequent written notice to the holders of Series
AA Preferred, shall rescind such offer to repurchase and shall return
any certificates previously tendered to the Corporation.
Notwithstanding the foregoing, the Corporation shall not repurchase any
shares of Series AA Preferred on the Repurchase Date unless the
Corporation also repurchases contemporaneously therewith or prior
thereto a Ratable Portion of the shares of Series BB based on the
liquidation value (face value plus accrued and unpaid dividends) of the
outstanding shares of each series. As used herein, "Ratable Portion"
shall be the percentage determined by multiplying (A) the quotient of
(x) the liquidation value of the outstanding shares of the applicable
series of preferred stock divided by (y) the aggregate liquidation
value of the outstanding shares of the Series AA Preferred and the
Series BB Preferred, and (B) 100.
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<PAGE> 17
Upon surrender of the certificate(s) representing shares of Series AA
Preferred that are the subject of repurchase, duly endorsed (or
otherwise in proper form for transfer, as determined by the
Corporation), in the manner and at the place designated in the
Repurchase Notice and on the Repurchase Date, the full repurchase price
for such shares will be paid in cash to the person or entity whose name
appears on such certificate(s) as the owner thereof, and each
surrendered certificate will be canceled and retired. In the event that
fewer than all of the shares represented by any one certificate are
repurchased, a new certificate will be issued representing the
unrepurchased shares. On and after the Repurchase Date, unless the
Corporation defaults in the payment in full of the applicable
repurchase price, dividends on the Series AA Preferred to be
repurchased will cease to accumulate, and all rights of the holders
thereof will terminate with respect thereto on the Repurchase Date,
other than the right to receive the repurchase price, provided,
however, that if a Repurchase Notice has been given as provided in
Section 2.8.8(a) and the funds necessary for repurchase (including an
amount in cash in respect of all dividends that will accumulate to the
Repurchase Date) have been irrevocably deposited in trust with a bank
having an aggregate shareholders' equity of at least $5.0 billion for
the equal and ratable benefit of all holders of shares of Series AA
Preferred that are to be repurchased, then, at the close of business on
the day on which such funds are deposited in trust, dividends on the
Series AA Preferred to be repurchased will cease to accumulate and the
holders thereof will cease to be shareholders of the Corporation and be
entitled only to receive the repurchase price.
(b) A "Change in Control" will be deemed to occur upon the
occurrence of (1) the MEI Affiliates ceasing to be the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of 50% or more
of the combined voting power of the Corporation's then-outstanding
voting securities entitled to vote generally in the election of
directors ("Voting Stock"), whether directly by a stock sale or
indirectly through a merger, consolidation, recapitalization or similar
transaction; (2) the adoption of a plan of liquidation or distribution
by the Corporation; or (3) the sale, lease, transfer, conveyance or
other disposition (other than by way of merger or consolidation), in
one or a series of related transactions, of all or substantially all of
the assets of the Corporation and its subsidiaries taken as a whole to
any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act); or (4) the first day after the Initial Issuance on which a
majority of the members of the Board are not Continuing Directors;
provided, however, that no event described above will constitute a
"Change in Control" if the transaction that would otherwise constitute
a "Change in Control" has received Series AA Approval prior to the
consummation of such transaction. As used herein, "MEI Affiliate"
means, collectively, MEI Holdings, L.P., SZ Capital, L.P., each a
Delaware limited partnership, and any person that directly, or
indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, such entities, and
"Continuing Directors" means, as of any date of determination, any
member of the Board who (i) was a member of such Board on the Initial
Issuance Date, (ii) was nominated for election or elected to the Board
with the approval of a majority of the Continuing Directors who were
members of the Board at the time of such nomination or election or
(iii) is an MEI Affiliate or was nominated for election or elected to
the Board by an MEI Affiliate.
2.8.9. Fractional Shares. Series AA Preferred may be issued
in fractions of a share which will entitle the holder, in proportion to
such holder's
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<PAGE> 18
fractional shares, to receive dividends, participate in distributions,
vote and to have the benefit of all other rights of holders of Series
AA Preferred.
2.8.10. Rank. The Series AA Preferred will rank senior as to
all capital stock of the Corporation, including all Series AA Junior
Stock, in each case as to (i) the payment of dividends or other
distributions, (ii) the redemption of any shares of the Corporation's
capital stock or (iii) distributions upon liquidation, dissolution or
winding up of the Corporation.
2.8.11. Notice to Holders. Any notice given by the
Corporation to holders of record of Series AA Preferred will be
effective if addressed to such holders at their last addresses as shown
on the stock books of the Corporation and deposited in the U.S. mail,
sent first-class, and will be conclusively presumed to have been duly
given, whether or not the holder of the Series AA Preferred receives
such notice.
2.8.12. Certain Limitations. Notwithstanding any other
provision in the Charter or applicable law to the contrary, (a) the
vote of any holder of Series AA Preferred will not be affected by any
direct or indirect interest of the holder or any affiliate or associate
or other person or entity in the matter under consideration or any
other matter, (b) holders of Series AA Preferred will have only the
rights and duties set forth herein and will have no fiduciary or
similar rights and duties, and (c) no holder of Series AA Preferred or
any affiliate or associate thereof will have any liabilities or
obligations to any other person or entity, including without limitation
any other holder of Series AA Preferred or any other class or series of
capital stock of the Corporation, by reason of the giving or
withholding of any vote or consent hereunder or otherwise, it being the
expectation and intention that such vote or consent will be so given or
withheld in the sole discretion of such holder regardless of the effect
thereof on any other person or entity.
2.8.13. Contractual Rights of Holders. The various provisions
set forth herein for the benefit of the holders of the Series AA
Preferred will be deemed contract rights enforceable by them, including
without limitation, by one or more actions for specific performance.
2.8.14. Rule 144A Information Requirement. For so long as any
shares of Series AA Preferred remain outstanding, the Corporation shall
make available, upon the request of any holder of Series AA Preferred,
to such holder or beneficial owner or prospective purchaser of Series
AA Preferred, in connection with any proposed sale thereof, the
information required to be delivered pursuant to Rule 144A under the
Securities Act."
IV.
All other provisions of the Articles of Incorporation shall remain in
full force and effect.
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V.
This Amendment to the Articles of Incorporation was duly adopted on
June 30, 1999 by the Board of Directors of the Corporation without shareholder
approval (which was not required) in accordance with the provisions of Section
14-2-602(d) of the Code.
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IN WITNESS WHEREOF, this amendment to the Certificate of Designations
is executed on behalf of the Corporation as of this ____th day of July, 1999.
By:
----------------------------
Name:
Title:
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EXHIBIT 3.2
CERTIFICATE OF DESIGNATIONS OF SERIES BB PREFERRED STOCK
ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION
OF
MALIBU ENTERTAINMENT WORLDWIDE, INC.
In accordance with Section 14-2-1006 of the Georgia Business
Corporation Code (the "Code"), Malibu Entertainment Worldwide, Inc., a Georgia
corporation (the "Corporation"), hereby certifies as follows:
I.
The name of the corporation is Malibu Entertainment Worldwide, Inc.
II.
Section 2 of Article III of the Articles of Incorporation is hereby
amended to add the following Subsection 2.9:
"2.9 Series BB Preferred Stock. Five thousand shares of
Preferred Stock, no par value, of the Corporation are designated as
"Series BB Preferred Stock" having the voting powers, preferences and
relative participating, optional and other special rights, and the
qualifications, limitations or restrictions thereof, as are set forth
below (the "Series BB Preferred"). Shares of Series BB Preferred shall
not be sold for consideration that is less than the liquidation
preference of such shares.
2.9.1. Dividends and Distributions.
(a) The holders of shares of Series BB Preferred, in
preference to the holders of the Common Stock, no par value per share
(the "Common Stock"), and of any and all other classes or series of
preferred or other capital stock of the Corporation other than the
Series AA Preferred (hereinafter defined) of the Corporation
(collectively, the "Series BB Junior Stock"), will be entitled to
receive dividends, when and as declared by the Board out of funds
legally available therefor, at an annual rate of $9,000 per share,
payable quarterly in arrears on the 1st day of each of January, April,
July and October of each year (except that if any such date is not a
Business Day (as defined below), then such dividend will be payable on
the next day that is a Business Day) (the "Dividend Payment Date"),
commencing with the date of the first issuance of any shares of the
Series BB Preferred (the "Initial Issuance Date"), prior and in
preference to any declaration or payment of any dividend on Series BB
Junior Stock (other than (i) a dividend or distribution on Series BB
Junior Stock solely in shares of Series BB Junior Stock and then only
if all accrued but unpaid dividends on the Series
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BB Preferred have been or are concurrently being paid as provided
herein and (ii) a dividend or distribution on Series BB Junior Stock
in cash with Series BB Approval (as defined below) prior thereto as
provided in Section 2.9.2(b)). Such dividends will be cumulative and
accrue with respect to each share of Series BB Preferred from the date
of issuance of such share of Series BB Preferred (the "Dividend
Commencement Date"), whether or not declared by the Board and whether
or not there are funds of the Corporation legally available for
payment of such dividends. No accrued or accumulated dividends on the
Series BB Preferred will bear interest. As used herein, the term
"Series AA Preferred" means all shares of Preferred Stock, no par
value, of the Corporation that are designated as "Series AA Preferred
Stock", as set forth in the Charter. For purposes hereof, "Business
Day" means any day other than a Saturday, Sunday or any other day on
which national banks in Dallas, Texas are not open for business.
(b) Any dividends that accrue and are payable shall be paid
(i) by the issuance as of the Dividend Payment Date of additional
shares of fully paid, nonassessable Series BB Preferred having an
aggregate liquidation preference equal to the amount of such accrued
dividends or (ii) in cash, with the determination of whether dividends
are to be paid in cash or by issuance of additional shares to be made
by the Board, in its sole discretion; provided, however, that any
dividends that first accrue on or after January 1, 2002 may not be paid
by the issuance of additional shares of Series BB Preferred unless the
Corporation has first obtained Series BB Approval in writing prior to
the applicable Dividend Payment Date. In the event that dividends are
declared and paid by the issuance of additional shares of Series BB
Preferred as provided in the previous sentence, such dividends will be
deemed paid in full and will not accumulate. The Corporation will
deliver certificates representing shares of Series BB Preferred issued
pursuant to this Section 2.9.1(b) promptly after the Dividend Payment
Date.
(c) Each dividend will be payable to holders of record as
they appear on the stock books of the Corporation on the record date
which shall be the last day of a fiscal quarter of the Corporation.
(d) Notwithstanding anything to the contrary contained
herein, without a Series AA Approval (as such term is defined in the
Certificate of Designations for the Series AA Preferred), (i) no
dividends, whether in cash or in additional shares of Series BB
Preferred, shall be paid on the Series BB Preferred with respect to any
quarter unless all accrued but unpaid dividends on the Series AA
Preferred together with dividends on the Series AA Preferred for the
current quarterly period shall have been paid by the Corporation and
(ii) no cash dividends on the Series BB Preferred shall be paid for any
quarterly periods ending after January 1, 2003 unless cash dividends
for such quarterly period are paid to the holders of Series AA
Preferred contemporaneously therewith or prior thereto.
2.9.2. Voting Rights. Holders of Series BB Preferred will
have no voting rights and their consent will not be required for taking
any corporate action
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except (a) for any amendments to this Certificate of Designations of
Series BB Preferred Stock, (b) as otherwise required by law or as
otherwise provided in Section 2.9.3 herein and (c) that, if any share
of Series BB Preferred is then outstanding, the affirmative vote or
consent of holders of a majority of the then-outstanding shares of
Series BB Preferred, voting together as a single voting group
(provided that any such amendment described in Section 2.9.2(a) herein
that adversely changes the dividend payable on or liquidation
preference of the Series BB Preferred shall require the affirmative
vote or consent of all holders of Series BB Preferred) (a "Series BB
Approval"), will be required in order for the Corporation to:
(i) Amend the Charter in any way, whether by amending the
terms of this Section 2.9 or any other provision of the Charter,
that adversely affects any of the powers, designations,
preferences and relative, participating, optional and other
special rights of the Series BB Preferred;
(ii) Subject to Section 2.9.1(a), declare or pay any cash or
other dividends on, or make any other distributions in respect of
any other shares of Series BB Junior Stock;
(iii) Redeem or purchase or otherwise acquire for
consideration any shares of any Series BB Junior Stock (except
(A) in connection with the exercise of employee stock options and
(B) in connection with the repurchase of up to $2,500,000 in
liquidation preference of Series CC Preferred Stock, no par
value, of the Corporation (the "Series CC Preferred"), plus an
amount equal to all accrued but unpaid dividends thereon during
each calendar year pursuant to Section 2.10.9 of the Certificate
of Designations of Series CC Preferred Stock);
(iv) Authorize or issue any shares of capital stock or
increase the authorized number of shares of any class or series
of capital stock ranking prior or superior to, or on parity with,
the Series BB Preferred with respect to dividends or other
distributions or upon liquidation, dissolution or winding up of
the Corporation (except to SZ Capital, L.P. or its successors or
assigns in accordance with (A) the terms of the Second Amended
and Restated Recapitalization Agreement, dated July 1999, among
the Corporation, Malibu Centers, Inc., Nomura Asset Capital
Corporation ("Nomura"), Partnership Acquisition Trust V (the
"Trust"), MEI Holdings, L.P. ("MEIH") and SZ Capital, L.P. ("SZ")
(the "Recapitalization Agreement") and (B) shares of Series AA
Preferred issued pursuant to Section 2.8.1 of the Certificate of
Designations of Series AA Preferred Stock);
(v) Pay any dividends on the Series BB Preferred that first
accrue on or after January 1, 2002 by the issuance of additional
shares of Series BB Preferred;
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(vi) Issue any shares of Series BB Preferred other than the
shares issued to Partnership Acquisition Trust V on the date of
the Recapitalization Agreement or issued as payments of dividends
on shares of Series BB Preferred as provided herein;
(vii) Issue more than $18,500,000 in liquidation preference
of shares of Series AA Preferred to SZ Capital, L.P. or its
affiliates pursuant to Sections 2.9(a) and 2.9(b) of the
Recapitalization Agreement or otherwise;
(viii) Amend Section 2.8.8 of the Certificate of
Designations of Series AA Preferred Stock or Section 2.10.9 of
the Certificate of Designations of the Series CC Preferred Stock;
or
(ix) In one or a series of related transactions, consolidate
or merge with or into (whether or not the Corporation is the
surviving corporation), or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its
properties or assets to, another person or entity or adopt a plan
relating to the liquidation or dissolution of the Corporation
unless (1) either (I) the Corporation shall be the surviving or
continuing entity or (II) the entity (if other than the
Corporation) formed by or surviving any such consolidation or
merger or to which such sale, assignment, transfer, lease,
conveyance or other disposition has been made shall be a
corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia; (2) the
Series BB Preferred shall be converted into or exchanged for and
shall become shares of the successor, transferee or resulting
entity, having in respect of such successor, transferee or
resulting entity substantially the same powers, preferences and
relative participating, optional or other special rights, and the
qualifications, limitations or restrictions thereon, that the
Series BB Preferred had immediately prior to such transaction;
(3) the Corporation or such successor, transferee or resulting
entity as applicable, shall have a Consolidated Net Worth
(immediately after such transaction but prior to any purchase
accounting adjustments for such transaction) equal to or greater
than the Consolidated Net Worth of the Corporation immediately
prior to such transaction; and (4) the Corporation delivers to
the holders of the Series BB Preferred prior to the consummation
of the proposed transaction an officer's certificate or an
opinion of counsel reasonably satisfactory to the holders of the
Series BB Preferred to the combined effect that such sale,
assignment, transfer, lease, conveyance or other disposition
complies with the terms of the Articles of Incorporation,
including without limitation, this Certificate of Designations,
and that all conditions precedent to such sale, assignment,
transfer, lease, conveyance or other disposition have been
satisfied. Notwithstanding the foregoing, the consent of the
holders of the Series BB Preferred shall not be required to
authorize or approve the merger of any wholly-owned subsidiary of
the Corporation with and into the Corporation.
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For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series
of related transactions) of properties or assets of one or more
subsidiaries of the Corporation which, if all properties and
assets of such subsidiaries were held directly by the
Corporation, would constitute a transfer of all or substantially
all of the properties and assets of the Corporation shall be
deemed to be a transfer of all or substantially all of the
properties and assets of the Corporation.
"Consolidated Net Worth" means the net worth of the Corporation
and its subsidiaries determined by the Corporation's auditors
based on the consolidated balance sheet of the Corporation
prepared in accordance with GAAP. As used herein, "GAAP" means
the generally accepted accounting principles in the United
States.
The Corporation will not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of
the Corporation unless the Corporation could purchase or otherwise
acquire such shares at such time and in such manner in accordance with
the foregoing restrictions.
2.9.3. Voting Rights in Certain Circumstances.
(a) (i) Except as otherwise set forth in this Section 2.9.3,
if for any reason (x) on January 1, 2002, the Corporation has not
paid either by cash or the issuance of additional shares of
Series BB Preferred in accordance with and as permitted by the
provisions of this Section 2.9, all dividends that are accrued
and payable for all quarterly periods ending prior to January 1,
2002, (y) at any time on and after January 1, 2003, the Board
does not declare or the Corporation does not pay all dividends
first accruing on or after January 1, 2002 in full in cash for
any two quarters or (z) the Corporation does not redeem all
shares of Series BB Preferred in accordance with Section 2.9.6
prior to January 1, 2014 (any of (x), (y), or (z) a "Series BB
Board Representation Event"), then the holders of Series BB
Preferred will be entitled, at any annual meeting of the
shareholders or any special meeting called for such purpose
(which meeting will be called upon the request of the holders of
at least 20% of the then-outstanding shares of Series BB
Preferred as provided below), to elect (1) a number of directors
(the "Series BB Directors") equal to the Series BB Board
Representation Number (as defined below) and (2) as set forth in
paragraph (ii) below, three Outside Directors (as defined
below)(the rights to elect directors set forth in clauses (1) and
(2) are sometimes referred to herein as the "Board Representation
Requirement").
(ii) If a Series BB Board Representation Event has occurred,
the Board Representation Requirement set forth in paragraph (i)
above shall also require that the Board of Directors of the
Corporation include three Outside Directors. The Outside
Directors shall be approved by a vote (an "Outsider Director
Vote") of each of (1) the holders of Series BB Preferred, voting
as a separate voting group, and (2) the holders of the Common
Stock, Series AA Preferred pursuant to their rights in Section
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2.8.2(a) of the Certificate of Designations of Series AA
Preferred Stock, and Series CC Preferred pursuant to their rights
in Section 2.10.2(a) of the Certificate of Designations of Series
CC Preferred Stock, voting together as a single voting group,
separate from the Series BB Preferred, with the number of votes
each share of Series AA or Series CC Preferred, as the case may
be, is entitled to cast being determined with reference to the
number of shares of Common Stock into which such share of Series
AA or Series CC Preferred, as the case may be, may be converted.
(iii) "Affiliate" means, with respect to any person or
entity, any other person or entity that, directly or indirectly
through one or more intermediaries, controls or is controlled by,
or is under common control with, such person or entity. The
"Series BB Board Representation Number" shall be equal to (x) the
number of directors constituting the entire Board of Directors of
the Corporation minus three (or such lesser number of Outside
Directors which shall be in office), divided by (y) 2; provided
that if such calculation produces a fraction, such fraction shall
be rounded upward to the next nearest whole number to determine
the Series BB Board Representation Number and provided further
that in no event shall the Series BB Board Representation Number
be less than two. A director shall qualify as an "Outside
Director" if such director is not an Affiliate (except in his
capacity as a director of the Corporation), officer or employee
of the Corporation, MEIH, SZ, Trust or any other holders of a
majority of the then-outstanding shares of Series AA Preferred,
Series BB Preferred, Series CC Preferred or Common Stock, or any
of its subsidiaries and is not an officer, director or employee
of any Affiliate of the Corporation, MEIH, SZ, Trust or any other
holders of a majority of the then-outstanding shares of Series AA
Preferred, Series BB Preferred, Series CC Preferred or Common
Stock.
(iv) The Corporation will notify all holders of Series BB
Preferred as promptly as possible after the occurrence of a
Series BB Board Representation Event of such occurrence and the
material facts relating thereto. In the event that the
Corporation obtains a Series BB Approval to pay a dividend that
first accrues on or after January 1, 2002 by issuance of
additional shares of Series BB Preferred in lieu of cash and the
Corporation agrees to pay such dividend in shares of Series BB
Preferred, the receipt of such approval by the Corporation and
subsequent delivery of certificates representing shares of the
Series BB Preferred issued in full payment of such dividend shall
constitute a waiver of the voting rights specifically provided in
this Section 2.9.3(a) for the quarter in which such dividends
were required to be declared by the Board and paid by the
Corporation. Under no circumstances shall such waiver by the
holders of Series BB Preferred in one quarter constitute a waiver
for subsequent quarters.
(b) (i) Whenever the right to elect directors of the
Corporation has accrued to the holders of Series BB Preferred,
the Corporation may, and upon the written request of the holders
of record of at least 20% of the
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then-outstanding shares of Series BB Preferred will, promptly
satisfy the Board Representation Requirement by increasing the
size of the Board and/or using reasonable efforts to secure the
resignations of such number of directors as is necessary to
enable the Series BB Directors and the Outside Directors to
promptly be elected to the Board. If the Board Representation
Requirement is not so satisfied, then, at any time after the
right to elect directors has vested in the Series BB Preferred
pursuant to this Section 2.9.3, the Secretary of the Corporation
may, and, upon the written request of the holders of record of at
least 20% of the then-outstanding shares of the Series BB
Preferred, addressed to the Secretary at the principal office of
the Corporation, will, call a special meeting of the holders of
Series BB Preferred for the election of the Series BB Directors
and the Outside Directors (and the holders of the Common Stock
and Series AA and Series CC Preferred in respect of the Outside
Directors) as herein above provided, to be held within 30
calendar days after such call and at the place and upon the
notice provided by law and in the Bylaws of the Corporation for
the holding of meetings of shareholders. If any such special
meeting required to be called as above provided has not been
called by the Secretary within 30 calendar days after receipt of
any such request, then the holders of record of at least 20% of
the then-outstanding Series BB Preferred may designate in writing
one of their number to call such meeting, and the person so
designated may call such meeting to be held at the place and upon
the notice above provided, and for that purpose will have access
to the stock ledger of the Corporation. If any such special
meeting has been called by the Secretary of the Corporation or by
the holders of the Series BB Preferred as above provided, and if
the holders of at least a majority of the then-outstanding shares
of Series BB Preferred and entitled to vote at such meeting are
present or represented by proxy at such meeting or any
adjournment thereof, then, by vote of the holders of at least a
majority of such shares of Series BB Preferred present or so
represented at such meeting, the then-authorized number of
directors of the Corporation will be increased by such number of
directors as is necessary to enable the Series BB Directors and
the Outside Directors to promptly be elected to the Board, and at
such meeting, the holders of the Series BB Preferred will be
entitled to elect the additional Series BB Directors so provided
for and the applicable holders will be entitled to elect by an
Outsider Director Vote the additional Outside Directors, such
that the holders of Series BB Preferred shall have elected a
number of Series BB Directors equal to the Series BB Board
Representation Number and the applicable holders shall have
elected by an Outsider Director Vote three Outside Directors, but
any directors so elected will hold office only until their
respective successors are duly elected and qualified at the
annual meeting of shareholders or special meeting held in place
thereof next succeeding their election, at which time their
successors will be elected by vote of the applicable holders
present or so represented at such meeting. The foregoing remedy
will not be deemed exclusive, and shall be in addition to all
other rights and remedies available at law or equity to the
holders of Series BB Preferred. Except for the waiver described
in Section 2.9.3(a),
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the failure to exercise, or any delay in exercising any rights
under this Section 2.9.3 as to a particular Series BB Board
Representation Event will not diminish or otherwise affect the
rights hereunder.
(c) Upon the occurrence of a Series BB Board Representation
Event, each holder of a share of the Series BB Preferred will be
entitled to receive the same prior notice of any shareholders' meeting
as provided to the holders of Common Stock in accordance with the
Bylaws of the Corporation, as well as prior notice of all shareholder
actions to be taken by legally available means in lieu of meeting, and
will vote separately as a class to the extent herein provided.
Fractional votes will be permitted, and any fractions will be counted
in computing voting rights. Any action which may be taken by the
holders of Series BB Preferred may be taken without a meeting of Series
BB Preferred shareholders upon the execution of written consents to
such action by holders of the number of shares of Series BB Preferred
that would be required to vote in favor of taking such action at any
meeting of holders of Series BB Preferred at which all such holders
were present and voting.
(d) Following a Series BB Board Representation Event,
whenever all arrears in dividends on the Series BB Preferred then
outstanding for the quarterly periods that gave rise to the Series BB
Board Representation Event have been paid and dividends thereon for the
current quarterly dividend period shall have been declared by the Board
and paid by the Corporation, then the right of holders of the Series BB
Preferred to satisfy the Board Representation Requirement shall cease
(but subject always to the same provisions for the occurrence of a
Series BB Board Representation Event that causes the vesting of the
Board Representation Requirement specifically set forth in Section
2.9.3(a)), and one month after all such dividends are paid to the
holders of the Series BB Preferred (i) the term of office of Series BB
Directors pursuant to Section 2.9.3 shall terminate in the event that
such director(s) were elected to fill seat(s) on the Board created to
satisfy this Section 2.9.3 and/or (ii) the holders of Series BB
Preferred will use reasonable efforts to secure the resignation(s) of
the number of Series BB Directors.
(e) For so long as the Board Representation Requirement is in
effect, then the holders of Series BB Preferred shall at all times be
entitled to elect a number of Series BB Directors equal to the Series
BB Board Representation Number and shall be entitled to vote in the
election of three Outside Directors as set forth in paragraph (a)
above, including in the event the size of the Board is increased to
satisfy any similar board representation requirements held by any other
classes or series of Preferred Stock.
(f) Shares of Series BB Preferred owned by the Corporation or
any subsidiary of the Corporation will not be counted as outstanding
for any purpose of these Articles of Amendment to Articles of
Incorporation of the Corporation.
(g) For so long as the Board Representation Requirement is in
effect, any vacancies among the directorships relating the directors to
be elected
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solely by vote of the holders of Series BB Preferred pursuant to their
rights to elect the Series BB Directors may be filled by the majority
vote of such Series BB Directors then in office. For so long as the
Board Representation Requirement is in effect, any vacancies among the
Outside Directors may be filled by majority vote of the entire Board
of Directors then in office; provided that a majority of the Series BB
Directors then in office shall have voted in favor of so filling such
vacancy. Notwithstanding the foregoing, any action taken by the Board
of Directors or members thereof to fill vacancies pursuant to this
paragraph shall not detract from the rights of holders of Series BB
Preferred to elect and remove, at any time, the Series BB Directors
and the Outside Directors (in the case of the Outside Directors, such
removal to be only with the concurrence of the holders of Series AA
Preferred, Series CC Preferred and Common Stock voting together as a
single voting group, separate from the Series BB Preferred Stock who
shall also vote as a single voting group).
2.9.4. Reacquired Shares. If permitted by law, any shares of
Series BB Preferred that are issued and thereafter cease to be issued
and outstanding for any reason will be restored to the status of
authorized but unissued shares of preferred stock of the Corporation,
including shares of Series BB Preferred, and may be reissued as part of
a new series of preferred stock of the Corporation subject to the
conditions and restrictions on issuance set forth herein (including
without limitation Section 2.9.2 hereof) or in any other certificate of
designations creating a series of preferred or any similar stock of the
Corporation.
2.9.5. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no
distribution will be made to the holders of shares of Series BB Junior
Stock unless, prior thereto, the holders of shares of Series BB
Preferred shall have received $100,000 per share plus accrued and
unpaid dividends. Neither a consolidation or merger of the Corporation
with another corporation or other legal entity, nor a sale or transfer
of all or part of the Corporation's assets for cash, securities or
other property will be considered a liquidation, dissolution or winding
up of the Corporation.
2.9.6. Redemption.
(a) Redemption Price. Shares of Series BB Preferred may be
redeemed (to the extent not previously redeemed) by the Corporation, at
its sole option, at any time after issuance and:
(i) prior to or on January 1, 2001, at a price per share of
$100,000 plus accrued and unpaid dividends through the date such
redemption price is paid ("Accrued Dividends");
(ii) after January 1, 2001 and prior to or on January 1,
2002, at a price per share of $105,000 plus Accrued Dividends;
(iii) after January 1, 2002 and prior to or on January 1,
2003, at a price per share of $104,000 plus Accrued Dividends;
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(iv) after January 1, 2003 and prior to or on January 1,
2004, at a price per share of $103,000 plus Accrued Dividends;
(v) after January 1, 2004 and prior to or on January 1,
2005, at a price per share of $102,000 plus Accrued Dividends;
(vi) after January 1, 2005 and prior to or on January 1,
2006, at a price per share of $101,000 plus Accrued Dividends;
and
(vii) after January 1, 2006, at a price per share of
$100,000 plus Accrued Dividends;
provided, however, that no shares of Series BB Preferred may be
redeemed by the Corporation under this Section 2.9.6 (A) unless no
shares of Series AA Preferred are outstanding on the date the
Redemption Notice is given or will be outstanding as of the date fixed
for redemption or (B) unless the Corporation has obtained a Series AA
Approval to such redemption.
(b) Redemption Procedures. At least 30 calendar days and not
more than 60 calendar days prior to the date fixed for any redemption
of Series BB Preferred, written notice ("Redemption Notice") will be
given by the Corporation by first class mail, postage prepaid, to each
holder of record of Series BB Preferred on the record date fixed for
such redemption by the Board at such holder's address as it appears on
the stock books of the Corporation, provided that no failure to give
such notice nor any deficiency therein will affect the validity of the
procedure for redemption of any shares of Series BB Preferred except as
to the holder or holders to whom the Corporation has failed to give
such notice or whose notice was defective. The Redemption Notice will
state:
(i) the redemption price;
(ii) whether all or fewer than all of the outstanding shares
of Series BB Preferred are to be redeemed and the total number of
shares of Series BB Preferred being redeemed;
(iii) the date fixed for redemption by the Board, which date
will occur within the applicable redemption period specified in
clause (a) above (the "Redemption Date");
(iv) the place or places and manner in which the holder is
to surrender his or her certificate(s) to the Corporation; and
(v) that dividends on the shares of Series BB Preferred to
be redeemed will cease to accumulate on the Redemption Date
unless the Corporation defaults in payment in full of the
applicable redemption price.
(c) Upon surrender of the certificate(s) representing shares
of Series BB Preferred that are the subject of redemption pursuant to
Section 2.9.6(a), duly endorsed (or otherwise in proper form for
transfer, as determined by the Corporation), in the manner and at the
place designated in the
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Redemption Notice and on the Redemption Date, the full redemption
price for such shares will be paid in cash to the person or entity
whose name appears on such certificate(s) as the owner thereof, and
each surrendered certificate will be canceled and retired. In the
event that fewer than all of the shares represented by any one
certificate are redeemed, a new certificate will be issued
representing the unredeemed shares.
(d) On and after the Redemption Date, unless the Corporation
defaults in the payment in full of the applicable redemption price,
dividends on the Series BB Preferred to be redeemed will cease to
accumulate, and all rights of the holders thereof will terminate with
respect thereto on the Redemption Date, other than the right to receive
the redemption price, provided, however, that if a Redemption Notice
has been given as provided in Section 2.9.6(b) and the funds necessary
for redemption (including an amount in cash in respect of all dividends
that will accumulate to the Redemption Date) have been irrevocably
deposited in trust with a bank having an aggregate shareholders' equity
of at least $5.0 billion for the equal and ratable benefit of all
holders of shares of Series BB Preferred that are to be redeemed, then,
at the close of business on the day on which such funds are deposited
in trust, dividends on the Series BB Preferred to be redeemed will
cease to accumulate and the holders thereof will cease to be
shareholders of the Corporation and be entitled only to receive the
redemption price.
(e) If (i) the funds of the Corporation legally available for
redemption of shares of Series BB Preferred on the date scheduled for a
redemption are insufficient to redeem the total number of shares of
Series BB Preferred to be redeemed on such date or (ii) the Corporation
elects to redeem fewer than all of the then-outstanding shares of
Series BB Preferred, then the Corporation shall redeem outstanding
shares of Series BB Preferred ratably among the holders of such shares
to be redeemed based on their holdings of Series BB Preferred. The
shares of Series BB Preferred not redeemed will remain outstanding and
entitled to all the rights and preferences provided herein. If the
funds of the Corporation legally available for redemption of shares of
Series BB Preferred on the date scheduled for a redemption are
insufficient to redeem the total number of shares of Series BB
Preferred to be redeemed on such date, then at any time thereafter when
additional funds of the Corporation become legally available, such
funds will immediately be used to redeem the balance of the shares that
the Corporation has become obligated to redeem on any scheduled
redemption date that it has not redeemed.
2.9.7. Repurchase Upon Change in Control.
(a) In the event of the occurrence of a Change in Control, or
if the Corporation enters into a definitive agreement providing for a
transaction that, upon consummation would result in a Change in
Control, the Corporation will, within 30 calendar days after such
Change in Control or the execution of such an agreement, offer to
purchase each then-outstanding share of Series BB Preferred for an
amount per share equal to $100,000 plus accrued and unpaid dividends
through the date of purchase. Within 10 calendar days after such
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Change in Control or the execution of such an agreement, the
Corporation will provide written notice (a "Repurchase Notice") to
each holder of Series BB Preferred at such holder's address as it
appears on the stock books of the Corporation. The Repurchase Notice
will state (i) the repurchase price, (ii) the commencement date of
such offer and the expiration date of such offer (which shall be no
less than 20 Business Days after the commencement date), (iii) the
Repurchase Date (as defined below) on which shares tendered during the
offer period will be repurchased by the Corporation, (iv) the place or
places and manner in which the holder is to surrender his or her
certificate(s) to the Corporation, and (v) that dividends on the
shares of Series BB Preferred that are tendered for repurchase will
cease to accumulate on the Repurchase Date unless the Corporation
defaults in payment in full of the applicable repurchase price. The
Corporation will comply with the requirements of all applicable
securities laws and regulations in connection with such a transfer.
The Corporation will purchase any shares tendered to the Corporation
during such offer period on the applicable Repurchase Date. The term
"Repurchase Date" shall mean (i) with respect to a Change in Control
that has already occurred, the expiration date of the offer period, as
set forth in the Repurchase Notice, and (ii) with respect to a Change
in Control that will result upon consummation of an agreement executed
by the Corporation, the date on which the transactions contemplated by
such agreement are consummated; provided, that, if the agreement
referenced in the preceding clause (ii) is terminated prior to closing
or the transactions contemplated thereby are not otherwise
consummated, then the Repurchase Date shall not be deemed to have
occurred and the Corporation shall not have any obligation to
consummate the repurchase of shares pursuant to this Section 2.9.7 and
the Corporation, by subsequent written notice to the holders of Series
BB Preferred, shall rescind such offer to repurchase and shall return
any certificates previously tendered to the Corporation.
Notwithstanding the foregoing, the Corporation shall not repurchase
any shares of Series BB Preferred on the Repurchase Date unless the
Corporation also repurchases contemporaneously therewith or prior
thereto a Ratable Portion of the shares of Series AA Preferred based
on the liquidation value (face value plus accrued and unpaid
dividends) of the outstanding shares of each series. As used herein,
"Ratable Portion" shall be the percentage determined by multiplying
(A) the quotient of (x) the liquidation value of the outstanding
shares of the applicable series of preferred stock divided by (y) the
aggregate liquidation value of the outstanding shares of the Series AA
Preferred and the Series BB Preferred, and (B) 100.
Upon surrender of the certificate(s) representing shares of
Series BB Preferred that are the subject of repurchase, duly endorsed
(or otherwise in proper form for transfer, as determined by the
Corporation), in the manner and at the place designated in the
Repurchase Notice and on the Repurchase Date, the full repurchase price
for such shares will be paid in cash to the person or entity whose name
appears on such certificate(s) as the owner thereof, and each
surrendered certificate will be canceled and retired. In the event that
fewer than all of the shares represented by any one certificate are
repurchased, a new certificate will be issued representing the
unrepurchased shares. On and after the Repurchase Date, unless the
Corporation defaults in the payment in full of the
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applicable repurchase price, dividends on the Series BB Preferred to
be repurchased will cease to accumulate, and all rights of the holders
thereof will terminate with respect thereto on the Repurchase Date,
other than the right to receive the repurchase price, provided,
however, that if a Repurchase Notice has been given as provided in
Section 2.9.7(a) and the funds necessary for repurchase (including an
amount in cash in respect of all dividends that will accumulate to the
Repurchase Date) have been irrevocably deposited in trust with a bank
having an aggregate shareholders' equity of at least $5.0 billion for
the equal and ratable benefit of all holders of shares of Series BB
Preferred that are to be repurchased, then, at the close of business
on the day on which such funds are deposited in trust, dividends on
the Series BB Preferred to be repurchased will cease to accumulate and
the holders thereof will cease to be shareholders of the Corporation
and be entitled only to receive the repurchase price.
(b) A "Change in Control" will be deemed to occur
upon the occurrence of (1) the MEI Affiliates ceasing to be the
beneficial owner (within the meaning of Rule 13d-3 promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
of 50% or more of the combined voting power of the Corporation's
then-outstanding voting securities entitled to vote generally in the
election of directors ("Voting Stock"), whether directly by a stock
sale or indirectly through a merger, consolidation, recapitalization or
similar transaction; (2) the adoption of a plan of liquidation or
distribution by the Corporation; (3) the sale, lease, transfer,
conveyance or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Corporation and its subsidiaries
taken as a whole to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act); or (4) the first day after the Initial
Issuance on which a majority of the members of the Board are not
Continuing Directors; provided, however, that no event described above
will constitute a "Change in Control" if the transaction that would
otherwise constitute a "Change in Control" has received Series BB
Approval prior to the consummation of such transaction. As used herein,
"MEI Affiliate" means, collectively, MEI Holdings, L.P., SZ Capital,
L.P., each a Delaware limited partnership, and any person that
directly, or indirectly, through one or more intermediaries, controls
or is controlled by, or is under common control with, such entities,
and "Continuing Directors" means, as of any date of determination, any
member of the Board who (i) was a member of such Board on the Initial
Issuance Date, (ii) was nominated for election or elected to the Board
with the approval of a majority of the Continuing Directors who were
members of the Board at the time of such nomination or election or
(iii) is an MEI Affiliate or was nominated for election or elected to
the Board by an MEI Affiliate.
2.9.8. Fractional Shares. Series BB Preferred may be issued
in fractions of a share which will entitle the holder, in proportion to
such holder's fractional shares, to receive dividends, participate in
distributions, vote and to have the benefit of all other rights of
holders of Series BB Preferred.
2.9.9. Rank. The Series BB Preferred will rank senior as to
all capital stock of the Corporation other than the Series AA
Preferred, including all
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Series BB Junior Stock, in each case as to (i) the payment of
dividends or other distributions, (ii) the redemption of any shares of
the Corporation's capital stock or (iii) distributions upon
liquidation, dissolution or winding up of the Corporation.
2.9.10. Notice to Holders. Any notice given by the
Corporation to holders of record of Series BB Preferred will be
effective if addressed to such holders at their last addresses as shown
on the stock books of the Corporation and deposited in the U.S. mail,
sent first-class, and will be conclusively presumed to have been duly
given, whether or not the holder of the Series BB Preferred receives
such notice.
2.9.11. Certain Limitations. Notwithstanding any other
provision in the Charter or applicable law to the contrary, (a) the
vote of any holder of Series BB Preferred will not be affected by any
direct or indirect interest of the holder or any affiliate or associate
or other person or entity in the matter under consideration or any
other matter, (b) holders of Series BB Preferred will have only the
rights and duties set forth herein and will have no fiduciary or
similar rights and duties, and (c) no holder of Series BB Preferred or
any affiliate or associate thereof will have any liabilities or
obligations to any other person or entity, including without limitation
any other holder of Series BB Preferred or any other class or series of
capital stock of the Corporation, by reason of the giving or
withholding of any vote or consent hereunder or otherwise, it being the
expectation and intention that such vote or consent will be so given or
withheld in the sole discretion of such holder regardless of the effect
thereof on any other person or entity.
2.9.12. Contractual Rights of Holders. The various provisions
set forth herein for the benefit of the holders of the Series BB
Preferred will be deemed contract rights enforceable by them, including
without limitation, by one or more actions for specific performance.
2.9.13. Rule 144A Information Requirement. For so long as any
shares of Series BB Preferred remain outstanding, the Corporation shall
make available, upon the request of any holder of Series BB Preferred,
to such holder or beneficial owner or prospective purchaser of Series
BB Preferred, in connection with any proposed sale thereof, the
information required to be delivered pursuant to Rule 144A under the
Securities Act."
III.
All other provisions of the Articles of Incorporation shall remain in
full force and effect.
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IV.
This Amendment to the Articles of Incorporation was duly adopted on
June 30, 1999 by the Board of Directors of the Corporation without shareholder
approval (which was not required) in accordance with the provisions of Section
14-2-602(d) of the Code.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to the Articles of Incorporation to be executed by its duly authorized
officer as of the ____ day of July, 1999.
By:
--------------------------
Name:
Title:
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EXHIBIT 3.3
CERTIFICATE OF DESIGNATIONS OF SERIES CC PREFERRED STOCK
ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION
OF
MALIBU ENTERTAINMENT WORLDWIDE, INC.
In accordance with Section 14-2-1006 of the Georgia Business
Corporation Code (the "Code"), Malibu Entertainment Worldwide, Inc., a Georgia
corporation (the "Corporation"), hereby certifies as follows:
I.
The name of the corporation is Malibu Entertainment Worldwide, Inc.
II.
Section 2 of Article III of the Articles of Incorporation is hereby
amended to add the following Subsection 2.10:
"2.10 Series CC Preferred Stock. Five thousand shares of
Preferred Stock, no par value, of the Corporation are designated as
"Series CC Preferred Stock" having the voting powers, preferences and
relative participating, optional and other special rights, and the
qualifications, limitations or restrictions thereof, as are set forth
below (the "Series CC Preferred"). Shares of Series CC Preferred shall
not be sold for consideration that is less than the liquidation
preference of such shares.
2.10.1. Dividends and Distributions.
(a) The holders of shares of Series CC Preferred, in
preference to the holders of the Common Stock, no par value per share
(the "Common Stock"), and of any and all other classes or series of
preferred or other capital stock of the Corporation other than the
Series AA Preferred (hereinafter defined) and the Series BB Preferred
(hereinafter defined) of the Corporation (collectively, the "Series CC
Junior Stock"), will be entitled to receive dividends, when and as
declared by the Board out of funds legally available therefor, at an
annual rate of $7,000 per share, payable quarterly in arrears on the
1st day of each of January, April, July and October of each year
(except that if any such date is not a Business Day (as defined below),
then such dividend will be payable on the next day that is a Business
Day) (the "Dividend Payment Date"), commencing with the date of the
first issuance of any shares of the Series CC Preferred (the "Initial
Issuance Date"), prior and in preference to any declaration or payment
of any dividend on Series CC Junior Stock (other than (i) a dividend or
distribution on Series CC Junior Stock solely in shares of Series CC
Junior Stock and then only if all accrued but unpaid dividends on the
Series CC Preferred have been or are concurrently being paid as
provided herein and (ii) a dividend or distribution on Series CC Junior
Stock in cash
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with Series CC Approval (as defined below) prior thereto as provided
in Section 2.10.2(b)). Such dividends will be cumulative and accrue
with respect to each share of Series CC Preferred from the date of
issuance of such share of Series CC Preferred (the "Dividend
Commencement Date"), whether or not declared by the Board and whether
or not there are funds of the Corporation legally available for
payment of such dividends. No accrued or accumulated dividends on the
Series CC Preferred will bear interest. As used herein, the term
"Series AA Preferred" means all shares of Preferred Stock, no par
value, of the Corporation that are designated as "Series AA Preferred
Stock" as set forth in the Charter. As used herein, the term "Series
BB Preferred" means all shares of Preferred Stock, no par value, of
the Corporation that are designated as "Series BB Preferred Stock" as
set forth in the Charter. For purposes hereof, "Business Day" means
any day other than a Saturday, Sunday or any other day on which
national banks in Dallas, Texas are not open for business.
(b) Any dividends that accrue and are payable shall be paid
(i) by the issuance as of the Dividend Payment Date of additional
shares of fully paid, nonassessable Series CC Preferred having an
aggregate liquidation preference equal to the amount of such accrued
dividends or (ii) in cash, with the determination of whether dividends
are to be paid in cash or by issuance of additional shares to be made
by the Board, in its sole discretion; provided, however, that any
dividends that first accrue on or after January 1, 2002 may not be paid
by the issuance of additional shares of Series CC Preferred unless the
Corporation has first obtained Series CC Approval in writing prior to
the applicable Dividend Payment Date. In the event that dividends are
declared and paid by the issuance of additional shares of Series CC
Preferred as provided in the previous sentence, such dividends will be
deemed paid in full and will not accumulate. The Corporation will
deliver certificates representing shares of Series CC Preferred issued
pursuant to this Section 2.10.1(b) promptly after the Dividend Payment
Date.
(c) Each dividend will be payable to holders of record as
they appear on the stock books of the Corporation on the record date
which shall be the last day of a fiscal quarter of the Corporation.
(d) Notwithstanding anything to the contrary contained
herein, without a Series AA Approval (as such term is defined in the
Certificate of Designations for the Series AA Preferred), (i) no
dividends, whether in cash or in additional shares of Series CC
Preferred, shall be paid on the Series CC Preferred with respect to any
quarter unless all accrued but unpaid dividends on the Series AA
Preferred together with dividends on the Series AA Preferred for the
current quarterly period shall have been paid by the Corporation and
(ii) no cash dividends on the Series CC Preferred shall be paid for any
quarterly periods ending after January 1, 2004 unless cash dividends
for such quarterly period are paid to the holders of Series AA
Preferred contemporaneously therewith or prior thereto.
(e) Notwithstanding anything to the contrary contained
herein, without a Series BB Approval (as such term is defined in the
Certificate of Designations for the Series BB Preferred), (i) no
dividends, whether in cash or in additional shares of Series CC
Preferred, shall be paid on the Series CC Preferred with respect to any
quarter unless all accrued but unpaid dividends on the Series BB
Preferred together with dividends on the Series BB Preferred for the
current quarterly period shall have been
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paid by the Corporation and (ii) no cash dividends on the Series CC
Preferred shall be paid for any quarterly periods ending after January
1, 2002 unless cash dividends for such quarterly period are paid to
the holders of Series BB Preferred contemporaneously therewith or
prior thereto.
2.10.2. Voting Rights.
(a) Except as otherwise required by law, and in addition to
the rights provided in Section 2.10.2(b), each share of Series CC
Preferred shall entitle the holder thereof to vote on each matter
submitted to a vote of the shareholders of the Corporation (including
with respect to the election of "Outside Directors" of the Corporation
pursuant to Section 2.9.3 of the Certificate of Designations of the
Series BB Preferred at the record date for the determination of
shareholders entitled to vote on such matter or, if no such record date
is established, at the date such vote is taken or any written consent
of shareholders becomes effective. Each holder of Series CC Preferred
shall be entitled to cast the number of votes per share thereof as
equals the number of votes which could be cast by the holders of the
number of shares of Common Stock into which such share of Series CC
Preferred could then be converted pursuant to Section 2.10.7
(regardless of whether the Series CC Preferred is then convertible)
immediately prior to the taking of such vote. Except as otherwise
required by law or expressly provided in the Charter, the holders of
shares of Common Stock, Series AA Preferred and Series CC Preferred
(and of any other class or series of Series CC Junior Stock that is
entitled to vote on a matter) shall vote together and not as separate
classes or series.
(b) In addition to the voting rights provided in Section
2.10.2(a), the affirmative vote or consent of holders of a majority of
the then-outstanding shares of Series CC Preferred, voting together as
a single voting group (a "Series CC Approval"), will be required in
order for the Corporation to:
(i) Amend the Charter in any way, whether by amending the
terms of this Section 2.10 or any other provision of the Charter,
that adversely affects any of the powers, designations,
preferences and relative, participating, optional and other
special rights of the Series CC Preferred (provided that any such
amendment that adversely changes the dividend payable on or
liquidation preference of the Series CC Preferred shall require
the affirmative vote or consent of all holders of Series CC
Preferred);
(ii) Subject to Section 2.10.1(a), declare or pay any cash
or other dividends on, or make any other distributions in respect
of any other shares of Series CC Junior Stock;
(iii) Redeem or purchase or otherwise acquire for
consideration any shares of any Series CC Junior Stock (except in
connection with the exercise of employee stock options);
(iv) Authorize or issue any shares of capital stock or
increase the authorized number of shares of any class or series
of capital stock ranking prior or superior to, or on parity with,
the Series CC Preferred with respect to
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dividends or other distributions or upon liquidation, dissolution
or winding up of the Corporation (except to SZ Capital, L.P. or
Nomura Asset Capital Corporation ("Nomura") or their successors
or assigns in accordance with the terms of the Second Amended and
Restated Recapitalization Agreement, dated July 1999, among the
Corporation, Malibu Centers, Inc., Nomura, Partnership
Acquisition Trust V, MEI Holdings, L.P. and SZ Capital, L.P. (the
"Recapitalization Agreement"));
(v) Pay any dividends on the Series CC Preferred that first
accrue on or after January 1, 2002 by the issuance of additional
shares of Series CC Preferred;
(vi) Issue any shares of Series BB Preferred other than the
shares issued to Partnership Acquisition Trust V on the date of
the Recapitalization Agreement or issued as payments of dividends
thereon as provided in the Certificate of Designations of Series
BB Preferred Stock;
(vii) Issue any shares of Series CC Preferred other than
pursuant to the Recapitalization Agreement, including issuances
of Working Capital Series CC Preferred pursuant to Section 2.10.9
of this Certificate of Designations;
(viii) [Intentionally Omitted]; or
(ix) In one or a series of related transactions, consolidate
or merge with or into (whether or not the Corporation is the
surviving corporation), or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its
properties or assets to, another person or entity or adopt a plan
relating to the liquidation or dissolution of the Corporation
unless (1) either (I) the Corporation shall be the surviving or
continuing entity or (II) the entity (if other than the
Corporation) formed by or surviving any such consolidation or
merger or to which such sale, assignment, transfer, lease,
conveyance or other disposition has been made shall be a
corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia; (2) the
Series CC Preferred shall be converted into or exchanged for and
shall become shares of the successor, transferee or resulting
entity, having in respect of such successor, transferee or
resulting entity substantially the same powers, preferences and
relative participating, optional or other special rights, and the
qualifications, limitations or restrictions thereon, that the
Series CC Preferred had immediately prior to such transaction;
(3) the Corporation or such successor, transferee or resulting
entity as applicable, shall have a Consolidated Net Worth
(immediately after such transaction but prior to any purchase
accounting adjustments for such transaction) equal to or greater
than the Consolidated Net Worth of the Corporation immediately
prior to such transaction; and (4) the Corporation delivers to
the holders of the Series CC Preferred prior to the consummation
of the proposed transaction an officer's certificate or an
opinion of counsel reasonably satisfactory to the holders of the
Series CC Preferred to the combined effect that such sale,
assignment, transfer, lease, conveyance or other disposition
complies with the terms of the Articles of Incorporation of the
Corporation,
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including without limitation, the Articles of Amendment thereto
that include this Certificate of Designations, and that all
conditions precedent to such sale, assignment, transfer, lease,
conveyance or other disposition have been satisfied.
Notwithstanding the foregoing, the consent of the holders of the
Series CC Preferred shall not be required to authorize or approve
the merger of any wholly-owned subsidiary of the Corporation with
and into the Corporation.
For purposes of the foregoing, the transfer (by lease,
assignment, sale or otherwise, in a single transaction or series
of related transactions) of properties or assets of one or more
subsidiaries of the Corporation which, if all properties and
assets of such subsidiaries were held directly by the
Corporation, would constitute a transfer of all or substantially
all of the properties and assets of the Corporation shall be
deemed to be a transfer of all or substantially all of the
properties and assets of the Corporation.
"Consolidated Net Worth" means the net worth of the Corporation
and its subsidiaries determined by the Corporation's auditors
based on the consolidated balance sheet of the Corporation
prepared in accordance with GAAP. As used herein, "GAAP" means
the generally accepted accounting principles in the United
States.
The Corporation will not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of
the Corporation unless the Corporation could purchase or otherwise
acquire such shares at such time and in such manner in accordance with
the foregoing restrictions.
2.10.3. Outstanding Shares. Shares of Series CC Preferred
owned by the Corporation or any subsidiary of the Corporation will not
be counted as outstanding for any purpose of these Articles of
Amendment to Articles of Incorporation of the Corporation.
2.10.4. Reacquired Shares. If permitted by law, any shares of
Series CC Preferred that are issued and thereafter cease to be issued
and outstanding for any reason will be restored to the status of
authorized but unissued shares of preferred stock of the Corporation,
including shares of Series CC Preferred, and may be reissued as part of
a new series of preferred stock of the Corporation subject to the
conditions and restrictions on issuance set forth herein (including
without limitation Section 2.10.2 hereof) or in any other certificate
of designations creating a series of preferred or any similar stock of
the Corporation.
2.10.5. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no
distribution will be made to the holders of shares of Series CC Junior
Stock unless, prior thereto, the holders of shares of Series CC
Preferred shall have received $100,000 per share plus accrued and
unpaid dividends. Neither a consolidation or merger of the Corporation
with another corporation or other legal entity, nor a sale or transfer
of all or part of the Corporation's assets for cash, securities or
other property will be considered a liquidation, dissolution or winding
up of the Corporation.
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2.10.6. Redemption.
(a) Redemption Price. Shares of Series CC Preferred may be
redeemed (to the extent not previously redeemed or converted and as to
which no Conversion Notice has been delivered to the Corporation on or
before the date fixed for redemption) by the Corporation, at its sole
option, at any time after issuance and:
(i) prior to or on January 1, 2001, at a price per share of
$100,000 plus accrued and unpaid dividends through the date such
redemption price is paid ("Accrued Dividends");
(ii) after January 1, 2001 and prior to or on January 1,
2002, at a price per share of $105,000 plus Accrued Dividends;
(iii) after January 1, 2002 and prior to or on January 1,
2003, at a price per share of $104,000 plus Accrued Dividends;
(iv) after January 1, 2003 and prior to or on January 1,
2004, at a price per share of $103,000 plus Accrued Dividends;
(v) after January 1, 2004 and prior to or on January 1,
2005, at a price per share of $102,000 plus Accrued Dividends;
(vi) after January 1, 2005 and prior to or on January 1,
2006, at a price per share of $101,000 plus Accrued Dividends;
and
(vii) after January 1, 2006, at a price per share of
$100,000 plus Accrued Dividends;
provided, however, that no shares of Series CC Preferred may be
redeemed by the Corporation under this Section 2.10.6 (A) unless
no shares of Series AA Preferred are outstanding on the date the
Redemption Notice is given or will be outstanding as of the date
fixed for redemption or the Corporation has obtained a Series AA
Approval to such redemption and (B) unless no shares of Series BB
Preferred are outstanding on the date the Redemption Notice is
given or will be outstanding as of the date fixed for redemption
or the Corporation has obtained a Series BB Approval to such
redemption.
(b) Redemption Procedures. At least 30 calendar days and not
more than 60 calendar days prior to the date fixed for any redemption
of Series CC Preferred, written notice ("Redemption Notice") will be
given by the Corporation by first class mail, postage prepaid, to each
holder of record of Series CC Preferred on the record date fixed for
such redemption by the Board at such holder's address as it appears on
the stock books of the Corporation, provided that no failure to give
such notice nor any deficiency therein will affect the validity of the
procedure for redemption of any shares of Series CC Preferred except as
to the holder or holders to whom the Corporation has failed to give
such notice or whose notice was defective. The Redemption Notice will
state:
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(i) the redemption price;
(ii) whether all or fewer than all of the outstanding shares
of Series CC Preferred are to be redeemed and the total number of
shares of Series CC Preferred being redeemed;
(iii) the date fixed for redemption by the Board, which date
will occur within the applicable redemption period specified in
clause (a) above (the "Redemption Date");
(iv) the place or places and manner in which the holder is to
surrender his or her certificate(s) to the Corporation; and
(v) that dividends on the shares of Series CC Preferred to be
redeemed will cease to accumulate on the Redemption Date unless
the Corporation defaults in payment in full of the applicable
redemption price.
(c) Upon surrender of the certificate(s) representing shares
of Series CC Preferred that are the subject of redemption pursuant to
Section 2.10.6(a), duly endorsed (or otherwise in proper form for
transfer, as determined by the Corporation), in the manner and at the
place designated in the Redemption Notice and on the Redemption Date,
the full redemption price for such shares will be paid in cash to the
person or entity whose name appears on such certificate(s) as the owner
thereof, and each surrendered certificate will be canceled and retired.
In the event that fewer than all of the shares represented by any one
certificate are redeemed, a new certificate will be issued representing
the unredeemed shares.
(d) On and after the Redemption Date, unless the Corporation
defaults in the payment in full of the applicable redemption price,
dividends on the Series CC Preferred to be redeemed will cease to
accumulate, and all rights of the holders thereof will terminate with
respect thereto on the Redemption Date, other than the right to receive
the redemption price, provided, however, that if a Redemption Notice
has been given as provided in Section 2.10.6(b) and the funds necessary
for redemption (including an amount in cash in respect of all dividends
that will accumulate to the Redemption Date) have been irrevocably
deposited in trust with a bank having an aggregate shareholders' equity
of at least $5.0 billion for the equal and ratable benefit of all
holders of shares of Series CC Preferred that are to be redeemed, then,
at the close of business on the day on which such funds are deposited
in trust, dividends on the Series CC Preferred to be redeemed will
cease to accumulate and the holders thereof will cease to be
shareholders of the Corporation and be entitled only to receive the
redemption price.
(e) If (i) the funds of the Corporation legally available for
redemption of shares of Series CC Preferred on the date scheduled for a
redemption are insufficient to redeem the total number of shares of
Series CC Preferred to be redeemed on such date or (ii) the Corporation
elects to redeem fewer than all of the then-outstanding shares of
Series CC Preferred, then the Corporation shall redeem outstanding
shares of Series CC Preferred ratably among the holders of such shares
to be redeemed based on their holdings of Series CC Preferred. The
shares of Series CC Preferred not redeemed will remain outstanding and
entitled to all the rights and
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preferences provided herein. If the funds of the Corporation legally
available for redemption of shares of Series CC Preferred on the date
scheduled for a redemption are insufficient to redeem the total number
of shares of Series CC Preferred to be redeemed on such date, then at
any time thereafter when additional funds of the Corporation become
legally available, such funds will immediately be used to redeem the
balance of the shares that the Corporation has become obligated to
redeem on any scheduled redemption date that it has not redeemed.
2.10.7. Conversion.
(a) Conversion Rate. From and after the date of its issuance,
but subject to Section 2.10.7(k) below, each share of the Series CC
Preferred shall be convertible, at the option of the holder thereof,
into the number of fully paid and nonassessable shares of Common Stock
determined, subject to adjustment as described below, by dividing
$100,000 plus the total accrued and unpaid dividends thereon through
the date of conversion by the Conversion Price. As used herein,
"Conversion Price" means $2.50 and "Conversion Rate" means the number
of shares of Common Stock into which each share of Series CC Preferred
may be converted.
(b) No Fractional Shares. No fractional shares of Common
Stock will be issued upon conversion of Series CC Preferred and, if any
shares of Series CC Preferred surrendered by a holder, in the
aggregate, for conversion would otherwise result in a fractional share
of Common Stock, then such fractional share will be redeemed at the
then-effective Conversion Price per share, payable as promptly as
possible when funds are legally available therefor.
(c) Mechanics of Conversion. Before any holder of shares of
Series CC Preferred will be entitled to convert the same into shares of
Common Stock, such holder must deliver a written notice (a "Conversion
Notice") to the attention of the Secretary or Treasurer of the
Corporation at the Corporation's principal place of business of its
desire to exercise its rights to convert, specifying the number of
shares of Series CC Preferred to be converted and the holder's
calculation of the Conversion Rate. Such computation will be deemed
correct for all purposes hereof absent manifest error. In the event of
any disagreement between the Corporation and the holder as to the
correct Conversion Price, the Conversion Price will be finally
determined by an investment banking or brokerage firm selected by the
Corporation, the fees and expenses of which will be borne equally by
the Corporation and such holder. Such conversion will be deemed to have
been made as of the close of business on the fifth Business Day after
such notice has been so delivered or such other date as the holder
exercising such conversion right and the Corporation agree (the
"Conversion Date"). The Corporation will, promptly upon receipt of all
certificates representing Series CC Preferred as have been issued to
such holder that are to be converted, issue the appropriate number of
shares of Common Stock to such holder. All certificates issued upon the
exercise of the conversion will contain a legend governing restrictions
upon the disposition of such shares imposed by applicable securities
laws. Such legend will be removed by the Corporation by delivery of
substitute certificates without such legend in the event that such
legend is no longer required for purposes of applicable securities laws
upon receipt by the Corporation of an opinion of holder's counsel to
the effect that such legend is no longer so required.
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(d) Adjustment for Subdivisions or Combinations of Common
Stock. In the event that the Corporation at any time or from time to
time after the Initial Issuance Date effects a subdivision or
combination of its outstanding Common Stock into a greater or lesser
number of shares, then and in each such event the Conversion Price will
be increased or decreased proportionately.
(e) Adjustments for Dividends, Distributions on Common Stock.
In the event the Corporation at any time or from time to time after the
Initial Issuance Date makes or issues, or fixes a record date for the
determination of holders of Common Stock entitled to receive a dividend
or other distribution (a "Common Stock Distribution") payable in
additional shares of Common Stock or other securities or rights (other
than the rights, options or warrants offered to Series CC Preferred
pursuant to Section 2.10.7(g)) that are convertible into or entitling
the holder thereof to receive additional shares of Common Stock (such
other securities or rights, "Common Stock Equivalents") without payment
of any consideration by such holder of such Common Stock Equivalents
for the additional shares of Common Stock, without a proportionate and
corresponding dividend or other distribution to holders of Series CC
Preferred calculated as if all of the Series CC Preferred had been
converted in accordance with the terms hereof as of the record date for
such dividend or other distribution, then and in each such event, the
Conversion Price will be decreased as of the time of such issuance or,
in the event such a record date will have been fixed, as of the close
of business on such record date, by multiplying the Conversion Price by
a fraction,
(i) the numerator of which will be the total number of (A)
shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such
record date, plus (B) the maximum number of shares of Common
Stock (not including any shares described in clause (ii)(B)
immediately below) issuable upon conversion or exercise of all
outstanding Common Stock Equivalents as of immediately prior to
the time of such issuance or the close of business on such record
date (the sum of the shares described in clauses (A) and (B)
immediately above, the "Outstanding Shares"); and
(ii) the denominator of which will be the total number of
(A) Outstanding Shares, plus (B) the number of shares of Common
Stock issuable in payment of such dividend or distribution or
upon conversion or exercise of such Common Stock Equivalents;
provided, however, (i) if such record date shall have been fixed and
such dividend is not fully paid or if such distribution is not fully
made on the date fixed therefor, the Conversion Price will be
recomputed accordingly as of the close of business on such record date
and thereafter the Conversion Price will be adjusted pursuant to this
Section 2.10.7(e) as of the time of actual payment of such dividends
or distributions; (ii) if such Common Stock Equivalents provide, with
the passage of time or otherwise, for any decrease or increase in the
number of shares of Common Stock issuable upon conversion or exercise
thereof, the Conversion Price computed upon the original issue
thereof, and any subsequent adjustments based thereon, will, upon any
such decrease or increase becoming effective, be recomputed to reflect
such decrease or increase insofar as it affects the rights of
conversion or exercise of the Common Stock
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Equivalents then outstanding; (iii) upon the expiration of any rights
of conversion or exercise under any unexercised Common Stock
Equivalents, the Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, will, upon
such expiration, be recomputed as if the only additional shares of
Common Stock issued were the shares of such stock, if any, actually
issued upon the conversion or exercise of such Common Stock
Equivalents; or (iv) in the event of issuance of Common Stock
Equivalents which expire by their terms not more than 60 calendar days
after the date of issuance thereof, no adjustments of the Conversion
Price will be made until the expiration or exercise of all such Common
Stock Equivalents, whereupon such adjustment will be made in the
manner provided in this Section 2.10.7(e). The adjustments provided
for in this Section 2.10.7(e) will be made successively whenever any
such dividend or distribution is made. Notwithstanding anything
contained in the foregoing to the contrary, no adjustment to the
Conversion Rate Cap will be made in connection with the issuance of
Common Stock to Nomura or its affiliates pursuant to Section 3.4 the
Recapitalization Agreement.
(f) Reorganization, Merger, Consolidation or Sale of Assets.
If at any time or from time to time there shall be a capital
reorganization of the Common Stock (other than a subdivision,
combination, reclassification or exchange of shares provided for
elsewhere in this Section 2.10.7) or a merger or consolidation of the
Corporation with or into another corporation or other legal entity, or
the sale of all or substantially all of the Corporation's properties
and assets to any other person which is effected so that holders of
Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or
in exchange for Common Stock, then, as a part of such capital
reorganization, merger, consolidation or sale, proper provision will be
made so that the holders of the Series CC Preferred will thereafter be
entitled to receive upon conversion of the Series CC Preferred the
number of shares of stock, securities or assets of the Corporation, or
of the successor corporation or other legal entity resulting from such
merger or consolidation or sale, to which a holder of the Common Stock
deliverable upon conversion of Series CC Preferred would have been
entitled on such capital reorganization, merger, consolidation or sale
at the Conversion Rate then in effect (regardless of whether the Series
CC Preferred is then convertible). In any such case, appropriate
adjustment will be made in the application of the provisions of this
Section 2.10.7 with respect to the rights of the holders of the Series
CC Preferred after the reorganization, merger, consolidation or sale
such that the provisions of this Section 2.10.7 (including adjustment
of the Conversion Price then in effect and the number of shares
purchasable upon conversion of the Series CC Preferred) will be
applicable after that event as nearly equivalent as may be practicable.
This provision will apply to successive capital reorganizations,
mergers, consolidations or sales.
(g) Rights Offering. If at any time or from time to time the
Corporation shall offer to all of the holders of Common Stock any
right, option or warrant to acquire additional shares of capital stock
of the Corporation, then each holder of a share of then-outstanding
Series CC Preferred will be entitled to receive rights, options or
warrants to acquire such number of additional shares of capital stock
of the Corporation as such holder would have been entitled to receive
had such holders of Series CC Preferred been converted immediately
prior to the record date for the offering
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of such rights, options or warrants, at the Conversion Rate then in
effect (regardless of whether the Series CC Preferred is then
convertible).
(h) No Adjustment. Anything herein to the contrary
notwithstanding, the Corporation shall not be required to make any
adjustment to the Conversion Price in case of the issuance of any
securities or shares of Common Stock or other securities pursuant to
the Recapitalization Agreement, including, without limitation, the
issuance of Common Stock to Nomura or its affiliates pursuant to
Section 3.4 of the Recapitalization Agreement, or in the event that the
Corporation shall grant options or other equity incentive awards to
purchase the Corporation's Common Stock or other securities pursuant to
a bona fide employee stock option, equity incentive, stock purchase or
non-employee director plan duly adopted by its shareholders. In
addition, no adjustment to the Conversion Price will be made if such
adjustment would result in a change in the Conversion Price of less
than one cent ($0.01). Any adjustment of less than one cent ($0.01)
which is not made will be carried forward and will be made at the time
of and together with any subsequent adjustment which, on a cumulative
basis, amounts to an adjustment of one cent ($0.01) or more in the
Conversion Price.
(i) Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Conversion Price pursuant to
this Section 2.10.7, the Corporation at its expense will promptly
compute such adjustment or readjustment in accordance with the terms
hereof and cause independent public accountants selected by the
Corporation to verify such computation and prepare and furnish to each
holder of Series CC Preferred a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Corporation will, upon
the written request at any time of any holder of Series CC Preferred,
furnish or cause to be furnished to such holder a like certificate
setting forth (i) such adjustments and readjustments, (ii) the
Conversion Rate at that time in effect, and (iii) the number of shares
of Common Stock and the amount, if any, of other property which at that
time would be received upon the conversion of Series CC Preferred.
(j) Reservation of Stock Issuable Upon Conversion. The
Corporation will at all times reserve and keep available out of its
authorized but unissued shares of Common Stock solely for the purpose
of effecting the conversion of the shares of the Series CC Preferred
such number of its shares of Common Stock as will from time to time be
sufficient to effect the conversion of all then-outstanding shares of
the Series CC Preferred; and if at any time the number of authorized
but unissued shares of Common Stock will not be sufficient to effect
the conversion of all then-outstanding shares of the Series CC
Preferred, the Corporation will take such corporate action as may, in
the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as will be
sufficient for such purpose.
(k) American Stock Exchange Limitations. If on the Conversion
Date applicable to any conversion of any shares of Series CC Preferred,
(i) the Common Stock is then listed for trading on the American Stock
Exchange, (ii) the Conversion Price then in effect is such that the
aggregate number of (A) shares of Common Stock that would then be
issuable upon conversion of all shares of Series AA Preferred and
shares of the Series CC Preferred issued pursuant to the
Recapitalization
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Agreement that are currently subject to a Conversion Notice, (B) any
shares of Common Stock previously issued upon conversion of shares of
Series AA Preferred and Series CC Preferred issued pursuant to the
Recapitalization Agreement, (C) any shares of Common Stock previously
issued pursuant to the Recapitalization Agreement and any shares of
Common Stock which are or may become issuable pursuant to Section 3.4
of the Recapitalization Agreement, and (D) any shares of Common Stock
issued upon conversion of shares of Series AA Preferred and Series CC
Preferred issued in payment of dividends hereunder or in payment of
dividends under the Certificate of Designations for the Series AA
Preferred, would equal or exceed 20% of the number of shares of Common
Stock outstanding on the Initial Issuance Date (the "Issuable
Maximum"), and (iii) the Corporation has not previously obtained
Shareholder Approval (as defined below), then, in the event that the
American Stock Exchange has requested that the Corporation obtain
Shareholder Approval prior to the issuance of such shares of Common
Stock, the Corporation shall issue to the converting holder of Series
CC Preferred a number of shares of Common Stock equal to the Issuable
Maximum less the number of shares of Common Stock issued pursuant to
clauses (ii)(B), (C) and (D) above and, with respect to any shares of
Common Stock that would be issuable to such holder in respect of the
Conversion Notice at issue in excess of the Issuable Maximum, the
converting holder shall have the option to require the Corporation, as
promptly as possible, but in no event later than 60 days after such
Conversion Date, to convene a meeting of the holders of the Common
Stock and obtain the Shareholder Approval. "Shareholder Approval"
means the approval by a majority of the total votes cast on the
proposal, in person or by proxy, at a meeting of the shareholders of
the Corporation or such other procedure as shall be permissible under
the Code, all held in accordance with the Corporation's Charter and
by-laws, of the issuance by the Corporation of shares of Common Stock
exceeding the Issuable Maximum as a consequence of the conversion of
shares of Series CC Preferred into Common Stock as and to the extent
required pursuant to Section 713 of the American Stock Exchange Guide
(or any successor or replacement provision thereof). Any shares
referenced in clauses (ii)(A), (B), (C) or (D) above that are issued
at a price less than the greater of the book or market value of the
Common Stock on the Initial Issuance Date reduce the number of shares
constituting the Issuable Maximum.
2.10.8. Repurchase Upon Change in Control.
(a) In the event of the occurrence of a Change in Control, or
if the Corporation enters into a definitive agreement providing for a
transaction that, upon consummation, would result in a Change in
Control, the Corporation will, within 30 calendar days after such
Change in Control or the execution of such an agreement, offer to
purchase each then-outstanding share of Series CC Preferred for an
amount per share equal to $100,000 plus accrued and unpaid dividends
through the date of purchase. Within 10 calendar days after such Change
in Control or the execution of such an agreement, the Corporation will
provide written notice (a "Repurchase Notice") to each holder of Series
CC Preferred at such holder's address as it appears on the stock books
of the Corporation. The Repurchase Notice will state (i) the repurchase
price, (ii) the commencement date of such offer and the expiration date
of such offer (which shall be no less than 20 Business Days after the
commencement date), (iii) the Repurchase Date (as defined below) on
which shares tendered during the offer period will be repurchased by
the Corporation, (iv) the place or places and manner in which the
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holder is to surrender his or her certificate(s) to the Corporation,
and (v) that dividends on the shares of Series CC Preferred that are
tendered for repurchase will cease to accumulate on the Repurchase Date
unless the Corporation defaults in payment in full of the applicable
repurchase price. The Corporation will comply with the requirements of
all applicable securities laws and regulations in connection with such
a transfer. The Corporation will purchase any shares tendered to the
Corporation during such offer period on the applicable Repurchase Date.
The term "Repurchase Date" shall mean (i) with respect to a Change in
Control that has already occurred, the expiration date of the offer
period, as set forth in the Repurchase Notice, and (ii) with respect to
a Change in Control that will result upon consummation of an agreement
executed by the Corporation, the date on which the transactions
contemplated by such agreement are consummated; provided, that, if the
agreement referenced in the preceding clause (ii) is terminated prior
to closing or the transactions contemplated thereby are not otherwise
consummated, then the Repurchase Date shall not be deemed to have
occurred and the Corporation shall not have any obligation to
consummate the repurchase of shares pursuant to this Section 2.10.8 and
the Corporation, by subsequent written notice to the holders of Series
CC Preferred, shall rescind such offer to repurchase and shall return
any certificates previously tendered to the Corporation.
Notwithstanding the foregoing, the Corporation shall not repurchase any
shares of Series CC Preferred on the Repurchase Date unless the
Corporation has also repurchased all outstanding shares of Series AA
Preferred and Series BB Preferred.
Upon surrender of the certificate(s) representing shares of Series CC
Preferred that are the subject of repurchase, duly endorsed (or
otherwise in proper form for transfer, as determined by the
Corporation), in the manner and at the place designated in the
Repurchase Notice and on the Repurchase Date, the full repurchase price
for such shares will be paid in cash to the person or entity whose name
appears on such certificate(s) as the owner thereof, and each
surrendered certificate will be canceled and retired. In the event that
fewer than all of the shares represented by any one certificate are
repurchased, a new certificate will be issued representing the
unrepurchased shares. On and after the Repurchase Date, unless the
Corporation defaults in the payment in full of the applicable
repurchase price, dividends on the Series CC Preferred to be
repurchased will cease to accumulate, and all rights of the holders
thereof will terminate with respect thereto on the Repurchase Date,
other than the right to receive the repurchase price, provided,
however, that if a Repurchase Notice has been given as provided in
Section 2.10.8(a) and the funds necessary for repurchase (including an
amount in cash in respect of all dividends that will accumulate to the
Repurchase Date) have been irrevocably deposited in trust with a bank
having an aggregate shareholders' equity of at least $5.0 billion for
the equal and ratable benefit of all holders of shares of Series CC
Preferred that are to be repurchased, then, at the close of business on
the day on which such funds are deposited in trust, dividends on the
Series CC Preferred to be repurchased will cease to accumulate and the
holders thereof will cease to be shareholders of the Corporation and be
entitled only to receive the repurchase price.
(b) A "Change in Control" will be deemed to occur upon the
occurrence of (1) the MEI Affiliates ceasing to be the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of 50% or more
of the combined voting power of the Corporation's then-outstanding
voting securities entitled to vote generally in the election
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of directors ("Voting Stock"), whether directly by a stock sale or
indirectly through a merger, consolidation, recapitalization or similar
transaction; (2) the adoption of a plan of liquidation or distribution
by the Corporation; (3) the sale, lease, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a
series of related transactions, of all or substantially all of the
assets of the Corporation and its subsidiaries taken as a whole to any
"person" (as such term is used in Section 13(d)(3) of the Exchange
Act); or (4) the first day after the Initial Issuance on which a
majority of the members of the Board are not Continuing Directors;
provided, however, that no event described above will constitute a
"Change in Control" if the transaction that would otherwise constitute
a "Change in Control" has received Series CC Approval prior to the
consummation of such transaction. As used herein, "MEI Affiliate"
means, collectively, MEI Holdings, L.P., SZ Capital, L.P., each a
Delaware limited partnership, and any person that directly, or
indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, such entities, and
"Continuing Directors" means, as of any date of determination, any
member of the Board who (i) was a member of such Board on the Initial
Issuance Date, (ii) was nominated for election or elected to the Board
with the approval of a majority of the Continuing Directors who were
members of the Board at the time of such nomination or election or
(iii) is an MEI Affiliate or was nominated for election or elected to
the Board by an MEI Affiliate.
2.10.9. Optional Repurchases of Series CC Preferred. In the
event that the Corporation issues shares of Series CC Preferred
pursuant to Section 4.2 of the Recapitalization Agreement (the "Working
Capital Series CC Preferred"), the Corporation may (but shall not be
required to), at any point in time, redeem each then-outstanding share
of Working Capital Series CC Preferred for an amount per share equal to
$100,000 (the "Liquidation Preference") plus accrued and unpaid
dividends through the date of purchase. The aggregate Liquidation
Preference (exclusive of the amount of any accrued and unpaid
dividends) of shares of Working Capital Series CC Preferred issued and
outstanding at any point in time shall not exceed $2,500,000. In the
event the Corporation elects to exercise this option, the Corporation
will provide written notice (an "Optional Repurchase Notice") to (i)
each holder of shares of Working Capital Series CC Preferred at such
holder's address as it appears on the stock books of the Corporation
and (ii) Nomura. The Optional Repurchase Notice will state (i) the
repurchase price, (ii) the commencement date of such offer and the
expiration date of such offer (which shall be no less than 20 Business
Days after the commencement date), (iii) the Optional Repurchase Date
(as defined below) on which shares tendered during the offer period
will be repurchased by the Corporation, (iv) the place or places and
manner in which the holder is to surrender his or her certificate(s) to
the Corporation and (v) that dividends on the shares of Working Capital
Series CC Preferred that are tendered for repurchase will cease to
accumulate on the Optional Repurchase Date unless the Corporation
defaults in payment in full of the applicable repurchase price. The
Corporation will comply with the requirements of all applicable
securities laws and regulations in connection with such a transfer. The
Corporation will purchase any shares of Working Capital Series CC
Preferred tendered to the Corporation during such offer period on the
applicable Repurchase Date. The term "Optional Repurchase Date" shall
mean the expiration date of the offer period, as set forth in the
Optional Repurchase Notice, such date being no less than 20 Business
Days nor more than 30 Business Days after the commencement date.
Notwithstanding the fact that there are shares of Series AA Preferred
and shares of Series BB Preferred outstanding, the Corporation may
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consummate the repurchase of shares of Working Capital Series CC
Preferred pursuant to this Section 2.10.9.
Upon surrender of the certificate(s) representing shares of Working
Capital Series CC Preferred that are the subject of repurchase, duly
endorsed (or otherwise in proper form for transfer, as determined by
the Corporation), in the manner and at the place designated in the
Optional Repurchase Notice and on the Optional Repurchase Date, the
full repurchase price for such shares will be paid in cash to the
person or entity whose name appears on such certificate(s) as the owner
thereof, and each surrendered certificate will be canceled and retired.
In the event that fewer than all of the shares represented by any one
certificate are repurchased, a new certificate will be issued
representing the unrepurchased shares. On and after the Optional
Repurchase Date, unless the Corporation defaults in the payment in full
of the applicable repurchase price, dividends on the Working Capital
Series CC Preferred to be repurchased will cease to accumulate, and all
rights of the holders thereof will terminate with respect thereto on
the Optional Repurchase Date, other than the right to receive the
repurchase price, provided, however, that if an Optional Repurchase
Notice has been given as provided in Section 2.10.9 and the funds
necessary for repurchase (including an amount in cash in respect of all
dividends that will accumulate to the Optional Repurchase Date) have
been irrevocably deposited in trust with a bank having an aggregate
shareholders' equity of at least $5.0 billion for the equal and ratable
benefit of all holders of shares of Working Capital Series CC Preferred
that are to be repurchased, then, at the close of business on the day
on which such funds are deposited in trust, dividends on the Working
Capital Series CC Preferred to be repurchased will cease to accumulate
and the holders thereof will cease to be shareholders of the
Corporation and be entitled only to receive the repurchase price.
2.10.10. Fractional Shares. Series CC Preferred may be issued
in fractions of a share which will entitle the holder, in proportion to
such holder's fractional shares, to receive dividends, participate in
distributions, vote and to have the benefit of all other rights of
holders of Series CC Preferred.
2.10.11. Rank. The Series CC Preferred will rank senior as to
all capital stock of the Corporation other than the Series AA Preferred
and the Series BB Preferred, including all Series CC Junior Stock, in
each case as to (i) the payment of dividends or other distributions,
(ii) the redemption of any shares of the Corporation's capital stock or
(iii) distributions upon liquidation, dissolution or winding up of the
Corporation.
2.10.12. Notice to Holders. Any notice given by the
Corporation to holders of record of Series CC Preferred will be
effective if addressed to such holders at their last addresses as shown
on the stock books of the Corporation and deposited in the U.S. mail,
sent first-class, and will be conclusively presumed to have been duly
given, whether or not the holder of the Series CC Preferred receives
such notice.
2.10.13. Certain Limitations. Notwithstanding any other
provision in the Charter or applicable law to the contrary, (a) the
vote of any holder of Series CC Preferred will not be affected by any
direct or indirect interest of the holder or any affiliate or associate
or other person or entity in the matter under consideration or
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<PAGE> 16
any other matter, (b) holders of Series CC Preferred will have only
the rights and duties set forth herein and will have no fiduciary or
similar rights and duties, and (c) no holder of Series CC Preferred or
any affiliate or associate thereof will have any liabilities or
obligations to any other person or entity, including without
limitation any other holder of Series CC Preferred or any other class
or series of capital stock of the Corporation, by reason of the giving
or withholding of any vote or consent hereunder or otherwise, it being
the expectation and intention that such vote or consent will be so
given or withheld in the sole discretion of such holder regardless of
the effect thereof on any other person or entity.
2.10.14. Contractual Rights of Holders. The various
provisions set forth herein for the benefit of the holders of the
Series CC Preferred will be deemed contract rights enforceable by them,
including without limitation, by one or more actions for specific
performance.
2.10.15. Rule 144A Information Requirement. For so long as
any shares of Series AA Preferred remain outstanding, the Corporation
shall make available, upon the request of any holder of Series AA
Preferred, to such holder or beneficial owner or prospective purchaser
of Series AA Preferred, in connection with any proposed sale thereof,
the information required to be delivered pursuant to Rule 144A under
the Securities Act."
III.
All other provisions of the Articles of Incorporation shall remain in
full force and effect.
IV.
This Amendment to the Articles of Incorporation was duly adopted on
June 30, 1999 by the Board of Directors of the Corporation without shareholder
approval (which was not required) in accordance with the provisions of Section
14-2-602(d) of the Code.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to the Articles of Incorporation to be executed by its duly authorized
officer as of the ____ day of July, 1999.
By:
------------------------
Name:
Title:
17
<PAGE> 1
EXHIBIT 10.4
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made
and entered into as of July 20, 1999, by and between MALIBU ENTERTAINMENT
WORLDWIDE, INC., a Georgia corporation (the "Company"), PARTNERSHIP ACQUISITION
TRUST V, a Delaware business trust (the "Purchaser").
RECITALS
The parties hereto have entered into, or are equity owners in
entities that have entered into, other agreements which contemplate, among other
things, the execution and delivery of this Agreement by the parties hereto.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, the parties hereto hereby
agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
have the following meanings when used herein with initial capital letters:
(a) "Advice" has the meaning set forth in Section 6 hereof.
(b) "Business Day" means any day other than a Saturday, Sunday or any
other day on which national banks in Dallas, Texas are not open for business.
(c) "Common Stock" means the Common Stock, no par value, of the
Company.
(d) "Demand Notice" has the meaning set forth in Section 3 hereof.
(e) "Demand Registration" has the meaning set forth in Section 3
hereof.
(f) "Losses" has the meaning set forth in Section 8 hereof.
(g) "Other Equity Securities" means any shares of capital stock of the
Company and any other securities issued by the Company that are exercisable to
purchase, convertible into, or exchangeable for shares of capital stock of the
Company that are owned by any party hereto (other than the Company) or any
affiliate of any party hereto (other than the Company), whether acquired prior
to, on or after the date hereof.
(h) "Piggyback Registration" has the meaning set forth in Section 4
hereof.
(i) "Prospectus" means the prospectus included in any Registration
Statement (including without limitation a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the
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Registrable Securities covered by such Registration Statement and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
(j) "Registrable Securities" means the Securities and all Other Equity
Securities, upon the respective original issuance thereof, and at all times
subsequent thereto, until, in the case of any such security, (i) it is
effectively registered under the Securities Act and disposed of in accordance
with the Registration Statement covering it, (ii) it is saleable by the holder
thereof pursuant to Rule 144(k), or (iii) it is actually distributed to the
public pursuant to Rule 144; provided, however, "Registrable Securities" shall
not include any equity or debt securities of the Company held by any other
holders of Company Securities that are not party to this Agreement.
(k) "Registration Expenses" has the meaning set forth in Section 7
hereof.
(l) "Registration Statement" means any registration statement of the
Company under the Securities Act that covers any of the Registrable Securities
pursuant to the provisions of this Agreement, including the related Prospectus,
all amendments and supplements to such registration statement (including
post-effective amendments), all exhibits and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
(m) "Rule 144" means Rule 144 under the Securities Act, as such rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
(n) "SEC" means the Securities and Exchange Commission.
(o) "Securities" means all Series BB Preferred Shares held by the
Purchaser or its designee and all shares of Common Stock held by the Purchaser
or its designee.
(p) "Securities Act" means the Securities Act of 1933, as amended.
(q) "Series BB Preferred Shares" means shares of Series BB Preferred
Stock, no par value, of the Company having the terms set forth in the Articles
of Amendment to the Articles of Incorporation of Malibu Entertainment Worldwide,
Inc. filed with the Secretary of State of the State of Georgia on July ____,
1999.
(r) "Special Counsel" has the meaning set forth in Section 7(b) hereof.
(s) "Underwritten registration" or "underwritten offering" means a
distribution, registered pursuant to the Securities Act, in which securities of
the Company are sold to an underwriter for reoffering to the public.
2. Holders of Registrable Securities. Whenever a number or percentage
of Registrable Securities is to be determined hereunder, each then-outstanding
Other Equity Security that is exercisable to purchase, convertible into, or
exchangeable for shares of capital stock of the Company will be deemed to be
equal to the number of shares of Common Stock that would be issued upon the
conversion, exercise or
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exchange of such Other Equity Security (or any security into which such Other
Equity Security is then convertible) at such time (regardless of whether such
Other Equity Security is actually then convertible, exercisable or
exchangeable).
3. Demand Registration.
(a) Requests for Registration. At any time and from time to time after
the date hereof, the holders of Registrable Securities constituting at least 25%
of the total number of a class or series of Registrable Securities then
outstanding will have the right by written notice delivered to the Company (a
"Demand Notice"), to require the Company to register (a "Demand Registration")
under and in accordance with the provisions of the Securities Act the number of
Registrable Securities requested to be so registered (but not less than 15% of
the total number of such class or series of Registrable Securities then
outstanding); provided, however, that no Demand Notice may be given prior to 4
months after the effective date of the immediately preceding Demand
Registration, if any.
The number of Demand Registrations pursuant to this Section
3(a) shall not exceed three for each class or series of Registrable Securities;
provided, however, that in determining the number of Demand Registrations to
which the holders of Registrable Securities are entitled there shall be excluded
(1) any Demand Registration that is an underwritten registration if the managing
underwriter or underwriters advise the holders of Registrable Securities that
the total number of Registrable Securities requested to be included therein
exceeds the number of Registrable Securities that can be sold in such offering
in accordance with the provisions of this Agreement without materially and
adversely affecting the success of such offering and, as a result thereof, less
than the total number of Registrable Securities requested for inclusion are
included in such Demand Registration or such holders, upon receiving such advice
from the managing underwriter or underwriters, elect not to proceed with such
Demand Registration, and (2) any Demand Registration that does not become
effective or is not maintained effective for the period required pursuant to
Section 3(b) hereof, unless in the case of this clause (2) such Demand
Registration does not become effective after being filed by the Company solely
by reason of the refusal to proceed by the holders of Registrable Securities
unless (i) the refusal to proceed is based upon the advice of counsel relating
to a matter with respect to the Company, or (ii) the holders of the Registrable
Securities elect to pay all Registration Expenses in connection with such Demand
Registration.
(b) Filing and Effectiveness. The Company will file a Registration
Statement relating to any Demand Registration within 60 calendar days, and will
use its best efforts to cause the same to be declared effective by the SEC
within 120 calendar days, of the date on which the holders of Registrable
Securities first give the Demand Notice required by Section 3(a) hereof with
respect to such Demand Registration.
All requests made pursuant to this Section 3 will specify the
number of Registrable Securities to be registered and will also specify the
intended methods of disposition thereof; provided, that if the holder demanding
such registration specifies one particular type of underwritten offering, such
method of disposition shall be such type of underwritten offering or a series of
such underwritten offerings (as such demanding
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<PAGE> 4
holders of Registrable Securities may elect) during the period during which the
Registration Statement is effective.
If any Demand Registration is requested to be effected as a
"shelf" registration by the holders of Registrable Securities demanding such
Demand Registration, the Company will keep the Registration Statement filed in
respect thereof effective for a period of up to 12 months from the date on which
the SEC declares such Registration Statement effective (subject to extension
pursuant to Sections 5 and 6 hereof) or such shorter period that will terminate
when all Registrable Securities covered by such Registration Statement have been
sold pursuant to such Registration Statement or have otherwise ceased to be
Registrable Securities.
Within ten calendar days after receipt of such Demand Notice,
the Company will serve written notice thereof (the "Notice") to all other
holders of Registrable Securities and will, subject to the provisions of Section
3(c) hereof, include in such registration all Registrable Securities with
respect to which the Company receives written requests for inclusion therein
within 20 calendar days after the receipt of the Notice by the applicable
holder.
The holders of Registrable Securities will be permitted to
withdraw Registrable Securities from a Registration at any time prior to the
effective date of such Registration provided the remaining number of Registrable
Securities subject to a Demand Notice is at least 15% of the total number of
Registrable Securities then outstanding.
(c) Priority on Demand Registration. If any of the Registrable
Securities registered pursuant to a Demand Registration are to be sold in one or
more firm commitment underwritten offerings, the Company may also provide
written notice to other holders of its equity securities (other than Registrable
Securities), if any, who have piggyback registration rights with respect thereto
and will permit all such other holders who request to be included in the Demand
Registration to include any or all equity securities held by such other holders
in such Demand Registration on the same terms and conditions as the Registrable
Securities. Notwithstanding the foregoing, if the managing underwriter or
underwriters of the offering to which such Demand Registration relates advises
the holders of Registrable Securities that the total amount of Registrable
Securities and securities that such other equity security holders intend to
include in such Demand Registration is in the aggregate such as to materially
and adversely affect the success of such offering, then (i) first, the amount of
securities to be offered for the account of the holders of such other equity
securities will be reduced, to zero if necessary (pro rata among such other
holders on the basis of the amount of such other securities to be included
therein by each such holder), and (ii) second, the number of Registrable
Securities included in such Demand Registration will, if necessary, be reduced
and there will be included in such firm commitment underwritten offering only
the number of Registrable Securities that, in the opinion of such managing
underwriter or underwriters, can be sold without materially and adversely
affecting the success of such offering, allocated pro rata among the holders of
Registrable Securities on the basis of the amount of Registrable Securities to
be included therein by each such holder.
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<PAGE> 5
(d) Postponement of Demand Registration. The Company will be entitled
to postpone the filing period (or suspend the effectiveness) of any Demand
Registration for a reasonable period of time not in excess of 90 calendar days,
if the Company determines, in the good faith exercise of its reasonable business
judgment, that such registration and offering could materially interfere with
bona fide financing plans of the Company or would require disclosure of
information, the premature disclosure of which could materially and adversely
affect the Company. If the Company postpones the filing of a Registration
Statement, it will promptly notify the holders of Registrable Securities in
writing when the events or circumstances permitting such postponement have
ended.
4. Piggyback Registration.
(a) Right to Piggyback. If at any time the Company proposes to file a
registration statement under the Securities Act with respect to an offering of
any class of equity securities (other than a registration statement (i) on Form
S-4, S-8 or any successor form thereto or (ii) filed solely in connection with
an offering made solely to employees of the Company), whether or not for its own
account, then the Company will give written notice of such proposed filing to
the holders of Registrable Securities at least 10 calendar days before the
anticipated filing date. Such notice will offer such holders the opportunity to
register such amount of Registrable Securities as each such holder may request
(a "Piggyback Registration"). Subject to Section 4(b) hereof, the Company will
include in each such Piggyback Registration all Registrable Securities with
respect to which the Company has received written requests for inclusion
therein. The holders of Registrable Securities will be permitted to withdraw all
or part of the Registrable Securities from a Piggyback Registration at any time
prior to the effective date of such Piggyback Registration.
(b) Priority on Piggyback Registrations. The Company will cause the
managing underwriter or underwriters of a proposed underwritten offering to
permit holders of Registrable Securities requested to be included in the
registration for such offering to include therein all such Registrable
Securities requested to be so included on the same terms and conditions as any
similar securities, if any, of the Company included therein. Notwithstanding the
foregoing, if the managing underwriter or underwriters of such offering deliver
an opinion to the holders of Registrable Securities to the effect that the total
amount of securities which such holders, the Company and any other persons
having rights to participate in such registration propose to include in such
offering is such as to materially and adversely affect the success of such
offering, then:
(i) if such registration is a primary registration on behalf
of the Company, the amount of securities to be included therein (x) for the
account of holders of Registrable Securities on the one hand (allocated pro rata
among such holders on the basis of the Registrable Securities requested to be
included therein by each such holder), and (y) for the account of all such other
persons (exclusive of the Company), on the other hand, will be reduced (to zero
if necessary) pro rata in proportion to the respective amounts of securities
requested to be included therein to the extent necessary to reduce the total
amount of securities to be included in such offering to the amount recommended
by such managing underwriter or underwriters; and
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<PAGE> 6
(ii) if such registration is an underwritten secondary
registration on behalf of holders of securities of the Company other than
Registrable Securities, the Company will include therein: (x) first, up to the
full number of securities of such persons exercising "demand" registration
rights that in the opinion of such managing underwriter or underwriters can be
sold or allocated among such holders as they may otherwise so determine, and (y)
second, the amount of Registrable Securities and securities proposed to be sold
by any other person in excess of the amount of securities such persons
exercising "demand" registration rights propose to sell that, in the opinion of
such managing underwriter or underwriters, can be sold (allocated pro rata among
the holders of such Registrable Securities and such other persons on the basis
of the dollar amount of securities requested to be included therein).
5. Restrictions on Sale by Holders of Registrable Securities. Each
holder of Registrable Securities whose Registrable Securities are covered by a
Registration Statement filed pursuant to Section 3 or Section 4 hereof and
declared effective by the SEC, agrees and will confirm such agreement in
writing, if such holder is so requested (pursuant to a timely written notice) by
the managing underwriter or underwriters in an underwritten offering, not to
effect any public sale or distribution of any of the Company's equity securities
(except as part of such underwritten offering), including a sale pursuant to
Rule 144, during the 10-calendar day period prior to, and during the 90-calendar
day period (or such longer period as any managing underwriter or underwriters
may reasonably request in connection with any underwritten public offering)
beginning on, the closing date of each underwritten offering made pursuant to
such Registration Statement. If a request is made pursuant to this Section 5,
the time period during which a Demand Registration (if a shelf registration) is
required to remain continuously effective pursuant to Section 3(b) will be
extended by 100 calendar days or such shorter period that will terminate when
all such Registrable Securities not so included have been sold pursuant to such
Registration Statement.
6. Registration Procedures. In connection with the Company's
registration obligations pursuant to Sections 3 and 4 hereof, the Company will
effect such registrations to permit the sale of such Registrable Securities in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto the Company will as expeditiously as possible:
(a) Prepare and file with the SEC a Registration Statement or
Registration Statements on any appropriate form under the Securities Act
available for the sale of the Registrable Securities by the holders thereof in
accordance with the intended method or methods of distribution thereof, and
cause each such Registration Statement to become effective and remain effective
as provided herein; provided, however, that before filing a Registration
Statement or Prospectus or any amendments or supplements thereto (including
documents that would be incorporated or deemed to be incorporated therein by
reference) the Company will furnish to the holders of the Registrable Securities
covered by such Registration Statement, the Special Counsel and the managing
underwriters, if any, copies of all such documents proposed to be filed, which
documents will be subject to the review of such holders, the Special Counsel and
such underwriters, and the Company will not file any such Registration Statement
or amendment thereto or any Prospectus or any supplement thereto (including such
documents which, upon filing, would or would be incorporated or deemed to be
incorporated by reference therein) to
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<PAGE> 7
which the holders of a majority of the Registrable Securities covered by such
Registration Statement, the Special Counsel or the managing underwriter, if any,
shall reasonably object on a timely basis.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement continuously effective for the applicable period
specified in Section 3; cause the related Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 (or any similar provisions then in force) under the Securities Act; and
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such Registration Statement during the applicable
period in accordance with the intended methods of disposition by the sellers
thereof set forth in such Registration Statement as so amended or to such
Prospectus as so supplemented.
(c) Notify the selling holders of Registrable Securities, the Special
Counsel and the managing underwriters, if any, promptly, and (if requested by
any such person) confirm such notice in writing, (i) when a Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the SEC or any other federal
or state governmental authority for amendments or supplements to a Registration
Statement or related Prospectus or for additional information, (iii) of the
issuance by the SEC or any other federal or state governmental authority of any
stop order suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (iv) if at any time the
representations and warranties of the Company contained in any agreement
contemplated by Section 6(n) hereof (including any underwriting agreement) cease
to be true and correct, (v) of the receipt by the Company of any notification
with respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose, (vi) of the
occurrence of any event which makes any statement made in such Registration
Statement or related Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or which
requires the making of any changes in a Registration Statement, Prospectus or
documents so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading and, in the case of the Prospectus, it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated or is necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (vii) of the
Company's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.
(d) Use every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement, or the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Registrable securities for sale in any jurisdiction, at the earliest possible
moment.
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(e) If requested by the managing underwriters, if any, or the holders
of a majority of the Registrable Securities being registered, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment such
information as the managing underwriters, if any, and such holder agree should
be included therein as may be required by applicable law and (ii) make all
required filings of such Prospectus supplement or such post-effective amendment
as soon as practicable after the Company has received notification of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment; provided, however, that the Company will not be required to take any
actions under this Section 6(e) that are not, in the opinion of counsel for the
Company, in compliance with applicable law.
(f) Furnish to each selling holder of Registrable Securities, the
Special Counsel and each managing underwriter, if any, without charge, at least
one conformed copy of the Registration Statement and any post-effective
amendment thereto, including financial statements (but excluding schedules, all
documents incorporated or deemed incorporated therein by reference and all
exhibits, unless requested in writing by such holder, counsel or underwriter).
(g) Deliver to each selling holder of Registrable Securities, the
Special Counsel and the underwriters, if any, without charge, as many copies of
the Prospectus or Prospectuses relating to such Registrable Securities
(including each preliminary prospectus) and any amendment or supplement thereto
as such persons may reasonably request; and the Company hereby consents to the
use of such Prospectus or each amendment or supplement thereto by each of the
selling holders of Registrable Securities and the underwriters, if any, in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus or any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Securities, to register
or qualify or cooperate with the selling holders of Registrable Securities, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or blue sky laws of such jurisdictions within the United States as
any seller or underwriter reasonably requests in writing; keep each such
registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be kept effective and do any
and all other acts or things necessary or advisable to enable the disposition in
such jurisdiction of the Registrable Securities covered by the applicable
Registration Statement; provided, however that the Company will not be required
to (i) qualify generally to do business in any jurisdiction in which it is not
then so qualified or (ii) take any action that would subject it to general
service of process in any such jurisdiction in which it is not then so subject.
(i) Cooperate with the selling holders of Registrable Securities and
the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold, which
certificates will not bear any restrictive legends; and enable such Registrable
Securities to be in such denominations and registered in such names as the
managing underwriters, if any, shall request at least two Business Days prior to
any sale of Registrable securities to the underwriters.
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(j) Cause the Registrable Securities covered by the applicable
Registration Statement to be registered with or approved by such other
governmental agencies or authorities within the United States except as may be
required solely as a consequence of the nature of such selling holder's
business, in which case the Company will cooperate in all reasonable respects
with the filing of such Registration Statement and the granting of such
approvals as may be necessary to enable the seller or sellers thereof or the
underwriters, if any, to consummate the disposition of such Registrable
Securities.
(k) Upon the occurrence of any event contemplated by Section 6(c)(vi)
or 6(c)(vii) hereof, prepare a supplement or post-effective amendment to each
Registration Statement or a supplement to the related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Securities being
sold thereunder, such Prospectus will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(l) Use its best efforts to cause all Registrable Securities covered by
such Registration Statement to be, at the Company's option (i) listed on each
securities exchange, if any, on which similar securities issued by the Company
are then listed or, if no similar securities issued by the Company are then so
listed, on the New York Stock Exchange or another national securities exchange
if the securities qualify to be so listed or (ii) authorized to be quoted on the
National Association of Securities Dealers Automated Quotation System ("NASDAQ")
or the National Market System of NASDAQ if the securities qualify to be so
quoted; in each case, if requested by the holders of a majority of the
Registrable Securities covered by such Registration statement or the managing
underwriters, if any.
(m) Prior to the effective date of the first Demand Registration or the
first Piggyback Registration, whichever shall occur first, (i) engage an
appropriate transfer agent and provide the transfer agent with printed
certificates for the Registrable Securities in a form eligible for deposit with
The Depository Trust Company and (ii) provide a CUSIP number for the Registrable
Securities.
(n) Enter into such agreements (including, in the event of an
underwritten offering, an underwriting agreement in form, scope and substance as
is customary in underwritten offerings) and take all such other actions in
connection therewith (including those requested by the holders of a majority of
the Registrable Securities being sold or, in the event of an underwritten
offering, those requested by the managing underwriters) in order to expedite or
facilitate the disposition of such Registrable Securities and in such
connection, whether or not an underwriting agreement is entered into and whether
or not the registration is an underwritten registration, (i) make such
representations and warranties to the holders of such Registrable Securities and
the underwriters, if any, with respect to the business of the Company and its
subsidiaries, the Registration Statement, Prospectus and documents incorporated
by reference or deemed incorporated by reference, if any, in each case, in form,
substance and scope as are customarily made by issuers to underwriters in
underwritten offerings and confirm the same if and when requested; (ii) obtain
opinions of counsel to the Company and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably satisfactory to
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<PAGE> 10
the managing underwriters, if any) addressed to each of the underwriters, if
any, covering the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably requested by
such underwriters, including without limitation the matters referred to in
Section 6(n)(i) hereof; (iii) use its best efforts to obtain "comfort" letters
and updates thereof from the independent certified public accountants of the
Company (and, if necessary, any other certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for which
financial statements and financial data is, or is required to be, included in
the Registration Statement), addressed to each of the underwriters, if any, such
letters to be in customary form and covering matters of the type customarily
covered in "comfort" letters in connection with underwritten offerings; and (iv)
deliver such documents and certificates as may be reasonably requested by the
holders of a majority of the Registrable Securities being sold, the Special
Counsel and the managing underwriters, if any, to evidence the continued
validity of the representations and warranties of the Company and its
subsidiaries made pursuant to clause (i) above and to evidence compliance with
any customary conditions contained in the underwriting agreement or similar
agreement entered into by the Company. The foregoing actions will be taken in
connection with each closing under such underwriting or similar agreement as and
to the extent required thereunder.
(o) Make available for inspection by a representative of the holders of
Registrable Securities being sold, any underwriter participating in any
disposition of Registrable Securities, and any attorney or accountant retained
by such selling holders or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company and its
subsidiaries, and cause the officers, directors and employees of the Company and
its subsidiaries to supply all information reasonably requested by any such
representative, underwriter, attorney or accountant in connection with such
Registration Statement; provided however, that any records, information or
documents that are designated by the Company in writing as confidential at the
time of delivery of such records, information or documents will be kept
confidential by such persons unless (i) such records, information or documents
are in the public domain or otherwise publicly available, (ii) disclosure of
such records, information or documents is required by court or administrative
order or is necessary to respond to inquiries of regulatory authorities, or
(iii) disclosure of such records, information or documents, in the opinion of
counsel to such person, is otherwise required by law (including, without
limitation, pursuant to the requirements of the Securities Act).
(p) Comply with all applicable rules and regulations of the SEC and
make generally available to its security holders earning statements satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder
(or any similar rule promulgated under the Securities Act) no later than 45
calendar days after the end of any 12-month period (or 90 calendar days after
the end of any 12-month period if such period is a fiscal year) (i) commencing
at the end of any fiscal quarter in which Registrable Securities are sold to
underwriters in a firm commitment or best efforts underwritten offering, and
(ii) if not sold to underwriters in such an offering, commencing on the first
day of the first fiscal quarter of the Company, after the effective date of a
Registration Statement, which statements shall cover said 12-month period.
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(q) Cooperate with any reasonable request by holders of a majority of
the Registrable Securities offered for sale, including by ensuring participation
by the executive management of the Company in road shows, so long as such
participation does not materially interfere with the operation of the Company's
business.
The Company may require each seller of Registrable Securities
as to which any registration is being effected to furnish to the Company such
information regarding the distribution of such Registrable Securities as the
Company may, from time to time, reasonably request in writing and the Company
may exclude from such registration the Registrable Securities of any seller who
unreasonably fails to furnish such information within a reasonable time after
receiving such request.
Each holder of Registrable Securities will be deemed to have
agreed by virtue of its acquisition of such Registrable Securities that, upon
receipt of any notice from the Company of the occurrence of any event of the
kind described in Section 6(c)(ii), 6(c)(iii), 6(c)(v), 6(c)(vi) or 6(c)(vii)
hereof, such holder will forthwith discontinue disposition of such Registrable
Securities covered by such Registration Statement or Prospectus until such
holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 6(k) hereof, or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and has received copies of any additional or supplemental filings that
are incorporated or deemed to be incorporated by reference in such Prospectus.
In the event the Company shall give any such notice, the time period prescribed
in Section 3(a) hereof will be extended by the number of days during the time
period from and including the date of the giving of such notice to and including
the date when each seller of Registrable Securities covered by such Registration
Statement shall have received (x) the copies of the supplemented or amended
Prospectus contemplated by Section 6(k) hereof or (y) the Advice.
7. Registration Expenses.
(a) All Registration Expenses will be borne by the Company whether or
not any of the Registration Statements become effective. "Registration Expenses"
will mean all fees and expenses incident to the performance of or compliance
with this Agreement by the Company, including, without limitation, (i) all
registration and filing fees (including without limitation fees and expenses (x)
with respect to filings required to be made with the National Association of
Securities Dealers, Inc. and (y) of compliance with securities or "blue sky"
laws), (ii) printing expenses (including without limitation expenses of printing
certificates for Registrable Securities in a form eligible for deposit with The
Depository Trust Company and of printing prospectuses if the printing of
prospectuses is requested by the holders of a majority of the Registrable
Securities included in any Registration Statement), (iii) messenger, telephone
and delivery expenses, (iv) fees and disbursements of counsel for the Company
and the Special Counsel for the sellers of the Registrable Securities, (v) fees
and disbursements of all independent certified public accountants referred to in
Section 6(n)(iii) hereof (including the expenses of any special audit and
"comfort" letters required by or incident to such performance), (vi) fees and
expenses of any "qualified independent underwriter" or other independent
appraiser participating in an offering pursuant to Section 3 of Schedule E to
the By-laws of the National Association of Securities Dealers, Inc., (vii)
Securities Act liability insurance if
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the Company so desires such insurance, and (viii) fees and expenses of all other
persons retained by the Company, provided, however, that Registration Expenses
will not include fees and expenses of counsel for the holders of Registrable
Securities other than as provided below in Section 7(b) nor shall it include
underwriting discounts and commissions relating to the offer and sale of
Registrable Securities, all of which shall be borne by such holders. In
addition, the Company will pay its internal expenses (including without
limitation all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit, the fees and
expenses incurred in connection with the listing of the securities to be
registered on any securities exchange on which similar securities issued by the
Company are then listed and the fees and expenses of any person, including
special experts, retained by the Company.
(b) In connection with any Demand Registration or Piggyback
Registration hereunder, the Company will reimburse the holders of the
Registrable Securities being registered in such registration for the reasonable
fees and disbursements of not more than one counsel (the "Special Counsel"),
chosen by the holders of a majority of the Registrable Securities being
registered.
8. Indemnification.
(a) Indemnification by the Company. The Company will, without
limitation as to time, indemnify and hold harmless, to the fullest extent
permitted by law, each holder of Registrable Securities registered pursuant to
this Agreement, the officers, directors and agents and employees of each of
them, each person who controls such holder (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of any such controlling person, from and against
all losses, claims, damages, liabilities, costs (including without limitation
the costs of investigation and attorneys' fees) and expenses (collectively,
"Losses"), as incurred, arising out of or based upon any untrue or alleged
untrue statement of a material fact contained in any Registration Statement,
Prospectus or form of Prospectus or in any amendment or supplement thereto or in
any preliminary prospectus, or arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
the same are based solely upon information furnished in writing to the Company
by such holder expressly for use therein; provided, however, that the Company
will not be liable to any holder of Registrable Securities to the extent that
any such Losses arise out of or are based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any preliminary
prospectus if either (A) (i) such holder failed to send or deliver a copy of the
Prospectus with or prior to the delivery of written confirmation of the sale by
such holder of a Registrable Security to the person asserting the claim from
which such Losses arise and (ii) the Prospectus would have completely corrected
such untrue statement or alleged untrue statement or such omission or alleged
omission; or (B) such untrue statement or alleged untrue statement, omission or
alleged omission is completely corrected in an amendment or supplement to the
Prospectus previously furnished by or on behalf of the Company with copies of
the Prospectus as so amended or supplemented, and such holder thereafter fails
to deliver such Prospectus as so amended or supplemented prior to or
concurrently with the sale of a Registrable Security to the person asserting the
claim from which such Losses arise.
12
<PAGE> 13
The rights of any holder of Registrable Securities hereunder
will not be exclusive of the rights of any holder of Registrable Securities
under any other agreement or instrument of any holder of Registrable Securities
to which the Company is a party. Nothing in such other agreement or instrument
will be interpreted as limiting or otherwise adversely affecting a holder of
Registrable Securities hereunder and nothing in this Agreement will be
interpreted as limiting or otherwise adversely affecting the holder of
Registrable Securities' rights under any such other agreement or instrument,
provided, however, that no Indemnified Party will be entitled hereunder to
recover more than its indemnified Losses.
(b) Indemnification by Holders of Registrable Securities. In connection
with any Registration Statement in which a holder of Registrable Securities is
participating, such holder of Registrable Securities will furnish to the Company
in writing such information as the Company reasonably requests for use in
connection with any Registration Statement or Prospectus and will severally
indemnify, to the fullest extent permitted by law, the Company, its directors
and officers, agents and employees, each person who controls the Company (within
the meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents or employees of such controlling
persons, from and against all Losses arising out of or based upon (i) any untrue
statement of a material fact contained in any Registration Statement, Prospectus
or preliminary prospectus or arising out of or based upon any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing by
such holder to the Company expressly for use in such Registration Statement or
Prospectus and was relied upon by the Company in the preparation of such
Registration Statement, Prospectus or preliminary prospectus and (ii) the
failure of such holder of Registrable Securities to deliver such Prospectus as
so amended or supplemented prior to or concurrently with the sale of a
Registrable Security to the person asserting the claim from which such Losses
arise. In no event will the liability of any selling holder of Registrable
Securities hereunder be greater in amount than the dollar amount of the proceeds
(net of payment of all expenses and underwriter's discounts and commissions)
received by such holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. If any person shall become
entitled to indemnity hereunder (an "indemnified party"), such indemnified party
shall give prompt notice to the party from which such indemnity is sought (the
"indemnifying party") of any claim or of the commencement of any action or
proceeding with respect to which such indemnified party seeks indemnification or
contribution pursuant hereto; provided, however, that the failure to so notify
the indemnifying party will not relieve the indemnifying party from any
obligation or liability except to the extent that the indemnifying party has
been prejudiced materially by such failure. All fees and expenses (including any
fees and expenses incurred in connection with investigating or preparing to
defend such action or proceeding) will be paid to the indemnified party, as
incurred, within five calendar days of written notice thereof to the
indemnifying party (regardless of whether it is ultimately determined that an
indemnified party is not entitled to indemnification hereunder). The
indemnifying party will not consent to entry of any judgment or enter into any
settlement or otherwise seek to terminate any action or
13
<PAGE> 14
proceeding in which any indemnified party is or could be a party and as to which
indemnification or contribution could be sought by such indemnified party under
this Section 8, unless such judgment, settlement or other termination includes
as an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release, in form and substance satisfactory to the
indemnified party, from all liability in respect of such claim or litigation for
which such indemnified party would be entitled to indemnification hereunder.
(d) Contribution. If the indemnification provided for in this Section 8
is unavailable to an indemnified party under Section 8(a) or 8(b) hereof in
respect of any Losses or is insufficient to hold such indemnified party
harmless, then each applicable indemnifying party, in lieu of indemnifying such
indemnified party, will, jointly and severally, contribute to the amount paid or
payable by such indemnified party as a result of such Losses, in such proportion
as is appropriate to reflect the relative fault of the indemnifying party or
indemnifying parties, on the one hand, and such indemnified party, on the other
hand, in connection with the actions, statements or omissions that resulted in
such Losses as well as any other relevant equitable considerations. The relative
fault of such indemnifying party or indemnifying parties, on the one hand, and
such indemnified party, on the other hand, will be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or related to information supplied by,
such indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses will be deemed to include any legal or other fees or expenses
incurred by such party in connection with any action or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) were determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provision of this Section 8(d), an indemnifying
party that is a selling holder of Registrable Securities will not be required to
contribute any amount in excess of the amount by which the proceeds actually
received by such indemnifying party from the sale of Registrable Securities
exceeds the amount of any damages which such indemnifying party has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
The indemnity, contribution and expense reimbursement
obligations of the Company hereunder will be in addition to any liability the
Company may otherwise have hereunder or otherwise. The provisions of this
Section 8 will survive so long as Registrable Securities remain outstanding,
notwithstanding any transfer of the Registrable Securities by any holder thereof
or any termination of this Agreement.
9. Rules 144 and 144A. The Company will file the reports required to be
filed by it under the Securities Act and the Exchange Act in a timely manner,
and will cooperate with any holder of Registrable Securities (including without
limitation by
14
<PAGE> 15
making such representations as any such holder may reasonably request), all to
the extent required from time to time to enable such holder to sell Registrable
Securities without registration under the Securities Act within the limitations
of the exemptions provided by Rules 144 and 144A (including, without limitation,
the requirements of Rule 144A(d)(4)). Upon the request of any holder of
Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with such filing requirements.
Notwithstanding the foregoing, nothing in this Section 9 will be deemed to
require the Company to register any of its securities under any section of the
Exchange Act.
10. Underwritten Registrations. If any of the Registrable Securities
covered by any Demand Registration are to be sold in an underwritten offering,
the investment banker or investment bankers and manager or managers that will
manage the offering will be selected by the holders of Registrable Securities
that gave the Demand Notice with respect to such offering; provided, that such
investment banker or manager shall be reasonably satisfactory to the Company. If
any Piggyback Registration is an underwritten offering, the Company will have
the right to select the investment banker or investment bankers and managers to
administer the offering.
11. Miscellaneous.
(a) Remedies. In the event of a breach by the Company of its
obligations under this Agreement, each holder of Registrable Securities, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby further agrees that, in the event
of any action for specific performance in respect of such breach, it will waive
the defense that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Except for (i) the Registration Rights
Agreement, dated August 28, 1996, between the Company and MEI Holdings, L.P.
(the "First MEI Agreement"), (ii) the Registration Rights Agreement, dated July
20, 1999, between the Company and MEI Holdings, L.P. (the "Second MEI
Agreement") and (iii) the Registration Rights Agreement, dated July 20, 1999,
between the Company and SZ Capital, L.P. (the "SZ Agreement"), the Company has
not entered, as of the date hereof, and will not enter, on or after the date
hereof, into any agreement with respect to its securities which is inconsistent
with the rights granted to the holders of Registrable Securities in this
Agreement or otherwise conflicts with the provisions hereof and, in addition
thereto, without the written consent of the holders of a majority of the
then-outstanding Registrable Securities, the Company will not grant to any
person the right to request the Company to register any securities of the
Company under the Securities Act unless the rights so granted are subject to the
prior rights of the holders of Registrable Securities set forth herein, and, if
exercised, would not otherwise conflict or be inconsistent with the provisions
of, this Agreement. This Agreement, the First MEI Agreement, the Second MEI
Agreement and the SZ Agreement will be deemed to be independent agreements and
no limitation or restriction contained in this Agreement will be deemed to
conflict with, limit or restrict the rights of MEI Holdings, L.P. under the
First MEI Agreement or the Second MEI Agreement or the rights of SZ Capital,
L.P. under the
15
<PAGE> 16
SZ Agreement and no limitation or restriction contained in this Agreement will
be deemed to conflict with, limit or restrict the rights of the Purchaser under
this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the Company has obtained the written consent of holders of a
majority of the then-outstanding Registrable Securities. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of holders of Registrable
Securities whose securities are being sold pursuant to a Registration Statement
and that does not directly or indirectly affect the rights of other holders of
Registrable Securities may be given by holders of at least 51% of the
Registrable Securities being sold by such holders; provided, however, that the
provisions of this sentence may not be amended, modified, or supplemented except
in accordance with the provisions of the immediately preceding sentence.
(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing and will be deemed given (i) when
made, if made by hand delivery, (ii) upon confirmation, if made by fax, or (iii)
one Business Day after being deposited with a reputable next-day courier,
postage prepaid, to the parties as follows:
(x) if to the Company, initially at 717 North Harwood, Suite
1640, Dallas, Texas 75201, Fax Number (214) 210-8702, Attention: Chief
Executive Officer, and thereafter at such other address, notice of
which is given to the holders of Registrable Securities in accordance
with the provisions of this Section 11(d), with a copy to Munsch Hardt
Kopf & Harr, P.C., 4000 Fountain Place, 1445 Ross Avenue, Dallas, Texas
75201, Fax Number (214) 855-7584, Attention: William T. Cavanaugh, Jr.,
Esq.;
(y) if to Purchaser, initially at 2 World Financial Center,
Building B, 21st Floor, New York, New York 10281, Fax Number (212)
667-1861, Attention: Timothy Mackey, and thereafter at such other
address, notice of which is given in accordance with the provisions of
Section 11(d), with a copy to Dechert Price & Rhoads, 4000 Bell
Atlantic Tower, 1717 Arch Street, Philadelphia, Pennsylvania 19103, Fax
Number (215) 994-5106, Attention: David W. Forti, Esq.; and
(z) if to any other holder of Registrable Securities, at the
most current address given by such holder to the Company in accordance
with the provisions of this Section 11(d).
(e) Owner of Registrable Securities. The Company will maintain, or will
cause its registrar and transfer agent to maintain, a stock book with respect to
the Common Stock, in which all transfers of Registrable Securities of which the
Company has received notice will be recorded. The Company may deem and treat the
person in whose name Registrable Securities are registered in the stock book of
the Company as the owner thereof for all purposes, including without limitation
the giving of notices under this Agreement.
16
<PAGE> 17
(f) Successors and Assigns. This Agreement will inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties
and will inure to the benefit of each holder of any Registrable Securities. The
Company may not assign its rights or obligations hereunder without the prior
written consent of each holder of any Registrable Securities. The holders of the
shares may assign the rights and obligations under this Agreement to any
subsequent holder of such shares. Notwithstanding the foregoing, no transferee
will have any of the rights granted under this Agreement (i) until such
transferee shall have acknowledged its rights and obligations hereunder by a
signed written statement of such transferee's acceptance of such rights and
obligations or (ii) if the transferor notifies the Company in writing on or
prior to such transfer that the transferee shall not have such rights.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed will be deemed to be an original and all of which taken
together will constitute one and the same instrument.
(h) Headings. The headings in this Agreement are for convenience of
reference only and will not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF GEORGIA, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS.
(j) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein will remain in full force and effect and will in
no way be affected, impaired or invalidated, and the parties hereto will use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such which may
be hereafter declared invalid, void or unenforceable.
(k) Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the registration rights granted by the Company with respect to the
Registrable Securities. This Agreement supersedes all prior agreements and
understandings among the parties with respect to such registration rights.
(l) Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the prevailing party, as determined by the court, will be entitled
to recover reasonable attorneys' fees in addition to any other available remedy.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
17
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date first written above.
COMPANY:
MALIBU ENTERTAINMENT WORLDWIDE, INC.,
a Georgia corporation
By:
-------------------------------------
Name:
-------------------------------------
Title
-------------------------------------
PURCHASER:
PARTNERSHIP ACQUISITION TRUST V,
a Delaware business trust
By:
-------------------------------------
Name:
-------------------------------------
Title
-------------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,095,005
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 1,330,698
<CURRENT-ASSETS> 5,970,852
<PP&E> 97,221,013<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 105,351,749
<CURRENT-LIABILITIES> 12,471,195
<BONDS> 19,385,530
0
88,793,959
<COMMON> 143,281,180
<OTHER-SE> 162,274,381
<TOTAL-LIABILITY-AND-EQUITY> 105,351,749
<SALES> 33,630,939
<TOTAL-REVENUES> 33,630,939
<CGS> 0
<TOTAL-COSTS> 37,949,598
<OTHER-EXPENSES> (98,025)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,624,744
<INCOME-PRETAX> (11,041,428)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,041,428)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,526,856)
<EPS-BASIC> (.26)
<EPS-DILUTED> (.26)
<FN>
<F1>PP&E is net of Accumulated Depreciation
</FN>
</TABLE>
