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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
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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 COMMISSION FILE NO. 0-22458 IRS NO. 58-1949379
</TABLE>
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Securities registered pursuant to Section 12(b) of the Securities Exchange Act:
<TABLE>
<CAPTION>
TITLE OF CLASS NAME OF EXCHANGE ON WHICH REGISTERED
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<S> <C>
Common Stock, no par value American Stock Exchange
</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.
Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K will not
be contained in the definitive Proxy Statement incorporated by reference into
Part III of this Report.
At March 26, 1999, there were 46,508,625 shares of the Company's common
stock outstanding. The aggregate market value of the 7.2 million common shares
held by nonaffiliates of the Company was approximately $9.4 million, based on
the closing sales price of common stock as reported by the American Stock
Exchange on that date.
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DOCUMENT INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Company's 1999 annual meeting of
shareholders, which will be filed prior to April 30, 1999, will be when so filed
incorporated by reference into Part III hereof to the extent stated therein.
Except with respect to information specifically incorporated by reference
herein, the Proxy Statement is not deemed to be filed as a part hereof.
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<PAGE> 2
PART I
CERTAIN 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 are based on the beliefs of the management of the Company, as
well as assumptions made by and information currently available to the
management of the Company. When used in this report, the words "anticipate,"
"believe," "estimate," "expect," "intend" and similar expressions, as they
relate to the Company or its management, identify forward-looking statements.
Such statements reflect the current views of the Company or its management with
respect to future events and are subject to certain risks, uncertainties and
assumptions relating to the operations and results of operations of the Company
and the success of the Company's business and Recapitalization Plan, including
as a result of the availability, terms and cost of capital resources, the
willingness of the Company's lenders to agree to the recapitalization of the
Company's debt, and the terms thereof; 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; the impact of present and future
laws; the ongoing need for capital improvements; changes in operating expenses;
adverse changes in governmental rules or policies, and changes in demographics
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.
ITEMS 1 & 2. BUSINESS AND PROPERTIES
BUSINESS
The Company owns and operates multiple-attraction entertainment centers.
The Company's original concept was the family entertainment center ("FEC"),
which generally included a combination of several entertainment attractions at a
single location such as miniature golf courses, go-karts, bumper boats, batting
cages, video game rooms, souvenir concession stands and, in some parks, scaled
grand prix style racetracks utilizing the Company's proprietary Malibu Grand
Prix race cars. In 1997, the Company introduced its new SpeedZone concept.
SpeedZones are primarily designed for young adults and feature the Company's
Malibu Grand Prix racing attraction, go-kart-type racing attractions and the
Company's new "Top Eliminator" dragster attraction, together with a restyled
clubhouse, miniature golf course, video game room and meeting and party rooms to
complement the racing attractions. The implementation of the SpeedZone concept
began in 1997 with the re-development and opening, at the end of June, of the
new SpeedZones in Dallas and Los Angeles and a scaled-down version in Atlanta.
The Company closed four FECs that the Company determined did not meet the
long-term objectives of the Company during 1998. As of March 25, 1999, the
Company operated or had ownership interests in 22 traditional FECs and
three SpeedZones.
PROPERTIES
At March 30, 1999, the Company owned and operated three SpeedZones and 19
FECs located in eight states. The land for nine FECs and two SpeedZones is owned
and the land for 10 FECs and one SpeedZone is leased. 1998 lease payments under
these land leases (which expire on various dates from 1999 to 2020) totaled $4.3
million in 1998. Three FECs are owned by limited partnerships in which the
Company has minority ownership interests. The SpeedZones and 22 FECs are located
in California (3), Florida (3), Georgia (3), Nevada (1), Ohio (2), Oregon (1),
South Carolina (1), and Texas (8), generally in large metropolitan areas and the
three Partnership FECs are located in California, Texas and Colorado.
As of March 25, 1999, the Company and its subsidiaries employed
approximately 1,166 persons, none of whom was represented by a union.
<PAGE> 3
SIGNIFICANT RECENT DEVELOPMENTS
During 1998, the Company focused on building its management team, seeking
to improve its results of operations and developing a plan to recapitalize the
Company. The Company hired Richard Beckert as Chief Executive Officer in August
1998. Mr. Beckert had been Senior Vice President of Bristol Hotels & Resorts.,
Inc. and predecessor entities since 1983. The Company also hired Eric Terry as
Vice President of Sales and Marketing in November 1998. Mr. Terry was previously
with Hollywood Casinos as its Vice President of Marketing for 11 years. Scott
Wheeler was hired as Chief Financial Officer in December 1998. Mr. Wheeler was
Vice President of Business Management for The Beltway Companies where he had
been employed for the past 13 years.
While the Company's results of operations improved during 1998 compared to
1997, the Company's results of operations and standalone capital resources were
not sufficient in 1998 to fund the Company's working capital, debt service and
capital expenditure requirements. Accordingly, in the Fall of 1998, the Company
announced that it was pursuing a recapitalization. See Item 7 under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." In March 1999, the Company announced that it had entered into an
agreement in principle with its principal lenders providing for a
recapitalization plan (the "Recapitalization Plan"). Under the Recapitalization
Plan, which is subject to final documentation and funding of the $11.4 million
payment described below:
- The Company agreed to repay by May 1, 1999 (subject to extension to May
28, 1999 under certain circumstances) $11.4 million of secured debt held
by its principal non-shareholder lender;
- The remaining $31.0 million of debt (including accrued interest) held by
that lender as of December 31, 1998 (including $21.0 million of advances
made as an accommodation by the Company's principal shareholder and
reloaned to the Company) would be converted into perpetual preferred
stock with a 9% dividend rate and dividends payable in kind through
January 1, 2002. In addition, the lender would receive six million
Company common shares. If the preferred stock were not redeemed by
September 30, 2000, the lender would receive an additional two million
Company common shares from the Company as well as four million of the
Company common shares now owned by the Company's largest shareholder. The
principal non-shareholder lender also agreed to convert all interest due
under the above-described debt during the period from March 1, 1999 to
May 1, 1999 (subject to extension to May 28, 1999 under certain
circumstances) into perpetual preferred stock having the above-described
terms;
- The $6.1 million (as of March 26, 1999) of advances since November of
last year ($2.9 million as of December 31, 1998) by an entity related to
the Company's largest shareholder would be converted into perpetual
preferred stock with a 9% dividend rate and dividends payable in kind
through January 1, 2004. The preferred stock would be convertible into
Company common shares at the lesser of $2.50 per share or 120% of market
beginning September 30, 2000. In addition, that entity would agree to
purchase up to an additional $7.9 million (for a total of $14.0 million)
of perpetual preferred stock if called by the Company over a three-year
period for certain purposes; and
- The $47.3 million (including $5.4 million of accrued interest) as of
December 31, 1998 of remaining debt and accrued interest due to the
Company's largest shareholder (excluding the reloaned advances described
above) would be converted into perpetual convertible preferred stock with
a 7% dividend rate and dividends payable in kind through January 1, 2002.
The preferred stock would be convertible into the Company's common stock
at $2.50 per share.
The Company's largest shareholder currently owns 84.6% of the Company's
outstanding common stock. Assuming that all of the transactions described above
had been completed on December 31, 1998 and the above-described preferred stock
had been converted into Company common shares at the conversion price that would
have been in effect at December 31, 1998 such percentage ownership interest
would decrease to 82.1%.
The agreement in principle is subject to the repayment of the $11.4 million
of secured debt, the negotiation and execution of definitive documentation and
other conditions. The Company has been in discussions with various capital
sources to secure the amounts necessary to make the $11.4 million payment. There
can, however, be no assurance that the Company will be able to implement the
Recapitalization Plan or as to the ultimate timing or terms thereof. If the
Company is unable to refinance or restructure its indebtedness in the proposed
Recapitalization Plan or otherwise, it would be forced to seek to obtain
additional capital resources from other sources or take other actions because
the Company's present capital resources are not sufficient to fund its projected
working capital, debt service and capital expenditure requirements. There can be
no assurance that the Company would be able to obtain such additional capital
resources.
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The Company's largest shareholder has informed the Company that, except in
the limited circumstances and subject to the conditions described above, it is
not willing to invest additional capital in the Company unless the
Recapitalization is completed on terms consistent with those described above.
The Company has adopted a business plan designed to increase revenue and
decrease operating expenses to improve its results of operations. The Company's
ability to improve its results of operations and the timing thereof is dependent
on a variety of factors, many of which are beyond the Company's control,
including the successful completion of the Recapitalization Plan and the other
risks and uncertainties described under "Certain Forward-Looking Statements"
above. There can be no assurance that the Company will be able to successfully
implement its business plan or improve its results of operations.
SEASONALITY
The business of the Company is highly seasonal. Approximately two-thirds of
the Company's revenues are 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.
ITEM 3. LEGAL PROCEEDINGS
Due to the nature of the attractions at the Company's parks, the Company
has been, and will likely continue to be, subject to a significant number of
personal injury lawsuits, certain of which may involve claims for substantial
damages. The Company also is from time to time a party to other claims and legal
proceedings, and is subject to environmental, zoning and other legal
requirements. As of the date of this report, the Company does not believe that
any such matter is reasonably likely to have a material adverse effect on the
Company's financial position or results of operations. However, there
necessarily can be no assurance in this regard or that the Company will not be
subject to material claims or legal proceedings or requirements in the future.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On December 15, 1998, at the annual meeting of the Shareholders of the
Company, the following persons were re-elected as Directors of the Company by
the following vote:
<TABLE>
<CAPTION>
AGAINST/
FOR WITHHELD
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<S> <C> <C>
Richard N. Beckert..................... 45,931,144 1,300
Daniel A. Decker....................... 45,931,144 1,300
Julia E. Demerau....................... 45,883,313 49,126
L. Scott Demerau....................... 45,883,313 49,126
Richard FitzPatrick.................... 45,931,144 1,300
James Hands............................ 45,931,144 1,300
William Kearns......................... 45,931,144 1,300
Steven Scheetz......................... 45,931,144 1,300
Bert Wasserman......................... 45,919,586 12,858
Robert Whitman......................... 45,931,144 1,300
</TABLE>
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
INFORMATION RELATING TO COMMON STOCK
The Company's common stock is traded on the AMEX under the symbol "MBE".
The following table indicates for each calendar quarter in 1998 and 1997 the
high and low reported closing sale prices for the Company's common stock during
the prior two calendar years:
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<CAPTION>
HIGH LOW
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<S> <C> <C>
1998
Fourth Quarter........................................ $2.56 $0.93
Third Quarter......................................... $3.43 $1.75
Second Quarter........................................ $4.06 $1.62
First Quarter......................................... $4.43 $3.00
1997
Fourth Quarter........................................ $4.43 $3.00
Third Quarter......................................... $5.50 $3.75
Second Quarter........................................ $6.00 $2.50
First Quarter......................................... $3.56 $2.50
</TABLE>
As of March 25, 1999, there were approximately 184 holders of record of the
Company's common stock.
The Company has not paid dividends on its common stock since prior to its
initial public offering and does not intend to pay regular dividends on its
common stock in the foreseeable future. The payment of dividends is restricted
by credit instruments to which the Company is a party.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA (AMOUNTS IN THOUSANDS)
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<CAPTION>
YEARS ENDED THREE MONTHS YEARS ENDED
------------------------------------------ ENDED -----------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1996 1995(1) 1995 1994
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<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Operating revenues......... $45,456 $44,607 $37,430 $6,754 $46,207 $28,177
Operating expenses(2)...... 64,014 95,089 77,239 10,417 47,765 25,293
Operating income (loss).... (18,558) (50,482) (39,809) (3,663) (1,558) 2,884
Interest expense........... 14,838 6,185 6,579 2,754 4,108 1,371
Income (loss) before other
income (expenses)........ (33,396) (56,667) (46,388) (6,417) (5,666) 1,513
Other income (expenses).... (767) (2,597) 1,648 (680) 1,514 342
Benefit (provision) for
income taxes............. -0- -0- (2,184) 2,692 1,310 (705)
Net income (loss).......... (34,386) (59,303) (47,633) (4,494) (3,201) 1,232
Basic and diluted income
(loss) per share of
common stock............. $ (0.71) $ (1.41) $ (2.91) $(0.77) $ (0.53) $ 0.20
Weighted average shares of
common stock
outstanding.............. 48,457 41,960 17,407 8,375 7,720 6,269
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1996 1995 1994
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<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.......................... $(39,231) $(1,824) $16,210 $(8,253) $(1,316)
Total assets............................. 117,431 135,350 122,097 101,139 69,926
Long-term obligations, excluding current
portion................................ 83,717 95,733 25,538 15,545 18,285
Convertible subordinated debentures...... -0- -0- 16,521 14,150 -0-
Total liabilities........................ 130,153 114,614 57,088 51,702 28,258
Total shareholders' equity............... $(12,722) $20,736 $64,231 $48,059 $31,827
</TABLE>
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(1) Represents a three-month period because during 1995 the Company changed its
fiscal year end to December 31st.
(2) Operating expenses include non-recurring charges including losses on
impairment of assets and write downs of investments in affiliates of $0.1
million and $0 million, respectively, for the year ended December 31, 1998,
$20.9 million and $0.6 million, respectively, for the year ended December
31, 1997 and $21.0 million and $2.6 million, respectively, for the year
ended December 31, 1996. In 1998, the Company recorded a $1.7 million charge
for provision against accounts receivable from partnerships. See "Item
7 -- Management's Discussion and Analysis of Financial Condition and Results
of Operations" for a discussion of other non-recurring charges.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Noncomparability
In 1998, the Company closed four FECs and recorded a $0.1 million charge
for impairment of assets and a provision of an allowance for accounts receivable
from partnerships of $1.7 million.
Among other transactions and actions during 1997, the Company launched the
SpeedZone concept with the opening of three new SpeedZones mid-year, closed
four FECs, disposed of 12 FECs, recorded a $20.9 million charge for impairment
of assets, recorded a $0.6 million write down of investments in affiliates and a
$2.4 million charge for relocation of its corporate headquarters, recorded a
charge of $1.9 million for environmental remediation costs and issued 19.4
million shares of common stock upon conversion of certain convertible debt
securities.
Similarly, during 1996, the Company effected a recapitalization, recorded a
$21.0 million charge for impairment of assets and a $2.6 million write down of
investments in affiliates, recorded a charge of $1.1 million for environmental
remediation costs, and ceased conducting syndication and development/
construction activities as separate businesses. In addition, $3.8
million aggregate liquidation preference of the Company's convertible preferred
stock and $3.0 million of the Company's convertible debt was converted into
common stock during 1996. In 1996, the Company changed its fiscal year end from
September 30 to December 31. The Company also acquired the partnership interests
that it did not already own in three FECs in August 1996.
In light of the foregoing, the financial condition and results of
operations of the Company discussed herein are generally not directly comparable
period-to-period and are not necessarily indicative of the Company's future
results of operations. The following discussion should be read in conjunction
with the Consolidated Financial Statements and the notes thereto contained
elsewhere in this Report.
FISCAL YEAR ENDED DECEMBER 31, 1998 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1997
Net Loss
The Company's operations resulted in a net loss of $34.4 million ($.71 per
share) for the year ended December 31, 1998 ("1998") as compared to a net loss
of $59.3 million ($1.41 per share) for the year ended December 31, 1997
("1997").
The net loss for 1998 included a $0.1 million charge under Statement of
Financial Accounting Standards No. 121 ("SFAS121") for impairment of assets and
adjustments in carrying values. In addition, during 1998, the Company recorded a
provision for accounts receivable from partnerships of $1.7 million. In 1997,
the Company recorded a charge totaling $21.5 million under SFAS121. In 1997, the
net loss also included another $4.3 million of non-recurring charges associated
with increases in environmental reserves and relocation of the Company's
headquarters.
Operating Revenues
Entertainment revenues (revenues from the operation of FECs and SpeedZones)
increased by $0.8 million or 2%, to $44.3 million for 1998 from $43.5 million
for 1997. The increase in entertainment revenues was due to an increase in
revenues from the three SpeedZones which were open the entire year ($4.4
million), offset by a decrease in entertainment revenues from operating FECs
($0.4 million) and from the FECs which were closed in 1998 ($3.2 million).
Operating Expenses
Total 1998 operating expenses were $64.0 million, a decrease of $31.1
million, or 33%, over 1997.
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Entertainment expenses decreased by $8.6 million, or 17%, to $43.2 million
for 1998 from $51.8 million for 1997. The decrease was primarily a result of
reducing payroll consistent with associated revenue levels, reductions in
advertising expenditures in 1998, grand opening costs incurred in 1997 for the
redeveloped SpeedZones and decreases in expenses from the FECs that were sold or
closed in 1998. The principal categories of entertainment expenses were cost of
goods sold ($5.6 million in 1998 compared to $6.2 million in 1997), payroll
($17.0 million in 1998 compared to $18.9 million in 1997), repairs and
maintenance ($3.3 million in 1998 compared to $3.3 million in 1997), facilities
operating and utilities expense ($4.9 million in 1998 compared to $7.0 million
in 1997), advertising($2.3 million in 1998 compared to $5.7 million in 1997),
corporate expenses ($3.0 million in 1998 compared to $3.6 million in 1997) and
other (unchanged at $7.1 million).
General and administrative expenses decreased $1.1 million, or 12%, to $8.1
million from $9.2 million for 1997 primarily as a result of a reduction in
professional fees associated with the development of the SpeedZone concept.
Depreciation and amortization expense increased by $0.2 million to $10.2
million primarily due to a full year's depreciation for the Company's three
SpeedZones and for games purchased in the latter part of 1997, offset by
depreciation on closed parks.
During 1998 and 1997, the Company recognized a loss due to impairment of
assets of $0.1 million and $20.9 million, respectively, principally as a result
of adjustments in the carrying value of assets resulting from the determination
that the carrying value of certain assets was higher than their undiscounted
expected future cash flows.
In addition, in 1997, the Company adjusted the value of investments in its
limited partnerships based upon their net realizable values which resulted in a
loss on investments of $0.6 million and recorded a charge of $1.9 million for
environmental remediation costs.
Other (Expense)/Income
During 1997, the Company made the decision to relocate its corporate
headquarters from Atlanta, Georgia to Dallas, Texas. The relocation was
completed in March 1998. In connection with this relocation, the Company
recognized office closing costs (including $2.2 million in severance costs) of
$2.4 million in 1997.
Interest expense increased by $8.6 million, or 139%, to $14.8 million from
$6.2 million in 1997 primarily due to the increase in the outstanding balance of
indebtedness incurred to construct the SpeedZone parks and finance operating
cashflow shortfalls.
FISCAL YEAR ENDED DECEMBER 31, 1997 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1996
The Company's operations resulted in a net loss of $59.3 million ($1.41 per
share) for the year ended December 31, 1997 as compared to a net loss of $47.6
million ($2.91 per share) for the year ended December 31, 1996 ("1996").
The net loss for 1997 included $25.8 million ($0.61 per share) of
non-recurring charges and expenses, and the net loss for 1996 included $30.3
million ($1.74 per share) of non-recurring charges and expenses and adjustments
in carrying value of assets, increases in environmental reserves, and the
relocation of the Company's headquarters.
12 of the Company's non-strategic FECs were sold during 1997, five FECs
were held for sale or closure, and the Company recorded a charge totaling $20.9
million under SFAS 121 for impairment of assets and adjustments in carrying
values. In 1996 the Company recorded a charge totaling $21.0 million under SFAS
121.
Operating Revenues
Entertainment revenues increased by $7.7 million, or 22%, to $43.5 million
for 1997 from $35.8 for 1996. The increase in entertainment revenues was due to
(i) an increase in entertainment revenue from the FECs which were operated in
both years ($2.2 million), (ii) an increase in entertainment revenues from the
three FECs which were converted to SpeedZones ($5.9 million), and (iii) three
FECs purchased in August 1996 that were only included in five months of 1996
($2.3 million). These increases were offset by the decrease in revenue ($2.3
million) from the FECs which were sold in May 1997 and FECs closed in 1997
pending final disposition ($0.4 million).
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Operating Expenses
Total 1997 operating expenses were $95.1 million, an increase of $17.9
million, or 23%, over 1996.
Entertainment expenses increased by $18.3 million, or 55%, to $51.8 million
for 1997 from $33.5 million for 1996. The increase was primarily a result of (i)
greater operating costs associated with the increase in operating revenues
generated by the new SpeedZone product, (ii) higher operating costs for the
SpeedZone parks to provide enhanced customer service in the initial months of
operations prior to the implementation of operational efficiencies, (iii)
expenses associated with the grand opening of the SpeedZone parks and pre-
opening costs such as promotion, advertising, training and non-recurring concept
refinement costs and travel, (iv) additional advertising expenses incurred to
revitalize customer awareness of all of the Company's FECs, and (v) the three
FECs purchased in August 1996.
General and administrative expenses decreased by $2.9 million, or 24%, to
$9.2 million from $12.1 million for 1996. The decrease was primarily a result of
expenses the Company incurred in 1996 relating to recording (i) bad debt
reserves and various accruals of $1.6 million and (ii) costs associated with the
Company's 1996 recapitalization.
Depreciation and amortization expense increased by $3.8 million, or 61%,
primarily as a result of the acquisition of the three parks in August 1996 and
the depreciation recognized on the newly redeveloped SpeedZones.
During each of 1997 and 1996, the Company recognized a loss due to
impairment of assets of $20.9 million and $21.0 million, respectively,
principally as a result of adjustments in the carrying value of assets. In
addition, the Company adjusted the value of investments in its limited
partnerships based upon their net realizable values, which resulted in a loss on
investments in affiliates of $0.6 million in 1997 and $2.6 million in 1996,
recorded a charge of $1.1 million for environmental remediation costs in 1996
and recorded an additional environmental charge of $1.9 million in 1997.
Other (Expense)/Income
During 1997, the Company began the relocation of its corporate headquarters
from Atlanta, Georgia to Dallas, Texas, which was completed March 1, 1998. In
connection with this relocation, the Company recognized office closing costs
(including $2.2 million in severance costs) of $2.4 million in 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's internally generated cash has been insufficient to fund its
working capital, debt service and capital expenditure requirements for the past
several years and the Company has, therefore, funded its operations and capital
expenditures principally through external financing. The Company undertook a
substantial recapitalization in 1996 and began a substantial capital investment
program, both in connection with the roll-out of its SpeedZone concept and in
connection with the general upgrading of its strategic FECs. Under this program,
the Company made $85.7 million in capital investments in its facilities during
1996-1998.
At December 31, 1998, the Company had $5.4 million of current assets
(including $0.2 million of unrestricted cash) and $44.6 million of current
liabilities (including $30.2 million of current debt); or negative working
capital of $39.2 million (compared to negative working capital of $1.8 million
at December 31, 1997, which amount included $5.3 million of unrestricted cash).
As of December 31, 1998, the Company's total shareholder's equity was negative
$12.7 million, compared to a positive $20.7 million at December 31, 1997.
The Company's principal uses of cash during the year were to fund
operations ($13.2 million) and capital investment ($6.6 million). The Company
financed its operations during 1998 through a combination of $5.0 million of
cash on hand as of the beginning of the year, debt financings provided by the
Company's largest shareholder and a related entity ($14.6 million in the
aggregate) and the sale in June 1998 of a property held for sale for net
proceeds of $1.4 million.
The Company's largest shareholder has informed the Company that, except in
the limited circumstances and subject to the conditions described above, it is
not willing to invest additional capital in the Company
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<PAGE> 10
unless the Recapitalization is completed on terms consistent with those
described in Item 1 under "Significant Recent Developments."
Of the Company's $113.9 million of total debt at December 31, 1998
(including accrued interest), $30.2 million matures in 1999 (the "Current
Debt"). The Current Debt primarily includes $21.4 million of secured debt from a
third-party lender and a $8.0 million loan from that lender through the
Company's largest shareholder. The $8.0 million of Current Debt and an
additional $13.0 million of indebtedness (together, the "Pass-Through Debt") was
advanced by the Company's largest shareholder and reloaned to the Company as an
accommodation to the Company and the third-party lender so that the largest
shareholder's equity interests in the Company effectively supported that portion
of the third-party financing.
In the first quarter of 1999, the Company agreed in principle with its
principal lenders on the Recapitalization Plan. The principal components of the
Recapitalization Plan (which is subject to final documentation and funding of
the $11.4 million payment described below) are as follows:
- The Company agreed to repay by May 1, 1999 (subject to extension to May
28, 1999 under certain circumstances) $11.4 million of secured debt held
by its principal non-shareholder lender;
- The remaining $31.0 million of debt (including accrued interest) held by
that lender as of December 31, 1998 (including $21.0 million of advances
made as an accommodation by the Company's principal shareholder and
reloaned to the Company) would be converted into perpetual preferred
stock with a 9% dividend rate and dividends payable in kind through
January 1, 2002. In addition, the lender would receive six million
Company common shares. If the preferred stock were not redeemed by
September 30, 2000, the lender would receive an additional two million
Company common shares from the Company as well as four million of the
Company common shares now owned by the Company's largest shareholder. The
principal non-shareholder lender also agreed to convert all interest due
under the above-described debt during the period from March 1, 1999 to
May 1, 1999 (subject to extension to May 28, 1999 under certain
circumstances) into perpetual preferred stock having the above-described
terms;
- The $6.1 million (as of March 26, 1999) of advances since November of
last year ($2.9 million as of December 31, 1998) by an entity related to
the Company's largest shareholder would be converted into perpetual
preferred stock with a 9% dividend rate and dividends payable in kind
through January 1, 2004. The preferred stock would be convertible into
Company common shares at the lesser of $2.50 per share or 120% of market
beginning September 30, 2000. In addition, that entity would agree to
purchase up to an additional $7.9 million (for a total of $14.0 million)
of perpetual preferred stock if called by the Company over a three-year
period for certain purposes; and
- The $47.3 million (including $5.4 million of accrued interest) as of
December 31, 1998 of remaining debt held by the Company's largest
shareholder (excluding the reloaned advances described above) would be
converted into perpetual convertible preferred stock with a 7% dividend
rate and dividends payable in kind through January 1, 2002. The preferred
stock would be convertible into the Company's common stock at $2.50 per
share.
The agreement in principle is subject to the repayment of the $11.4 million
of secured debt, the negotiation and execution of definitive documentation and
other conditions. The Company has been in discussions with various capital
sources to secure the amounts necessary to make the $11.4 million payment.
9
<PAGE> 11
There can, however, be no assurance that the Company will be able to implement
the Recapitalization Plan or as to the ultimate timing or terms thereof. If the
Company is unable to refinance or restructure its indebtedness in the proposed
Recapitalization Plan or otherwise, it would be forced to seek to obtain
additional capital resources from other sources or take other actions because
the Company's present capital resources are not sufficient to fund its projected
working capital, debt service and capital expenditure requirements, including
the repayment of the Current Debt, $29.4 million of which is due in July 1999.
There can be no assurance that the Company would be able to obtain such
additional capital resources.
The Company's strategy currently contemplates evaluating and developing
plans for converting underperforming FECs to SpeedZones in the latter part of
1999 or 2000. In addition, the Company intends to spend $5.8 million to repair
and renovate FECs and to purchase new games to revitalize current park
operations during 1999. Any such actions would, however, require the Company to
obtain additional capital resources even if the Recapitalization Plan described
above is completed. There can be no assurance that the Company will be able to
obtain the capital to implement these plans.
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 Company believes that with modifications or
replacements of existing software and certain hardware, the year 2000 issue can
be mitigated. However, if such modifications and replacements are not made, or
are not completed timely, the year 2000 issue could have a material adverse
impact in 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 product design, point of sales systems, race car timing
and safety systems, 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 by year-end.
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. Based on the report, the total cost
of the year 2000 project is estimated at approximately $300,000.
In the event that the Company does not complete any 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 their
year 2000 issues is outside the Company's control. There can be no assurance
that the failure of the Company or such third parties to adequately address
their respective year 2000 issues will not have a material adverse effect on the
Company.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
A substantial portion of the Company's long-term debt bears 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, which are
incorporated herein by reference. At December 31, 1998, the Company did not hold
any derivatives related to interest rate exposure for any of its debt facilities
and it does not use financial instruments for trading or other speculative
purposes. Based on the terms and outstanding amounts of the Company's borrowings
at December 31, 1998, 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.
10
<PAGE> 12
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth in the Company's
Consolidated Financial Statements contained in this Report and is incorporated
herein by reference. Specific financial information can be found at the pages
listed in the following index:
<TABLE>
<CAPTION>
ITEM PAGE NO.
- ---- --------
<S> <C>
Report of Independent Public Accountants................. F-1
Consolidated Balance Sheets.............................. F-2
Consolidated Statement of Operations..................... F-3
Consolidated Statement of Cash Flows..................... F-4
Consolidated Statement of Changes in Shareholders'
Equity................................................... F-6 and F-7
Notes to Consolidated Financial Statements............... F-8 through F-23
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
11
<PAGE> 13
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item will be set forth under the caption
"Election of Directors" in the Company's Proxy Statement for the 1999 Annual
Meeting of Shareholders, which will be filed with the Securities and Exchange
Commission prior to April 30, 1999 (the "Proxy Statement") and is incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item will be set forth under the caption
"Executive Compensation" in the Proxy Statement and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item will be set forth under the caption
"Security Ownership Information" in the Proxy Statement and is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item will be set forth under the caption
"Certain Relationships and Related Transactions" in the Proxy Statement and is
incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Form 10-K:
1. Financial Statements: The list of financial statements required by
this item is set forth in Item 8 under "Financial Statements and
Supplementary Data" and is incorporated herein by reference.
2. Financial Statement Schedules: All financial statement schedules
are omitted as they are either not applicable or the required information
is included in the consolidated financial statements or the notes thereto.
3. Exhibits: The following exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
3.1 -- Articles of Incorporation of the Company (incorporated by
reference to the Company's Annual Report on Form 10-K for
the year ended September 30, 1993 (the "1993 10-K"))
3.2 -- Amended and Restated Bylaws of the Company (incorporated
by reference to the Company's Current Report on Form 8-K,
dated June 19, 1996 (the "1996 8-K"))
4.1 -- Specimen of Common Stock Certificate (incorporated by
reference to the 1993 10-K)
4.2 -- Form of Warrant (incorporated by reference to the
Company's 1993 10-K)
4.3 -- Preferred Stock Designations (incorporated by reference
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 (the "1996 10-K"))
10.1 -- 1993 Incentive Stock Option Plan (incorporated by
reference to the Company's Registration Statement on Form
SB-2 filed on November 3, 1993 (File No. 33-68454-A) (the
"Registration Statement"))
</TABLE>
12
<PAGE> 14
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.2 -- 1993 Company Nonemployee Director Stock Option Plan with
form of option agreement (incorporated by reference to
the Registration Statement)
10.3 -- Equity Incentive Plan (incorporated by reference to Annex
A of the Company's proxy statement on Schedule 14A for
the 1997 Annual Meeting Of Shareholders)
10.4 -- Promissory Note, dated June 30, 1993, in the principal
amount of $6,150,000 in favor of M.B. Seretean
(incorporated by reference to the Registration Statement)
10.5 -- Consolidated Amended and Restated Loan and Security
Agreement, dated August 22, 1996, between the Company and
Foothill Capital Corporation (incorporated by reference
to 1996 10-K)
10.6 -- Amendment Nos. 1, 2, 3, 4, 5, 6, 7 and 8 to the
Consolidated, Amended and Restated Loan Security, dated
August 22, 1996, between the Company and Foothill Capital
Corporation (filed herewith)
10.7 -- Investment Agreement, dated as of June 5, 1996, as
amended between MEI Holdings and the Company
(incorporated by reference to MEI Holdings' Amendment No.
3 to Schedule 13D-1 filed September 25, 1996 ("MEI
Holdings' 1996 13D-1"))
10.8 -- Warrant, dated August 28, 1996, by the Company
(incorporated by reference to MEI Holdings' 1996 13D-1)
10.9 -- Registration Rights Agreement, dated August 28, 1996,
between the Company and MEI Holdings (incorporated by
reference to MEI Holdings' 1996 13D-1)
10.10 -- Agreements, dated August 28, 1996, between the Company
and L. Scott Demerau and the Company and Julia E. Demerau
(incorporated by reference to the 1996 8-K)
10.11 -- Redemption Agreement, dated November 14, 1996, between
the Company and MEI Holdings (incorporated by reference
to MEI Holdings' Schedule 14D-1, dated November 14, 1996)
10.13 -- Loan Agreement, dated as of June 27, 1997, between Malibu
Centers, Inc. and Nomura Asset Capital Corporation
("Nomura") (incorporated by reference to the 2nd Q 1997
10-Q)
10.14 -- Promissory Note by Malibu Centers, Inc. in favor of
Nomura for $21,390,375 (incorporated by reference to the
2nd Q 1997 10-Q)
10.15 -- Guaranty, dated June 27, 1997, of MEI Holdings in favor
of Nomura (incorporated by reference to the 2nd Q 1997
10-Q)
10.16 -- Recapitalization Agreement, dated March 1, 1999, between
Nomura Asset Capital Corporation, the Company, Malibu
Centers, Inc., MEI Holdings and SZ Capital (incorporated
by reference to Amendment No. 19 to the Schedule 13D-1
filed by MEI Holdings on March 10, 1999)
10.17 -- Second Amended and Restated Subordination Agreement,
dated as of January 20, 1999, among MEI Holdings, the
Company and Foothill Capital Corporation (incorporated by
reference to Amendment No. 18 to the Schedule 13D-1 filed
by MEI Holdings on February 22, 1999 (the "MEI Holdings'
Feb 1999 13D-1"))
10.18 -- Third Amended and Restated Subordinated Convertible
Promissory Note by the Company in favor of MEI Holdings,
in the amount of $65,000,000 (incorporated by reference
to the MEI Holdings' Feb 1999 13D-1)
</TABLE>
13
<PAGE> 15
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.19 -- Second Amended and Restated Promissory Note by the
Company in favor of MEI Holdings, in the amount of
$10,000,000 (incorporated by reference to the MEI
Holdings' Feb 1999 13D-1)
10.20 -- Agreement Regarding Right to Convert Promissory Notes,
dated as of January 20, 1999, between MEI Holdings and
the Company (incorporated by reference to the MEI
Holdings' Feb 1999 13D-1)
10.21 -- Subordinated Convertible Promissory Note by the Company
in favor of SZ Capital, in the amount of $30,000,000
(incorporated by reference to the MEI Holdings' Feb 1999
13D-1)
10.22 -- Subordination Agreement, dated as of November 16, 1998,
among SZ Capital, the Company and Foothill Capital
Corporation (incorporated by reference to MEI Holdings'
Feb 1999 13D-1)
10.23 -- Registration Rights Agreement, dated as of November 16,
1998, between the Company and SZ Capital (incorporated by
reference to the MEI Holdings' Feb 1999 13D-1)
10.24 -- Loan Agreement, dated as of November 16, 1998, between SZ
Capital and the Company (filed herewith)
10.25 -- Subordinated Convertible Promissory Note, dated November
16, 1998, by the Company in favor of SZ Capital, in the
amount of $30,000,000 (incorporated by reference to MEI
Holdings' Feb 1999 13D-1)
21 -- Subsidiaries (filed herewith)
24 -- Powers of Attorney (filed herewith)
27 -- Financial Data Schedule (for SEC purposes only)
</TABLE>
(b) Reports on Form 8-K: No Reports on Form 8-K were filed by the Company
during the fourth quarter of 1997.
14
<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
1934, the Company has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MALIBU ENTERTAINMENT WORLDWIDE, INC.
By: /s/ R. SCOTT WHEELER
-------------------------------------
R. Scott Wheeler
Chief Financial Officer
Date: March 31, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the Company
and in the capacities indicated on March 27, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ RICHARD N. BECKERT Chief Executive Officer and Director
- ----------------------------------------------------- (principal operating officer)
Richard N. Beckert
/s/ R. SCOTT WHEELER Chief Financial Officer (principal financial
- ----------------------------------------------------- and accounting officer)
R. Scott Wheeler
* Chairman of the Board and Director
- -----------------------------------------------------
Robert A. Whitman
* Director
- -----------------------------------------------------
Richard M. FitzPatrick
* Director
- -----------------------------------------------------
Daniel A. Decker
* Director
- -----------------------------------------------------
L. Scott Demerau
* Director
- -----------------------------------------------------
Julia E. Demerau
* Director
- -----------------------------------------------------
James T. Hands
* Director
- -----------------------------------------------------
William M. Kearns, Jr.
* Director
- -----------------------------------------------------
Steven D. Scheetz
* Director
- -----------------------------------------------------
Bert W. Wasserman
</TABLE>
- ---------------
* The undersigned, by signing his name hereto, does sign and execute this Report
pursuant to the powers of attorney executed by the above-named officers and
directors and filed herewith:
By: /s/ R. SCOTT WHEELER
--------------------------------
R. Scott Wheeler
Attorney-in-Fact
15
<PAGE> 17
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Malibu Entertainment Worldwide, Inc.:
We have audited the accompanying consolidated balance sheets of Malibu
Entertainment Worldwide, Inc. (a Georgia corporation) and Subsidiaries as of
December 31, 1998 and 1997, and the related consolidated statements of
operations, shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Malibu Entertainment
Worldwide, Inc. and subsidiaries as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has incurred significant
losses from operations, has a net capital deficiency and current maturities of
debt obligations in amounts greater than its present cash resources, that raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are described in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
ARTHUR ANDERSEN LLP
Dallas, Texas
March 29, 1999
F-1
<PAGE> 18
MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Current
Cash and cash equivalents................................. $ 237,336 $ 5,270,843
Restricted cash........................................... 1,388,396 1,302,724
Inventories............................................... 1,153,923 1,976,524
Current portion of notes receivable....................... 17,000 79,927
Assets held for sale...................................... 1,615,217 3,002,672
Prepaid expenses.......................................... 1,007,459 1,019,946
------------ ------------
Total current assets.............................. 5,419,331 12,652,636
------------ ------------
Property and equipment, less accumulated depreciation....... 108,843,304 116,125,918
------------ ------------
Other noncurrent
Investments in and advances to limited partnerships....... 335,836 2,180,410
Notes receivable.......................................... 26,405 41,823
Other assets.............................................. 154,965 163,805
Debt issuance costs, less accumulated amortization........ 1,655,784 3,155,526
Intangible assets, less accumulated amortization.......... 995,365 1,029,986
------------ ------------
Total other noncurrent assets..................... 3,168,355 6,571,550
------------ ------------
$117,430,990 $135,350,104
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of notes payable.......................... $ 22,182,802 $ 1,060,411
Current portion of notes payable to shareholder........... 8,000,000 --
Accounts payable.......................................... 4,249,065 5,623,907
Accrued expenses.......................................... 9,406,008 6,719,027
Accrued expenses related to assets held for sale.......... 812,152 1,073,714
------------ ------------
Total current liabilities......................... 44,650,027 14,477,059
Noncurrent liabilities
Line of credit............................................ 7,500,000 7,500,000
Term loan revolver........................................ 10,000,000 10,000,000
Notes payable to shareholder.............................. 57,809,603 48,301,668
Notes payable............................................. 3,012,691 28,836,505
Accrued interest due to shareholder....................... 5,394,524 1,094,781
Other accrued expenses.................................... 1,785,811 4,403,856
------------ ------------
Total liabilities................................. 130,152,656 114,613,869
------------ ------------
Commitments and contingencies
Shareholders' equity
Preferred stock, 6,000,000 shares
Authorized with no par value...........................
Series F, 2,700,000 authorized; none outstanding.......
Series G, 213,551 authorized; none outstanding.........
Common stock, 100,000,000 shares authorized with no par
value; 46,508,625 and 48,376,776 shares issued and
outstanding............................................ 136,386,360 141,212,037
Outstanding warrants...................................... 1,974,600 2,085,100
Notes receivable from shareholders........................ -- (5,864,523)
Accumulated deficit....................................... (151,082,626) (116,696,379)
------------ ------------
Total shareholders' equity........................ (12,721,666) 20,736,235
------------ ------------
$117,430,990 $135,350,104
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE> 19
MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING REVENUES
Entertainment revenue.............................. $ 44,267,680 $ 43,523,933 $ 35,810,918
Other.............................................. 1,188,659 1,083,545 1,619,205
------------ ------------ ------------
Total operating revenues................. 45,456,339 44,607,478 37,430,123
------------ ------------ ------------
OPERATING EXPENSES
Entertainment expenses............................. 43,157,091 51,837,953 33,533,903
General and administrative expenses................ 8,131,576 9,248,877 12,063,425
Other expenses..................................... 690,247 632,402 712,099
Depreciation and amortization...................... 10,181,821 9,995,090 6,220,848
Provision for loss due to impairment of assets..... 127,073 20,869,962 21,038,417
Provision of allowance for accounts receivable from
partnerships..................................... 1,726,363 -- --
Provision for environmental costs.................. -- 1,900,000 1,100,000
Provision for loss on investments in limited
partnerships..................................... -- 604,957 2,570,000
------------ ------------ ------------
Total operating expenses................. 64,014,171 95,089,241 77,238,692
------------ ------------ ------------
Operating loss..................................... (18,557,832) (50,481,763) (39,808,569)
OTHER (EXPENSE) INCOME
Interest expense................................... (14,838,193) (6,184,502) (6,578,838)
Interest income.................................... 91,306 608,570 308,007
Office closing expense............................. -- (2,410,000) --
Loss on settlement of strategic alliance
agreements....................................... -- -- (1,005,751)
Gain associated with development and construction
division......................................... -- -- 795,000
Gain associated with cancellation of warrants...... -- -- 422,333
Other, net......................................... (858,369) (795,576) 1,128,149
------------ ------------ ------------
Loss before provision for income taxes and
extraordinary item............................... (34,163,088) (59,263,271) (44,739,669)
Provision for income taxes......................... -- -- (2,184,357)
Equity in net losses of limited partnerships, net
of tax of $0..................................... (223,159) (39,240) (46,287)
------------ ------------ ------------
Loss before extraordinary item..................... (34,386,247) (59,302,511) (46,970,313)
Extraordinary item, net of tax of $0............... -- -- (662,580)
------------ ------------ ------------
Net loss........................................... $(34,386,247) $(59,302,511) $(47,632,893)
============ ============ ============
NET LOSS APPLICABLE TO COMMON STOCK
Net loss........................................... $(34,386,247) $(59,302,511) $(47,632,893)
Less: Preferred stock dividends.................. -- -- (2,969,464)
------------ ------------ ------------
Net loss applicable to common stock................ $(34,386,247) $(59,302,511) $(50,602,357)
============ ============ ============
Basic and diluted loss applicable to common stock
before extraordinary item........................ $ (0.71) $ (1.41) $ (2.87)
Basic and diluted effect of extraordinary item..... -- -- (0.04)
------------ ------------ ------------
Basic and diluted loss per share of common stock... $ (0.71) $ (1.41) $ (2.91)
============ ============ ============
Weighted average number of shares of common stock
used in calculating net loss per share........... 48,457,099 41,959,558 17,406,837
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 20
MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss.................................................... $(34,386,247) $(59,302,511) $(47,632,893)
Extraordinary item, net of income taxes..................... -- -- 662,580
Adjustments to reconcile net loss to net cash used in
operating activities
Equity in net loss of limited partnerships.................. 223,159 39,240 46,287
Increase in allowance for doubtful accounts................. 1,726,363 244,502 853,039
Depreciation and amortization............................... 10,181,821 9,995,090 6,220,848
Interest expense associated with amortization of loan
costs..................................................... 4,141,012 1,337,411 1,399,796
Deferred income taxes....................................... -- -- 2,205,829
Realized loss on securities/investments in affiliates....... -- 604,957 2,570,000
Loss (gain) on sales or write-off of property and
equipment................................................. 1,218,938 845,135 (1,129,652)
Loss on impairment of assets................................ 127,073 20,869,962 21,038,417
Amortization of warrants.................................... -- -- 234,722
Gain associated with cancellation of warrants............... -- -- (422,333)
Gain associated with development and construction
division.................................................. -- -- (795,000)
Decrease (increase) in inventories.......................... 822,601 (676,873) 306,643
Decrease (increase) in prepaid expenses..................... 21,327 162,063 (538,131)
(Increase) decrease in intangible assets.................... (8,173) (113,653) 13,504
(Decrease) increase in accounts payable..................... (1,374,842) 3,269,084 925,378
Increase in accrued expenses................................ 68,936 2,819,905 1,589,153
Decrease in accrued expenses related to assets held for
sale...................................................... (261,562) (571,647) --
Increase in accrued interest due to shareholder............. 4,299,743 1,094,781 --
Decrease in deferred revenue................................ -- -- (1,856,248)
------------ ------------ ------------
Cash used in operating activities......................... (13,199,851) (19,382,554) (14,308,061)
------------ ------------ ------------
INVESTING ACTIVITIES:
Purchases of property and equipment......................... (8,064,181) (63,210,827) (14,447,703)
Proceeds from sales of property and equipment............... 1,568,287 4,491,247 3,431,107
Increase in notes receivable................................ -- (68,750) (435,745)
Principal payments under notes receivable................... 78,345 147,049 459,110
Decrease in restricted certificates of deposit.............. -- -- 1,925,686
(Increase) decrease in restricted cash...................... (85,672) (336,649) 1,150,471
Increase in investments in limited
partnerships.............................................. (104,948) (652,710) (2,588,786)
Purchases of facilities..................................... -- -- (9,427,340)
------------ ------------ ------------
Cash used in investing activities......................... (6,608,169) (59,630,640) (19,933,200)
------------ ------------ ------------
FINANCING ACTIVITIES:
Proceeds from borrowings.................................... 17,507,938 73,657,630 40,699,206
Payments of borrowings...................................... (1,020,501) (4,502,733) (42,495,703)
Increase in debt issuance costs............................. (2,641,270) (2,317,638) (2,744,033)
Decrease (increase) in subscription receivable.............. -- 16,076,260 (16,076,260)
Decrease (increase) in interest on notes receivable for
employees................................................. 533,346 (418,076) (113,685)
Issuance of preferred stock................................. -- -- 34,188,260
Redemption of preferred stock............................... -- -- (7,398,690)
Redemption of subordinated debentures....................... -- -- (8,597,545)
Issuance of common stock.................................... 395,000 -- 45,579,336
Payment of guaranteed stock values.......................... -- (777,861) (3,018,451)
Stock issuance costs........................................ -- -- (3,885,578)
Payment of dividends on preferred stock..................... -- -- (138,455)
Purchase and cancellation of common stock................... -- (17,280) (722,744)
------------ ------------ ------------
Cash provided by financing activities..................... 14,774,513 81,700,302 35,275,658
------------ ------------ ------------
(Decrease) increase in cash and cash equivalents............ (5,033,507) 2,687,108 1,034,397
Cash and cash equivalents, beginning of year................ 5,270,843 2,583,735 1,549,338
------------ ------------ ------------
Cash and cash equivalents, end of year...................... $ 237,336 $ 5,270,843 $ 2,583,735
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 21
MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED STOCK
------------------------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS D CLASS F CLASS G
--------- ----------- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995...... $ 420,140 $ 4,300,000 $ 500,000 $ -- $ -- $ --
Issuance of preferred stock... 6,662,000 22,700,000 4,826,260
Issuance of common stock......
Discount on 9% subordinated
debentures..................
Interest on notes receivable
from employees..............
Stock issuance costs..........
Purchase and cancellation of
stock.......................
Unearned compensation in
connection with the
financial advisory
agreements..................
Warrants issued...............
Adjustment to common stock as
a result of guaranteed stock
prices......................
Accretion and payment of
preferred stock dividends... 28,441 215,000 1,266,000
Accretion of preferred stock
discount....................
Preferred stock converted..... (310,126) (3,502,700)
Preferred stock redeemed...... (1,354,500) (500,000) (4,425,300)
Subordinated debt converted...
Preferred stock converted to
subordinated debt........... (3,160,500)
Payment of dividends.......... (138,455)
Cancellation of warrants......
Net loss......................
--------- ----------- --------- ----------- ------------ -----------
Balance, December 31, 1996...... -- -- -- -- 22,700,000 4,826,260
Issuance of common stock......
Interest on notes receivable
from employees..............
Purchase of stock from
employees...................
Stock issuance costs..........
Subordinated debt converted... 15,671,322
Conversion of preferred
stock....................... (38,371,322) (4,826,260)
Termination of warrants.......
Net loss......................
--------- ----------- --------- ----------- ------------ -----------
Balance, December 31, 1997...... -- -- -- -- -- --
Issuance of common stock......
Interest on notes receivable
from employees..............
Purchase of stock from
employees...................
Net loss......................
Balance, December 31, 1998...... $ -- $ -- $ -- $ -- $ -- $ --
========= =========== ========= =========== ============ ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-5
<PAGE> 22
MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY -- (CONTINUED)
<TABLE>
<CAPTION>
NOTES
TOTAL RECEIVABLE
PREFERRED COMMON OUTSTANDING UNEARNED FROM ACCUMULATED
STOCK STOCK WARRANTS COMPENSATION EMPLOYEES DEFICIT TOTAL
------------ ------------ ----------- ------------ ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1995.................... $ 5,220,140 $ 43,868,329 $3,064,933 $(497,222) $ -- $ (6,217,605) $ 45,438,575
Issuance of preferred
stock................. 34,188,260 34,188,260
Issuance of common
stock................. 51,087,602 (5,568,266) 45,519,336
Discount on 9%
subordinated
debentures............ 236,250 236,250
Interest on notes
receivable from
employees............. (113,685) (113,685)
Stock issuance costs.... (3,353,921) (531,657) (3,885,578)
Purchase and
cancellation of
stock................. (722,744) (722,744)
Unearned compensation in
connection with the
financial advisory
agreements............ 234,722 234,722
Warrants issued......... 60,000 60,000
Adjustment to common
stock as a result of
guaranteed stock
prices................ (682,201) (682,201)
Accretion and payment
of preferred stock
dividends........... 1,509,441 (2,969,464) (1,460,023)
Accretion of preferred
stock discount...... --
Preferred stock
converted............. (3,812,826) 3,812,826 --
Preferred stock
redeemed.............. (6,279,800) (6,279,800)
Subordinated debt
converted............. 3,052,348 3,052,348
Preferred stock
converted to
subordinated debt..... (3,160,500) (3,160,500)
Payment of dividends.... (138,455) (138,455)
Cancellation of
warrants.............. (684,833) 262,500 (422,333)
Net loss................ (47,632,893) (47,632,893)
------------ ------------ ---------- --------- ----------- ------------- ------------
Balance, December 31,
1996.................... 27,526,260 97,062,239 2,440,100 -- (5,681,951) (57,115,369) 64,231,279
Issuance of common
stock................. 556,000 (556,000) --
Interest on notes
receivable from
employees............. (418,076) (418,076)
Purchase of stock from
employees............. (808,784) 791,504 (17,280)
Stock issuance costs.... (278,499) (278,499)
Subordinated debt
converted............. 15,671,322 850,000 16,521,322
Conversion of preferred
stock................. (43,197,582) 43,197,582 --
Termination of
warrants.............. 355,000 (355,000) --
Net loss................ (59,302,511) (59,302,511)
------------ ------------ ---------- --------- ----------- ------------- ------------
Balance, December 31,
1997.................... -- 141,212,037 2,085,100 -- (5,864,523) (116,696,379) 20,736,235
Issuance of common
stock................. 395,000 395,000
Purchase of stock from
employees............. (5,331,177) 5,864,523 533,346
Expiration of
warrants.............. 110,500 (110,500) --
Net loss................ (34,386,247) (34,386,247)
------------ ------------ ---------- --------- ----------- ------------- ------------
Balance, December 31,
1998.................... $ -- $136,386,360 $1,974,600 $ -- $ -- $(151,082,626) $(12,721,666)
============ ============ ========== ========= =========== ============= ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-6
<PAGE> 23
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES
Malibu Entertainment Worldwide, Inc. (the "Company") owns and operates
multi-attraction entertainment centers. The Company's original concept was the
family entertainment center ("FEC") which generally included a combination of
several entertainment attractions at a single location such as miniature golf
courses, go-karts, bumper boats, batting cages, video game rooms, souvenir
concession stands and, in some parks, scaled grand prix style racetracks
utilizing the Company's proprietary Malibu Grand Prix race cars. In 1997, the
Company introduced its new SpeedZone concept. SpeedZones are primarily designed
for young adults and feature the Company's Malibu Grand Prix racing attraction,
go-kart-type racing attractions and the Company's new "Top Eliminator" dragster
attraction, together with a restyled clubhouse, miniature golf course, video
game room and meeting and party rooms to complement the racing attractions. The
implementation of the SpeedZone concept began in 1997 with the re-development
and opening, at the end of June, of the new SpeedZones in Dallas and Los
Angeles, and a scaled-down version in Atlanta. The Company closed four FECs that
the Company determined did not meet the long-term objectives of the Company
during 1998. As of March 25, 1999, the Company owned, leased or had ownership
interests in 22 traditional FECs and three SpeedZones.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All intercompany accounts and transactions
have been eliminated in consolidation.
REVENUES
Entertainment revenue represents revenue from FECs and SpeedZones operated
by the Company and is recognized when earned.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid investment securities purchased with an initial maturity of three
months or less to be cash equivalents.
RESTRICTED CASH
Restricted cash is restricted in accordance with various agreements with
insurance carriers and is held on deposit by these carriers.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in first-out (FIFO) method.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost less accumulated depreciation.
Depreciation is computed over the lesser of the estimated useful lives of the
assets or the term of the lease as applicable. Depreciable lives range from two
to thirty-six years and lease terms range from one to twenty-five years.
Depreciation is computed using the straight-line method for financial reporting
and an accelerated method for income tax purposes. Repairs and maintenance costs
are charged to expense when incurred.
F-7
<PAGE> 24
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DEBT ISSUANCE COSTS
Costs associated with the issuance of debt are capitalized and amortized
using the straight line method which approximates the effective interest method
over the term of the related debt.
INTANGIBLE ASSETS
Goodwill, which represents the excess of purchase price over the fair value
of assets acquired in connection with the acquisitions of various entities, is
being amortized over 30 years. Trademarks are capitalized and amortized over 17
years.
INVESTMENTS IN AND ADVANCES TO LIMITED PARTNERSHIPS
Investments in limited partnerships are accounted for under the equity
method. Under the equity method, the Company adjusts the carrying amount of its
investments for its share of the earnings or losses of the limited partnership
and reports the earnings or losses in income. Distributions from a limited
partnership reduce the carrying amount of the investment.
ENVIRONMENTAL RESERVE
The Company has adopted a policy of providing a reserve for estimated costs
of site remediation of its underground storage tanks on a tank by tank basis as
soon as a potential liability is reasonably estimable. The Company's reserve is
periodically evaluated and adjusted as necessary based on the latest available
information.
NET LOSS PER SHARE OF COMMON STOCK
Net loss per common share is computed by dividing net loss applicable to
common stock by the weighted average number of common shares outstanding during
the year. Potentially issuable shares under stock options were not included in
the loss per share calculations because they were anti-dilutive and were
insignificant in amount for the years ended December 31, 1998, 1997 and 1996,
respectively. Any preferred dividends paid or accrued during the year are
reflected as an increase in net loss prior to the calculation of net loss per
common share.
During 1997 the Company adopted Statement of Financial Accounting Standards
No. 128, Earnings Per Share (SFAS 128). The effect of adopting SFAS 128 was not
material to the Company.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company estimates that the fair value of its financial instruments,
primarily its debt instruments and notes receivable, approximates the
instruments carrying amounts based on the respective instruments terms and
maturities. Disclosure about fair value of financial instruments is based on
pertinent information available to management as of December 31, 1998 and 1997.
LONG-LIVED ASSETS
An impairment loss is recognized when expected undiscounted cash flows are
less than the carrying value of the asset. In situations where the Company does
not expect to recover its carrying costs, the Company reduces its carrying costs
to fair value (Notes 9, 10 & 22).
F-8
<PAGE> 25
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could vary from these estimates.
RECLASSIFICATION
Certain prior year amounts have been reclassified to conform with current
year presentation.
ADOPTION OF NEW ACCOUNTING DISCLOSURES
For the fiscal year ended December 31, 1998, the Company adopted SFAS No.
131, "Disclosure about Segments of an Enterprise and Related Information," which
establishes standards for the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports issued to shareholders. This statement is effective
for financial statements for periods beginning after December 15, 1997.
2. CURRENT OPERATING ENVIRONMENT
The accompanying financial statements have been prepared on a going concern
basis which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company has incurred
significant losses from operations during the last several years, has a net
capital deficiency and current maturities of debt obligations in amounts greater
than the present capital resources of the Company. These factors indicate that
the Company may be unable to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
In the first quarter of 1999, the Company agreed in principle with its
principal lenders on a recapitalization plan (the "Recapitalization Plan"). The
principal components of the Recapitalization Plan, which is subject to final
documentation and funding of the $11.4 million payment described below, are as
follows:
- The Company agreed to repay by May 1, 1999 (subject to extension to May
28, 1999 under certain circumstances) $11.4 million of secured debt held
by its principal non-shareholder lender;
- The remaining $31.0 million of debt (including accrued interest) held by
that lender as of December 31, 1998 (including $21.0 million of advances
made as an accommodation by the Company's principal shareholder and
reloaned to the Company) would be converted into perpetual preferred
stock with a 9% dividend rate and dividends payable in kind through
January 1, 2002. In addition, the lender would receive six million
Company common shares. If the preferred stock were not redeemed by
September 30, 2000, the lender would receive an additional two million
Company common shares from the Company as well as four million of the
Company common shares now owned by the Company's largest shareholder. The
principal non-shareholder lender also agreed to convert all interest due
under the above-described debt during the period from March 1, 1999 to
May 1, 1999 (subject to extension to May 28, 1999 under certain
circumstances) into perpetual preferred stock having the above-described
terms;
- The $6.1 million (as of March 26, 1999) of advances since November of
last year ($2.9 million as of December 31, 1998) by an entity related to
the Company's largest shareholder would be converted into perpetual
preferred stock with a 9% dividend rate and dividends payable in kind
through January 1, 2004. The preferred stock would be convertible into
Company common shares at the lesser of $2.50 per share or 120% of market
beginning September 30, 2000. In addition, that entity would agree to
purchase up to an additional $7.9 million (for a total of $14.0 million)
of perpetual preferred stock if called by the Company over a three-year
period for certain purposes; and
F-9
<PAGE> 26
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- The $47.3 million (including $5.4 million of accrued interest) as of
December 31, 1998 of remaining debt held by the Company's largest
shareholder (excluding the reloaned advances described above) would be
converted into perpetual convertible preferred stock with a 7% dividend
rate and dividends payable in kind through January 1, 2002. The preferred
stock would be convertible into the Company's common stock at $2.50 per
share.
The agreement in principle is subject to the repayment of the $11.4 million
of secured debt, the negotiation and execution of definitive documentation and
other conditions. The Company has been in discussions with various capital
sources to secure the amounts necessary to make the $11.4 million payment. There
can, however, be no assurance that the Company will be able to implement the
recapitalization or as to the ultimate timing or terms thereof. If the Company
is unable to refinance or restructure its indebtedness in the proposed
Recapitalization Plan or otherwise, it would be forced to seek to obtain
additional capital resources from other sources or take other actions because
the Company's present capital resources are not sufficient to fund its projected
working capital, debt service and capital expenditure requirements. There can be
no assurance that the Company would be able to obtain such additional capital
resources.
The Company renegotiated the terms of its Top Eliminator contract. Under
the amended contract, the Company must make a payment of $1,100,000 to pay for
completed work in process, which has been recorded as of December 31, 1998. No
future lane purchases are required in 1999 or 2000. The effectiveness of the
amended contract is subject to the completion of the Recapitalization Plan.
Upon consummation of the Recapitalization Plan, the Company's debt
obligations and interest expense will be substantially reduced. The Company
currently has commitments available from an affiliate of the largest shareholder
and the primary remaining lender referred to in Note 13 that will provide the
Company with sufficient cash resources to make the $11.4 million debt payment
referred to above and finance the operating needs of the Company through the
beginning of the year 2000 peak operating season. Although the Company has
commitments to fund its current cash requirements, management will continue to
explore other alternatives of acceptable financing sources.
3. 1996 RECAPITALIZATION
On June 5, 1996, the Company and MEI Holdings, L.P. ("MEI Holdings")
entered into an Investment Agreement (the "Investment Agreement") and related
documents (collectively, the "Recapitalization Agreements"). The transactions
provided for in the Recapitalization Agreement (the "Recapitalization") were
completed on August 28, 1996.
Pursuant to the Recapitalization Agreement, the Company (i) sold 11,727,970
shares of common stock to MEI Holdings (45.45% of the then-outstanding shares of
common stock after giving effect to such issuance and prior to the sale of 2.1
million shares of common stock to employees) and (ii) issued to MEI Holdings a
Warrant to acquire additional shares of common stock automatically upon the
occurrence of certain events. In addition, MEI Holdings is entitled to
additional common stock under certain post-closing adjustment provisions of the
Investment Agreement if certain events occur which vary adversely from the
parties' valuation assumptions related to MEI Holdings' investment in the
Company pursuant to the Investment Agreement.
F-10
<PAGE> 27
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As a part of the Recapitalization, among other things, the Company obtained
the right to require MEI Holdings to invest up to an additional $22.7 million in
the Company (the "Company Call Option"). The Company exercised the Company Call
Option in December 1996 and subsequently issued 6,655,623 Common Shares to MEI
Holdings for $22.7 million.
In November 1996, MEI Holdings provided the capital required for the
Company to redeem the $4.6 million aggregate principal amount of the Company's
10% Debentures in exchange for which MEI Holdings received 213,551 shares of
Series G Preferred Stock (subsequently converted into 2,135,513 Common Shares).
4. EXTRAORDINARY ITEM
In September 1995, the Company issued $8.5 million principal amount of 10%
Debentures. During 1996, the 10% Debentures were amended and certain terms
modified. In connection with amending certain terms, the Company redeemed 30% of
the outstanding balance of its 10% Debentures and its Series B Preferred Stock
and the Company exchanged the remaining 70% outstanding balance under the Series
B Preferred Stock and its 10% Debentures into newly structured 10% Convertible
Subordinated Debentures (the "New 10% Debentures"). The redemption of the 10%
Debentures, along with the issuance of the New 10% Debentures, resulted in the
Company recognizing a loss on the extinguishment of debt of approximately
$663,000 for the year ended December 31, 1996 for the redemption premium of 20%,
along with the write off of unamortized debt issue costs.
5. RELATED PARTY TRANSACTIONS
On January 17, 1997, MEI Holdings completed a tender offer for any and all
outstanding common stock it did not own at $3.50 per share and for any and all
of the Company's 9% Debentures and 9.1% Debentures at par plus accrued and
unpaid interest for the purchased debentures. Pursuant to the tender offer, MEI
Holdings acquired 7,802,435 common shares, $4,249,000 aggregate principal amount
of 9% Debentures and $11,422,322 aggregate principal amount of 9.1% Debentures.
The purchased debentures have been converted into 4,477,521 of common shares.
During 1997, the Company executed two promissory notes in favor of MEI
Holdings with terms which management believed to be comparable to terms which
would be attainable from third parties. The Company paid loan costs of $685,000
to MEI Holdings in connection with one of the promissory notes. Additionally,
the Company reimburses MEI Holdings for certain costs incurred by MEI Holdings
for the benefit of the Company. The total amount charged to the Company for
overhead costs was $287,000 and $636,000 for the years ended December 31, 1998
and 1997 respectively.
During the year ended December 31, 1996, the Company terminated strategic
alliance agreements with related parties and recognized a $1,006,000 loss
thereon.
During 1998, the Company entered into a loan agreement with SZ Capital (an
entity related to MEI Holdings) to advance up to $30 million to the Company. As
of December 1998, $2.9 million had been advanced. The promissory note evidencing
this indebtedness is convertible into preferred stock of the Company, which
preferred stock is convertible into common shares of the Company. The Company
and SZ Capital also entered into a registration rights agreement pursuant to
which the Company agreed to register the note held by SZ Capital and any
preferred or common stock of the Company into which such note is convertible.
The Company, SZ Capital and MEI Holdings entered into a subordination agreement
subordinating the notes held by MEI Holdings to the notes held by SZ Capital.
(See Note 2 for additional discussion.)
During 1998, the Company and MEI Holdings amended the terms of the
$65,000,000 and $10,000,000 notes of the Company payable to MEI Holdings to
provide specific terms on which those notes are convertible into preferred stock
of the Company and have entered into an agreement regarding right
F-11
<PAGE> 28
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
to convert promissory notes. Pursuant to the terms of the agreement, the MEI
Holdings notes are convertible into preferred stock of the Company (in addition
to MEI Holdings' existing right to convert the notes into one or more
convertible subordinated notes) and the maturity date of the $10,000,000 note
payable to MEI Holdings was extended to July 20, 1999. (See Note 2 for
additional discussion.)
6. NOTES RECEIVABLE
Notes receivable are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
RELATED PARTIES
Note receivable from Mountasia of Colorado Springs, L.P.,
interest at 10%, due in March 2001, unsecured............. 50,000 50,000
Note receivable from officer, non interest bearing, due on
demand, secured by common stock........................... -- 61,750
OTHER
Note receivable from Swingtime, Inc., interest at 9.5%; due
in January 2001, secured by real and personal property.... 43,405 60,000
Notes receivable from an individual, interest at 12%; due on
demand, unsecured......................................... 30,000 30,000
-------- ---------
123,405 201,750
Less: Current portion (before reserve of $30,000 in 1998 and
1997)..................................................... (47,000) (109,927)
-------- ---------
Long-term portion........................................... 76,405 91,823
Less: Reserve for uncollectible notes receivable............ (50,000) (50,000)
-------- ---------
$ 26,405 $ 41,823
======== =========
</TABLE>
Future aggregate receipts of notes receivable are due as follows (without
giving effect to the reserves reflected above):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C>
1999.............................................. 47,000
2000.............................................. 18,000
2001.............................................. 58,405
--------
$123,405
========
</TABLE>
F-12
<PAGE> 29
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. PROPERTY AND EQUIPMENT, NET
Property and equipment, net are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Land............................................. $ 25,579,812 $ 30,272,715
Racetracks, miniature golf courses and
clubhouses..................................... 75,006,917 73,618,092
Equipment........................................ 9,377,554 8,669,489
Games............................................ 9,978,465 9,241,632
Racing lanes..................................... 8,198,448 3,821,508
------------ ------------
128,141,196 125,623,436
Less: Accumulated depreciation................... (19,297,892) (9,497,518)
------------ ------------
$108,843,304 $116,125,918
============ ============
</TABLE>
During 1997, the Company capitalized interest of $504,000 related to the
construction of the three SpeedZones.
During 1998, the Company recognized a loss on sale or disposal of assets of
approximately $1,219,000 which is recorded in Other, net in the Consolidated
Statement of Operations.
8. ASSETS HELD FOR SALE
During 1996, the Company adopted a comprehensive business plan designed to
reposition the Company through investment in its best performing parks,
including additions of new attractions, upgrading FECs, selling or closing FECs
that are not believed to be strategic and the pursuit of internal and external
growth opportunities. In implementing this business plan, the Company determined
that it would initially sell or close 15 parks. The 15 parks to be sold
generated operating revenues of $4.5 million and had an operating loss of
$517,000 for the year ended December 31, 1996. During 1997, the Company sold 12
of the FECs for a total sales price of $3.8 million. During 1997, the Company
closed an additional four FECs. In 1998, the Company closed another 4 parks with
revenues of $1.6 million. In June 1998, the Company sold a property held for
sale for net proceeds of $1.4 million.
At December 31, 1998, the Company held two non-operating properties for
sale with recorded value of approximately $1.6 million.
9. INVESTMENTS IN AND TRANSACTIONS WITH LIMITED PARTNERSHIPS
The Company charges fees for management services related to the operation
of certain FEC's in which the Company has partnership interests. Management fees
for the years ended December 31, 1998, 1997 and 1996 were $78,000, $64,000, and
$153,000 respectively.
Prior to 1997, the Company had entered into game revenue sharing agreements
with limited partnerships in which the Company purchased games for the limited
partnerships' use and received 40-50% of total game revenue. Total game sharing
revenue recognized for the year ended December 31, 1996 was $209,000.
During the year ended December 31, 1997, the Company determined that the
carrying value of its investments in limited partnerships exceeded the expected
undiscounted cash flows and therefore adjusted the carrying value of its
investments in limited partnerships which resulted in a writedown of its
investments by approximately $605,000.
In 1998, the Company recorded a $1.7 million charge for potential
uncollectibility of certain receivables from the partnerships.
F-13
<PAGE> 30
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. INTANGIBLE ASSETS, NET
Intangible assets, net are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Goodwill............................................ $1,049,910 $1,049,910
Trademarks.......................................... 134,556 126,381
---------- ----------
1,184,466 1,176,291
Less: accumulated amortization...................... (189,101) (146,305)
---------- ----------
$ 995,365 $1,029,986
========== ==========
</TABLE>
During 1997, the Company wrote down the carrying value of goodwill
associated with certain impaired assets by $1,593,000 (Notes 9 and 22).
11. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Insurance........................................... $1,289,263 $ 793,712
Racing lanes........................................ 1,100,000 --
Environmental....................................... 1,778,510 998,623
Interest............................................ 280,294 240,579
Payroll and related expenses........................ 2,303,090 2,680,123
Property taxes...................................... 257,328 --
Sales tax........................................... 458,957 529,648
Accrued rent........................................ 551,338 534,685
Accrued legal....................................... 248,903 129,559
MEI Holdings........................................ 604,551 --
Other............................................... 533,774 812,098
---------- ----------
$9,406,008 $6,719,027
========== ==========
</TABLE>
Total long-term and short-term environmental reserves were $1,778,510 and
$2,999,453 in 1998 and 1997, respectively. Environmental expenses paid and
expensed in 1998, 1997 and 1996 were $1,220,943 and $0; $563,691 and $1,900,000;
and $59,741 and $1,100,000, respectively.
12. NOTES PAYABLE TO SHAREHOLDER
During 1997, the Company entered into two promissory notes with MEI
Holdings with terms which management believed to be comparable to terms which
would be attainable from third parties. The initial amounts of the two
promissory notes were $9.5 million and $30.0 million, respectively. As
subsequently amended, the first promissory note is for $10.0 million with
interest at LIBOR plus 350 basis points, is unsecured and is payable in July
1999 and the second promissory note is for maximum borrowings of up to $65.0
million with interest at 10% and matures in August 2001. MEI Holdings has the
option, but is not obligated, to advance amounts in excess of the amounts
presently outstanding under the notes.
The MEI Holdings notes are each convertible at MEI Holdings' option into
subordinated notes that are convertible into common stock ("Convertible Notes")
which will have terms that an independent investment adviser advises the Company
would ensure that the proceeds of a sale at the time of the Convertible Notes
F-14
<PAGE> 31
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
would be sufficient to repay the then outstanding interest and principal on the
$10.0 million and $65.0 million notes and all third-party costs incurred in
connection therewith. At December 31, 1998 the outstanding balances under the
$10.0 million and the $65.0 million notes were approximately $8.0 million and
$54.9 million, respectively. Accrued interest on the notes totaled approximately
$5.4 million and $1.1 million as of December 31, 1998 and 1997, respectively.
During 1998, the Company entered into an unsecured promissory note with SZ
Capital (an entity related to MEI Holdings) with terms management believes are
comparable to terms which would be attainable from third parties. SZ Capital
may, but is not obligated to, advance up to $30,000,000. SZ Capital has the
option, but is not obligated, to advance amounts in excess of the amounts
presently outstanding under the notes. At December 31, 1998, SZ Capital had
advanced the Company approximately $2.9 million plus accrued interest. (See Note
2 for further discussions.)
13. LINE OF CREDIT AND TERM LOAN REVOLVER
In 1996, the Company entered into a loan agreement ("Senior Credit
Facility"), which was amended during 1997, with a U.S. based financial
institution to provide $20 million in senior secured credit facilities. The
Senior Credit Facility is comprised of a $12.5 million senior secured term loan
and a $7.5 million senior secured revolving credit facility. Each credit
facility matures in August 2001 with no interim principal amortization. The
credit facilities are secured by substantially all of the Company's assets and
bear interest at a floating reference rate plus 1.5%. At December 31, 1998 the
outstanding balance under the term loan and revolver was $10,000,000 and
$7,500,000, respectively.
The Company is required to maintain affirmative covenants regarding among
other things, the maintenance of certain financial ratios and net worth. At
December 31, 1998 the Company was in compliance with these covenants.
14. NOTES PAYABLE AND SUBORDINATED DEBENTURES
Notes payable are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Mortgage note bearing interest at LIBOR plus 350 basis
points, payable in July 1999; secured by real estate...... $ 21,390,375 $ 21,390,375
Mortgage notes bearing interest at prime plus 2.75% to
11.5%, weighted average interest rate of 9% and 10%,
respectively, payable in various monthly installments of
principal and interest and balloon payments through 2018;
secured by land and miniature golf courses................ 870,169 4,576,836
Notes payable to financial institutions bearing interest at
rates ranging from 8% to 10%, weighted average interest
rate of 9%, with various maturity dates through 2000;
secured by land, miniature golf courses and equipment,
intangibles, and the guarantee of certain shareholders.... 563,100 1,219,702
Note payable to a former shareholder........................ 2,371,849 2,710,003
------------ ------------
25,195,493 29,896,916
Less: Current portion....................................... (22,182,802) (1,060,411)
------------ ------------
$ 3,012,691 $ 28,836,505
============ ============
</TABLE>
F-15
<PAGE> 32
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Future maturities of notes payable are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C>
1999........................................... 22,182,802
2000........................................... 496,101
2001........................................... 370,367
2002........................................... 376,000
2003........................................... 390,000
Thereafter..................................... 1,380,223
-----------
$25,195,493
===========
</TABLE>
The note payable to a former shareholder represents a note which bears
interest at 8% per annum and is unsecured. Under the terms of the note
agreement, the Company is required to remit all excess cash flow of certain FECs
to the note holder and has guaranteed a minimum principal and interest payment
of $500,000 annually, less any capital improvements made to these FECs. Under
the terms of the note agreement, principal will be reduced by 15% of capital
improvements to the facilities. Under the terms of the note agreement, certain
shareholders must own an aggregate of 750,000 shares of common stock. In the
event that such persons fail to continue to own 750,000 shares of common stock,
the former shareholder may accelerate payment of the note to a five-year term.
15. INCOME TAXES
The provision for income taxes is as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Federal taxes-current............ $ -- $ -- $ 11,584
Deferred income taxes............ -- -- (2,195,941)
---- ---- -----------
Provision for income taxes....... $ -- $ -- $(2,184,357)
==== ==== ===========
</TABLE>
As of December 31, 1998, the Company has a tax net operating loss
carryforward of approximately $123,976,925 for income tax purposes which expires
in 2006-2013. There are certain limitations that could be imposed by the
Internal Revenue Code regarding the amount of carryforwards that may be utilized
each year. The Company also has available alternative minimum tax credit
carryforwards of approximately $292,000, which may be used to offset future
regular income tax.
The primary differences between the statutory income tax rate and the
Company's effective income tax rate are the net operating loss carryforwards and
depreciation expense. The Company has not recognized a deferred tax asset
resulting from the tax loss carryforwards generated from operations or other
temporary differences in each of the three years in the period ended December
31, 1998 due to the uncertainty related to the recoverability of that asset.
F-16
<PAGE> 33
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the Company's deferred income tax liabilities are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Deferred tax liabilities:
Depreciation................................... $ 9,562,003 $ 8,113,463
Syndication revenue............................ 1,235,190 1,235,190
Other.......................................... 256,509 273,319
------------ ------------
Gross deferred tax liabilities................. 11,053,702 9,621,972
Deferred tax assets:
Net operating loss carryforward................ (47,111,232) (32,909,278)
Equity in net earnings of limited
partnerships................................ (738,906) (738,906)
Minimum tax credit carryforward................ (292,060) (292,060)
Loss on impairment of assets................... (15,668,515) (15,721,901)
Other.......................................... (2,463,258) (2,147,434)
------------ ------------
Gross deferred tax assets...................... (66,273,971) (51,809,579)
------------ ------------
(55,220,269) (42,187,607)
Less: Valuation allowance........................ 55,220,269 42,187,607
------------ ------------
$ -- $ --
============ ============
</TABLE>
16. SHAREHOLDERS' EQUITY
COMMON STOCK
On January 17, 1997, MEI Holdings closed on a tender offer for any and all
outstanding common stock it did not own at $3.50 per share and for any and all
of the Company's 9% Debentures and 9.1% Debentures at par plus accrued and
unpaid interest for the purchased debentures. Pursuant to the tender offer, MEI
Holdings acquired 7,802,435 shares of common stock, $4,249,000 aggregate
principal amount of 9% Debentures and $11,422,322 aggregate principal amount of
9.1% shares of Debentures. The purchased debentures have been converted into
4,477,521 shares of common stock.
During the periods ended December 31, 1998, 1997, and 1996, the Company
purchased and canceled 1,974,761; 291,875; and 347,102 shares of common stock.
PREFERRED STOCK
The Company's Articles of Incorporation, as amended, authorized the
issuance of up to 6,000,000 shares of preferred stock, no par value with such
designations, rights and preferences as may be determined by the Board of
Directors.
During 1997 and 1996, the Company redeemed or converted all outstanding
preferred stock as follows:
<TABLE>
<S> <C>
1996
Series A All shares were converted into equivalent common shares
Series B Redeemed 30% of the outstanding balance and exchanged the
remaining 70% into a New 10% Debenture (Note 3)
Series C Redeemed all outstanding shares for face value plus a 13%
preferred dividend
Series D $4,023,500 was redeemed and $3,187,000 was converted into
1,331,367 common shares
1997
Series F & G All shares were converted into equivalent common shares
</TABLE>
F-17
<PAGE> 34
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During 1996, the Company's Board of Directors designated 2,700,000 shares
of the Company's preferred stock as Series F Preferred Stock. Series F shares
were convertible into common shares after shareholder approval was given or
under certain other circumstances. The terms of the Series F shares were
structured so that Series F shares were substantially equivalent (except as to
voting) to common shares. Accordingly, the holders of Series F shares were
entitled when, as and if declared by the Board, to dividends or other
distributions payable or distributable on the date on which dividends or other
distributions were so payable or distributable on or in respect of common
shares, in an amount per Series F share equal to the aggregate per share amount
of all cash dividends and the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions, declared on the common shares. If
the Company declared any dividend or other distribution on common shares payable
in common shares or any other capital stock of the Company having the right to
vote in the election of directors on a regular basis, then in each such case
where common shares would have been payable, each holder of Series F shares
would be entitled to receive a number of additional Series F shares equal to the
number of common shares such holder would have received if all of such holder's
Series F shares had been converted into common shares, and in each such case
where shares of other voting shares would have been payable, each such holder of
Series F shares would be entitled to receive such number of shares of any series
or class of Company shares as provides such holder all of the relative rights,
preferences and powers, except voting rights, that the holder would have
received as a holder of common shares if all of such holder's Series F shares
had been converted into common shares. Subject to the prior and superior rights
of the holders of any shares of any senior preferred stock, if the Company
subdivides the outstanding common shares into a greater number of shares or
combines the outstanding common shares into a reduced number of shares, then in
each case the outstanding Series F shares would also be subdivided or combined
in the same proportion so that each Series F share continued to be entitled to
ten times the amount of dividends and distributions as each common share.
During 1997, upon shareholder approval at the Company's 1997 annual
meeting, all such shares were converted into common stock.
During 1996, the Company's Board of Directors designated 213,551 shares of
the Company's preferred stock as Series G Preferred Stock. The Series G shares
were (i) nonvoting, (ii) had a liquidation preference equal to the amount
received by the Company for their issuance, (iii) had a dividend rate of 7% per
annum with unpaid dividends to accrue but be payable only at such time as
dividends are declared and paid on the common shares, and (iv) were not
convertible into common shares unless and until shareholder approval was given.
Dividends accrued but not declared would be lost upon conversion of the Series G
shares into common shares.
During 1997, upon shareholder approval at the Company's 1997 annual
meeting, all such shares were converted into common stock.
MANAGEMENT INCENTIVE PLAN
In September 1996 the Company sold 2,093,333 shares (the "Management
Shares") of common stock at a per share price equal to $2.6625 per share, for an
aggregate note receivable of $5,568,266, which price was the average of the
closing prices of the common stock for the 10 trading days immediately preceding
the sale to the participants in the Management Incentive Plan (the "Incentive
Plan"). Those persons eligible to participate in the Incentive Plan were key
employees designated by the Compensation Committee of the Board of Directors. In
order to participate in the Incentive Plan the participants surrendered all
options to acquire Common Shares. During 1997, the Company purchased 291,875
Management Shares and issued 200,000 Common Shares.
Initially, all Management Shares were restricted such that they are not
subject to alienation or transfer by the participant and are subject to the
Company's repurchase option as set forth below. The Management Shares "vested",
thereby becoming unrestricted shares, at a rate of 1/48th per month, provided
the participant
F-18
<PAGE> 35
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
remains in the continuous full time employment of the Company. If a
participant's employment with the Company was terminated within five years of
the acquisition of such shares, the Company has the right to repurchase from the
participant, and the participant has the right to sell to the Company, all of
the participant's Management Shares which have not vested. If the participant
was terminated without cause, the per share purchase price to be paid by the
Company upon such repurchase would be equal to the initial per share purchase
price of such shares (plus accrued interest). If the participant was terminated
with cause or voluntarily terminates his or her own employment, the per share
purchase price to be paid by the Company upon such repurchase would be equal to
the lesser of (i) the average of the closing price on the principal securities
market on which the common stock is then included for each of the 15 trading
days immediately preceding the date on which the participant's employment was
terminated or (ii) the initial purchase price for such shares (plus accrued
interest).
To finance the purchase of the Management Shares, the Company made
available to each participant a five year recourse loan bearing interest
initially at 7.0% per annum and escalating to 8.5% per annum secured by the
Common Shares acquired thereby. If a participant's employment with the Company
was terminated within five years of the acquisition of such shares, or if the
participant otherwise defaults on the loan, then the entire balance due under
such participant's financing would become due and payable.
On December 31, 1998, the Company redeemed all unvested outstanding stock
issued under the Management Incentive Plan in exchange for the cancellation of
the notes receivable from participants and any accrued interest thereon. Notes
receivable having a balance of approximately $5,865,000, including accrued
interest were canceled in exchange for the redemption of 1,974,761 outstanding
shares. Interest income of $533,346 which was previously accrued was expensed in
the accompanying financial statements. 26,697 vested shares remain outstanding.
COMMON STOCK OPTIONS
On September 3, 1993, the Company adopted the Mountasia 1993 Incentive
Stock Option Plan (the 1993 Plan). The 1993 Plan was amended during fiscal 1995
and provides for the issuance of options covering up to 1,250,000 shares of
common stock (subject to appropriate adjustments in the event of stock splits,
stock dividends and similar dilutive events). The options vest immediately and
expire four to five years from the date of grant. Activity under 1993 Plan is as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------------ ------------------ -------------------
OPTIONS WTD. OPTIONS WTD. OPTIONS WTD.
TO AVERAGE TO AVERAGE TO AVERAGE
ACQUIRE EXERCISE ACQUIRE EXERCISE ACQUIRE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding as of January 1,....... 21,700 8.00 25,700 8.00 232,100 8.49
Granted.......................... -- -- -- -- -- --
Exercised........................ -- -- -- -- -- --
Expired or forfeited............. (21,700) 8.00 (4,000) 8.00 (206,400) 8.49
------- -------- ------- -------- -------- --------
Outstanding as of December 31,..... -- -- 21,700 8.00 25,700 8.00
------- -------- ------- -------- -------- --------
Exercisable as of December 31,..... -- -- 21,700 8.00 25,700 8.00
</TABLE>
In September 1993, the Company adopted the 1993 Nonemployee Director Stock
Option Plan (the Director Plan), which was amended during the year ended
September 30, 1995, and reserved 250,000 Common Shares for issuance thereunder.
The Director Plan provides for the grant of nonqualified stock options to
purchase Common Shares to directors who are not employees of the Company. All
options are
F-19
<PAGE> 36
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
issued at fair market value at the date of grant, vest immediately and expire 10
years from date of grant. Activity under the Director Plan is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------------ ------------------- -------------------
OPTIONS WTD. OPTIONS OPTIONS WTD. EXERCISE
TO AVERAGE TO TO AVERAGE PRICE
ACQUIRE EXERCISE ACQUIRE ACQUIRE EXERCISE WTD.
SHARES PRICE SHARES SHARES PRICE AVERAGE
------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding as of January 1,...... 73,000 4.81 168,000 6.89 143,000 7.64
Granted......................... 10,000 1.31 30,000 4.88 25,000 2.60
Exercised....................... -- -- -- -- -- --
Expired or forfeited............ (18,000) 3.59 (125,000) 7.62 -- --
------- ---- -------- ---- -------- ----
Outstanding as of December 31,.... 65,000 4.62 73,000 4.81 168,000 6.89
------- ---- -------- ---- -------- ----
Exercisable as of December 31,.... 65,000 4.62 73,000 4.81 168,000 6.89
</TABLE>
The options at December 31, 1998 have a range of exercise prices of $1.31
to $8.75 with a weighted average years remaining life before expiration of
eight.
In conjunction with the purchase of Malibu Grand Prix Corporation, the
Company granted MGP Holdings, Inc., or its nominee, an option to acquire, for a
period of five years from November 15, 1994, 200,000 Common Shares at $12.00 per
share. No options have been exercised at December 31, 1998. The options are
fully vested and have a weighted average remaining life before expiration of 10
months.
In 1997, the Company adopted the Long-term Incentive Plan (the 1997 Plan)
which was implemented to attract and retain qualified officers and other key
employees of the Company and to provide such employee with appropriate
incentives. The 1997 Plan provides for issuance of options up to 4,000,000
shares. No options were granted in 1997. As of December 31, 1998, the Company
had issued, at market value, 918,100 options at prices ranging from $1.19 to
$3.00. The options under the 1997 Plan vest over 4 years and expire 10 years
from date of grant. The weighted average years remaining life before expiration
is 9.7 years. Activity under the 1997 plan is as follows:
<TABLE>
<CAPTION>
1998
----------------------------
OPTIONS TO
ACQUIRE WTD. AVG.
SHARES EXERCISE PRICE
---------- --------------
<S> <C> <C>
Outstanding as of January 1,......................... -- --
Granted............................................ 918,100 2.33
Exercised.......................................... -- --
Expired or forfeited............................... -- --
------- ----
Outstanding as of December 31,....................... 918,100 2.33
------- ----
Exercisable as of December 31,....................... -- --
</TABLE>
In September 1998, the Company authorized and issued, at market value,
1,000,000 options to a key officer at an exercise price of $2.00. No options
have been exercised to date. The options vest over four years and expire 10
years from date of grant.
The Company also authorized and issued, at market value, to the same key
employee, 500,000 shares of restricted stock with 100% cliff vesting on August
17, 2002.
The Company applies APB No. 25 in accounting for options granted pursuant
to the 1993 Plan, Director Plan and 1997 Plan (collectively, the "Plans").
Accordingly, no compensation cost has been recognized for the Plans. Had
compensation cost for the Plans been determined based on fair value at the grant
dates for
F-20
<PAGE> 37
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
awards under the Plans, consistent with SFAS No. 123, the Company's net loss and
loss per share would have been increased to the following proforma amounts:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------
1998 1997 1996
------------------------- ------------------------- -------------------------
AS REPORTED PROFORMA AS REPORTED PROFORMA AS REPORTED PROFORMA
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net income........... (34,386,247) (34,687,590) (59,302,511) (59,327,511) (50,602,357) (50,631,879)
Basic and dilutive
earnings per
share.............. (.71) (.72) (1.41) (1.41) (2.91) (2.91)
</TABLE>
At December 31, 1998, 1997 and 1996, the weighted average fair value of
options granted was $2.16, $2.75, and $2.60, respectively. The fair value of
each option is estimated at the date of grant using the Black-Scholes
Option-Pricing Model with the following weighted average assumptions used for
grants in 1998, 1997 and 1996, respectively; risk free interest rates of 5.32%,
6.99% and 6.99%, expected dividend yields of 0.0%, 0.0% and 0%; expected of
lives of 10 years and expected volatility of 57.89%, 105% and 105%.
WARRANTS
In connection with the issuance of the 10% Debentures in September 1995,
the Company issued warrants to purchase 82,069 and 111,034 Common Shares at
$8.70 per share to the underwriter as compensation for investment services. The
warrants expire in September 2000. In connection with the amendments to the 10%
Debentures and the Preferred A Stock the Company reduced the exercise price on
79,607 of the warrants to $5.125.
In calendar year 1995, the Company entered into two financial advisory
agreements with investment firms for a specific period of time. As consideration
for their retention, the Company issued to the investment firms warrants to
purchase common stock. The warrants were valued and expensed over the terms of
the financial advisory agreements. During 1996 the Company terminated financial
advisory agreements, which the Company had previously issued warrants as
consideration and the investment firms returned the warrants. The Company
recognized a gain of approximately $422,000 related to the warrant's value which
had previously been expensed.
17. 401(k) PLAN
In May 1997, the Company adopted the Malibu Entertainment Worldwide, Inc.
401(k) plan. All full-time employees are eligible to participate in the plan
after one full year of service. The Company matches 25% of each dollar
contributed to this plan up to 6% of an employee's salary. Participants who
terminate service for reasons other than retirement, death, or full and
permanent disability prior to the completion of six years of service, will
forfeit the nonvested portion of their company matched accounts according to the
following schedule:
<TABLE>
<CAPTION>
YEARS OF VESTING
SERVICE PERCENTAGE
- -------- ----------
<S> <C>
Less than 2...................................... 0%
2................................................ 20%
3................................................ 40%
4................................................ 60%
5................................................ 80%
6 or more........................................ 100%
</TABLE>
The Company recognized expense related to the 401(k) plan of $61,000 and
$60,000 for the years ended December 31, 1998 and 1997, respectively.
F-21
<PAGE> 38
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
18. COMMITMENTS AND CONTINGENCIES
The Company leases its office and operating facilities and certain
equipment under operating leases. Additionally, the Company has various
operating leases which require the payment of a percentage of gross revenues to
the lessor. The following schedule summarizes the future minimum lease payments
required, excluding percentage rents, under noncancelable operating leases:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C>
1999........................................... 3,906,113
2000........................................... 2,961,109
2001........................................... 2,863,543
2002........................................... 2,042,159
2003........................................... 1,652,379
Thereafter..................................... 13,118,282
-----------
$26,543,585
===========
</TABLE>
Rental expense totaled approximately $4,300,000, $3,971,000, and $5,202,000
for the years ended December 31, 1998, 1997 and 1996, respectively.
The Company has entered into sponsorship contracts with six entities that
have relationships with NASCAR, CART and NHRA drivers. The contracts expire at
various dates through 2001; however, the Company has the right to terminate the
agreements under certain conditions. Future annual payments under these
contracts are follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C>
1999............................................ 454,960
2000............................................ 595,000
2001............................................ 695,000
----------
$1,744,960
==========
</TABLE>
The Company has also entered into a purchase and license agreement, the
effectiveness of which is subject to the completion of the Company's
recapitalization plan, with an entity to provide certain race car attractions
and the related license rights to that attraction. Future minimum payments under
the purchase contract are $1.1 million, which has been recorded as of December
31, 1998. (See Note 2 for additional discussions.)
The Company is a guarantor on an outstanding loan for a limited
partnership. In the event the limited partnership defaults under the debt, the
Company is required to purchase the loan from the bank. At December 31, 1998,
the outstanding balance under the loan was $1.7 million.
19. SUPPLEMENTAL CASH FLOW INFORMATION
The Company paid interest of approximately $8,739,000, $5,485,000 and
$4,936,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
The Company paid state income taxes of $100,000, $158,000 and $110,000 for the
years ended December 31, 1998, 1997 and 1996, respectively. During 1998, the
Company reduced its debt by $3.6 million in connection with the disposal of an
asset.
F-22
<PAGE> 39
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
20. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial information for the periods ended December 31, 1998 and
1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
--------------------------------------
FIRST SECOND THIRD FOURTH
------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Operating revenues.................... $ 9,130 $14,013 $14,066 $ 8,247
Operating expenses.................... 13,960 16,114 16,101 17,839
Operating loss........................ (4,830) (2,101) (2,035) (9,592)
Net loss.............................. (7,636) (4,952) (5,262) (16,536)
Loss per common share(A).............. $ (0.16) $ (0.10) $ (0.11) $ (0.34)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
--------------------------------------
FIRST SECOND THIRD FOURTH
------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Operating revenues.................... $ 7,171 $11,375 $16,877 $ 9,184
Operating expenses.................... 10,370 16,793 24,103 43,823
Operating loss........................ (3,199) (5,418) (7,226) (34,639)
Net loss.............................. (3,933) (5,853) (11,499) (38,018)
Loss per common share(A).............. $ (0.14) $ (0.14) $ (0.24) $ (0.89)
</TABLE>
- ---------------
(A) The sum of the quarterly loss per common share may not equal the annual
loss per common share due to rounding of weighted average shares.
21. LITIGATION
Due to the nature of the attractions at the Company's parks, the Company
has been, and will likely continue to be, subject to a significant number of
personal injury lawsuits, certain of which may involve claims for substantial
damages. The Company also is, from time to time, a party to other claims and
legal proceedings, and is subject to environmental, zoning and other legal
requirements. As of the date of this Report, the Company does not believe that
any such matter is reasonably likely to have a material adverse effect on the
Company's financial position or results of operations. However, there
necessarily can be no assurance in this regard or that the Company will not be
subject to material claims or legal proceedings or requirements in the future.
22. FOURTH QUARTER CHARGES
During the fourth quarters of each of 1998, 1997 and 1996 the Company
recorded a loss due to impairment of assets in accordance with the provisions of
Statement of Financial Accounting Standards No. 121 of $0.1 million, $20.9
million and $21.0 million respectively, principally as a result of adjustments
in the carrying value of assets resulting from the implementation of its new
business plan and the determination that the carrying value of such assets was
higher than their undiscounted expected future cash flows. Additionally, the
Company adjusted the value of its limited partnerships based upon their net
realizable values which resulted in a loss on investments in affiliates of $-0-
million, $0.6 million and $2.6 million in the respective fourth quarters of
1998, 1997 and 1996. In 1998, the Company recorded a $1.7 million charge for
potential uncollectibility of a receivable from the partnerships.
During the fourth quarter of 1997 and 1996, the Company recorded charges of
$1.9 million and $1.1 million, respectively, for environmental costs based upon
analyses completed by the Company's environmental consultants.
F-23
<PAGE> 40
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
3.1 -- Articles of Incorporation of the Company (incorporated by
reference to the Company's Annual Report on Form 10-K for
the year ended September 30, 1993 (the "1993 10-K"))
3.2 -- Amended and Restated Bylaws of the Company (incorporated
by reference to the Company's Current Report on Form 8-K,
dated June 19, 1996 (the "1996 8-K"))
4.1 -- Specimen of Common Stock Certificate (incorporated by
reference to the 1993 10-K)
4.2 -- Form of Warrant (incorporated by reference to the
Company's 1993 10-K)
4.3 -- Preferred Stock Designations (incorporated by reference
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 (the "1996 10-K"))
10.1 -- 1993 Incentive Stock Option Plan (incorporated by
reference to the Company's Registration Statement on Form
SB-2 filed on November 3, 1993 (File No. 33-68454-A) (the
"Registration Statement"))
</TABLE>
<PAGE> 41
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.2 -- 1993 Company Nonemployee Director Stock Option Plan with
form of option agreement (incorporated by reference to
the Registration Statement)
10.3 -- Equity Incentive Plan (incorporated by reference to Annex
A of the Company's proxy statement on Schedule 14A for
the 1997 Annual Meeting Of Shareholders)
10.4 -- Promissory Note, dated June 30, 1993, in the principal
amount of $6,150,000 in favor of M.B. Seretean
(incorporated by reference to the Registration Statement)
10.5 -- Consolidated Amended and Restated Loan and Security
Agreement, dated August 22, 1996, between the Company and
Foothill Capital Corporation (incorporated by reference
to 1996 10-K)
10.6 -- Amendment Nos. 1, 2, 3, 4, 5, 6, 7 and 8 to the
Consolidated, Amended and Restated Loan Security, dated
August 22, 1996, between the Company and Foothill Capital
Corporation (filed herewith)
10.7 -- Investment Agreement, dated as of June 5, 1996, as
amended between MEI Holdings and the Company
(incorporated by reference to MEI Holdings' Amendment No.
3 to Schedule 13D-1 filed September 25, 1996 ("MEI
Holdings' 1996 13D-1"))
10.8 -- Warrant, dated August 28, 1996, by the Company
(incorporated by reference to MEI Holdings' 1996 13D-1)
10.9 -- Registration Rights Agreement, dated August 28, 1996,
between the Company and MEI Holdings (incorporated by
reference to MEI Holdings' 1996 13D-1)
10.10 -- Agreements, dated August 28, 1996, between the Company
and L. Scott Demerau and the Company and Julia E. Demerau
(incorporated by reference to the 1996 8-K)
10.11 -- Redemption Agreement, dated November 14, 1996, between
the Company and MEI Holdings (incorporated by reference
to MEI Holdings' Schedule 14D-1, dated November 14, 1996)
10.13 -- Loan Agreement, dated as of June 27, 1997, between Malibu
Centers, Inc. and Nomura Asset Capital Corporation
("Nomura") (incorporated by reference to the 2nd Q 1997
10-Q)
10.14 -- Promissory Note by Malibu Centers, Inc. in favor of
Nomura for $21,390,375 (incorporated by reference to the
2nd Q 1997 10-Q)
10.15 -- Guaranty, dated June 27, 1997, of MEI Holdings in favor
of Nomura (incorporated by reference to the 2nd Q 1997
10-Q)
10.16 -- Recapitalization Agreement, dated March 1, 1999, between
Nomura Asset Capital Corporation, the Company, Malibu
Centers, Inc., MEI Holdings and SZ Capital (incorporated
by reference to Amendment No. 19 to the Schedule 13D-1
filed by MEI Holdings on March 10, 1999)
10.17 -- Second Amended and Restated Subordination Agreement,
dated as of January 20, 1999, among MEI Holdings, the
Company and Foothill Capital Corporation (incorporated by
reference to Amendment No. 18 to the Schedule 13D-1 filed
by MEI Holdings on February 22, 1999 (the "MEI Holdings'
Feb 1999 13D-1"))
10.18 -- Third Amended and Restated Subordinated Convertible
Promissory Note by the Company in favor of MEI Holdings,
in the amount of $65,000,000 (incorporated by reference
to the MEI Holdings' Feb 1999 13D-1)
</TABLE>
<PAGE> 42
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.19 -- Second Amended and Restated Promissory Note by the
Company in favor of MEI Holdings, in the amount of
$10,000,000 (incorporated by reference to the MEI
Holdings' Feb 1999 13D-1)
10.20 -- Agreement Regarding Right to Convert Promissory Notes,
dated as of January 20, 1999, between MEI Holdings and
the Company (incorporated by reference to the MEI
Holdings' Feb 1999 13D-1)
10.21 -- Subordinated Convertible Promissory Note by the Company
in favor of SZ Capital, in the amount of $30,000,000
(incorporated by reference to the MEI Holdings' Feb 1999
13D-1)
10.22 -- Subordination Agreement, dated as of November 16, 1998,
among SZ Capital, the Company and Foothill Capital
Corporation (incorporated by reference to MEI Holdings'
Feb 1999 13D-1)
10.23 -- Registration Rights Agreement, dated as of November 16,
1998, between the Company and SZ Capital (incorporated by
reference to the MEI Holdings' Feb 1999 13D-1)
10.24 -- Loan Agreement, dated as of November 16, 1998, between SZ
Capital and the Company (filed herewith)
10.25 -- Subordinated Convertible Promissory Note, dated November
16, 1998, by the Company in favor of SZ Capital, in the
amount of $30,000,000 (incorporated by reference to MEI
Holdings' Feb 1999 13D-1)
21 -- Subsidiaries (filed herewith)
24 -- Powers of Attorney (filed herewith)
27 -- Financial Data Schedule (for SEC purposes only)
</TABLE>
(b) Reports on Form 8-K: No Reports on Form 8-K were filed by the Company
during the fourth quarter of 1997.
<PAGE> 1
EXHIBIT 10.6
AMENDMENT NUMBER ONE TO
CONSOLIDATED, AMENDED, AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NUMBER ONE TO CONSOLIDATED, AMENDED, AND RESTATED LOAN
AND SECURITY AGREEMENT (THIS "AMENDMENT"), is entered into as of September 4,
1996, between FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at 11111 Santa Monica Boulevard,
Suite 1500, Los Angeles, California 90025-3333, MOUNTASIA ENTERTAINMENT
INTERNATIONAL, INC., a Georgia corporation ("Mountasia"), with its chief
executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, MOUNTASIA MANAGEMENT COMPANY, a Georgia corporation ("MMC"),
with its chief executive office located at 5895 Windward Parkway, Suite 220,
Alpharetta, Georgia 30202, MOUNTASIA PARTNERS I, INC., a Georgia corporation
("MPI"), with its chief executive office located at 5895 Windward Parkway,
Suite 220, Alpharetta, Georgia 30202, MALIBU GRAND PRIX CORPORATION, a Delaware
corporation ("MGPC"), with its chief executive office located at 5895 Windward
Parkway, Suite 220, Alpharetta, Georgia 30202, MIAMI CASTLE MGPC, INC., a
Florida corporation ("Miami"), with its chief executive office located at 5895
Windward Parkway, Suite 220, Alpharetta, Georgia 30202, TEMPE MGPC, INC., an
Arizona corporation ("Tempe"), with its chief executive office located at 5895
Windward Parkway, Suite 220, Alpharetta, Georgia 30202, TUCSON MGPC, INC., an
Arizona corporation ("Tucson"), with its chief executive office located at 5895
Windward Parkway, Suite 220, Alpharetta, Georgia 30202, FRESNO MGPC, INC., a
California corporation ("Fresno"), with its chief executive office located at
5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202, NORTH HOLLYWOOD
CASTLE MGPC, INC., a California corporation ("NHC"), with its chief executive
office located at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202,
PUENTE HILLS MGPC, INC., a California corporation ("PH"), with its chief
executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, PUENTE HILLS SHOWBOAT MGPC, INC., a California corporation
("PHS"), with its chief executive office located at 5895 Windward Parkway,
Suite 220, Alpharetta, Georgia 30202, REDONDO BEACH CASTLE MGPC, INC., a
California corporation ("RBC"), with its chief executive office located at 5895
Windward Parkway, Suite 220, Alpharetta, Georgia 30202, REDWOOD CITY CASTLE
MGPC, INC., a California corporation ("RCC"), with its chief executive office
located at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202, REDWOOD
CITY MGPC, INC., a California corporation ("RC"), with its chief executive
office located at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202,
SAN DIEGO MGPC, INC., a California corporation ("San Diego"), with its chief
executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, DENVER MGPC, INC., a Colorado corporation ("Denver"), with its
chief executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, ORLANDO CASTLE
-1-
<PAGE> 2
MGPC, INC., a Florida corporation ("OC"), with its chief executive office
located at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202, ORLANDO
MGPC, INC., a Florida corporation ("Orlando"), with its chief executive office
located at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202, TAMPA
CASTLE MGPC, INC., a Florida corporation ("TC"), with its chief executive
office located at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202,
TAMPA MGPC, INC., a Florida corporation ("Tampa"), with its chief executive
office located at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202,
LENEXA MGPC, INC., a Kansas corporation ("Lenexa"), with its chief executive
office located at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202,
MT. LAUREL MGPC, INC., a New Jersey corporation ("Mt.Laurel"), with its chief
executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, COLUMBUS MGPC, INC., an Ohio corporation ("Columbus"), with its
chief executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, CINCINNATI MGPC, INC., an Ohio corporation ("Cincinnati"), with
its chief executive office located at 5895 Windward Parkway, Suite 220,
Alpharetta, Georgia 30202, PORTLAND MGPC, INC., an Oregon corporation
("Portland"), with its chief executive office located at 5895 Windward Parkway,
Suite 220, Alpharetta, Georgia 30202, AUSTIN MGPC, INC., a Texas corporation
("Austin"), with its chief executive office located at 5895 Windward Parkway,
Suite 220, Alpharetta, Georgia 30202, DALLAS CASTLE MGPC, INC., a Texas
corporation ("DC"), with its chief executive office located at 5895 Windward
Parkway, Suite 220, Alpharetta, Georgia 30202, DALLAS MGPC, INC., a Texas
corporation ("Dallas"), with its chief executive office located at 5895
Windward Parkway, Suite 220, Alpharetta, Georgia 30202, HOUSTON CASTLE MGPC,
INC., a Texas corporation ("HC"), with its chief executive office located at
5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202, HOUSTON II MGPC,
INC., a Texas corporation ("Houston"), with its chief executive office located
at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202, SAN ANTONIO
CASTLE MGPC, INC., a Texas corporation ("SAC"), with its chief executive office
located at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202, SAN
ANTONIO MGPC, INC., a Texas corporation ("San Antonio"), with its chief
executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, MOUNTASIA DEVELOPMENT COMPANY, a Georgia corporation ("MDC"),
with its chief executive office located at 5895 Windward Parkway, Suite 220,
Alpharetta, Georgia 30202, MALIBU GRAND PRIX DESIGN & MANUFACTURING, INC., a
California corporation ("MGPDMI"), with its chief executive office located at
5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202, MALIBU GRAND PRIX
FINANCIAL SERVICES, INC., a California corporation ("MGPFSI"), with its chief
executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, OFF TRACK MANAGEMENT, INC., a California corporation ("Off
Track"), with its chief executive office located at 5895 Windward Parkway,
Suite 220, Alpharetta, Georgia 30202, MGP SPECIAL, INC., a California
corporation ("Special"), with its chief executive office located at 5895
Windward Parkway, Suite 220, Alpharetta, Georgia 30202, AMUSEMENT
-2-
<PAGE> 3
MANAGEMENT FLORIDA, INC., a Florida corporation ("Amusement"), with its chief
executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, MALIBU GRAND PRIX CONSULTING, INC., a California corporation
("Consulting"), with its chief executive office located at 5895 Windward
Parkway, Suite 220, Alpharetta, Georgia 30202, MOUNTASIA - MEI INTERNATIONAL,
INC., a Georgia corporation ("MMEII"), with its chief executive office located
at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202, MOUNTASIA - MEI
LIMITED COMPANY, INC., a California corporation ("MMEILC"), with its chief
executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, MOUNTASIA - MEI CALIFORNIA, INC., a California corporation
("MCNC"), with its chief executive office located at 5895 Windward Parkway,
Suite 220, Alpharetta, Georgia 30202, MOUNTASIA - MEI CALIFORNIA LIMITED
PARTNERSHIP, a California limited partnership ("MMEICLP"), with its chief
executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, MOUNTASIA - MEI MANUFACTURING COMPANY, INC., a Georgia
corporation ("MMEIMCI"), with its chief executive office located at 5895
Windward Parkway, Suite 220, Alpharetta, Georgia 30202, AMUSEMENT CO., INC., a
Delaware corporation ("ACI"), with its chief executive office located at 5895
Windward Parkway, Suite 220, Alpharetta, Georgia 30202, and AMUSEMENT CO.
PARTNERS, INC., a Delaware corporation ("ACPI"), with its chief executive
office located at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202.
This Amendment is entered into with reference to the following facts:
A. Foothill, as lender, and Mountasia and forty-five of its
direct and indirect Subsidiaries, jointly and severally as
borrower, heretofore entered into that certain Consolidated,
Amended, and Restated Loan and Security Agreement, dated as of
August 22, 1996 (herein the "Agreement");
B. Borrower has requested Foothill to amend the Agreement as set
forth in this Amendment, to permit Borrower to repurchase
$2,700,000 of the Ten Percent Debentures;
C. Foothill is willing to so amend the Agreement in accordance
with the terms and conditions hereof; and
D. All capitalized terms used herein and not defined herein shall
have the meanings ascribed to them in the Agreement, as
amended hereby.
NOW, THEREFORE, in consideration of the above recitals and the
mutual promises contained herein, Foothill and Borrower hereby agree as
follows:
-3-
<PAGE> 4
1. Amendments to the Agreement.
a. Section 1.1 of the Agreement hereby is
amended by adding the following new defined terms in alphabetical order:
"First Amendment" means that certain Amendment Number
One to Consolidated, Amended, and Restated Loan and Security
Agreement, dated as of September 4, 1996, between Foothill and
Borrower.
"Permitted Ten Percent Debenture Repurchases" means,
so long as no Event of Default has occurred and is continuing, the
repurchase by Mountasia, for cash, for not more than par, in one or
more transactions, of not more than $2,700,000 in the aggregate of the
Ten Percent Debentures.
b. The following definitions contained in
Section 1.1 of the Amendment are amended and restated in their entirety to read
as follows:
"Permitted Transactions" means (a) the NEF
Acquisition, (b) the Willowbrook Acquisition, (c) the Nine Percent
Debenture Amendments, (d) the Nine Percent Debenture Conversion, (e)
the NEF Debenture Conversion, (f) the Ten Percent Debenture
Conversion, (g) Permitted Subordinated Debt Payments, (h) Permitted
Special Distributions, (i) Permitted Unrestricted Subsidiary
Investments, (j) Permitted Unrestricted Subsidiary Transactions, (k)
Permitted Hampstead Transactions, and (l) Permitted Ten Percent
Debenture Repurchases.
c. The following specified provisions of the
Agreement hereby are amended and restated in their entirety as follows:
(1) The last sentence of Section 7.8 of the
Agreement:
Without limiting the generality of the foregoing, except for Permitted
Ten Percent Debenture Repurchases, at no time shall Borrower make any
(y) payment with respect to any Subordinated Debt if the making of
same would conflict with the subordination provisions thereof, or (z)
cash payment of principal with respect to the NEF Debentures.
(2) Section 8.11 of the Agreement:
8.11 If Borrower makes any payment on account of
Indebtedness that has been contractually subordinated in right of
payment to the payment of the Obligations, except to the extent such
payment is permitted by the terms of the subordination provisions
applicable to such
-4-
<PAGE> 5
Indebtedness, and except for Permitted Ten Percent Debenture
Repurchases; or
2. Representations and Warranties. Borrower hereby
represents and warrants to Foothill that (a) the execution, delivery, and
performance of this Amendment and of the Agreement, as amended by this
Amendment, are within its corporate powers, have been duly authorized by all
necessary corporate action, and are not in contravention of any law, rule, or
regulation, or any order, judgment, decree, writ, injunction, or award of any
arbitrator, court, or governmental authority, or of the terms of its charter or
bylaws, or of any contract or undertaking to which it is a party or by which
any of its properties may be bound or affected, and (b) this Amendment and the
Agreement, as amended by this Amendment, constitute Borrower's legal, valid,
and binding obligation, enforceable against Borrower in accordance with its
terms.
3. Conditions Precedent to Amendment. The satisfaction
of each of the following, on or before the First Amendment Closing Deadline,
unless waived or deferred by Foothill in its sole discretion, shall constitute
conditions precedent to the effectiveness of this Amendment:
a. Foothill shall have received the following
document, duly executed, and which document shall be in full force and effect:
(1) the Investment Agreement Amendment.
b. The representations and warranties in this
Amendment, the Agreement as amended by this Amendment, and the other Loan
Documents shall be true and correct in all respects on and as of the date
hereof, as though made on such date (except to the extent that such
representations and warranties relate solely to an earlier date);
c. No Event of Default or event which with the
giving of notice or passage of time would constitute an Event of Default shall
have occurred and be continuing on the date hereof, nor shall result from the
consummation of the transactions contemplated herein;
d. No injunction, writ, restraining order, or
other order of any nature prohibiting, directly or indirectly, the consummation
of the transactions contemplated herein shall have been issued and remain in
force by any governmental authority against Borrower or Foothill; and
e. All other documents and legal matters in
connection with the transactions contemplated by this Amendment shall have been
delivered or executed or recorded and shall be in form and substance
satisfactory to Foothill and its counsel.
-5-
<PAGE> 6
4. Further Assurances. Borrower shall execute and
deliver all agreements, documents, and instruments, in form and substance
satisfactory to Foothill, and take all actions as Foothill may reasonably
request from time to time fully to consummate the transactions contemplated
under this Amendment and the Agreement, as amended by this Amendment.
5. Miscellaneous.
a. Upon the effectiveness of this Amendment,
each reference in the Agreement to "this Agreement", "hereunder", "herein",
"hereof" or words of like import referring to the Agreement shall mean and
refer to the Agreement as amended by this Amendment.
b. Upon the effectiveness of this Amendment,
each reference in the Loan Documents to the "Loan Agreement", "thereunder",
"therein", "thereof" or words of like import referring to the Agreement shall
mean and refer to the Agreement as amended by this Amendment.
c. As used in this Amendment, "First Amendment
Closing Deadline" means September 23, 1996.
d. As used in this Amendment, "Investment
Agreement Amendment" means an amendment to the Investment Agreement, entered
into between Hampstead and Mountasia, in form and substance acceptable to
Foothill, pursuant to which the parties to the Investment Agreement clarify
that (i) the additional up to $2,700,000 of new equity to be made available by
Hampstead if Mountasia repurchases up to $2,700,000 of Ten Percent Debentures
also will be available if Mountasia uses funds on hand without regard to the
issuance of new equity (rather than funds received from Hampstead in connection
with the issuance of new equity) to fund such repurchases, and, notwithstanding
paragraph (f) of Exhibit G to the Investment Agreement, such additional new
equity availability is not restricted to the situation where the funds received
from Hampstead in connection with the issuance of new equity are the actual
funds used to repurchase Ten Percent Debentures, (ii) notwithstanding paragraph
(h) of Exhibit G to the Investment Agreement, if Mountasia uses up to
$2,700,000 of its funds on hand (without regard to the issuance of new equity)
to repurchase Ten Percent Debentures, and subsequently issues up to $2,700,000
of new equity to Hampstead to replenish such funds previously used for such
purpose, such up to $2,700,000 so received from Hampstead shall not be subject
to any restrictions as to the use thereof by Mountasia otherwise set forth in
paragraph (h) of Exhibit G of the Investment Agreement, and (iii) the only
remaining conditions to Hampstead's agreement to purchase new equity of
Mountasia as set forth in the Investment
-6-
<PAGE> 7
Agreement, as amended by the Investment Agreement Amendment, are those
conditions expressly set forth in Exhibit G to the Investment Agreement, as
amended by the Investment Agreement Amendment.
e. This Amendment shall be governed by and
construed in accordance with the laws of the State of California.
f. This Amendment may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Amendment by signing
any such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the date first written above.
MOUNTASIA
ENTERTAINMENT
INTERNATIONAL, INC.,
a Georgia corporation
MOUNTASIA MANAGEMENT COMPANY,
a Georgia corporation
MOUNTASIA PARTNERS I, INC.,
a Georgia corporation
MALIBU GRAND PRIX CORPORATION,
a Delaware corporation
MIAMI CASTLE MGPC, INC.,
a Florida corporation
TEMPE MGPC, INC.,
an Arizona corporation
TUCSON MGPC, INC.,
an Arizona corporation
FRESNO MGPC, INC.,
a California corporation
NORTH HOLLYWOOD CASTLE MGPC, INC.,
a California corporation
-7-
<PAGE> 8
PUENTE HILLS MGPC, INC.,
a California corporation
PUENTE HILLS SHOWBOAT MGPC, INC.,
a California corporation
REDONDO BEACH CASTLE MGPC, INC.,
a California corporation
REDWOOD CITY CASTLE MGPC, INC.,
a California corporation
REDWOOD CITY MGPC, INC.,
a California corporation
SAN DIEGO MGPC, INC.,
a California corporation
DENVER MGPC, INC.,
a Colorado corporation
ORLANDO CASTLE MGPC, INC.,
a Florida corporation
ORLANDO MGPC, INC.,
a Florida corporation
TAMPA CASTLE MGPC, INC.,
a Florida corporation
TAMPA MGPC, INC.,
a Florida corporation
LENEXA MGPC, INC.,
a Kansas corporation
MT. LAUREL MGPC, INC.,
a New Jersey corporation
COLUMBUS MGPC, INC.,
an Ohio corporation
-8-
<PAGE> 9
CINCINNATI MGPC, INC.,
an Ohio corporation
PORTLAND MGPC, INC.,
an Oregon corporation
AUSTIN MGPC, INC.,
a Texas corporation
DALLAS CASTLE MGPC, INC.,
a Texas corporation
DALLAS MGPC, INC.,
a Texas corporation
HOUSTON CASTLE MGPC, INC.,
a Texas corporation
HOUSTON II MGPC, INC.,
a Texas corporation
SAN ANTONIO CASTLE MGPC, INC.,
a Texas corporation
SAN ANTONIO MGPC, INC.,
a Texas corporation
MOUNTASIA DEVELOPMENT COMPANY,
a Georgia corporation
MALIBU GRAND PRIX DESIGN &
MANUFACTURING, INC.,
a California corporation
MALIBU GRAND PRIX FINANCIAL SERVICES,
INC.,
a California corporation
OFF TRACK MANAGEMENT, INC.,
a California corporation
MGP SPECIAL, INC.,
a California corporation
-9-
<PAGE> 10
AMUSEMENT MANAGEMENT FLORIDA, INC.,
a Florida corporation
MALIBU GRAND PRIX CONSULTING, INC.,
a California corporation
MOUNTASIA - MEI INTERNATIONAL, INC.,
a Georgia corporation
MOUNTASIA - MEI LIMITED COMPANY, INC.,
a California corporation
MOUNTASIA - MEI CALIFORNIA, INC.,
a California corporation
MOUNTASIA - MEI CALIFORNIA LIMITED
PARTNERSHIP,
a California limited partnership
By Mountasia - MEI International,
Inc., its general partner
MOUNTASIA - MEI MANUFACTURING COMPANY,
INC.,
a Georgia corporation
AMUSEMENT CO., INC.,
a Delaware corporation
AMUSEMENT CO. PARTNERS, INC.,
a Delaware corporation
By /s/ GREGORY N. WATERS
-----------------------------------
Name: Gregory N. Waters
Title: Executive Vice President of
each Debtor, on behalf of each
Debtor
FOOTHILL CAPITAL CORPORATION,
a California corporation
By /s/ CATHERINE BURKE
-----------------------------------
Name: Catherine Burke
Title:
-10-
<PAGE> 11
AMENDMENT NUMBER TWO TO CONSOLIDATED, AMENDED, AND
RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NUMBER TWO TO CONSOLIDATED, AMENDED, AND RESTATED LOAN
AND SECURITY AGREEMENT (THIS "AMENDMENT"), is entered into as of May 22, 1997,
between FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"),
with a place of business located at 11111 Santa Monica Boulevard, Suite 1500,
Los Angeles, California 90025-3333, MOUNTASIA ENTERTAINMENT INTERNATIONAL,
INC., a Georgia corporation ("Mountasia"), with its chief executive office
located at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202,
MOUNTASIA MANAGEMENT COMPANY, a Georgia corporation ("MMC"), with its chief
executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, MOUNTASIA PARTNERS I, INC., a Georgia corporation ("MPI"), with
its chief executive office located at 5895 Windward Parkway, Suite 220,
Alpharetta, Georgia 30202, MALIBU GRAND PRIX CORPORATION, a Delaware
corporation ("MGPC"), with its chief executive office located at 5895 Windward
Parkway, Suite 220, Alpharetta, Georgia 30202, MIAMI CASTLE MGPC, INC., a
Florida corporation ("Miami"), with its chief executive office located at 5895
Windward Parkway, Suite 220, Alpharetta, Georgia 30202, TEMPE MGPC, INC., an
Arizona corporation ("Tempe"), with its chief executive office located at 5895
Windward Parkway, Suite 220, Alpharetta, Georgia 30202, TUCSON MGPC, INC., an
Arizona corporation ("Tucson"), with its chief executive office located at 5895
Windward Parkway, Suite 220, Alpharetta, Georgia 30202, FRESNO MGPC, INC., a
California corporation ("Fresno"), with its chief executive office located at
5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202, NORTH HOLLYWOOD
CASTLE MGPC, INC., a California corporation ("NHC"), with its chief executive
office located at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202,
PUENTE HILLS MGPC, INC., a California corporation ("PH"), with its chief
executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, PUENTE HILLS SHOWBOAT MGPC, INC., a California corporation
("PHS"), with its chief executive office located at 5895 Windward Parkway,
Suite 220, Alpharetta, Georgia 30202, REDONDO BEACH CASTLE MGPC, INC., a
California corporation ("RBC"), with its chief executive office located at 5895
Windward Parkway, Suite 220, Alpharetta, Georgia 30202, REDWOOD CITY CASTLE
MGPC, INC., a California corporation ("RCC"), with its chief executive office
located at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202, REDWOOD
CITY MGPC, INC., a California corporation ("RC"), with its chief executive
office located at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202,
SAN DIEGO MGPC, INC., a California corporation ("San Diego"), with its chief
executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, DENVER MGPC, INC., a Colorado corporation ("Denver"), with its
chief executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, ORLANDO CASTLE MGPC, INC., a Florida corporation ("OC"), with
its chief executive office located at 5895
-1-
<PAGE> 12
Windward Parkway, Suite 220, Alpharetta, Georgia 30202, ORLANDO MGPC, INC., a
Florida corporation ("Orlando"), with its chief executive office located at
5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202, TAMPA CASTLE MGPC,
INC., a Florida corporation ("TC"), with its chief executive office located at
5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202, TAMPA MGPC, INC.,
a Florida corporation ("Tampa"), with its chief executive office located at
5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202, LENEXA MGPC, INC.,
a Kansas corporation ("Lenexa"), with its chief executive office located at
5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202, MT. LAUREL MGPC,
INC., a New Jersey corporation ("Mt.Laurel"), with its chief executive office
located at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202,
COLUMBUS MGPC, INC., an Ohio corporation ("Columbus"), with its chief executive
office located at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202,
CINCINNATI MGPC, INC., an Ohio corporation ("Cincinnati"), with its chief
executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, PORTLAND MGPC, INC., an Oregon corporation ("Portland"), with
its chief executive office located at 5895 Windward Parkway, Suite 220,
Alpharetta, Georgia 30202, AUSTIN MGPC, INC., a Texas corporation ("Austin"),
with its chief executive office located at 5895 Windward Parkway, Suite 220,
Alpharetta, Georgia 30202, DALLAS CASTLE MGPC, INC., a Texas corporation
("DC"), with its chief executive office located at 5895 Windward Parkway, Suite
220, Alpharetta, Georgia 30202, DALLAS MGPC, INC., a Texas corporation
("Dallas"), with its chief executive office located at 5895 Windward Parkway,
Suite 220, Alpharetta, Georgia 30202, HOUSTON CASTLE MGPC, INC., a Texas
corporation ("HC"), with its chief executive office located at 5895 Windward
Parkway, Suite 220, Alpharetta, Georgia 30202, HOUSTON II MGPC, INC., a Texas
corporation ("Houston"), with its chief executive office located at 5895
Windward Parkway, Suite 220, Alpharetta, Georgia 30202, SAN ANTONIO CASTLE
MGPC, INC., a Texas corporation ("SAC"), with its chief executive office
located at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202, SAN
ANTONIO MGPC, INC., a Texas corporation ("San Antonio"), with its chief
executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, MOUNTASIA DEVELOPMENT COMPANY, a Georgia corporation ("MDC"),
with its chief executive office located at 5895 Windward Parkway, Suite 220,
Alpharetta, Georgia 30202, MALIBU GRAND PRIX DESIGN & MANUFACTURING, INC., a
California corporation ("MGPDMI"), with its chief executive office located at
5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202, MALIBU GRAND PRIX
FINANCIAL SERVICES, INC., a California corporation ("MGPFSI"), with its chief
executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, OFF TRACK MANAGEMENT, INC., a California corporation ("Off
Track"), with its chief executive office located at 5895 Windward Parkway,
Suite 220, Alpharetta, Georgia 30202, MGP SPECIAL, INC., a California
corporation ("Special"), with its chief executive office located at 5895
Windward Parkway, Suite 220, Alpharetta, Georgia 30202, AMUSEMENT MANAGEMENT
FLORIDA, INC., a Florida corporation ("Amusement"), with its
-2-
<PAGE> 13
chief executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, MALIBU GRAND PRIX CONSULTING, INC., a California corporation
("Consulting"), with its chief executive office located at 5895 Windward
Parkway, Suite 220, Alpharetta, Georgia 30202, MOUNTASIA - MEI INTERNATIONAL,
INC., a Georgia corporation ("MMEII"), with its chief executive office located
at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202, MOUNTASIA - MEI
LIMITED COMPANY, INC., a California corporation ("MMEILC"), with its chief
executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, MOUNTASIA - MEI CALIFORNIA, INC., a California corporation
("MCNC"), with its chief executive office located at 5895 Windward Parkway,
Suite 220, Alpharetta, Georgia 30202, MOUNTASIA - MEI CALIFORNIA LIMITED
PARTNERSHIP, a California limited partnership ("MMEICLP"), with its chief
executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, MOUNTASIA - MEI MANUFACTURING COMPANY, INC., a Georgia
corporation ("MMEIMCI"), with its chief executive office located at 5895
Windward Parkway, Suite 220, Alpharetta, Georgia 30202, AMUSEMENT CO., INC., a
Delaware corporation ("ACI"), with its chief executive office located at 5895
Windward Parkway, Suite 220, Alpharetta, Georgia 30202, and AMUSEMENT CO.
PARTNERS, INC., a Delaware corporation ("ACPI"), with its chief executive
office located at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202.
WHEREAS Foothill and Borrower are parties to the Consolidated,
Amended, and Restated Loan and Security Agreement, entered into as of August
22, 1996 ("the Loan Agreement");
WHEREAS Mountasia has changed its legal name to Malibu Entertainment
Worldwide, Inc.;
WHEREAS, Borrower and Foothill have agreed that the references in the
Loan Documents to Mountasia be amended to account for such change in name in
accordance with the terms hereof; and
WHEREAS, Borrower has disposed of certain parcels of real property
which necessitates the amendment of Schedule R-1 and Exhibit I.
NOW, THEREFORE, in consideration of the mutual promises
contained herein, Foothill and Borrower hereby agree as follows:
All capitalized terms used herein and not defined herein shall
have the meanings ascribed to them in the Loan Agreement.
-3-
<PAGE> 14
1. Amendments to the Loan Agreement.
a. Section 1.1 of the Loan Agreement hereby is
amended by adding the following definitions:
"MEWI" means Malibu Entertainment Worldwide, Inc., formerly
known as Mountasia Entertainment International, a Georgia corporation.
"Real Property Collateral" means the Real Property, including
the parcel or parcels of real property and the related improvements thereto
identified on the Amended and Restated Schedule R-1 attached hereto, and any
Real Property hereafter acquired by Borrower.
b. Exhibit I of the Loan Agreement is hereby
amended, restated, and replaced by the Amended and Restated Exhibit I attached
hereto.
c. Each of the references to "Mountasia" or
"Mountasia Entertainment International, Inc." in the Loan Documents, including
but not limited to the Loan Agreement, is hereby amended and deemed to refer to
"MEWI" as defined herein.
2. Representations and Warranties. Borrower hereby
represents and warrants to Foothill that (a) the execution, delivery, and
performance of this Amendment, are within its corporate powers, have been duly
authorized by all necessary corporate action, and are not in contravention of
any law, rule, or regulation, or any order, judgment, decree, writ, injunction,
or award of any arbitrator, court, or governmental authority, or of the terms
of its charter or bylaws, or of any contract or undertaking to which it is a
party or by which any of its properties may be bound or affected, and (b) the
Loan Agreement, as amended by this Amendment, constitute Borrower's legal,
valid, and binding obligation, enforceable against Borrower in accordance with
its terms.
3. Further Assurances. Borrower shall execute and
deliver all financing statements, agreements, documents, and instruments, in
form and substance satisfactory to Foothill, and take all actions as Foothill
may reasonably request from time to time, to perfect and maintain the
perfection and priority of Foothill's security interests in the Collateral, and
to fully consummate the transactions contemplated under the Loan Agreement and
this Amendment.
4. Effect on Loan Agreement. The Loan Agreement, as
amended hereby, shall be and remain in full force and effect in accordance with
its respective terms and hereby is ratified and confirmed in all respects. The
execution, delivery, and performance of this Amendment shall not operate as a
waiver of or, except as expressly set forth herein, as an amendment, of any
right, power, or remedy of Lender under the Loan Agreement, as in effect prior
to the date hereof.
-4-
<PAGE> 15
5. Miscellaneous.
a. Upon the effectiveness of this Amendment,
each reference in the Agreement to "this Agreement", "hereunder", "herein",
"hereof" or words of like import referring to the Agreement shall mean and
refer to the Loan Agreement as amended by this Amendment.
b. Upon the effectiveness of this Amendment,
each reference in the Loan Documents to the "Loan Agreement", "thereunder",
"therein", "thereof" or words of like import referring to the Agreement shall
mean and refer to the Loan Agreement as amended by this Amendment.
c. This Amendment shall be governed by and
construed in accordance with the laws of the State of California.
d. This Amendment may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Amendment by signing
any such counterpart.
-5-
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed in on the date first written above.
By:
---------------------------------------
By
-------------------------
in his capacity as of:
-------------
MALIBU ENTERTAINMENT WORLDWIDE, INC., formerly known as MOUNTASIA
ENTERTAINMENT INTERNATIONAL, INC., a Georgia corporation MOUNTASIA FAMILY
ENTERTAINMENT CENTERS, INC., a Texas corporation
By:
---------------------------------------
L. Scott Demerau,
in his capacity as President of;
MOUNTASIA MANAGEMENT COMPANY, a Georgia corporation
MOUNTASIA PARTNERS I, INC., a Georgia corporation
MALIBU GRAND PRIX CORPORATION, a Delaware corporation
MIAMI CASTLE MGPC, INC., a Florida corporation
TEMPE MGPC, INC., an Arizona corporation
TUCSON MGPC, INC., an Arizona corporation
FRESNO MGPC, INC., a California corporation
NORTH HOLLYWOOD CASTLE MGPC, INC., a California corporation
PUENTE HILLS MGPC, INC., a California corporation
PUENTE HILLS SHOWBOAT MGPC, INC., a California corporation
REDONDO BEACH CASTLE MGPC, INC., a California corporation
REDWOOD CITY CASTLE MGPC, INC., a California corporation
REDWOOD CITY MGPC, INC., a California corporation
SAN DIEGO MGPC, INC., a California corporation
DENVER MGPC, INC., a Colorado corporation
ORLANDO CASTLE MGPC, INC., a Florida corporation
ORLANDO MGPC, INC., a Florida corporation
TAMPA CASTLE MGPC, INC., a Florida corporation
TAMPA MGPC, INC., a Florida corporation
LENEXA MGPC, INC., a Kansas corporation
MT. LAUREL MGPC, INC., a New Jersey corporation
COLUMBUS MGPC, INC., an Ohio corporation
CINCINNATI MGPC, INC., an Ohio corporation
PORTLAND MGPC, INC., an Oregon corporation
AUSTIN MGPC, INC., a Texas corporation
DALLAS CASTLE MGPC, INC., a Texas corporation
-6-
<PAGE> 17
DALLAS MGPC, INC., a Texas corporation
HOUSTON CASTLE MGPC, INC., a Texas corporation
HOUSTON II MGPC, INC., a Texas corporation
SAN ANTONIO CASTLE MGPC, INC., a Texas corporation
SAN ANTONIO MGPC, INC., a Texas corporation
MOUNTASIA DEVELOPMENT COMPANY, a Georgia corporation
MALIBU GRAND PRIX DESIGN & MANUFACTURING, INC., a California corporation
MALIBU GRAND PRIX FINANCIAL SERVICES, INC., a California corporation
OFF TRACK MANAGEMENT, INC., a California corporation
MGP SPECIAL, INC., a California corporation
AMUSEMENT MANAGEMENT FLORIDA, INC., a Florida corporation
MALIBU GRAND PRIX CONSULTING, INC., a California corporation
MOUNTASIA - MEI INTERNATIONAL, INC., a Georgia corporation
MOUNTASIA - MEI LIMITED COMPANY, INC., a California corporation
MOUNTASIA - MEI CALIFORNIA, INC., a California corporation
MOUNTASIA - MEI INTERNATIONAL, INC., a Georgia corporation, in its capacity as
general partner of MOUNTASIA - MEI
CALIFORNIA LIMITED PARTNERSHIP, a California limited partnership
MOUNTASIA - MEI MANUFACTURING COMPANY, INC., a Georgia corporation
AMUSEMENT CO., INC., a Delaware corporation
AMUSEMENT CO. PARTNERS, INC., a Delaware corporation
FOOTHILL CAPITAL CORPORATION,
a California corporation
By:
---------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
-7-
<PAGE> 18
AMENDED AND RESTATED EXHIBIT I
MOUNTASIA ENTERTAINMENT INTERNATIONAL, INC.
FUNCENTERS
<TABLE>
<CAPTION>
LOCATION FEE SIMPLE LEASE
-------- ---------- -----
<S> <C> <C> <C> <C>
MOUNTASIA FUNCENTERS:
Willowbrook, TX X
North Cobb, GA X
Columbus, OH X
Henderson, NV (NEF Acquisition) X
Houston, TX X
Arlington, TX X
Plano, TX X
Kingwood, TX X
McAllen, TX (NEF Acquisition) X
Spartanburg, SC X
------- ------ -----
TOTAL MOUNTASIA FUNCENTERS 8 + 2 = 10
------- ------ -----
MALIBU GRAND PRIX FUNCENTERS:
Tucson, AZ X
N. Hollywood, CA X
Puente Hills, CA X
Redondo Beach, CA X
Redwood City, CA X
Denver, CO X
Miami, FL (NEF Acquisition) X
Orlando, FL X
Tampa, FL X
Kennesaw, GA X
Norcross, GA X
Lenexa, KS X
Mount Laurel, NJ X
Cincinnati, OH X
Columbus, OH X
Portland, OR X
Austin, TX X
Dallas, TX X
Houston, TX X
San Antonio, TX X
------- ------ -----
TOTAL MALIBU GRAND PRIX FUNCENTERS 5 + 15 = 20
------- ------ -----
TOTAL COMBINED FACILITIES 13 + 17 = 30
======= ====== =====
</TABLE>
-8-
<PAGE> 19
AMENDMENT NUMBER THREE TO CONSOLIDATED, AMENDED, AND
RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NUMBER THREE TO CONSOLIDATED, AMENDED, AND RESTATED LOAN
AND SECURITY AGREEMENT (this "Amendment"), is entered into as of June 27, 1997,
between FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"),
with a place of business located at 11111 Santa Monica Boulevard, Suite 1500,
Los Angeles, California 90025-3333, MALIBU ENTERTAINMENT WORLDWIDE, INC., a
Georgia corporation ("MEWI"), with its chief executive office located at 5895
Windward Parkway, Suite 220, Alpharetta, Georgia 30202, MOUNTASIA MANAGEMENT
COMPANY, a Georgia corporation ("MMC"), with its chief executive office located
at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202, MOUNTASIA
PARTNERS I, INC., a Georgia corporation ("MPI"), with its chief executive office
located at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202, MALIBU
GRAND PRIX CORPORATION, a Delaware corporation ("MGPC"), with its chief
executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, MIAMI CASTLE MGPC, INC., a Florida corporation ("Miami"), with
its chief executive office located at 5895 Windward Parkway, Suite 220,
Alpharetta, Georgia 30202, TEMPE MGPC, INC., an Arizona corporation ("Tempe"),
with its chief executive office located at 5895 Windward Parkway, Suite 220,
Alpharetta, Georgia 30202, TUCSON MGPC, INC., an Arizona corporation ("Tucson"),
with its chief executive office located at 5895 Windward Parkway, Suite 220,
Alpharetta, Georgia 30202, FRESNO MGPC, INC., a California corporation
("Fresno"), with its chief executive office located at 5895 Windward Parkway,
Suite 220, Alpharetta, Georgia 30202, NORTH HOLLYWOOD CASTLE MGPC, INC., a
California corporation ("NHC"), with its chief executive office located at 5895
Windward Parkway, Suite 220, Alpharetta, Georgia 30202, PUENTE HILLS MGPC, INC.,
a California corporation ("PH"), with its chief executive office located at 5895
Windward Parkway, Suite 220, Alpharetta, Georgia 30202, PUENTE HILLS SHOWBOAT
MGPC, INC., a California corporation ("PHS"), with its chief executive office
located at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202, REDONDO
BEACH CASTLE MGPC, INC., a California corporation ("RBC"), with its chief
executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, REDWOOD CITY CASTLE MGPC, INC., a California corporation ("RCC"),
with its chief executive office located at 5895 Windward Parkway, Suite 220,
Alpharetta, Georgia 30202, REDWOOD CITY MGPC, INC., a California corporation
("RC"), with its chief executive office located at 5895 Windward Parkway, Suite
220, Alpharetta, Georgia 30202, SAN DIEGO MGPC, INC., a California corporation
("San Diego"), with its chief executive office located at 5895 Windward Parkway,
Suite 220, Alpharetta, Georgia 30202, DENVER MGPC, INC., a Colorado corporation
("Denver"), with its chief executive office located at 5895 Windward Parkway,
Suite 220, Alpharetta, Georgia 30202, ORLANDO CASTLE MGPC, INC., a Florida
corporation ("OC"), with its chief executive office located at 5895 Windward
Parkway, Suite 220, Alpharetta, Georgia 30202, ORLANDO MGPC, INC., a Florida
corporation ("Orlando"), with its chief executive office located at 5895
Windward Parkway, Suite 220, Alpharetta, Georgia 30202, TAMPA CASTLE MGPC, INC.,
a Florida
<PAGE> 20
corporation ("TC"), with its chief executive office located at 5895 Windward
Parkway, Suite 220, Alpharetta, Georgia 30202, TAMPA MGPC, INC., a Florida
corporation ("Tampa"), with its chief executive office located at 5895 Windward
Parkway, Suite 220, Alpharetta, Georgia 30202, LENEXA MGPC, INC., a Kansas
corporation ("Lenexa"), with its chief executive office located at 5895
Windward Parkway, Suite 220, Alpharetta, Georgia 30202, MT. LAUREL MGPC, INC.,
a New Jersey corporation ("Mt.Laurel"), with its chief executive office located
at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202, COLUMBUS MGPC,
INC., an Ohio corporation ("Columbus"), with its chief executive office located
at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202, CINCINNATI
MGPC, INC., an Ohio corporation ("Cincinnati"), with its chief executive office
located at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202,
PORTLAND MGPC, INC., an Oregon corporation ("Portland"), with its chief
executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, AUSTIN MGPC, INC., a Texas corporation ("Austin"), with its
chief executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, DALLAS CASTLE MGPC, INC., a Texas corporation ("DC"), with its
chief executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, DALLAS MGPC, INC., a Texas corporation ("Dallas"), with its
chief executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, HOUSTON CASTLE MGPC, INC., a Texas corporation ("HC"), with its
chief executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, HOUSTON II MGPC, INC., a Texas corporation ("Houston"), with its
chief executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, SAN ANTONIO CASTLE MGPC, INC., a Texas corporation ("SAC"), with
its chief executive office located at 5895 Windward Parkway, Suite 220,
Alpharetta, Georgia 30202, SAN ANTONIO MGPC, INC., a Texas corporation ("San
Antonio"), with its chief executive office located at 5895 Windward Parkway,
Suite 220, Alpharetta, Georgia 30202, MOUNTASIA DEVELOPMENT COMPANY, a Georgia
corporation ("MDC"), with its chief executive office located at 5895 Windward
Parkway, Suite 220, Alpharetta, Georgia 30202, MALIBU GRAND PRIX DESIGN &
MANUFACTURING, INC., a California corporation ("MGPDMI"), with its chief
executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, MALIBU GRAND PRIX FINANCIAL SERVICES, INC., a California
corporation ("MGPFSI"), with its chief executive office located at 5895
Windward Parkway, Suite 220, Alpharetta, Georgia 30202, OFF TRACK MANAGEMENT,
INC., a California corporation ("Off Track"), with its chief executive office
located at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202, MGP
SPECIAL, INC., a California corporation ("Special"), with its chief executive
office located at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202,
AMUSEMENT MANAGEMENT FLORIDA, INC., a Florida corporation ("Amusement"), with
its chief executive office located at 5895 Windward Parkway, Suite 220,
Alpharetta, Georgia 30202, MALIBU GRAND PRIX CONSULTING, INC., a California
corporation ("Consulting"), with its chief executive office located at 5895
Windward Parkway, Suite 220, Alpharetta, Georgia 30202, MOUNTASIA - MEI
INTERNATIONAL, INC., a Georgia corporation ("MMEII"), with its chief executive
office located at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202,
MOUNTASIA - MEI LIMITED COMPANY, INC., a California corporation ("MMEILC"),
with its chief executive office located at 5895 Windward
<PAGE> 21
Parkway, Suite 220, Alpharetta, Georgia 30202, MOUNTASIA - MEI CALIFORNIA,
INC., a California corporation ("MCNC"), with its chief executive office
located at 5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202,
MOUNTASIA - MEI CALIFORNIA LIMITED PARTNERSHIP, a California limited
partnership ("MMEICLP"), with its chief executive office located at 5895
Windward Parkway, Suite 220, Alpharetta, Georgia 30202, MOUNTASIA - MEI
MANUFACTURING COMPANY, INC., a Georgia corporation ("MMEIMCI"), with its chief
executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, AMUSEMENT CO., INC., a Delaware corporation ("ACI"), with its
chief executive office located at 5895 Windward Parkway, Suite 220, Alpharetta,
Georgia 30202, AMUSEMENT CO. PARTNERS, INC., a Delaware corporation ("ACPI"),
with its chief executive office located at 5895 Windward Parkway, Suite 220,
Alpharetta, Georgia 30202, and MOUNTASIA FAMILY ENTERTAINMENT CENTERS, INC., a
Texas corporation ("MFEC"), with its chief executive office located at 5895
Windward Parkway, Suite 220, Alpharetta, Georgia 30202.
WHEREAS Foothill and Borrower are parties to the Consolidated,
Amended, and Restated Loan and Security Agreement, entered into as of August
22, 1996, (as amended to date, the "Loan Agreement");
WHEREAS Borrower has requested Foothill release its liens in
respect of the Puente Hills, California and Willowbrook, Texas properties
pledged to Foothill by MFEC in connection with the Loan Agreement;
WHEREAS Borrower has requested Foothill consent to (i) the
creation of a special purpose subsidiary ("SPC") of MFEC, (ii) to the transfer
of all of MFEC's interests in the Puente Hills, California and Willowbrook,
Texas properties to the SPC, (iii) to the transfer of all of the interests of
PH and PHS in any Personal Property collateral attached to, located on, or
appurtenant to the Puente Hills, California property to the SPC, and (iv) to
the SPC's obtaining financing from a third party lender on a senior, secured
basis, secured by the SPC's interests in the Puente Hills, California and
Willowbrook, Texas properties, any fixtures, machinery, equipment, and any
other personal property located on or appurtenant to those properties, and by
MFEC's pledge of its interest in the capital stock of the SPC;
WHEREAS Foothill has agreed to consent to the forgoing upon
Borrower's agreement to a permanent reduction of $2,500,000 in the Term Loan A
Commitment amount to $10,000,000 and to the other terms and conditions hereof;
WHEREAS, Borrower and Foothill have agreed to amend the Loan
Agreement in accordance with the terms hereof; and
WHEREAS, Borrower has disposed of certain parcels of real
property which necessitates the amendment and restatement of Schedule R-1 and
Exhibit I.
NOW, THEREFORE, in consideration of the mutual promises
contained herein, Foothill and Borrower hereby agree as follows:
<PAGE> 22
All capitalized terms used herein and not defined herein shall
have the meanings ascribed to them in the Loan Agreement.
1. Amendments to the Loan Agreement.
a. Section 1.1 of the Loan Agreement hereby is
amended by adding the following definitions:
"Amended and Restated Subordinated Promissory Note"
means that certain Amended and Restated Subordinated Promissory Note
dated as of June 5, 1997 issued by MEWI in favor of MEIH, subject to
the terms and conditions of the Amended and Restated Subordination
Agreement, in the form attached hereto as Annex A.
"Amended and Restated Subordination Agreement" means
that certain Amended and Restated Subordination Agreement dated as of
June 27, 1997 among MEIH, MEWI, and Foothill, in the form attached
hereto as Annex B.
"Charlotte, North Carolina Mortgage" means that
certain Mortgage entered into between Borrower and Foothill in respect
of Borrower's land to be developed located in Charlotte, North
Carolina.
"Current MEIH Advances" means advances (other than
Permitted MEIH Subordinated Debt) made by MEIH to MEWI and outstanding
as of the Third Amendment Closing Date or made prior to September 1,
1997, but not to exceed $9,500,000 in aggregate principal amount (and
accrued interest thereon at a rate per annum not to exceed 10%).
"MEIH" means MEI Holdings, L.P. a Delaware limited
partnership.
"MFEC" means Mountasia Family Entertainment Centers,
Inc., a Texas corporation.
"Permitted MEIH Current Advances Payments" means, so
long as no Event of Default has occurred and is continuing, one or
more payments to MEIH, in an amount not to exceed $9,500,000 in
aggregate principal amount (and accrued interest thereon at a rate per
annum not to exceed 10%), made in connection with the repayment or the
prepayment of Current MEIH Advances extended to Borrower by MEIH,
provided that, in no event, shall such payment be made with Net Cash
Proceeds to the extent constituting a Required Amount.
"Permitted MEIH Subordinated Debt" means any
Indebtedness constituting a "Subordinated Obligation" under and as
defined in the Amended and Restated Subordination Agreement among
MEWI, MEIH, and Foothill in an aggregate principal amount of up to
$30,000,000.
<PAGE> 23
"Permitted MEIH Subordinated Debt Payments" means, so
long as no Event of Default has occurred and is continuing and subject
the terms and conditions of the Amended and Restated Subordination
Agreement, one or more payments to MEIH, made in connection with the
repayment or prepayment of any Permitted MEIH Subordinated Debt
extended to Borrower by MEIH from time to time. Any such Permitted
MEIH Subordinated Debt Payments shall be made from the proceeds of the
issuance of additional capital stock of MEWI, or from the proceeds of
Future Subordinated Debt incurred by MEWI.
"Permitted SPC Advances" means, so long as no Event
of Default has occurred and is continuing, periodic advances from
Borrower to SPC, in an amount not to exceed $35,000,000 in the
aggregate, made in connection with SPC's repayment of the SPC
Non-Recourse Financing. Any such Permitted SPC Advances shall be made
from the proceeds of Future Subordinated Debt or from the proceeds of
the issuance of additional capital stock of MEWI.
"Reconveyance Transaction" means Foothill's release
of its liens on MFEC's interests in the Puente Hills, California and
Willowbrook, Texas properties.
"Second Amendment" means that certain Amendment
Number Two to Consolidated, Amended, and Restated Loan and Security
Agreement, dated as of May 22, 1997, between Foothill and Borrower.
"SPC" means a special purpose subsidiary of MFEC
formed for the purpose of holding the property conveyed in the SPC
Transfer and obtaining the SPC Non-Recourse Financing.
"SPC Non-Recourse Financing" means any Indebtedness
extended to SPC by a third party lender on terms and conditions
satisfactory to Foothill, in its reasonable discretion, in a principal
amount not to exceed $30,000,000, provided, however, that such
Indebtedness shall be non-recourse to any Debtor other than under the
pledge of the capital stock of SPC to such third party lender by MFEC,
but such Indebtedness may be recourse to SPC and may be secured by a
first priority Lien on all assets of SPC.
"SPC Non-Recourse Refinancing Deadline" shall mean
November 1, 1998.
"SPC Transfer" means the transfer of all of MFEC's
interest in the Puente Hills, California and Willowbrook, Texas
properties (including the personal property used in connection
therewith or otherwise related thereto) to SPC in connection with the
SPC Non-Recourse Financing.
<PAGE> 24
"Term Loan A Commitment" means $10,000,000, as such
amount may be adjusted from time to time in accordance with the
provisions of Section 2.2(b).
"Third Amendment" means that certain Amendment Number
Three to Consolidated, Amended, and Restated Loan and Security
Agreement, dated as of June 27, 1997, between Foothill and Borrower.
"Third Amendment Closing Date" means the date on
which the Reconveyance Transaction is consummated pursuant to the
terms of the Third Amendment.
b. The definition of "Permitted Liens" in
Section 1.1 of the Loan Agreement hereby is amended by adding the following
clause (n) to the end of the definition following existing clause (m):
(n) Liens on the capital stock of SPC granted to a
third party lender by MFEC in connection with SPC Non-Recourse
Financing.
c. The definition of "Permitted Transactions" in
Section 1.1 of the Loan Agreement hereby is amended by adding the following
clauses (l), (m), (n), (o), and (p) to the end of the definition following
existing clause (k):
(l) Current MEIH Advances,
(m) Permitted Current MEIH Advances Payments,
(n) Permitted MEIH Subordinated Debt Payments,
(o) the SPC Non-Recourse Financing, and
(p) Permitted SPC Advances.
d. Section 2.2 of the Loan Agreement hereby is
amended by adding the following subsection thereto:
(c) Anything to the contrary in this Section 2.2
notwithstanding, if, prior to the SPC Non-Recourse Refinancing
Deadline, Borrower has not (i) extended the final maturity of the SPC
Non-Recourse Financing to a date on or after August 31, 2001, or (ii)
obtained replacement financing for the SPC Non- Recourse Financing on
terms and conditions satisfactory to Foothill in its sole discretion,
then Borrower shall commence repayment of the unpaid principal balance
of Term Loan A in monthly installments of principal in the amount of
$500,000. Each such installment shall be due and payable on the first
day of each month, commencing on the first day of the first month
following the SPC Non-Recourse Refinancing Deadline, and continuing on
the first day of each succeeding month until the earlier of (x) the
date on which the unpaid balance of Term Loan A is paid in full, or
(y) the Maturity Date. The
<PAGE> 25
remaining outstanding principal balance and all accrued and unpaid
interest under Term Loan A shall be due and payable upon the
termination of this Agreement, whether by its terms, by prepayment, by
acceleration, or otherwise.
e. Section 2.10 of the Loan Agreement hereby is
amended by adding the following subsection thereto:
(f) Third Amendment Fee. A one time fee of
$50,000 which is earned, in full, on the Third Amendment Closing Date
and is due and payable by Borrower to Foothill in connection with this
Agreement on the Third Amendment Closing Date.
f. Section 3.7 of the Loan Agreement hereby is
amended and restated in its entirety as follows:
3.7 EARLY TERMINATION BY BORROWER. Borrower has
the option, at any time upon 45 days prior written notice to Foothill,
to terminate this Agreement by paying to Foothill, in cash, the
Obligations, in full, together with a premium (the "Early Termination
Premium") equal to the sum of (a) $50,000 (which amount shall be in
addition to the Exit Fee that is then due and payable) plus (b)
$50,000 if Borrower terminates this Agreement pursuant to the
provisions of this section prior to July 1, 1998.
g. Clause (a) of Section 3.9 of the Loan
Agreement hereby is amended and restated in its entirety as follows:
(a) the aggregate amount of re-advances
under Term Loan A shall not exceed $10,000,000 (i.e., Term Loan A may
only be re-borrowed once in the aggregate), and the aggregate
outstanding principal balance of Term Loan A shall not at any time
exceed the Term Loan A Commitment;
h. The first sentence of Section 7.4 of the Loan
Agreement hereby is amended and restated in its entirety as follows:
Except for Permitted Dispositions and the SPC
Transfer, sell, lease, assign, transfer, or otherwise dispose of any
of any Debtor's properties or assets; provided, however, that any
Operating Subsidiary may transfer Personal Property Collateral to any
Debtor of which it is a Subsidiary (but not to any other Debtor).
i. Section 7.8 of the Loan Agreement hereby is
amended and restated in its entirety as follows:
<PAGE> 26
7.8 PREPAYMENTS AND AMENDMENTS.
Except for the Permitted Transactions, and
except in connection with a refinancing permitted by Section 7.1(F),
prepay, redeem, retire, defease, purchase, or otherwise acquire any
indebtedness owing to any third Person, other than the Obligations in
accordance with this Agreement, and (b) directly or indirectly, amend,
modify, alter, increase, or change any of the terms or conditions of
any agreement, instrument, document, indenture, or other writing
evidencing or concerning indebtedness permitted under Sections
7.1(B), (c), (d), or (e). Without limiting the generality of the
foregoing, except for Permitted Ten Percent Debenture Repurchases and
Permitted MEIH Subordinated Debt Payments, at no time shall Borrower
make any (y) payment with respect to any Subordinated Debt if the
making of same would conflict with the subordination provisions
thereof, or (z) cash payment of principal with respect to the NEF
Debentures.
j. Section 8.11 of the Loan Agreement hereby is
amended and restated in its entirety as follows:
8.11 If Borrower makes any payment on account of
Indebtedness that has been contractually subordinated in right of
payment to the payment of the Obligations, (a) except to the extent
such payment is permitted by the terms of the subordination provisions
applicable to such Indebtedness, and (b) except for Permitted Ten
Percent Debenture Repurchases and Permitted MEIH Subordinated Debt
Payments; or
k. Exhibit I of the Loan Agreement is hereby
amended, restated, and replaced in its entirety by the Amended and Restated
Exhibit I attached hereto.
l. Schedule R-1 of the Loan Agreement is hereby
amended, restated, and replaced in its entirety by the Amended and Restated
Schedule R-1 attached hereto.
2. Conditions Precedent to the Effectiveness of this
Amendment. The effectiveness of this Amendment is subject to the fulfillment,
to the satisfaction of Foothill and its counsel, of each of the following
conditions:
a. Foothill shall have received a certificate of
the Secretary of Borrower attesting to the resolutions of Borrower's Board of
Directors authorizing the execution, delivery, and performance of the Loan
Agreement as amended by this Amendment and authorizing the specific officers of
Borrower to execute same;
b. The representations and warranties in this
Amendment, the Agreement as amended by this Amendment, and the other Loan
Documents shall be true and correct in all respects on and as of the date
hereof, as though made on such date (except to the extent that such
representations and warranties relate solely to an earlier date);
c. After giving effect hereto, no Event of
Default or event which with the giving of notice or passage of time would
constitute an Event of Default shall have
<PAGE> 27
occurred and be continuing on the date hereof, nor shall result from the
consummation of the transactions contemplated herein;
d. No injunction, writ, restraining order, or
other order of any nature prohibiting, directly or indirectly, the consummation
of the transactions contemplated herein shall have been issued and remain in
force by any governmental authority against Borrower, Foothill, or any of their
Affiliates;
e. No material adverse change shall have
occurred in the financial condition of Borrower or in the value of the
Collateral;
f. Foothill shall have received evidence
satisfactory to it that, contemporaneously with the Third Amendment Closing
Date, SPC shall receive the loan proceeds pursuant to the SPC Non-Recourse
Financing extended to SPC by a third party lender on terms and conditions
satisfactory to Foothill in its reasonable discretion;
g. Foothill shall have received each of the
following documents, in form and substance satisfactory to Foothill and its
counsel, duly executed, and each such document shall be in full force and
effect:
(1) the Amended and Restated
Subordination Agreement; and
(2) this Amendment;
h. Foothill shall have received the form of
Amended and Restated Subordinated Promissory Note, in form and substance
satisfactory to Foothill and its counsel.
i. Foothill shall have completed a satisfactory
review of the loan agreement and any such other agreements and/or documents
related to the SPC Non-Recourse Financing as are requested by Foothill in its
reasonable discretion;
j. Foothill shall have received the Third
Amendment Fee of $50,000;
k. Foothill shall have received a principal
payment for application to the outstanding principal balance of Term Loan A in
an amount equal to the greater of (i) $2,500,000 or (ii) an amount equal to the
amount required to repay the aggregate outstanding principal balance of Term
Loan A in excess of $10,000,000; and
l. All other documents and legal matters in
connection with the transactions contemplated by this Amendment shall have been
delivered or executed or recorded and shall be in form and substance
satisfactory to Foothill and its counsel.
3. Permitted MEIH Subordinated Debt. Foothill hereby
(i) consents to the incurrence by MEWI or up to $30,000,000 in aggregate
principal amount of Indebtedness to MEIH on the terms set forth on the Amended
and Restated Subordinated Promissory Note,
<PAGE> 28
and (ii) agrees that such Indebtedness shall constitute permitted "Future
Subordinated Indebtedness" approved by Foothill in accordance with the Loan
Agreement.
4. Reconveyance Transaction. Upon the fulfillment, to
the satisfaction of Foothill and its counsel, of each of the conditions of
Section 2 of this Amendment, Foothill shall perform the Reconveyance
Transaction.
5. Condition Subsequent. As a condition subsequent to
the effectiveness of this Third Amendment, Borrower shall perform or cause to
be performed the following (the failure by Borrower to so perform or cause to
be performed on the expiry of the applicable period provided therefor
constituting an Event of Default, but the failure to perform during the period
prior to the expiration of the applicable period provided therefor shall not
constitute a Default):
a. Within 30 days of the Third Amendment Closing
Date, Foothill and Borrower shall have entered into the Charlotte, North
Carolina Mortgage, in form and substance satisfactory to Foothill and its
counsel, duly executed by each respective party, and such document shall be in
full force and effect.
<PAGE> 29
b. Within 45 days of the Third Amendment Closing
Date, Foothill and Borrower shall have amended the Loan Agreement to reflect
modifications to Section 7.19 of the Loan Agreement, such modifications to be
in form and substance satisfactory to Foothill in its reasonable discretion.
Anything in this section to the contrary notwithstanding, the failure of
Borrower to enter into the amendment described herein prior to the expiration
of the applicable period provided herein shall not constitute an Event of
Default; and
c. Within 90 days of the Third Amendment Closing
Date, Foothill and Borrower shall have entered into such mortgages and deeds of
trust in respect of Borrower's leasehold estates in respect of which a
leasehold mortgage may be granted, as Foothill shall reasonably request, in
form and substance satisfactory to Foothill in its reasonable discretion, and
the Borrower hereby agrees to make reasonable, good faith, efforts to obtain
the consent of the lessor to the granting of such leasehold mortgages.
6. Representations and Warranties. Borrower hereby
represents and warrants to Foothill that (a) the execution, delivery, and
performance of this Amendment, are within its corporate powers, have been duly
authorized by all necessary corporate action, and are not in contravention of
any law, rule, or regulation, or any order, judgment, decree, writ, injunction,
or award of any arbitrator, court, or governmental authority, or of the terms
of its charter or bylaws, or of any contract or undertaking to which it is a
party or by which any of its properties may be bound or affected, and (b) the
Loan Agreement, as amended by this Amendment, constitute Borrower's legal,
valid, and binding obligation, enforceable against Borrower in accordance with
its terms.
7. Further Assurances. Borrower shall execute and
deliver all financing statements, agreements, documents, and instruments, in
form and substance satisfactory to Foothill, and take all actions as Foothill
may reasonably request from time to time, to perfect and maintain the
perfection and priority of Foothill's security interests in the Collateral, and
to fully consummate the transactions contemplated under the Loan Agreement and
this Amendment.
8. Effect on Loan Agreement. The Loan Agreement, as
amended hereby, shall be and remain in full force and effect in accordance with
its respective terms and hereby is ratified and confirmed in all respects. The
execution, delivery, and performance of this Amendment shall not operate as a
waiver of or, except as expressly set forth herein, as an amendment, of any
right, power, or remedy of Lender under the Loan Agreement, as in effect prior
to the date hereof.
9. Miscellaneous.
a. Upon the effectiveness of this Amendment,
each reference in the Agreement to "this Agreement", "hereunder", "herein",
"hereof" or words of like import referring to the Agreement shall mean and
refer to the Loan Agreement as amended by the First Amendment, the Second
Amendment, and this Amendment.
<PAGE> 30
b. Upon the effectiveness of this Amendment,
each reference in the Loan Documents to the "Loan Agreement", "thereunder",
"therein", "thereof" or words of like import referring to the Agreement shall
mean and refer to the Loan Agreement as amended by the First Amendment, the
Second Amendment, and this Amendment.
c. This Amendment shall be governed by and
construed in accordance with the laws of the State of California.
d. This Amendment may be executed in any number
of counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, shall be deemed to be an original, and all
of which, when taken together, shall constitute but one and the same Amendment.
Delivery of an executed counterpart of this Amendment by telefacsimile shall be
equally as effective as delivery of an original executed counterpart of this
Amendment. Any party delivering an executed counterpart of this Amendment by
telefacsimile also shall deliver an original executed counterpart of this
Amendment but the failure to deliver an original executed counterpart shall not
affect the validity, enforceability, and binding effect of this Amendment.
[Remainder of page intentionally left blank.]
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed in on the date first written above. MALIBU
ENTERTAINMENT WORLDWIDE, INC., a Georgia corporation MOUNTASIA FAMILY
ENTERTAINMENT CENTERS, INC., a Texas corporation
By:
----------------------------------------
Name:
----------------------------
Title:
----------------------------
<PAGE> 31
MOUNTASIA MANAGEMENT COMPANY, a Georgia corporation
MOUNTASIA PARTNERS I, INC., a Georgia corporation
MALIBU GRAND PRIX CORPORATION, a Delaware corporation
MIAMI CASTLE MGPC, INC., a Florida corporation
TEMPE MGPC, INC., an Arizona corporation
TUCSON MGPC, INC., an Arizona corporation
FRESNO MGPC, INC., a California corporation
NORTH HOLLYWOOD CASTLE MGPC, INC., a California corporation
PUENTE HILLS MGPC, INC., a California corporation
PUENTE HILLS SHOWBOAT MGPC, INC., a California corporation
REDONDO BEACH CASTLE MGPC, INC., a California corporation
REDWOOD CITY CASTLE MGPC, INC., a California corporation
REDWOOD CITY MGPC, INC., a California corporation
SAN DIEGO MGPC, INC., a California corporation
DENVER MGPC, INC., a Colorado corporation
ORLANDO CASTLE MGPC, INC., a Florida corporation
ORLANDO MGPC, INC., a Florida corporation
TAMPA CASTLE MGPC, INC., a Florida corporation
TAMPA MGPC, INC., a Florida corporation
LENEXA MGPC, INC., a Kansas corporation
MT. LAUREL MGPC, INC., a New Jersey corporation
COLUMBUS MGPC, INC., an Ohio corporation
CINCINNATI MGPC, INC., an Ohio corporation
PORTLAND MGPC, INC., an Oregon corporation
AUSTIN MGPC, INC., a Texas corporation
DALLAS CASTLE MGPC, INC., a Texas corporation
DALLAS MGPC, INC., a Texas corporation
HOUSTON CASTLE MGPC, INC., a Texas corporation
HOUSTON II MGPC, INC., a Texas corporation
SAN ANTONIO CASTLE MGPC, INC., a Texas corporation
SAN ANTONIO MGPC, INC., a Texas corporation
MOUNTASIA DEVELOPMENT COMPANY, a Georgia corporation
MALIBU GRAND PRIX DESIGN & MANUFACTURING, INC., a California corporation
MALIBU GRAND PRIX FINANCIAL SERVICES, INC., a California corporation
OFF TRACK MANAGEMENT, INC., a California corporation
MGP SPECIAL, INC., a California corporation
AMUSEMENT MANAGEMENT FLORIDA, INC., a Florida corporation
MALIBU GRAND PRIX CONSULTING, INC., a California corporation
MOUNTASIA - MEI INTERNATIONAL, INC., a Georgia corporation
MOUNTASIA - MEI LIMITED COMPANY, INC., a California corporation
MOUNTASIA - MEI CALIFORNIA, INC., a California corporation
<PAGE> 32
MOUNTASIA - MEI INTERNATIONAL, INC., a Georgia corporation, in its capacity as
general partner of MOUNTASIA - MEI CALIFORNIA LIMITED PARTNERSHIP, a California
limited partnership
MOUNTASIA - MEI MANUFACTURING COMPANY, INC., a Georgia corporation
AMUSEMENT CO., INC., a Delaware corporation
AMUSEMENT CO. PARTNERS, INC., a Delaware corporation
By:
----------------------------------------
Name:
----------------------------
Title:
----------------------------
FOOTHILL CAPITAL CORPORATION,
a California corporation
By:
----------------------------------------
Name:
----------------------------
Title:
----------------------------
<PAGE> 33
AMENDED AND RESTATED EXHIBIT I
MALIBU ENTERTAINMENT WORLDWIDE, INC.
FUNCENTERS
<TABLE>
<CAPTION>
LOCATION FEE SIMPLE LEASE COMMENTS
<S> <C> <C> <C>
MOUNTASIA FUNCENTERS:
North Cobb, GA X
Henderson, NV X
(NEF Acquisition)
Columbus, OH X
Spartanburg, SC X
Arlington, TX X
Houston, TX X
Kingwood, TX X Encumbered (FCC 2nd lien)
McAllen, TX X
(NEF Acquisition)
Plano, TX X
Willowbrook, TX X Encumbered (FCC no lien)
TOTAL MOUNTASIA FUNCENTERS: 8 + = 10 (1 Encumbered)
2
MALIBU GRAND PRIX FUNCENTERS:
North Hollywood, CA X
Puente Hills, CA X Encumbered (FCC no lien)
Redondo Beach, CA X
Redwood City, CA X
Denver, CO X
Miami, FL (NEF Acquisition) X
Orlando, FL X
Tampa, FL X
Kennesaw, GA X
Norcross, GA X
Lenexa, KS X
Mount Laurel, NJ X
Cincinnati, OH X
Columbus, OH X
Portland, OR X
Austin, TX X
Dallas, TX X
San Antonio, TX X
TOTAL MALIBU GRAND PRIX FUNCENTERS: 5 + 13 = 18 (1 Encumbered)
LAND TO BE DEVELOPED:
Arlington, Texas X Encumbered (FCC no lien)
Charlotte, North Carolina X
TOTAL LAND TO BE DEVELOPED: 2 + 0 = 2 (1 Encumbered)
TOTAL COMBINED FACILITIES: 15 + 15 = 30 (4 Encumbered)
</TABLE>
<PAGE> 34
SCHEDULE R-1
REAL PROPERTY COLLATERAL
FACILITY LOCATIONS - FEES:
The following fee simple interests:
Mountasia FunCenters: Malibu FunCenters:
Mountasia of Columbus Tampa Castle MGPC, Inc.
3567 West Dublin Granville Road 14320 N. Nebraska
Columbus, OH 43235 Tampa, FL 33612
Mountasia of North Cobb Miami Castle MGPC, Inc.
175 Ernest Barrett Parkway 7775 NW 8th Street
Marietta, GA 30066 Miami, FL 33126
Mountasia of Houston Mountasia Malibu/Gwinnett
11175 Katy Freeway 5400 Brook Hollow Parkway
Houston, TX 77079 Norcross, GA 30071
Mountasia of Arlington Mountasia Malibu/Kennesaw
1111 Wet 'n Wild Way 3005 George Busby Parkway
Arlington, TX 76011 Kennesaw, GA 30144
Mountasia of Plano
2400 Premier Drive
Plano, TX 75075
Mountasia of Kingwood
2600 Eastex Freeway
Kingwood, TX 77339
Mountasia of Spartanburg
185 Simuel Road
Spartanburg, SC 29303
<PAGE> 35
FACILITY LOCATIONS - LEASEHOLDS
The 15 leasehold estates relating to the 15 leasehold locations described on
the amended and restated Exhibit I.
LAND TO BE DEVELOPED LOCATIONS:
Charlotte Property
located near the intersection of Sugar Creek Road and Interstate 85
Charlotte, North Carolina
ENCUMBERED REAL PROPERTY COLLATERAL:
Mountasia of Puente Hills
17871-17909 Castleton Street
City of Industry, CA 91748
Mountasia of Willowbrook
17190 Tomball Parkway
Houston, TX 77070
Arlington Property
2100 East Lamar Blvd.
Arlington, Texas 76006-7408
<PAGE> 36
AMENDMENT NUMBER FOUR TO CONSOLIDATED, AMENDED, AND
RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NUMBER FOUR TO CONSOLIDATED, AMENDED, AND
RESTATED LOAN AND SECURITY AGREEMENT (this "Amendment"), is entered into as of
March 31, 1998, between FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at 11111 Santa Monica Boulevard,
Suite 1500, Los Angeles, California 90025-3333, MALIBU ENTERTAINMENT WORLDWIDE,
INC., a Georgia corporation ("MEWI"), with its chief executive office located
at 717 North Hardwood, Dallas, Texas 75201, MOUNTASIA MANAGEMENT COMPANY, a
Georgia corporation ("MMC"), with its chief executive office located at 717
North Hardwood, Dallas, Texas 75201, MOUNTASIA PARTNERS I, INC., a Georgia
corporation ("MPI"), with its chief executive office located at 717 North
Hardwood, Dallas, Texas 75201, MALIBU GRAND PRIX CORPORATION, a Delaware
corporation ("MGPC"), with its chief executive office located at 717 North
Hardwood, Dallas, Texas 75201, MIAMI CASTLE MGPC, INC., a Florida corporation
("Miami"), with its chief executive office located at 717 North Hardwood,
Dallas, Texas 75201, TEMPE MGPC, INC., an Arizona corporation ("Tempe"), with
its chief executive office located at 717 North Hardwood, Dallas, Texas 75201,
TUCSON MGPC, INC., an Arizona corporation ("Tucson"), with its chief executive
office located at 717 North Hardwood, Dallas, Texas 75201, FRESNO MGPC, INC., a
California corporation ("Fresno"), with its chief executive office located at
717 North Hardwood, Dallas, Texas 75201, NORTH HOLLYWOOD CASTLE MGPC, INC., a
California corporation ("NHC"), with its chief executive office located at 717
North Hardwood, Dallas, Texas 75201, PUENTE HILLS MGPC, INC., a California
corporation ("PH"), with its chief executive office located at 717 North
Hardwood, Dallas, Texas 75201, PUENTE HILLS SHOWBOAT MGPC, INC., a California
corporation ("PHS"), with its chief executive office located at 717 North
Hardwood, Dallas, Texas 75201, REDONDO BEACH CASTLE MGPC, INC., a California
corporation ("RBC"), with its chief executive office located at 717 North
Hardwood, Dallas, Texas 75201, REDWOOD CITY CASTLE MGPC, INC., a California
corporation ("RCC"), with its chief executive office located at 717 North
Hardwood, Dallas, Texas 75201, REDWOOD CITY MGPC, INC., a California
corporation ("RC"), with its chief executive office located at 717 North
Hardwood, Dallas, Texas 75201, SAN DIEGO MGPC, INC., a California corporation
("San Diego"), with its chief executive office located at 717 North Hardwood,
Dallas, Texas 75201, DENVER MGPC, INC., a Colorado corporation ("Denver"), with
its chief executive office located at 717 North Hardwood, Dallas, Texas 75201,
ORLANDO CASTLE MGPC, INC., a Florida corporation ("OC"), with its chief
executive office located at 717 North Hardwood, Dallas, Texas 75201, ORLANDO
MGPC, INC., a Florida corporation ("Orlando"), with its chief executive office
located at 717 North Hardwood, Dallas, Texas 75201, TAMPA CASTLE MGPC, INC., a
Florida corporation ("TC"), with its chief executive office located at 717
North Hardwood, Dallas, Texas 75201, TAMPA MGPC, INC., a Florida corporation
("Tampa"), with its chief executive office located at 717 North Hardwood,
Dallas, Texas 75201, LENEXA MGPC, INC., a Kansas corporation ("Lenexa"), with
its chief executive office located at 717 North Hardwood, Dallas, Texas
<PAGE> 37
75201, MT. LAUREL MGPC, INC., a New Jersey corporation ("Mt.Laurel"), with its
chief executive office located at 717 North Hardwood, Dallas, Texas 75201,
COLUMBUS MGPC, INC., an Ohio corporation ("Columbus"), with its chief executive
office located at 717 North Hardwood, Dallas, Texas 75201, CINCINNATI MGPC,
INC., an Ohio corporation ("Cincinnati"), with its chief executive office
located at 717 North Hardwood, Dallas, Texas 75201, PORTLAND MGPC, INC., an
Oregon corporation ("Portland"), with its chief executive office located at 717
North Hardwood, Dallas, Texas 75201, AUSTIN MGPC, INC., a Texas corporation
("Austin"), with its chief executive office located at 717 North Hardwood,
Dallas, Texas 75201, DALLAS CASTLE MGPC, INC., a Texas corporation ("DC"), with
its chief executive office located at 717 North Hardwood, Dallas, Texas 75201,
DALLAS MGPC, INC., a Texas corporation ("Dallas"), with its chief executive
office located at 717 North Hardwood, Dallas, Texas 75201, HOUSTON CASTLE MGPC,
INC., a Texas corporation ("HC"), with its chief executive office located at
717 North Hardwood, Dallas, Texas 75201, HOUSTON II MGPC, INC., a Texas
corporation ("Houston"), with its chief executive office located at 717 North
Hardwood, Dallas, Texas 75201, SAN ANTONIO CASTLE MGPC, INC., a Texas
corporation ("SAC"), with its chief executive office located at 717 North
Hardwood, Dallas, Texas 75201, SAN ANTONIO MGPC, INC., a Texas corporation
("San Antonio"), with its chief executive office located at 717 North Hardwood,
Dallas, Texas 75201, MOUNTASIA DEVELOPMENT COMPANY, a Georgia corporation
("MDC"), with its chief executive office located at 717 North Hardwood, Dallas,
Texas 75201, MALIBU GRAND PRIX DESIGN & MANUFACTURING, INC., a California
corporation ("MGPDMI"), with its chief executive office located at 717 North
Hardwood, Dallas, Texas 75201, MALIBU GRAND PRIX FINANCIAL SERVICES, INC., a
California corporation ("MGPFSI"), with its chief executive office located at
717 North Hardwood, Dallas, Texas 75201, OFF TRACK MANAGEMENT, INC., a
California corporation ("Off Track"), with its chief executive office located
at 717 North Hardwood, Dallas, Texas 75201, MGP SPECIAL, INC., a California
corporation ("Special"), with its chief executive office located at 717 North
Hardwood, Dallas, Texas 75201, AMUSEMENT MANAGEMENT FLORIDA, INC., a Florida
corporation ("Amusement"), with its chief executive office located at 717 North
Hardwood, Dallas, Texas 75201, MALIBU GRAND PRIX CONSULTING, INC., a California
corporation ("Consulting"), with its chief executive office located at 717
North Hardwood, Dallas, Texas 75201, MOUNTASIA - MEI INTERNATIONAL, INC., a
Georgia corporation ("MMEII"), with its chief executive office located at 717
North Hardwood, Dallas, Texas 75201, MOUNTASIA - MEI LIMITED COMPANY, INC., a
California corporation ("MMEILC"), with its chief executive office located at
717 North Hardwood, Dallas, Texas 75201, MOUNTASIA - MEI CALIFORNIA, INC., a
California corporation ("MCNC"), with its chief executive office located at 717
North Hardwood, Dallas, Texas 75201, MOUNTASIA - MEI CALIFORNIA LIMITED
PARTNERSHIP, a California limited partnership ("MMEICLP"), with its chief
executive office located at 717 North Hardwood, Dallas, Texas 75201, MOUNTASIA
- - MEI MANUFACTURING COMPANY, INC., a Georgia corporation ("MMEIMCI"), with its
chief executive office located at 717 North Hardwood, Dallas, Texas 75201,
AMUSEMENT CO., INC., a Delaware corporation ("ACI"), with its chief executive
office located at 717 North Hardwood, Dallas, Texas 75201, AMUSEMENT CO.
PARTNERS, INC., a Delaware corporation ("ACPI"), with its chief executive
office located at 717 North Hardwood, Dallas,
<PAGE> 38
Texas 75201, and MOUNTASIA FAMILY ENTERTAINMENT CENTERS, INC., a Texas
corporation ("MFEC"), with its chief executive office located at 717 North
Hardwood, Dallas, Texas 75201.
WHEREAS Foothill and Borrower are parties to the Consolidated,
Amended, and Restated Loan and Security Agreement, entered into as of August
22, 1996, (as amended to date, the "Loan Agreement");
WHEREAS Borrower has requested Foothill to amend the Loan
Agreement and the other Loan Documents to (i) reflect the relocation of the
chief executive office of Borrower and each of its Subsidiaries to 717 North
Hardwood, Dallas, Texas 75201, and (ii) to revise the financial covenants with
respect to minimum Debt Service Ratio and the minimum Interest Coverage Ratio;
WHEREAS Borrower has requested Foothill consent to (i)
increase the maximum aggregate principal amount of Permitted MEIH Subordinated
Debt from $30,000,000 to $65,000,000, (ii) to increase the interest rate on
Permitted MEIH Subordinated Debt to 10%, (iii) to increase in the maximum
amount of MEIH Current Advances from $9,500,000 to $10,000,000, and (iv) to
increase the interest rate and extend the maturity of MEIH Current Advances
Payments to correspond to the Borrower's credit facility with Nomura Asset
Capital Corporation;
WHEREAS Foothill has agreed to consent to the forgoing and to
amend the Loan Agreement and the other Loan Documents in accordance with the
terms hereof upon Borrower's payment of an Amendment Fee of $5,000 and subject
to the other terms and conditions hereof;
NOW, THEREFORE, in consideration of the mutual promises
contained herein, Foothill and Borrower hereby agree as follows:
All capitalized terms used herein and not defined herein shall
have the meanings ascribed to them in the Loan Agreement.
1. Amendments to the Loan Agreement.
a. Each of the references in the initial
paragraph of the Loan Agreement and in any other section thereof to "5895
Windward Parkway, Suite 220, Alpharetta, Georgia 30202" hereby are deleted in
their entirety and replaced with "717 North Hardwood, Dallas, Texas 75201."
b. Section 1.1 of the Loan Agreement hereby is
amended by deleting each of the following definitions in their entirety and
substituting the following in lieu thereof:
"Amended and Restated Subordinated Promissory Note
means that certain Second Amended and Restated Subordinated Promissory
Note dated as of
<PAGE> 39
March 27, 1998 issued by MEWI in favor of MEIH, subject to the terms
and conditions of the Amended and Restated Subordination Agreement, in
the form attached hereto as Amended and Restated Annex A".
"Current MEIH Advances means advances (other than
Permitted MEIH Subordinated Debt) made by MEIH to MEWI and made on or
prior to the Fourth Amendment Closing Date, but not to exceed
$10,000,000 in aggregate principal amount (and accrued interest
thereon at a rate per annum not to exceed LIBOR plus 3.50% (or,
following the occurrence of an event of default, 5.0%)), and evidenced
by the Amended and Restated MEIH Current Advances Promissory Note".
"Fourth Amendment means that certain Amendment Number
Four to Consolidated, Amended, and Restated Loan and Security
Agreement, dated as of March 31, 1998, between Foothill and Borrower".
"Fourth Amendment Closing Date" means March 31, 1998".
"Permitted MEIH Current Advances Payments means, so
long as no Event of Default has occurred and is continuing, one or
more payments to MEIH, in an amount not to exceed $10,000,000 in
aggregate principal amount (and accrued interest thereon at a rate per
annum not to exceed LIBOR plus 3.50% (or, following the occurrence of
an event of default, 5.0%)), made in connection with the repayment or
the prepayment of Current MEIH Advances extended to Borrower by MEIH;
provided that, in no event, shall such payment be made with Net Cash
Proceeds to the extent constituting a Required Amount".
"Permitted MEIH Subordinated Debt means any
Indebtedness constituting a "Subordinated Obligation" under and as
defined in the Amended and Restated Subordination Agreement among
MEWI, MEIH, and Foothill in an aggregate principal amount of up to
$65,000,000 and evidenced by the Amended and Restated Subordinated
Promissory Note".
c. Section 1.1 of the Loan Agreement hereby is
amended by adding the following definition in alphabetical order:
"Amended and Restated MEIH Current Advances
Promissory Note means that certain Amended and Restated Promissory
Note dated as of March 27, 1998 issued by MEIW in favor of MEIH, in
the form attached hereto as Annex B".
d. Clause (a) of Section 7.19 of the Loan
Agreement hereby is amended and restated in its entirety as follows:
"(a) Debt Service Ratio. A Debt Service
Ratio for the Relevant Measuring Period of not less than the relevant
amount set forth in the following table, measured on a fiscal
quarter-end basis:
<PAGE> 40
<TABLE>
<CAPTION>
Period Ending Minimum Ratio
------------- -------------
<S> <C>
12/31/97 (4.0) : 1.0
</TABLE>
e. Clause (d) of Section 7.19 of the Loan
Agreement hereby is amended and restated in its entirety as follows:
"(b) Interest Coverage Ratio. An
Interest Coverage Ratio for the Relevant Measuring Period most
recently ended of not less than the relevant amount set forth in the
following table, measured on a fiscal quarter-end basis:
<TABLE>
<CAPTION>
Period Ending Minimum Ratio
------------- -------------
<S> <C>
12/31/97 (5.0) : 1.0
</TABLE>
f. The notice address for MEWI contained in
Section 12 of the Loan Agreement hereby is amended and restated in its entirety
as follows:
"IF TO BORROWER: C/O MALIBU ENTERTAINMENT
WORLDWIDE, INC.
717 North Hardwood
Dallas, Texas 75201
Attn: Mr. Richard M. FitzPatrick
Title: Vice President
Fax No. 214.210.8752"
g. Annex A of the Loan Agreement is hereby
amended, restated, and replaced in its entirety by the Amended and Restated
Annex A attached hereto.
h. Annex B is hereby added in its entirety to
the Loan Agreement in the form of Annex B attached hereto.
i. Each of the references contained in any other
Loan Document to "5895 Windward Parkway, Suite 220, Alpharetta, Georgia 30202"
hereby is deleted in its entirety and deemed to be replaced with "717 North
Hardwood, Dallas, Texas 75201."
j. Each of the references contained in any other
Loan Document to the facsimile telephone number of "770.442.6644" hereby is
deleted in its entirety and deemed to be replaced with "214.210.8752".
2. Conditions Precedent to the Effectiveness of this
Amendment. The effectiveness of this Amendment is subject to the fulfillment,
to the satisfaction of Foothill and its counsel, of each of the following
conditions:
a. Foothill shall have received a certificate of
the Secretary of Borrower attesting to the resolutions of Borrower's Board of
Directors authorizing the
<PAGE> 41
execution, delivery, and performance of the Loan Agreement as amended by this
Amendment and authorizing the specific officers of Borrower to execute same;
b. The representations and warranties in this
Amendment, the Agreement as amended by this Amendment, and the other Loan
Documents shall be true and correct in all respects on and as of the date
hereof, as though made on such date (except to the extent that such
representations and warranties relate solely to an earlier date);
c. After giving effect hereto, no Event of
Default or event which with the giving of notice or passage of time would
constitute an Event of Default shall have occurred and be continuing on the
date hereof, nor shall result from the consummation of the transactions
contemplated herein;
d. No injunction, writ, restraining order, or
other order of any nature prohibiting, directly or indirectly, the consummation
of the transactions contemplated herein shall have been issued and remain in
force by any governmental authority against Borrower, Foothill, or any of their
Affiliates;
e. No material adverse change shall have
occurred in the financial condition of Borrower or in the value of the
Collateral that has not been disclosed to Foothill;
f. Foothill shall have received this duly
executed Amendment, which shall be in full force and effect;
g. Foothill shall have received the form of the
Second Amended and Restated Subordinated Promissory Note, in form and substance
satisfactory to Foothill and its counsel;
h. Foothill shall have received the form of the
Amended and Restated MEIH Current Advances Promissory Note, in form and
substance satisfactory to Foothill and its counsel;
i. Foothill shall have received the Fourth
Amendment Fee of $5,000; and
j. All other documents and legal matters in
connection with the transactions contemplated by this Amendment shall have been
delivered or executed or recorded and shall be in form and substance
satisfactory to Foothill and its counsel.
3. Permitted MEIH Subordinated Debt. Foothill hereby
(i) consents to the incurrence by MEWI of up to $65,000,000 in aggregate
principal amount of Indebtedness to MEIH on the terms set forth on the Amended
and Restated Subordinated Promissory Note, and (ii) agrees that such
Indebtedness shall constitute permitted "Future Subordinated Indebtedness"
approved by Foothill in accordance with the Loan Agreement.
<PAGE> 42
4. Permitted Current MEIH Advances. Foothill hereby (i)
consents to the incurrence by MEWI of up to $10,000,000 in aggregate principal
amount of Indebtedness to MEIH on the terms set forth on the Amended and
Restated Current MEIH Advances Promissory Note, and (ii) agrees that such
Indebtedness shall constitute permitted "Current MEIH Advances" approved by
Foothill in accordance with the Loan Agreement.
5. Waiver. Foothill hereby waives any Default or Event
of Default existing prior to the effectiveness of this Amendment and arising in
respect of any provisions of the Loan Agreement or the other Loan Documents
amended by, or as a result of the incurrence of any Indebtedness consented to
under, this Amendment.
6. Condition Subsequent. As a condition subsequent to
the effectiveness of this Fourth Amendment, Borrower shall perform or cause to
be performed the following (the failure by Borrower to so perform or cause to
be performed on the expiry of the applicable period provided therefor
constituting an Event of Default, but the failure to perform during the period
prior to the expiration of the applicable period provided therefor shall not
constitute a Default):
a. Within 30 days of the Fourth Amendment
Closing Date, Foothill and Borrower shall have submitted a revised business
plan to Foothill, in form and substance satisfactory to Foothill;
b. Within 60 days of the Fourth Amendment
Closing Date, Foothill and Borrower shall have amended the Loan Agreement to
reflect modifications to Section 7.19 of the Loan Agreement to reflect the
revised business plan, such modifications to be in form and substance
satisfactory to Foothill in its reasonable discretion. Anything in this
section to the contrary notwithstanding, the failure of Borrower to enter into
the amendment described herein prior to the expiration of the applicable period
provided herein shall not constitute a Default or an Event of Default; and
c. Within 90 days of the Fourth Amendment
Closing Date, Foothill and Borrower shall have entered into such mortgages and
deeds of trust in respect of Borrower's leasehold estates in respect of which a
leasehold mortgage may be granted, as Foothill shall reasonably request, in
form and substance satisfactory to Foothill in its reasonable discretion, and
the Borrower hereby agrees to make reasonable, good faith, efforts to obtain
the consent of the lessor to the granting of such leasehold mortgages.
7. Representations and Warranties. Borrower hereby
represents and warrants to Foothill that (a) the execution, delivery, and
performance of this Amendment, are within its corporate powers, have been duly
authorized by all necessary corporate action, and are not in contravention of
any law, rule, or regulation, or any order, judgment, decree, writ, injunction,
or award of any arbitrator, court, or governmental authority, or of the terms
of its charter or bylaws, or of any contract or undertaking to which it is a
party or by which any of its properties may be bound or affected, and (b) the
Loan Agreement, as amended by this Amendment, constitute Borrower's legal,
valid, and binding obligation, enforceable against Borrower in accordance with
its terms.
<PAGE> 43
8. Further Assurances. Borrower shall execute and
deliver all financing statements, agreements, documents, and instruments, in
form and substance satisfactory to Foothill, and take all actions as Foothill
may reasonably request from time to time, to perfect and maintain the
perfection and priority of Foothill's security interests in the Collateral, and
to fully consummate the transactions contemplated under the Loan Agreement and
this Amendment.
9. Effect on Loan Documents. The Loan Agreement and the
other Loan Documents, as amended hereby, shall be and remain in full force and
effect in accordance with its respective terms and each hereby is ratified and
confirmed in all respects. Except as expressly set forth herein, the
execution, delivery, and performance of this Amendment shall not operate as a
waiver of or as an amendment of any right, power, or remedy of Lender under the
Loan Agreement, as in effect prior to the date hereof.
10. Miscellaneous.
a. Upon the effectiveness of this Amendment,
each reference in the Agreement to "this Agreement", "hereunder", "herein",
"hereof" or words of like import referring to the Agreement shall mean and
refer to the Loan Agreement as amended by the First Amendment, the Second
Amendment, the Third Amendment, and this Amendment.
b. Upon the effectiveness of this Amendment,
each reference in the Loan Documents to the "Loan Agreement", "thereunder",
"therein", "thereof" or words of like import referring to the Agreement shall
mean and refer to the Loan Agreement as amended by the First Amendment, the
Second Amendment, the Third Amendment, and this Amendment.
c. This Amendment shall be governed by and
construed in accordance with the laws of the State of California.
d. This Amendment may be executed in any number
of counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, shall be deemed to be an original, and all
of which, when taken together, shall constitute but one and the same Amendment.
Delivery of an executed counterpart of this Amendment by telefacsimile shall be
equally as effective as delivery of an original executed counterpart of this
Amendment. Any party delivering an executed counterpart of this Amendment by
telefacsimile also shall deliver an original executed counterpart of this
Amendment but the failure to deliver an original executed counterpart shall not
affect the validity, enforceability, and binding effect of this Amendment.
[Remainder of page intentionally left blank.]
<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed in on the date first written above.
MALIBU ENTERTAINMENT WORLDWIDE, INC., a Georgia corporation
MOUNTASIA FAMILY ENTERTAINMENT CENTERS, INC., a Texas corporation
By: /s/ RICHARD M. FITZPATRICK
----------------------------------------
Name: Richard M. Fitzpatrick
----------------------------
Title: Vice President
---------------------------
MOUNTASIA MANAGEMENT COMPANY, a Georgia corporation
MOUNTASIA PARTNERS I, INC., a Georgia corporation
MALIBU GRAND PRIX CORPORATION, a Delaware corporation
MIAMI CASTLE MGPC, INC., a Florida corporation
TEMPE MGPC, INC., an Arizona corporation
TUCSON MGPC, INC., an Arizona corporation
FRESNO MGPC, INC., a California corporation
NORTH HOLLYWOOD CASTLE MGPC, INC., a California corporation
PUENTE HILLS MGPC, INC., a California corporation
PUENTE HILLS SHOWBOAT MGPC, INC., a California corporation
REDONDO BEACH CASTLE MGPC, INC., a California corporation
REDWOOD CITY CASTLE MGPC, INC., a California corporation
REDWOOD CITY MGPC, INC., a California corporation
SAN DIEGO MGPC, INC., a California corporation
DENVER MGPC, INC., a Colorado corporation
ORLANDO CASTLE MGPC, INC., a Florida corporation
ORLANDO MGPC, INC., a Florida corporation
TAMPA CASTLE MGPC, INC., a Florida corporation
TAMPA MGPC, INC., a Florida corporation
LENEXA MGPC, INC., a Kansas corporation
MT. LAUREL MGPC, INC., a New Jersey corporation
COLUMBUS MGPC, INC., an Ohio corporation
<PAGE> 45
CINCINNATI MGPC, INC., an Ohio corporation
PORTLAND MGPC, INC., an Oregon corporation
AUSTIN MGPC, INC., a Texas corporation
DALLAS CASTLE MGPC, INC., a Texas corporation
DALLAS MGPC, INC., a Texas corporation
HOUSTON CASTLE MGPC, INC., a Texas corporation
HOUSTON II MGPC, INC., a Texas corporation
SAN ANTONIO CASTLE MGPC, INC., a Texas corporation
SAN ANTONIO MGPC, INC., a Texas corporation
MOUNTASIA DEVELOPMENT COMPANY, a Georgia corporation
MALIBU GRAND PRIX DESIGN & MANUFACTURING, INC., a California corporation
MALIBU GRAND PRIX FINANCIAL SERVICES, INC., a California corporation
OFF TRACK MANAGEMENT, INC., a California corporation
MGP SPECIAL, INC., a California corporation
AMUSEMENT MANAGEMENT FLORIDA, INC., a Florida corporation
MALIBU GRAND PRIX CONSULTING, INC., a California corporation
MOUNTASIA - MEI INTERNATIONAL, INC., a Georgia corporation
MOUNTASIA - MEI LIMITED COMPANY, INC., a California corporation
MOUNTASIA - MEI CALIFORNIA, INC., a California corporation
MOUNTASIA - MEI INTERNATIONAL, INC., a Georgia corporation, in its capacity as
general partner of MOUNTASIA - MEI CALIFORNIA LIMITED PARTNERSHIP, a California
limited partnership
MOUNTASIA - MEI MANUFACTURING COMPANY, INC., a Georgia corporation
AMUSEMENT CO., INC., a Delaware corporation
AMUSEMENT CO. PARTNERS, INC., a Delaware corporation
By: /s/ RICHARD M. FITZPATRICK
----------------------------------------
Name: Richard M. Fitzpatrick
----------------------------
Title: Vice President
---------------------------
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/ THOMAS SIGURDSON
----------------------------------------
Name: Thomas Sigurdson
----------------------------
Title: Vice President
---------------------------
<PAGE> 46
AMENDMENT NUMBER FIVE TO CONSOLIDATED, AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NUMBER FIVE TO CONSOLIDATED, AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT (THIS "AMENDMENT"), is entered into as of
June 30, 1998, between FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at 11111 Santa Monica Boulevard,
Suite 1500, Los Angeles, California 90025-3333, MALIBU ENTERTAINMENT WORLDWIDE,
INC., a Georgia corporation ("MEWI"), with its chief executive office located
at 717 North Harwood, Suite 1650, Dallas, Texas 75201, MOUNTASIA MANAGEMENT
COMPANY, a Georgia corporation ("MMC"), with its chief executive office located
at 717 North Harwood, Suite 1650, Dallas, Texas 75201, MOUNTASIA PARTNERS I,
INC., a Georgia corporation ("MPI"), with its chief executive office located at
717 North Harwood, Suite 1650, Dallas, Texas 75201, MALIBU GRAND PRIX
CORPORATION, a Delaware corporation ("MGPC"), with its chief executive office
located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, MIAMI CASTLE
MGPC, INC., a Florida corporation ("Miami"), with its chief executive office
located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, TEMPE MGPC,
INC., an Arizona corporation ("Tempe"), with its chief executive office located
at 717 North Harwood, Suite 1650, Dallas, Texas 75201, TUCSON MGPC, INC., an
Arizona corporation ("Tucson"), with its chief executive office located at 717
North Harwood, Suite 1650, Dallas, Texas 75201, FRESNO MGPC, INC., a California
corporation ("Fresno"), with its chief executive office located at 717 North
Harwood, Suite 1650, Dallas, Texas 75201, NORTH HOLLYWOOD CASTLE MGPC, INC., a
California corporation ("NHC"), with its chief executive office located at 717
North Harwood, Suite 1650, Dallas, Texas 75201, PUENTE HILLS MGPC, INC., a
California corporation ("PH"), with its chief executive office located at 717
North Harwood, Suite 1650, Dallas, Texas 75201, PUENTE HILLS SHOWBOAT MGPC,
INC., a California corporation ("PHS"), with its chief executive office located
at 717 North Harwood, Suite 1650, Dallas, Texas 75201, REDONDO BEACH CASTLE
MGPC, INC., a California corporation ("RBC"), with its chief executive office
located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, REDWOOD CITY
CASTLE MGPC, INC., a California corporation ("RCC"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, REDWOOD
CITY MGPC, INC., a California corporation ("RC"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, SAN DIEGO
MGPC, INC., a California corporation ("San Diego"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, DENVER
MGPC, INC., a Colorado corporation ("Denver"), with its chief executive office
located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, ORLANDO CASTLE
MGPC, INC., a Florida corporation ("OC"), with its chief executive office
located at 717 North Harwood,
<PAGE> 47
Suite 1650, Dallas, Texas 75201, ORLANDO MGPC, INC., a Florida corporation
("Orlando"), with its chief executive office located at 717 North Harwood,
Suite 1650, Dallas, Texas 75201, TAMPA CASTLE MGPC, INC., a Florida corporation
("TC"), with its chief executive office located at 717 North Harwood, Suite
1650, Dallas, Texas 75201, TAMPA MGPC, INC., a Florida corporation ("Tampa"),
with its chief executive office located at 717 North Harwood, Suite 1650,
Dallas, Texas 75201, LENEXA MGPC, INC., a Kansas corporation ("Lenexa"), with
its chief executive office located at 717 North Harwood, Suite 1650, Dallas,
Texas 75201, MT. LAUREL MGPC, INC., a New Jersey corporation ("Mt.Laurel"),
with its chief executive office located at 717 North Harwood, Suite 1650,
Dallas, Texas 75201, COLUMBUS MGPC, INC., an Ohio corporation ("Columbus"),
with its chief executive office located at 717 North Harwood, Suite 1650,
Dallas, Texas 75201, CINCINNATI MGPC, INC., an Ohio corporation ("Cincinnati"),
with its chief executive office located at 717 North Harwood, Suite 1650,
Dallas, Texas 75201, PORTLAND MGPC, INC., an Oregon corporation ("Portland"),
with its chief executive office located at 717 North Harwood, Suite 1650,
Dallas, Texas 75201, AUSTIN MGPC, INC., a Texas corporation ("Austin"), with
its chief executive office located at 717 North Harwood, Suite 1650, Dallas,
Texas 75201, DALLAS CASTLE MGPC, INC., a Texas corporation ("DC"), with its
chief executive office located at 717 North Harwood, Suite 1650, Dallas, Texas
75201, DALLAS MGPC, INC., a Texas corporation ("Dallas"), with its chief
executive office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201,
HOUSTON CASTLE MGPC, INC., a Texas corporation ("HC"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, HOUSTON
II MGPC, INC., a Texas corporation ("Houston"), with its chief executive office
located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, SAN ANTONIO
CASTLE MGPC, INC., a Texas corporation ("SAC"), with its chief executive office
located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, SAN ANTONIO
MGPC, INC., a Texas corporation ("San Antonio"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, MOUNTASIA
DEVELOPMENT COMPANY, a Georgia corporation ("MDC"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, MALIBU
GRAND PRIX DESIGN & MANUFACTURING, INC., a California corporation ("MGPDMI"),
with its chief executive office located at 717 North Harwood, Suite 1650,
Dallas, Texas 75201, MALIBU GRAND PRIX FINANCIAL SERVICES, INC., a California
corporation ("MGPFSI"), with its chief executive office located at 717 North
Harwood, Suite 1650, Dallas, Texas 75201, OFF TRACK MANAGEMENT, INC., a
California corporation ("Off Track"), with its chief executive office located
at 717 North Harwood, Suite 1650, Dallas, Texas 75201, MGP SPECIAL, INC., a
California corporation ("Special"), with its chief executive office located at
717 North Harwood, Suite 1650, Dallas, Texas 75201, AMUSEMENT MANAGEMENT
FLORIDA, INC., a Florida corporation ("Amusement"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, MALIBU
GRAND PRIX CONSULTING, INC., a California corporation ("Consulting"), with its
-2-
<PAGE> 48
chief executive office located at 717 North Harwood, Suite 1650, Dallas, Texas
75201, MOUNTASIA - MEI INTERNATIONAL, INC., a Georgia corporation ("MMEII"),
with its chief executive office located at 717 North Harwood, Suite 1650,
Dallas, Texas 75201, MOUNTASIA - MEI LIMITED COMPANY, INC., a California
corporation ("MMEILC"), with its chief executive office located at 717 North
Harwood, Suite 1650, Dallas, Texas 75201, MOUNTASIA - MEI CALIFORNIA, INC., a
California corporation ("MCNC"), with its chief executive office located at 717
North Harwood, Suite 1650, Dallas, Texas 75201, MOUNTASIA - MEI CALIFORNIA
LIMITED PARTNERSHIP, a California limited partnership ("MMEICLP"), with its
chief executive office located at 717 North Harwood, Suite 1650, Dallas, Texas
75201, MOUNTASIA - MEI MANUFACTURING COMPANY, INC., a Georgia corporation
("MMEIMCI"), with its chief executive office located at 717 North Harwood,
Suite 1650, Dallas, Texas 75201, AMUSEMENT CO., INC., a Delaware corporation
("ACI"), with its chief executive office located at 717 North Harwood, Suite
1650, Dallas, Texas 75201, AMUSEMENT CO. PARTNERS, INC., a Delaware corporation
("ACPI"), with its chief executive office located at 717 North Harwood, Suite
1650, Dallas, Texas 75201, and MOUNTASIA FAMILY ENTERTAINMENT CENTERS, INC., a
Texas corporation ("MFEC"), with its chief executive office located at 717
North Harwood, Suite 1650, Dallas, Texas 75201.
WHEREAS Foothill and Borrower are parties to the Consolidated,
Amended, and Restated Loan and Security Agreement, entered into as of August
22, 1996, (as amended to date, the "Loan Agreement");
WHEREAS Borrower has requested Foothill to amend the Loan
Agreement and the other Loan Documents to (i) permanently amend the definition
of Adjusted Net Worth, (ii) revise the financial covenants with respect to the
minimum Debt Service Ratio, the maximum Total Liabilities to Adjusted Net Worth
Ratio, the minimum Adjusted Net Worth, and the minimum Interest Coverage Ratio,
and (iii) waive Borrower's failure to comply with the requirements of Sections
2.12, 7.19(a), and 7.19(d) of the Loan Agreement;
WHEREAS Foothill is willing to so amend the Loan Agreement and
waive Borrower's failure to comply with the requirements of Sections 2.12,
7.19(a), and 7.19(d) of the Loan Agreement in accordance with the terms hereof
upon Borrower's payment of an Amendment Fee of $15,000 and subject to the other
terms and conditions hereof;
NOW, THEREFORE, in consideration of the mutual promises
contained herein, Foothill and Borrower hereby agree as follows:
All capitalized terms used herein and not defined herein shall
have the meanings ascribed to them in the Loan Agreement.
-3-
<PAGE> 49
1. Amendments to the Loan Agreement.
a. Section 1.1 of the Loan Agreement hereby is
amended by deleting each of the following definitions in their entirety and
substituting the following in lieu thereof:
"Adjusted Net Worth means, as of any date of
determination, the sum of (a) the difference of (i) Borrower's total
stockholder's equity, minus (ii) the sum of (w) all Intangible Assets
of Borrower, (x) all of Borrower's prepaid expenses, (y) all amounts
due to Borrower from non-Borrower Affiliates, calculated on a
consolidated basis, and (z) all investments in partnerships or joint
ventures, plus, without duplication of any amount included in clause
(a), (b) the aggregate issue price of outstanding preferred Securities
and the aggregate principal amount of Existing Subordinated Debt of
MEWI."
"Fifth Amendment means that certain Amendment Number
Five to Consolidated, Amended, and Restated Loan and Security
Agreement, dated as of June 30, 1998, between Foothill and Borrower."
"Fifth Amendment Closing Date means June 30, 1998."
"Relevant Measuring Period means, with respect to
June 30, 1998, the three months then ended, with respect to September
30, 1998, the six months then ended, with respect to December 31,
1998, the nine months then ended, and, with respect to any date
thereafter, the twelve months then ended."
b. Clause (a) of Section 7.19 of the Loan
Agreement hereby is amended and restated in its entirety as follows:
"(a) Debt Service Ratio. A Debt Service
Ratio for the Relevant Measuring Period of not less than the relevant
amount set forth in the following table, measured on a fiscal
quarter-end basis:
<TABLE>
<CAPTION>
Period Ending Minimum Ratio
------------- -------------
<S> <C>
6/30/98 0.0 : 1
9/30/98 0.0 : 1
12/31/98 0.0 : 1
3/31/99 0.0 : 1
6/30/99 0.0 : 1
9/30/99 1.0 : 1
As of the end of each quarter thereafter 1.0 : 1
</TABLE>
-4-
<PAGE> 50
c. Clause (b) of Section 7.19 of the Loan
Agreement hereby is amended and restated in its entirety as follows:
"(b) Total Liabilities to Adjusted Net
Worth Ratio. A ratio of Borrower's total liabilities (exclusive of
Existing Subordinated Debt) divided by Adjusted Net Worth of 2.0:1.0,
or less, measured on a fiscal quarter-end basis;"
d. Clause (c) of Section 7.19 of the Loan
Agreement hereby is amended and restated in its entirety as follows:
"(c) Adjusted Net Worth. Adjusted Net
Worth of at least $40,000,000, measured on a fiscal quarter-end basis;
and"
e. Clause (d) of Section 7.19 of the Loan
Agreement hereby is amended and restated in its entirety as follows:
"(b) Interest Coverage Ratio. An
Interest Coverage Ratio for the Relevant Measuring Period most
recently ended of not less than the relevant amount set forth in the
following table, measured on a fiscal quarter-end basis:
<TABLE>
<CAPTION>
Period Ending Minimum Ratio
------------- -------------
<S> <C>
6/30/98 0.0 : 1
9/30/98 0.0 : 1
12/31/98 0.0 : 1
3/31/99 0.0 : 1
6/30/99 0.0 : 1
9/30/99 2.0 : 1
As of the end of each quarter thereafter 2.0 : 1
</TABLE>
-5-
<PAGE> 51
2. Conditions Precedent to the Effectiveness of this
Amendment. The effectiveness of this Amendment is subject to the fulfillment,
to the satisfaction of Foothill and its counsel, of each of the following
conditions:
a. The representations and warranties in this
Amendment, the Agreement as amended by this Amendment, and the other Loan
Documents shall be true and correct in all respects on and as of the date
hereof, as though made on such date (except to the extent that such
representations and warranties relate solely to an earlier date);
b. After giving effect hereto, no Event of
Default or event which with the giving of notice or passage of time would
constitute an Event of Default shall have occurred and be continuing on the
date hereof, nor shall result from the consummation of the transactions
contemplated herein;
c. No injunction, writ, restraining order, or
other order of any nature prohibiting, directly or indirectly, the consummation
of the transactions contemplated herein shall have been issued and remain in
force by any governmental authority against Borrower, Foothill, or any of their
Affiliates;
d. No material adverse change shall have
occurred in the financial condition of Borrower or in the value of the
Collateral that has not been disclosed to Foothill;
e. Foothill shall have received this duly
executed Amendment, which shall be in full force and effect;
f. Foothill shall have received the Fifth
Amendment Fee of $15,000; and
g. All other documents and legal matters in
connection with the transactions contemplated by this Amendment shall have been
delivered or executed or recorded and shall be in form and substance
satisfactory to Foothill and its counsel.
3. Waiver of Violation of Certain Covenants and
Conditions Subsequent. Pursuant to Borrower's request, Lender hereby agrees to
waive the Events of Default caused by Borrower's failure to comply with:
(a) the provisions of Section 2.12 of the Loan Agreement
requiring the prepayment of Term Loan A, Term Loan B, and the
Advances, as applicable, from any Net Cash Proceeds of any Permitted
Disposition (other than an Ordinary Course Disposition);
-6-
<PAGE> 52
(b) the minimum Debt Service Ratio as of the quarter
ending March 31, 1998 of (4.0):1 as set forth in Section 7.19(a) as a
result of Borrower's actual Debt Service Ratio for this period of
(5.76):1;
(c) the minimum Interest Coverage Ratio as of the quarter
ending March 31, 1998 of (5.0):1 as set forth in Section 7.19(d) as a
result of Borrower's actual Interest Coverage Ratio for this period of
(6.64):1; and
(d) the conditions subsequent of the Fourth Amendment
requiring (i) the revision of the Section 7.19on the basis of
Borrower's business plan within 60 days of the Fourth Amendment
Closing Date, and (ii) the Borrower's entry into such mortgages and
deeds of trust in respect of Borrower's leasehold estates in respect
of which a leasehold mortgage may be granted, as Foothill shall
reasonably request within 90 days of the Fourth Amendment Closing
Date.
4. Condition Subsequent. As a condition subsequent to
the effectiveness of this Fifth Amendment, within 60 days of the Fifth
Amendment Closing Date, Foothill and Borrower shall have entered into such
mortgages and deeds of trust in respect of Borrower's leasehold estates in
respect of which a leasehold mortgage may be granted, as Foothill shall
reasonably request, in form and substance satisfactory to Foothill in its
reasonable discretion, and the Borrower hereby agrees to make reasonable, good
faith, efforts to obtain the consent of the lessor to the granting of such
leasehold mortgages (the failure by Borrower to so enter into such mortgages
and deeds of trust on the expiry of the 60 day period provided therefor
constituting an Event of Default, but the failure to perform during the period
prior to the expiration of the applicable 60 day period provided therefor shall
not constitute a Default).
5. Representations and Warranties. Borrower hereby
represents and warrants to Foothill that (a) the execution, delivery, and
performance of this Amendment, are within its corporate powers, have been duly
authorized by all necessary corporate action, and are not in contravention of
any law, rule, or regulation, or any order, judgment, decree, writ, injunction,
or award of any arbitrator, court, or governmental authority, or of the terms
of its charter or bylaws, or of any contract or undertaking to which it is a
party or by which any of its properties may be bound or affected, and (b) the
Loan Agreement, as amended by this Amendment, constitutes Borrower's legal,
valid, and binding obligation, enforceable against Borrower in accordance with
its terms.
6. Further Assurances. Borrower shall execute and
deliver all financing statements, agreements, documents, and instruments, in
form and substance satisfactory to Foothill, and take all actions as Foothill
may reasonably request from time to time, to perfect and maintain the
perfection and priority of Foothill's security interests in the Collateral, and
to fully consummate the transactions contemplated under the Loan Agreement and
this Amendment.
-7-
<PAGE> 53
7. Effect on Loan Documents. The Loan Agreement, as
amended hereby, and the other Loan Documents shall be and remain in full force
and effect in accordance with their respective terms and each hereby is
ratified and confirmed in all respects. Except as expressly set forth herein,
the execution, delivery, and performance of this Amendment shall not operate as
a waiver of or as an amendment of any right, power, or remedy of Lender under
the Loan Agreement, as in effect prior to the date hereof.
8. Miscellaneous.
a. Upon the effectiveness of this Amendment,
each reference in the Loan Agreement to "this Agreement", "hereunder",
"herein", "hereof" or words of like import referring to the Loan Agreement
shall mean and refer to the Loan Agreement as amended by the First Amendment,
the Second Amendment, the Third Amendment, the Fourth Amendment, and this
Amendment.
b. Upon the effectiveness of this Amendment,
each reference in the Loan Documents to the "Loan Agreement", "thereunder",
"therein", "thereof" or words of like import referring to the Loan Agreement
shall mean and refer to the Loan Agreement as amended by the First Amendment,
the Second Amendment, the Third Amendment, the Fourth Amendment, and this
Amendment.
c. This Amendment shall be governed by and
construed in accordance with the laws of the State of California.
d. This Amendment may be executed in any number
of counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, shall be deemed to be an original, and all
of which, when taken together, shall constitute but one and the same Amendment.
Delivery of an executed counterpart of this Amendment by telefacsimile shall be
equally as effective as delivery of an original executed counterpart of this
Amendment. Any party delivering an executed counterpart of this Amendment by
telefacsimile also shall deliver an original executed counterpart of this
Amendment but the failure to deliver an original executed counterpart shall not
affect the validity, enforceability, and binding effect of this Amendment.
-8-
<PAGE> 54
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed in on the date first written above.
MALIBU ENTERTAINMENT WORLDWIDE, INC., a Georgia corporation
MOUNTASIA FAMILY ENTERTAINMENT CENTERS, INC., a Texas corporation
By: /s/ RICHARD M. FITZPATRICK
----------------------------------------
Name: Richard M. Fitzpatrick
----------------------------
Title: Vice President
---------------------------
MOUNTASIA MANAGEMENT COMPANY, a Georgia corporation
MOUNTASIA PARTNERS I, INC., a Georgia corporation
MALIBU GRAND PRIX CORPORATION, a Delaware corporation
MIAMI CASTLE MGPC, INC., a Florida corporation
TEMPE MGPC, INC., an Arizona corporation
TUCSON MGPC, INC., an Arizona corporation
FRESNO MGPC, INC., a California corporation
NORTH HOLLYWOOD CASTLE MGPC, INC., a California corporation
PUENTE HILLS MGPC, INC., a California corporation
PUENTE HILLS SHOWBOAT MGPC, INC., a California corporation
REDONDO BEACH CASTLE MGPC, INC., a California corporation
REDWOOD CITY CASTLE MGPC, INC., a California corporation
REDWOOD CITY MGPC, INC., a California corporation
SAN DIEGO MGPC, INC., a California corporation
DENVER MGPC, INC., a Colorado corporation
ORLANDO CASTLE MGPC, INC., a Florida corporation
ORLANDO MGPC, INC., a Florida corporation
TAMPA CASTLE MGPC, INC., a Florida corporation
TAMPA MGPC, INC., a Florida corporation
LENEXA MGPC, INC., a Kansas corporation
MT. LAUREL MGPC, INC., a New Jersey corporation
COLUMBUS MGPC, INC., an Ohio corporation
CINCINNATI MGPC, INC., an Ohio corporation
PORTLAND MGPC, INC., an Oregon corporation
AUSTIN MGPC, INC., a Texas corporation
DALLAS CASTLE MGPC, INC., a Texas corporation
DALLAS MGPC, INC., a Texas corporation
-9-
<PAGE> 55
HOUSTON CASTLE MGPC, INC., a Texas corporation
HOUSTON II MGPC, INC., a Texas corporation
SAN ANTONIO CASTLE MGPC, INC., a Texas corporation
SAN ANTONIO MGPC, INC., a Texas corporation
MOUNTASIA DEVELOPMENT COMPANY, a Georgia corporation
MALIBU GRAND PRIX DESIGN & MANUFACTURING, INC., a California corporation
MALIBU GRAND PRIX FINANCIAL SERVICES, INC., a California corporation
OFF TRACK MANAGEMENT, INC., a California corporation
MGP SPECIAL, INC., a California corporation
AMUSEMENT MANAGEMENT FLORIDA, INC., a Florida corporation
MALIBU GRAND PRIX CONSULTING, INC., a California corporation
MOUNTASIA - MEI INTERNATIONAL, INC., a Georgia corporation
MOUNTASIA - MEI LIMITED COMPANY, INC., a California corporation
MOUNTASIA - MEI CALIFORNIA, INC., a California corporation
MOUNTASIA - MEI INTERNATIONAL, INC., a Georgia corporation, in its capacity as
general partner of MOUNTASIA - MEI CALIFORNIA LIMITED PARTNERSHIP, a California
limited partnership
MOUNTASIA - MEI MANUFACTURING COMPANY, INC., a Georgia corporation
AMUSEMENT CO., INC., a Delaware corporation
AMUSEMENT CO. PARTNERS, INC., a Delaware corporation
By: /s/ RICHARD M. FITZPATRICK
----------------------------------------
Name: Richard M. Fitzpatrick
----------------------------
Title: Vice President
---------------------------
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/ THOMAS S. SIGURDSON
----------------------------------------
Name: Thomas S. Sigurdson
----------------------------
Title: Vice President
---------------------------
-10-
<PAGE> 56
AMENDMENT NUMBER SIX TO CONSOLIDATED, AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NUMBER SIX TO CONSOLIDATED, AMENDED AND RESTATED LOAN
AND SECURITY AGREEMENT (this "Amendment"), is entered into as of December ___,
1998, between FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at 11111 Santa Monica Boulevard,
Suite 1500, Los Angeles, California 90025-3333, MALIBU ENTERTAINMENT WORLDWIDE,
INC., a Georgia corporation ("MEWI"), with its chief executive office located
at 717 North Harwood, Suite 1650, Dallas, Texas 75201, MOUNTASIA MANAGEMENT
COMPANY, a Georgia corporation ("MMC"), with its chief executive office located
at 717 North Harwood, Suite 1650, Dallas, Texas 75201, MOUNTASIA PARTNERS I,
INC., a Georgia corporation ("MPI"), with its chief executive office located at
717 North Harwood, Suite 1650, Dallas, Texas 75201, MALIBU GRAND PRIX
CORPORATION, a Delaware corporation ("MGPC"), with its chief executive office
located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, MIAMI CASTLE
MGPC, INC., a Florida corporation ("Miami"), with its chief executive office
located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, TEMPE MGPC,
INC., an Arizona corporation ("Tempe"), with its chief executive office located
at 717 North Harwood, Suite 1650, Dallas, Texas 75201, TUCSON MGPC, INC., an
Arizona corporation ("Tucson"), with its chief executive office located at 717
North Harwood, Suite 1650, Dallas, Texas 75201, FRESNO MGPC, INC., a California
corporation ("Fresno"), with its chief executive office located at 717 North
Harwood, Suite 1650, Dallas, Texas 75201, NORTH HOLLYWOOD CASTLE MGPC, INC., a
California corporation ("NHC"), with its chief executive office located at 717
North Harwood, Suite 1650, Dallas, Texas 75201, PUENTE HILLS MGPC, INC., a
California corporation ("PH"), with its chief executive office located at 717
North Harwood, Suite 1650, Dallas, Texas 75201, PUENTE HILLS SHOWBOAT MGPC,
INC., a California corporation ("PHS"), with its chief executive office located
at 717 North Harwood, Suite 1650, Dallas, Texas 75201, REDONDO BEACH CASTLE
MGPC, INC., a California corporation ("RBC"), with its chief executive office
located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, REDWOOD CITY
CASTLE MGPC, INC., a California corporation ("RCC"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, REDWOOD
CITY MGPC, INC., a California corporation ("RC"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, SAN DIEGO
MGPC, INC., a California corporation ("San Diego"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, DENVER
MGPC, INC., a Colorado corporation ("Denver"), with its chief executive office
located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, ORLANDO CASTLE
MGPC, INC., a Florida corporation ("OC"), with its chief executive office
located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, ORLANDO MGPC,
INC., a Florida corporation ("Orlando"), with its chief executive office
located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, TAMPA CASTLE
MGPC, INC., a Florida corporation ("TC"), with its chief executive office
located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, TAMPA MGPC,
INC., a Florida corporation ("Tampa"), with its chief executive office located
at 717 North Harwood, Suite 1650, Dallas, Texas 75201, LENEXA MGPC, INC., a
Kansas corporation ("Lenexa"), with its chief executive office located at 717
North Harwood, Suite 1650, Dallas, Texas 75201, MT. LAUREL MGPC, INC., a New
Jersey corporation ("Mt. Laurel"), with its chief executive office located at
717 North Harwood, Suite 1650, Dallas, Texas 75201,
<PAGE> 57
COLUMBUS MGPC, INC., an Ohio corporation ("Columbus"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201,
CINCINNATI MGPC, INC., an Ohio corporation ("Cincinnati"), with its chief
executive office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201,
PORTLAND MGPC, INC., an Oregon corporation ("Portland"), with its chief
executive office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201,
AUSTIN MGPC, INC., a Texas corporation ("Austin"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, DALLAS
CASTLE MGPC, INC., a Texas corporation ("DC"), with its chief executive office
located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, DALLAS MGPC,
INC., a Texas corporation ("Dallas"), with its chief executive office located
at 717 North Harwood, Suite 1650, Dallas, Texas 75201, HOUSTON CASTLE MGPC,
INC., a Texas corporation ("HC"), with its chief executive office located at
717 North Harwood, Suite 1650, Dallas, Texas 75201, HOUSTON II MGPC, INC., a
Texas corporation ("Houston"), with its chief executive office located at 717
North Harwood, Suite 1650, Dallas, Texas 75201, SAN ANTONIO CASTLE MGPC, INC.,
a Texas corporation ("SAC"), with its chief executive office located at 717
North Harwood, Suite 1650, Dallas, Texas 75201, SAN ANTONIO MGPC, INC., a Texas
corporation ("San Antonio"), with its chief executive office located at 717
North Harwood, Suite 1650, Dallas, Texas 75201, MOUNTASIA DEVELOPMENT COMPANY,
a Georgia corporation ("MDC"), with its chief executive office located at 717
North Harwood, Suite 1650, Dallas, Texas 75201, MALIBU GRAND PRIX DESIGN &
MANUFACTURING, INC., a California corporation ("MGPDMI"), with its chief
executive office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201,
MALIBU GRAND PRIX FINANCIAL SERVICES, INC., a California corporation
("MGPFSI"), with its chief executive office located at 717 North Harwood, Suite
1650, Dallas, Texas 75201, OFF TRACK MANAGEMENT, INC., a California corporation
("Off Track"), with its chief executive office located at 717 North Harwood,
Suite 1650, Dallas, Texas 75201, MGP SPECIAL, INC., a California corporation
("Special"), with its chief executive office located at 717 North Harwood,
Suite 1650, Dallas, Texas 75201, AMUSEMENT MANAGEMENT FLORIDA, INC., a Florida
corporation ("Amusement"), with its chief executive office located at 717 North
Harwood, Suite 1650, Dallas, Texas 75201, MALIBU GRAND PRIX CONSULTING, INC., a
California corporation ("Consulting"), with its chief executive office located
at 717 North Harwood, Suite 1650, Dallas, Texas 75201, MOUNTASIA - MEI
INTERNATIONAL, INC., a Georgia corporation ("MMEII"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, MOUNTASIA
- - MEI LIMITED COMPANY, INC., a California corporation ("MMEILC"), with its
chief executive office located at 717 North Harwood, Suite 1650, Dallas, Texas
75201, MOUNTASIA - MEI CALIFORNIA, INC., a California corporation ("MCNC"),
with its chief executive office located at 717 North Harwood, Suite 1650,
Dallas, Texas 75201, MOUNTASIA - MEI CALIFORNIA LIMITED PARTNERSHIP, a
California limited partnership ("MMEICLP"), with its chief executive office
located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, MOUNTASIA - MEI
MANUFACTURING COMPANY, INC., a Georgia corporation ("MMEIMCI"), with its chief
executive office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201,
AMUSEMENT CO., INC., a Delaware corporation ("ACI"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, AMUSEMENT
CO. PARTNERS, INC., a Delaware corporation ("ACPI"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, and
MOUNTASIA FAMILY ENTERTAINMENT CENTERS, INC., a Texas corporation ("MFEC"),
with its chief executive office located at 717 North Harwood, Suite 1650,
Dallas, Texas 75201.
2
<PAGE> 58
Recitals:
A. Foothill and Borrower are parties to the Consolidated,
Amended, and Restated Loan and Security Agreement, entered into as of August
22, 1996, (as amended from time to time prior to the date hereof, the "Loan
Agreement").
B. Borrower has requested Foothill to (i) amend the Loan
Agreement to the extent necessary to extend the first date on which Borrower is
required to make monthly principal payments of $500,000.00 towards Term Loan A
pursuant to Section 2.2 (c) of the Loan Agreement, and (ii) waive any Event of
Default arising as the result of Borrower's failure to make any such payment as
otherwise required by Section 2.2(c) of the Loan Agreement on or before the
date hereof.
C. Foothill is willing to so amend the Loan Agreement in
accordance with the terms and conditions hereof and to waive any such Event of
Default.
Agreement:
NOW, THEREFORE, in consideration of the mutual promises contained
herein, Foothill and Borrower hereby agree as follows:
All capitalized terms used herein and not defined herein shall have
the meanings ascribed to them in the Loan Agreement.
1. Amendments to the Loan Agreement.
a. Section 1.1 of the Loan Agreement hereby is
amended by adding the following definition in alphabetical order:
"Sixth Amendment means that certain Amendment Number
Six to Consolidated, Amended, and Restated Loan and Security Agreement, dated
as of November 16, 1998."
b. The definition of "SPC Non-Recourse
Refinancing Deadline" contained in Section 1.1 of the Loan Agreement hereby is
amended and restated in its entirety as follows:
"SPC Non-Recourse Refinancing Deadline shall mean
January 20, 1999."
c. Section 2.2 (c) of the Loan Agreement hereby
is amended and restated in its entirety as follows:
3
<PAGE> 59
"(c) Anything to the contrary in this Section 2.2
notwithstanding, if, prior to the SPC Non-Recourse Refinancing Deadline,
Borrower has not (i) extended the final maturity of the SPC Non-Recourse
Financing to a date on or after August 31, 2001, (ii) obtained replacement
financing for the SPC Non-Recourse Financing on terms and conditions
satisfactory to Foothill in its sole discretion, (iii) converted the entire
amount of the SPC Non-Recourse Financing to shares of preferred stock of MEWI
on terms and conditions satisfactory to Foothill in its sole discretion, or
(iv) converted a portion of the amount of the SPC Non-Recourse Financing to
shares of preferred stock of MEWI on terms and conditions satisfactory to
Foothill in its sole discretion and extended the final maturity of the
remaining amount of the SPC Non-Recourse Financing to a date on or after August
31, 2001, then Borrower shall commence repayment of the unpaid principal
balance of Term Loan A in monthly installments of principal in the amount of
$500,000. Each such installment shall be due and payable on the first day of
each month, commencing on the first day of the first month following the SPC
Non-Recourse Refinancing Deadline, and continuing on the first day of each
succeeding month until the earlier of (x) the date on which the unpaid balance
of Term Loan A is paid in full, or (y) the Maturity Date. The remaining
outstanding principal balance and all accrued and unpaid interest under Term
Loan A shall be due and payable upon the termination of this Agreement, whether
by its terms, by prepayment, by acceleration, or otherwise."
2. Condition Precedent to the Effectiveness of this
Amendment. The effectiveness of this Amendment is subject to the fulfillment,
to the satisfaction of Foothill and its counsel, of each of the following
conditions:
a. The representations and warranties in this
Amendment, the Agreement as amended by this Amendment, and the other Loan
Documents shall be true and correct in all respects on and as of the date
hereof as though made on such date (except to the extent that such
representations and warranties relate solely to an earlier date);
b. After giving effect hereto, no Event of
Default or event which with the giving of notice or passage of time would
constitute an Event of Default shall have occurred and be continuing on the
date hereof, nor shall result from the consummation of the transactions
contemplated herein;
c. No injunction, writ, restraining order, or
other order of any nature prohibiting, directly or indirectly, the consummation
of the transactions contemplated herein shall have been issued and remain in
force by any governmental authority against Borrower, Foothill, or any of their
Affiliates;
d. No material adverse change shall have
occurred in the financial condition of Borrower or in the value of the
Collateral that has not been disclosed to Foothill;
e. Foothill shall have received payment in full
in cash of a fee in the amount of $5,000 as consideration for its entry into
this Amendment;
f. Foothill shall have received this duly
executed Amendment, which shall be in full force and effect;
4
<PAGE> 60
g. All other documents and legal matters in
connection with the transactions contemplated by this Amendment shall have been
delivered, executed or recorded, as applicable, and shall be in form and
substance satisfactory to Foothill and its counsel.
3. Waiver of Violation of Certain Covenants. Pursuant
to the request of Borrower, Foothill hereby agrees to waive any Default or any
Event of Default existing on or prior to the date of the effectiveness of this
Amendment arising in respect of Section 2.2(c) of the Loan Agreement prior to
its amendment hereby.
6. Representations and Warranties. Borrower hereby
represents and warrants to Foothill that (a) the execution, delivery, and
performance of this Amendment are within its corporate powers, have been duly
authorized by all necessary corporate action, and are not in contravention of
any law, rule, or regulation, or any order, judgment, decree, writ, injunction,
or award of any arbitrator, court, or governments authority, or of the terms of
its charter or bylaws, or of any contract or undertaking to which it is a party
or by which any of its properties may be bound or affected, and (b) the Loan
Agreement, as amended by this Amendment, constitutes Borrower's legal, valid,
and binding obligation, enforceable against Borrower in accordance with its
terms.
7. Further Assurances. Borrower shall execute and
deliver all financing statements, agreements, documents, and instruments, in
form and substance satisfactory to Foothill, and take all actions as Foothill
may reasonably request from time to time, to perfect and maintain the
perfection and priority of Foothill's security interests in the Collateral, and
to fully consummate the transactions contemplated under the Loan Agreement and
this Amendment.
8. Effect on Loan Documents. The Loan Agreement, as
amended hereby, and the other Loan Documents shall be and remain in full force
and effect in accordance with their respective terms and each hereby is
ratified and confirmed in all respects. Except as expressly set forth herein,
the execution, delivery, and performance of this Amendment shall not operate as
a waiver of or as an amendment of any right, power, or remedy of Lender under
the Loan Agreement, as in effect prior to the date hereof.
9. Miscellaneous.
a. Upon the effectiveness of this Amendment,
each reference in the Loan Agreement to "this Agreement", "hereunder",
"herein", "hereof" or words of like import referring to the Loan Agreement
shall mean and refer to the Loan Agreement as amended by the First Amendment,
the Second Amendment, the Third Amendment, the Fourth Amendment, the Fifth
Amendment, and this Amendment.
b. Upon the effectiveness of this Amendment,
each reference in the Loan Documents to the "Loan Agreement", "thereunder",
"therein", 'thereof" or words of like import referring to the Loan Agreement
shall mean and refer to the Loan Agreement as amended by the First Amendment,
the Second Amendment, the Third Amendment, the Fourth Amendment, the Firth
Amendment, and this Amendment.
5
<PAGE> 61
c. This Amendment shall be governed by and
construed in accordance with the laws of the State of California.
d. This Amendment may be executed in any number
of counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, shall be deemed to be an original, and all
of which, when taken together, shall constitute but one and the same Amendment.
Delivery of an executed counterpart of this Amendment by telefacsimile shall be
equally as effective as delivery of an original executed counterpart of this
Amendment. Any party delivering an executed counterpart of this Amendment by
telefacsimile also shall deliver an original executed counterpart of this
Amendment but the failure to deliver an original executed counterpart shall not
affect the validity, enforceability, and binding effect of this Amendment.
[The remainder of this page is intentionally left blank]
6
<PAGE> 62
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed on the date first written above.
MALIBU ENTERTAINMENT WORLDWIDE, INC., a Georgia corporation
MOUNTASIA FAMILY ENTERTAINMENT CENTERS, INC., a Texas corporation
MOUNTASIA MANAGEMENT COMPANY, a Georgia corporation
MOUNTASIA PARTNERS I, INC., a Georgia corporation
MALIBU GRAND PRIX CORPORATION, a Delaware corporation
MIAMI CASTLE MGPC, INC., a Florida corporation
TEMPE MGPC, INC., an Arizona corporation
TUCSON MGPC, INC., an Arizona corporation
FRESNO MGPC, INC., a California corporation
NORTH HOLLYWOOD CASTLE MGPC, INC., a California corporation
PUENTE HILLS MGPC, INC., a California corporation
PUENTE HILLS SHOWBOAT MGPC, INC., a California corporation
REDONDO REACH CASTLE MGPC, INC., a California corporation
REDWOOD CITY CASTLE MGPC, INC., a California corporation
REDWOOD CITY MGPC, INC., a California corporation
SAN DIEGO MGPC, INC., a California corporation
DENVER MGPC, INC., a Colorado corporation
ORLANDO CASTLE MGPC, INC., a Florida corporation
ORLANDO MGPC, INC., a Florida corporation
TAMPA CASTLE MGPC, INC., a Florida corporation
TAMPA MGPC, INC., a Florida corporation
LENEXA MGPC, INC., a Kansas corporation
MT. LAUREL MGPC, INC., a New Jersey corporation
COLUMBUS MGPC, INC., an Ohio corporation
CINCINNATI MGPC, INC., an Ohio corporation
PORTLAND MGPC, INC., an Oregon corporation
AUSTIN MGPC, INC., a Texas corporation
DALLAS CASTLE MGPC, INC., a Texas corporation
DALLAS MGPC, INC., a Texas corporation
HOUSTON CASTLE MGPC, INC., a Texas corporation
HOUSTON II MGPC, INC., a Texas corporation
SAN ANTONIO CASTLE MGPC, INC., a Texas corporation
SAN ANTONIO MGPC, INC., a Texas corporation
MOUNTASIA DEVELOPMENT COMPANY, a Georgia corporation
MALIBU GRAND PRIX DESIGN & MANUFACTURING, INC., a California corporation
MALIBU GRAND PRIX FINANCIAL SERVICES, INC., a California corporation
OFF TRACK MANAGEMENT, INC., a California corporation
MGP SPECIAL, INC., a California corporation
AMUSEMENT MANAGEMENT FLORIDA, INC., a Florida corporation
MALIBU GRAND PRIX CONSULTING, INC., a California corporation
MOUNTASIA - MEI INTERNATIONAL, INC., a Georgia corporation
MOUNTASIA - MEI LIMITED COMPANY, INC., a California corporation
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MOUNTASIA - MEI CALIFORNIA, INC., a California corporation
MOUNTASIA - MEI INTERNATIONAL, INC., a Georgia corporation, in its capacity as
general partner of MOUNTASIA - MEI CALIFORNIA LIMITED PARTNERSHIP, a California
limited partnership
MOUNTASIA - MEI MANUFACTURING COMPANY, INC., a Georgia corporation
AMUSEMENT CO., INC., a Delaware corporation
AMUSEMENT CO. PARTNERS, INC., a Delaware corporation
By: /s/ Richard M. FitzPatrick
----------------------------------
Richard M. FitzPatrick
Vice President
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/ Thomas Sigurdson
----------------------------------
Tom Sigurdson
Vice President
8
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AMENDMENT NUMBER SEVEN TO CONSOLIDATED, AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NUMBER SEVEN TO CONSOLIDATED, AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT (this "Amendment"), is entered into as of
February 12, 1999, between FOOTHILL CAPITAL CORPORATION, a California
corporation ("Foothill"), with a place of business located at 11111 Santa
Monica Boulevard, Suite 1500, Los Angeles, California 90025-3333, MALIBU
ENTERTAINMENT WORLDWIDE, INC., a Georgia corporation ("MEWI"), with its chief
executive office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201,
MOUNTASIA MANAGEMENT COMPANY, a Georgia corporation ("MMC"), with its chief
executive office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201,
MALIBU GRAND PRIX CORPORATION, a Delaware corporation ("MGPC"), with its chief
executive office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201,
TUCSON MGPC, INC., an Arizona corporation ("Tucson"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, FRESNO
MGPC, INC., a California corporation ("Fresno"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, NORTH
HOLLYWOOD CASTLE MGPC, INC., a California corporation ("NHC"), with its chief
executive office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201,
PUENTE HILLS MGPC, INC., a California corporation ("PH"), with its chief
executive office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201,
PUENTE HILLS SHOWBOAT MGPC, INC., a California corporation ("PHS"), with its
chief executive office located at 717 North Harwood, Suite 1650, Dallas, Texas
75201, REDONDO BEACH CASTLE MGPC, INC., a California corporation ("RBC"), with
its chief executive office located at 717 North Harwood, Suite 1650, Dallas,
Texas 75201, REDWOOD CITY CASTLE MGPC, INC., a California corporation ("RCC"),
with its chief executive office located at 717 North Harwood, Suite 1650,
Dallas, Texas 75201, REDWOOD CITY MGPC, INC., a California corporation ("RC"),
with its chief executive office located at 717 North Harwood, Suite 1650,
Dallas, Texas 75201, SAN DIEGO MGPC, INC., a California corporation ("San
Diego"), with its chief executive office located at 717 North Harwood, Suite
1650, Dallas, Texas 75201, PORTLAND MGPC, INC., an Oregon corporation
("Portland"), with its chief executive office located at 717 North Harwood,
Suite 1650, Dallas, Texas 75201, AUSTIN MGPC, INC., a Texas corporation
("Austin"), with its chief executive office located at 717 North Harwood, Suite
1650, Dallas, Texas 75201, DALLAS CASTLE MGPC, INC., a Texas corporation
("DC"), with its chief executive office located at 717 North Harwood, Suite
1650, Dallas, Texas 75201, SAN ANTONIO CASTLE MGPC, INC., a Texas corporation
("SAC"), with its chief executive office located at 717 North Harwood, Suite
1650, Dallas, Texas 75201, SAN ANTONIO MGPC, INC., a Texas corporation ("San
Antonio"), with its chief executive office located at 717 North Harwood, Suite
1650, Dallas, Texas 75201, MOUNTASIA DEVELOPMENT COMPANY, a Georgia corporation
("MDC"), with its chief executive office located at 717 North Harwood, Suite
1650, Dallas, Texas 75201, MALIBU GRAND PRIX DESIGN & MANUFACTURING, INC., a
California corporation ("MGPDMI"), with its chief executive office located at
717 North Harwood, Suite 1650, Dallas, Texas 75201, MALIBU GRAND PRIX FINANCIAL
SERVICES, INC., a California corporation ("MGPFSI"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, OFF TRACK
MANAGEMENT, INC., a California corporation ("Off Track"), with its chief
executive office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201,
MGP
<PAGE> 65
SPECIAL, INC., a California corporation ("Special"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, AMUSEMENT
MANAGEMENT FLORIDA, INC., a Florida corporation ("Amusement"), with its chief
executive office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201,
MALIBU GRAND PRIX CONSULTING, INC., a California corporation ("Consulting"),
with its chief executive office located at 717 North Harwood, Suite 1650,
Dallas, Texas 75201, MOUNTASIA - MEI INTERNATIONAL, INC., a Georgia corporation
("MMEII"), with its chief executive office located at 717 North Harwood, Suite
1650, Dallas, Texas 75201, MOUNTASIA - MEI LIMITED COMPANY, INC., a California
corporation ("MMEILC"), with its chief executive office located at 717 North
Harwood, Suite 1650, Dallas, Texas 75201, MOUNTASIA - MEI CALIFORNIA, INC., a
California corporation ("MCNC"), with its chief executive office located at 717
North Harwood, Suite 1650, Dallas, Texas 75201, MOUNTASIA - MEI CALIFORNIA
LIMITED PARTNERSHIP, a California limited partnership ("MMEICLP"), with its
chief executive office located at 717 North Harwood, Suite 1650, Dallas, Texas
75201, and MOUNTASIA FAMILY ENTERTAINMENT CENTERS, INC., a Texas corporation
("MFEC"), with its chief executive office located at 717 North Harwood, Suite
1650, Dallas, Texas 75201.
Recitals:
A. Foothill and Borrower are parties to the Consolidated, Amended, and
Restated Loan and Security Agreement, entered into as of August 22,
1996, (as amended from time to time prior to the date hereof, the "Loan
Agreement").
B. Borrower has requested Foothill to (i) amend the Loan Agreement to the
extent necessary to extend the first date on which Borrower is required
to make monthly principal payments of $500,000.00 towards Term Loan A
pursuant to Section 2.2 (c) of the Loan Agreement, (ii) waive any Event
of Default arising as the result of Borrower's failure to make any such
payment as otherwise required by Section 2.2(c) of the Loan Agreement
on or before the date hereof, (iii) consent to the incurrence of
additional subordinated indebtedness in an aggregate amount not to
exceed $30,000,000, and (iv) consent to certain amendment to the terms
and conditions of the Permitted MEIH Subordinated Debt and the Current
MEIH Advances.
C. Foothill is willing to so amend the Loan Agreement in accordance with
the terms and conditions hereof, to waive any such Event of Default,
and to consent to the amendment of the terms and conditions of the
Permitted MEIH Subordinated Debt and the Current MEIH Advances.
Agreement:
NOW, THEREFORE, in consideration of the mutual promises
contained herein, Foothill and Borrower hereby agree as follows:
All capitalized terms used herein and not defined herein shall
have the meanings ascribed to them in the Loan Agreement.
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<PAGE> 66
1. Amendments to the Loan Agreement.
a. Section 1.1 of the Loan Agreement hereby is amended
by adding each of the following definitions in
alphabetical order:
"MEIH Subordinated Promissory Note means that certain Third
Amended and Restated Subordinated Convertible Promissory Note dated as of
January 20, 1999, in the original principal amount of up to $65,000,000, issued
by MEWI in favor of MEIH, subject to the terms and conditions of the MEIH
Subordination Agreement, in the form attached hereto as the Second Amended and
Restated Annex A."
"MEIH Subordination Agreement means that certain Second
Amended and Restated Subordination Agreement dated as of January 20, 1999, among
MEIH, MEWI, and Foothill, in the form attached hereto as Amended and Restated
Annex B."
"Permitted SZ Capital Subordinated Debt means any Indebtedness
constituting a "Subordinated Obligation" under and as defined in the SZ Capital
Subordination Agreement among MEWI, SZ Capital, and Foothill in an aggregate
principal amount of up to $30,000,000 and evidenced by the SZ Capital
Subordinated Promissory Note."
"Permitted SZ Capital Subordinated Debt Payments means, so
long as no Event of Default has occurred and is continuing and subject the terms
and conditions of the SZ Capital Subordination Agreement, one or more payments
to SZ Capital, made in connection with the repayment or prepayment of any
Permitted SZ Capital Subordinated Debt extended to Borrower by SZ Capital from
time to time. Any such Permitted SZ Capital Subordinated Debt Payments shall be
made (a) in the form of additional capital stock of MEWI, (b) from the proceeds
of the issuance of additional capital stock of MEWI, or (c) from the proceeds of
Future Subordinated Debt incurred by MEWI."
"Second Amended and Restated MEIH Current Advances Promissory
Note means that certain Second Amended and Restated Promissory Note dated as of
January 20, 1999, in the original principal amount of up to $10,000,000, issued
by MEWI in favor of MEIH, in the form attached hereto as Annex C."
"Seventh Amendment means that certain Amendment Number Seven
to Consolidated, Amended, and Restated Loan and Security Agreement, dated as of
February ___, 1999."
"Seventh Amendment Closing Date means the earlier of (a)
February 15, 1999 and (b) the date on which each of the conditions precedent to
the Seventh Amendment contained in Section 2 thereof are satisfied or waived by
Foothill."
"SZ Capital means SZ Capital, L.P., a Delaware limited
partnership."
"SZ Capital Subordinated Promissory Note means that certain
Subordinated Convertible Promissory Note dated as of November 16, 1998, in the
original principal amount of up to $30,000,000, issued by MEWI in favor of SZ
Capital, subject to the terms and conditions of the SZ Capital Subordination
Agreement, in the form attached hereto as Annex D."
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<PAGE> 67
"SZ Capital Subordination Agreement means that certain
Subordination Agreement dated as of November 16, 1998, among SZ Capital, MEWI,
and Foothill, in the form attached hereto as Annex E."
b. Section 1.1 of the Loan Agreement hereby is amended
by deleting each of the following definitions in
their entirety and substituting the following in lieu
thereof:
"Borrower means MEWI, MMC, MGPC, Tucson, Fresno,
NHC, PH, PHS, RBC, RCC, RC, San Diego, Portland, Austin, DC, SAC, San Antonio,
MDC, MGPDMI, MGPFSI, Off Track, Special, Amusement, Consulting, MMEII, MMEILC,
MCNC, MMEICLP, and MFEC, and each of them, and any one or more of them,
individually and collectively, and jointly and severally."
"Existing Subordinated Debt means (a) the Ten
Percent Debentures, (b) the Nine Percent Debentures, (c) the NEF Debentures,
(d) the Permitted MEIH Subordinated Debt, and (e) the Permitted SZ Capital
Subordinated Debt."
"Permitted MEIH Subordinated Debt means any
Indebtedness constituting a "Subordinated Obligation" under and as defined in
the MEIH Subordination Agreement among MEWI, MEIH, and Foothill in an aggregate
principal amount of up to $65,000,000 and evidenced by the MEIH Subordinated
Promissory Note."
"Permitted MEIH Subordinated Debt Payments means, so
long as no Event of Default has occurred and is continuing and subject the
terms and conditions of the MEIH Subordination Agreement, one or more payments
to MEIH, made in connection with the repayment or prepayment of any Permitted
MEIH Subordinated Debt extended to Borrower by MEIH from time to time. Any
such Permitted MEIH Subordinated Debt Payments shall be made (a) in the form of
additional capital stock of MEWI, (b) from the proceeds of the issuance of
additional capital stock of MEWI, or (c) from the proceeds of Future
Subordinated Debt incurred by MEWI."
"SPC Non-Recourse Refinancing Deadline shall mean
July 20, 1999."
c. The definition of "Permitted Transactions" in Section
1.1 of the Loan Agreement hereby is amended by
deleting the word "and" at the end of existing clause
(o), replacing the period at the end of existing
clause (p) and inserting "; and" in lieu thereof, and
inserting the following new clause (q) immediately
following existing clause (p):
(q) Permitted SZ Capital Subordinated Debt.
d. Section 1.1 of the Loan Agreement hereby is amended
by deleting each of the following definitions in
their entirety:
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<PAGE> 68
"ACI"
"ACPI"
"Amended and Restated MEIH Current Advances Promissory Note"
"Amended and Restated Subordination Agreement"
"Amended and Restated Subordinated Promissory Note"
"Columbus"
"Cincinnati"
"Dallas"
"Denver"
"HC"
"Houston"
"Lenexa"
"Miami"
"Mt. Laurel"
"MPI"
"MMEIMCI"
"OC"
"Orlando"
"TC"
"Tampa"
"Tempe"
e. Section 7.8 of the Loan Agreement hereby is amended
and restated in its entirety as follows:
"7.8 PREPAYMENTS AND AMENDMENTS. Except for the Permitted
Transactions, and except in connection with a refinancing permitted by Section
7.1(f), prepay, redeem, retire, defease, purchase, or otherwise acquire any
Indebtedness owing to any third Person, other than the Obligations in accordance
with this Agreement, and (b) directly or indirectly, amend, modify, alter,
increase, or change any of the terms or conditions of any agreement, instrument,
document, indenture, or other writing evidencing or concerning Indebtedness
permitted under Sections 7.1(b), (c), (d), or (e). Without limiting the
generality of
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<PAGE> 69
the foregoing, except for Permitted Ten Percent Debenture Repurchases,
Permitted MEIH Subordinated Debt Payments, and Permitted SZ Capital
Subordinated Debt Payments at no time shall Borrower make any (y) payment with
respect to any Subordinated Debt if the making of same would conflict with the
subordination provisions thereof, or (z) cash payment of principal with respect
to the NEF Debentures."
f. Section 8.11 of the Loan Agreement hereby is amended
and restated in its entirety as follows:
"8.11 If Borrower makes any payment on account of Indebtedness
that has been contractually subordinated in right of payment to the payment of
the Obligations, (a) except to the extent such payment is permitted by the terms
of the subordination provisions applicable to such Indebtedness, and (b) except
for Permitted Ten Percent Debenture Repurchases, Permitted MEIH Subordinated
Debt Payments, and Permitted SZ Capital Subordinated Debt Payments; or"
2. Condition Precedent to the Effectiveness of this Amendment.
The effectiveness of this Amendment is subject to the fulfillment, to the
satisfaction of Foothill and its counsel, of each of the following conditions:
a. Foothill shall have received a certificate of the
Secretary of Borrower attesting to the resolutions of
Borrower's Board of Directors authorizing the
execution, delivery, and performance of the Loan
Agreement as amended by this Amendment and
authorizing the specific officers of Borrower to
execute same;
b. The representations and warranties in this Amendment,
the Agreement as amended by this Amendment, and the
other Loan Documents shall be true and correct in all
respects on and as of the date hereof as though made
on such date (except to the extent that such
representations and warranties relate solely to an
earlier date);
c. After giving effect hereto, no Event of Default or
event which with the giving of notice or passage of
time would constitute an Event of Default shall have
occurred and be continuing on the date hereof, nor
shall result from the consummation of the
transactions contemplated herein;
d. No injunction, writ, restraining order, or other
order of any nature prohibiting, directly or
indirectly, the consummation of the transactions
contemplated herein shall have been issued and remain
in force by any governmental authority against
Borrower, Foothill, or any of their Affiliates;
e. No material adverse change shall have occurred in the
financial condition of Borrower or in the value of
the Collateral that has not been disclosed to
Foothill;
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<PAGE> 70
f. Foothill shall have received evidence satisfactory to
it that, on or before the Seventh Amendment Closing
Date, SZ Capital and MEIW shall have entered into
agreements evidencing the Permitted SZ Capital
Subordinated Debt to be extended to MEWI by SZ
Capital on terms and conditions satisfactory to
Foothill in its reasonable discretion;
g. Foothill shall have received each of the following
documents, in form and substance satisfactory to
Foothill and its counsel, duly executed, and each
such document shall be in full force and effect:
(1) the MEIH Subordination Agreement;
(2) the SZ Capital Subordination Agreement; and
(3) this Amendment;
h. Foothill shall have received the form of MEIH
Subordinated Promissory Note, in form and substance
satisfactory to Foothill and its counsel.
i. Foothill shall have received the form of Second
Amended and Restated MEIH Current Advances Promissory
Note, in form and substance satisfactory to Foothill
and its counsel.
j. Foothill shall have received the form of SZ Capital
Subordinated Promissory Note, in form and substance
satisfactory to Foothill and its counsel.
k. Foothill shall have completed a satisfactory review
of the loan agreement and any such other agreements
and/or documents related to the Permitted MEIH
Subordinated Debt as are requested by Foothill in its
reasonable discretion;
l. Foothill shall have completed a satisfactory review
of the loan agreement and any such other agreements
and/or documents related to the Permitted SZ Capital
Subordinated Debt as are requested by Foothill in its
reasonable discretion;
m. Foothill shall have received payment in full in cash
of a fee in the amount of $5,000 as consideration for
its entry into this Amendment;
n. All other documents and legal matters in connection
with the transactions contemplated by this Amendment
shall have been delivered, executed or recorded, as
applicable, and shall be in form and substance
satisfactory to Foothill and its counsel.
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<PAGE> 71
3. Waiver of Violation of Certain Covenants and Consent to
Certain Actions.
a. Pursuant to the request of Borrower, Foothill hereby
agrees to waive any Default or any Event of Default
existing on or prior to the date of the effectiveness
of this Amendment arising in respect of Section
2.2(c) of the Loan Agreement prior to its amendment
hereby.
b. Pursuant to the request of Borrower, Foothill hereby
agrees (i) to the incurrence by MEWI of Indebtedness
in an aggregate principal amount of up to $30,000,000
payable to SZ Capital on the terms and conditions set
forth in the SZ Capital Subordinated Promissory Note,
and (ii) that all such Indebtedness shall constitute
"Future Subordinated Indebtedness" approved by
Foothill in accordance with the Loan Agreement.
4. Representations and Warranties. Borrower hereby represents and
warrants to Foothill that (a) the execution, delivery, and performance of this
Amendment are within its corporate powers, have been duly authorized by all
necessary corporate action, and are not in contravention of any law, rule, or
regulation, or any order, judgment, decree, writ, injunction, or award of any
arbitrator, court, or governments authority, or of the terms of its charter or
bylaws, or of any contract or undertaking to which it is a party or by which any
of its properties may be bound or affected, and (b) the Loan Agreement, as
amended by this Amendment, constitutes Borrower's legal, valid, and binding
obligation, enforceable against Borrower in accordance with its terms.
5. Further Assurances. Borrower shall execute and deliver all
financing statements, agreements, documents, and instruments, in form and
substance satisfactory to Foothill, and take all actions as Foothill may
reasonably request from time to time, to perfect and maintain the perfection and
priority of Foothill's security interests in the Collateral, and to fully
consummate the transactions contemplated under the Loan Agreement and this
Amendment.
6. Effect on Loan Documents. The Loan Agreement, as amended
hereby, and the other Loan Documents shall be and remain in full force and
effect in accordance with their respective terms and each hereby is ratified and
confirmed in all respects. Except as expressly set forth herein, the execution,
delivery, and performance of this Amendment shall not operate as a waiver of or
as an amendment of any right, power, or remedy of Lender under the Loan
Agreement, as in effect prior to the date hereof.
7. Miscellaneous.
a. Upon the effectiveness of this Amendment, each reference in
the Loan Agreement to "this Agreement", "hereunder", "herein",
"hereof" or words of like import referring to the Loan
Agreement shall mean and refer to the Loan Agreement as
amended by the First Amendment, the Second Amendment, the
Third Amendment, the Fourth Amendment, the Fifth Amendment,
the Sixth Amendment, and this Amendment.
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<PAGE> 72
b. Upon the effectiveness of this Amendment, each reference in
the Loan Documents to the "Loan Agreement", "thereunder",
"therein", 'thereof" or words of like import referring to the
Loan Agreement shall mean and refer to the Loan Agreement as
amended by the First Amendment, the Second Amendment, the
Third Amendment, the Fourth Amendment, the Fifth Amendment,
the Sixth Amendment, and this Amendment.
c. This Amendment shall be governed by and construed in
accordance with the laws of the State of California.
d. This Amendment may be executed in any number of counterparts
and by different parties on separate counterparts, each of
which, when executed and delivered, shall be deemed to be an
original, and all of which, when taken together, shall
constitute but one and the same Amendment. Delivery of an
executed counterpart of this Amendment by telefacsimile shall
be equally as effective as delivery of an original executed
counterpart of this Amendment. Any party delivering an
executed counterpart of this Amendment by telefacsimile also
shall deliver an original executed counterpart of this
Amendment but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and
binding effect of this Amendment.
[The remainder of this page is intentionally left blank]
9
<PAGE> 73
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed on the date first written above.
MALIBU ENTERTAINMENT WORLDWIDE, INC., a Georgia corporation
MOUNTASIA FAMILY ENTERTAINMENT CENTERS, INC., a Texas corporation
MOUNTASIA MANAGEMENT COMPANY, a Georgia corporation
MALIBU GRAND PRIX CORPORATION, a Delaware corporation
TUCSON MGPC, INC., an Arizona corporation
FRESNO MGPC, INC., a California corporation
NORTH HOLLYWOOD CASTLE MGPC, INC., a California corporation
PUENTE HILLS MGPC, INC., a California corporation
PUENTE HILLS SHOWBOAT MGPC, INC., a California corporation
REDONDO REACH CASTLE MGPC, INC., a California corporation
REDWOOD CITY CASTLE MGPC, INC., a California corporation
REDWOOD CITY MGPC, INC., a California corporation
SAN DIEGO MGPC, INC., a California corporation
PORTLAND MGPC, INC., an Oregon corporation
AUSTIN MGPC, INC., a Texas corporation
DALLAS CASTLE MGPC, INC., a Texas corporation
SAN ANTONIO CASTLE MGPC, INC., a Texas corporation
SAN ANTONIO MGPC, INC., a Texas corporation
MOUNTASIA DEVELOPMENT COMPANY, a Georgia corporation
MALIBU GRAND PRIX DESIGN & MANUFACTURING, INC., a California corporation
MALIBU GRAND PRIX FINANCIAL SERVICES, INC., a California corporation
OFF TRACK MANAGEMENT, INC., a California corporation
MGP SPECIAL, INC., a California corporation
AMUSEMENT MANAGEMENT FLORIDA, INC., a Florida corporation
MALIBU GRAND PRIX CONSULTING, INC., a California corporation
MOUNTASIA - MEI INTERNATIONAL, INC., a Georgia corporation
MOUNTASIA - MEI LIMITED COMPANY, INC., a California corporation
MOUNTASIA - MEI CALIFORNIA, INC., a California corporation
MOUNTASIA - MEI INTERNATIONAL, INC., a Georgia corporation, in its capacity as
general partner of MOUNTASIA - MEI
CALIFORNIA LIMITED PARTNERSHIP, a California limited partnership
By: /s/ Richard N. Beckert
-------------------------------------
Richard N. Beckert
President
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/ Thomas Sigurdson
-------------------------------------
Tom Sigurdson
Vice President
10
<PAGE> 74
AMENDMENT NUMBER EIGHT TO CONSOLIDATED, AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NUMBER EIGHT TO CONSOLIDATED, AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT (this "Amendment"), is entered into as of
March 30, 1999, between FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with a place of business located at 11111 Santa Monica Boulevard,
Suite 1500, Los Angeles, California 90025-3333, MALIBU ENTERTAINMENT WORLDWIDE,
INC., a Georgia corporation ("MEWI"), with its chief executive office located
at 717 North Harwood, Suite 1650, Dallas, Texas 75201, MOUNTASIA MANAGEMENT
COMPANY, a Georgia corporation ("MMC"), with its chief executive office located
at 717 North Harwood, Suite 1650, Dallas, Texas 75201, MALIBU GRAND PRIX
CORPORATION, a Delaware corporation ("MGPC"), with its chief executive office
located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, TUCSON MGPC,
INC., an Arizona corporation ("Tucson"), with its chief executive office
located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, FRESNO MGPC,
INC., a California corporation ("Fresno"), with its chief executive office
located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, NORTH HOLLYWOOD
CASTLE MGPC, INC., a California corporation ("NHC"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, PUENTE
HILLS MGPC, INC., a California corporation ("PH"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, PUENTE
HILLS SHOWBOAT MGPC, INC., a California corporation ("PHS"), with its chief
executive office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201,
REDONDO BEACH CASTLE MGPC, INC., a California corporation ("RBC"), with its
chief executive office located at 717 North Harwood, Suite 1650, Dallas, Texas
75201, REDWOOD CITY CASTLE MGPC, INC., a California corporation ("RCC"), with
its chief executive office located at 717 North Harwood, Suite 1650, Dallas,
Texas 75201, REDWOOD CITY MGPC, INC., a California corporation ("RC"), with its
chief executive office located at 717 North Harwood, Suite 1650, Dallas, Texas
75201, SAN DIEGO MGPC, INC., a California corporation ("San Diego"), with its
chief executive office located at 717 North Harwood, Suite 1650, Dallas, Texas
75201, PORTLAND MGPC, INC., an Oregon corporation ("Portland"), with its chief
executive office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201,
AUSTIN MGPC, INC., a Texas corporation ("Austin"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, DALLAS
CASTLE MGPC, INC., a Texas corporation ("DC"), with its chief executive office
located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, SAN ANTONIO
CASTLE MGPC, INC., a Texas corporation ("SAC"), with its chief executive office
located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, SAN ANTONIO
MGPC, INC., a Texas corporation ("San Antonio"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, MOUNTASIA
DEVELOPMENT COMPANY, a Georgia corporation ("MDC"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, MALIBU
GRAND PRIX DESIGN & MANUFACTURING, INC., a California corporation ("MGPDMI"),
with its chief executive office located at 717 North Harwood, Suite 1650,
Dallas, Texas 75201, MALIBU GRAND PRIX FINANCIAL SERVICES, INC., a California
corporation ("MGPFSI"), with its chief executive office located at 717 North
Harwood, Suite 1650, Dallas, Texas 75201, OFF TRACK MANAGEMENT, INC., a
California corporation ("Off Track"), with its chief executive office located
at 717 North Harwood, Suite 1650, Dallas, Texas 75201, MGP
<PAGE> 75
SPECIAL, INC., a California corporation ("Special"), with its chief executive
office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201, AMUSEMENT
MANAGEMENT FLORIDA, INC., a Florida corporation ("Amusement"), with its chief
executive office located at 717 North Harwood, Suite 1650, Dallas, Texas 75201,
MALIBU GRAND PRIX CONSULTING, INC., a California corporation ("Consulting"),
with its chief executive office located at 717 North Harwood, Suite 1650,
Dallas, Texas 75201, MOUNTASIA - MEI INTERNATIONAL, INC., a Georgia corporation
("MMEII"), with its chief executive office located at 717 North Harwood, Suite
1650, Dallas, Texas 75201, MOUNTASIA - MEI LIMITED COMPANY, INC., a California
corporation ("MMEILC"), with its chief executive office located at 717 North
Harwood, Suite 1650, Dallas, Texas 75201, MOUNTASIA - MEI CALIFORNIA, INC., a
California corporation ("MCNC"), with its chief executive office located at 717
North Harwood, Suite 1650, Dallas, Texas 75201, MOUNTASIA - MEI CALIFORNIA
LIMITED PARTNERSHIP, a California limited partnership ("MMEICLP"), with its
chief executive office located at 717 North Harwood, Suite 1650, Dallas, Texas
75201, and MOUNTASIA FAMILY ENTERTAINMENT CENTERS, INC., a Texas corporation
("MFEC"), with its chief executive office located at 717 North Harwood, Suite
1650, Dallas, Texas 75201.
Recitals:
A. Foothill and Borrower are parties to the Consolidated, Amended, and
Restated Loan and Security Agreement, entered into as of August 22, 1996, (as
amended from time to time prior to the date hereof, the "Loan Agreement").
B. Borrower has requested Foothill to (i) amend the Loan Agreement to
the extent necessary to revise the financial covenants with respect to the
minimum Debt Service Ratio and the minimum Interest Coverage Ratio, and (ii)
waive Borrower's failure to comply with certain of the requirements of Sections
6.3, 7.19(a) and 7.19(d) of the Loan Agreement.
C. Foothill is willing to so amend the Loan Agreement in accordance
with the terms and conditions hereof, to waive any such Event of Default.
Agreement:
NOW, THEREFORE, in consideration of the mutual promises
contained herein, Foothill and Borrower hereby agree as follows:
All capitalized terms used herein and not defined herein
shall have the meanings ascribed to them in the Loan Agreement.
1. Amendments to the Loan Agreement.
a. Section 1.1 of the Loan Agreement hereby is amended by
adding each of the following definitions in alphabetical order:
"Eighth Amendment means that certain Amendment Number Eight
to Consolidated, Amended, and Restated Loan and Security Agreement, dated as of
March 30, 1999."
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<PAGE> 76
b. Section 1.1 of the Loan Agreement hereby is amended by
deleting the following definition in its entirety and substituting the
following in lieu thereof:
"Relevant Measuring Period means, with respect to March 31,
1999, the three months then ended, with respect to June 30, 1999, the six
months then ended, with respect to September 30, 1999, the nine months then
ended, and, with respect to any date thereafter, the twelve months then ended."
c. Clause (a) of Section 7.19 of the Loan Agreement hereby
is amended and restated in its entirety as follows:
"(a) Debt Service Ratio. A Debt Service Ratio for the
Relevant Measuring Period of not less than the relevant amount set forth in the
following table, measured on a fiscal quarter-end basis:
<TABLE>
<CAPTION>
Period Ending Minimum Ratio
------------- -------------
<S> <C> <C>
3/31/99 (1.50) : 1
6/30/99 0.00 : 1
9/30/99 0.25 : 1
12/31/99 0.35 : 1
3/31/2000 0.50 : 1
As of the end of each quarter thereafter 1.00 : 1 "
</TABLE>
d.
e. Clause (d) of Section 7.19 of the Loan Agreement
hereby is amended and restated in its entirety as follows:
"(d) Interest Coverage Ratio. An Interest Coverage Ratio for the
Relevant Measuring Period most recently ended of not less than the relevant
amount set forth in the following table, measured on a fiscal quarter-end
basis:
<TABLE>
<CAPTION>
Period Ending Minimum Ratio
------------- -------------
<S> <C> <C>
3/3/99 (1.50) : 1
6/30/99 0.00 : 1
9/30/99 0.25 : 1
12/31/99 0.35 : 1
3/31/2000 0.50 : 1
As of the end of each quarter thereafter 1.00 : 1 "
</TABLE>
2. Condition Precedent to the Effectiveness of this Amendment.
The effectiveness of this Amendment is subject to the fulfillment, to the
satisfaction of Foothill and its counsel, of each of the following conditions:
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<PAGE> 77
a. On or before April 2, 1999, Foothill shall have received
a certificate of the Secretary of Borrower attesting to the resolutions of
Borrower's Board of Directors authorizing the execution, delivery, and
performance of the Loan Agreement as amended by this Amendment and authorizing
the specific officers of Borrower to execute same, the failure of Borrower to
deliver such certificate shall constitute and Event of Default under the Loan
Agreement;
b. The representations and warranties in this Amendment,
the Agreement as amended by this Amendment, and the other Loan Documents shall
be true and correct in all respects on and as of the date hereof as though made
on such date (except to the extent that such representations and warranties
relate solely to an earlier date);
c. After giving effect hereto, no Event of Default or event
which with the giving of notice or passage of time would constitute an Event of
Default shall have occurred and be continuing on the date hereof, nor shall
result from the consummation of the transactions contemplated herein;
d. No injunction, writ, restraining order, or other order
of any nature prohibiting, directly or indirectly, the consummation of the
transactions contemplated herein shall have been issued and remain in force by
any governmental authority against Borrower, Foothill, or any of their
Affiliates;
e. No material adverse change shall have occurred in the
financial condition of Borrower or in the value of the Collateral that has not
been disclosed to Foothill;
f. Foothill shall have received payment in full in cash of
a fee in the amount of $25,000 as consideration for its entry into this
Amendment;
g. All other documents and legal matters in connection with
the transactions contemplated by this Amendment shall have been delivered,
executed or recorded, as applicable, and shall be in form and substance
satisfactory to Foothill and its counsel.
3. Waiver of Violation of Certain Covenants and Consent to
Certain Actions.
a. Pursuant to the request of Borrower, Foothill hereby
agrees to waive any Default or any Event of Default existing on or prior to the
date of the effectiveness of this Amendment arising in respect of (i) Section
6.3 as the result of the delivery to Foothill of annual audited financial
statements containing a going concern qualification, (ii) Section 7.19(a) of
the Loan Agreement as the result of Borrower's Debt Service Ratio of (0.95) :1
for the 9 month period ended 12/31/98 failing to meet the required minimum of
0.0 :1, and (iii) Section 7.19(d) of the Loan Agreement as the result of
Borrower's Interest Coverage Ratio of (1.09) :1 for the 9 month period ended
12/31/98 failing to meet the required minimum of 0.0 :1.
4. Representations and Warranties. Borrower hereby represents
and warrants to Foothill that (a) the execution, delivery, and performance of
this Amendment are within its corporate powers, have been duly authorized by
all necessary corporate action, and are not in contravention of any law, rule,
or regulation, or any order, judgment, decree, writ, injunction, or award of
any arbitrator, court, or governments authority, or of the terms of its charter
or bylaws,
4
<PAGE> 78
or of any contract or undertaking to which it is a party or by which any of its
properties may be bound or affected, and (b) the Loan Agreement, as amended by
this Amendment, constitutes Borrower's legal, valid, and binding obligation,
enforceable against Borrower in accordance with its terms.
5. Further Assurances. Borrower shall execute and deliver all
financing statements, agreements, documents, and instruments, in form and
substance satisfactory to Foothill, and take all actions as Foothill may
reasonably request from time to time, to perfect and maintain the perfection
and priority of Foothill's security interests in the Collateral, and to fully
consummate the transactions contemplated under the Loan Agreement and this
Amendment.
6. Effect on Loan Documents. The Loan Agreement, as amended
hereby, and the other Loan Documents shall be and remain in full force and
effect in accordance with their respective terms and each hereby is ratified
and confirmed in all respects. Except as expressly set forth herein, the
execution, delivery, and performance of this Amendment shall not operate as a
waiver of or as an amendment of any right, power, or remedy of Lender under the
Loan Agreement, as in effect prior to the date hereof.
7. Miscellaneous.
a. Upon the effectiveness of this Amendment, each reference
in the Loan Agreement to "this Agreement", "hereunder", "herein", "hereof" or
words of like import referring to the Loan Agreement shall mean and refer to
the Loan Agreement as amended by the First Amendment, the Second Amendment, the
Third Amendment, the Fourth Amendment, the Fifth Amendment, the Sixth
Amendment, Seventh Amendment and this Amendment.
b. Upon the effectiveness of this Amendment, each reference
in the Loan Documents to the "Loan Agreement", "thereunder", "therein",
'thereof" or words of like import referring to the Loan Agreement shall mean
and refer to the Loan Agreement as amended by the First Amendment, the Second
Amendment, the Third Amendment, the Fourth Amendment, the Fifth Amendment, the
Sixth Amendment, the Seventh Amendment, and this Amendment.
c. This Amendment shall be governed by and construed in
accordance with the laws of the State of California.
d. This Amendment may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Amendment.
Delivery of an executed counterpart of this Amendment by telefacsimile shall be
equally as effective as delivery of an original executed counterpart of this
Amendment. Any party delivering an executed counterpart of this Amendment by
telefacsimile also shall deliver an original executed counterpart of this
Amendment but the failure to deliver an original executed counterpart shall not
affect the validity, enforceability, and binding effect of this Amendment.
[The remainder of this page is intentionally left blank]
5
<PAGE> 79
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed on the date first written above.
MALIBU ENTERTAINMENT WORLDWIDE, INC., a Georgia corporation
MOUNTASIA FAMILY ENTERTAINMENT CENTERS, INC., a Texas corporation
MOUNTASIA MANAGEMENT COMPANY, a Georgia corporation
MALIBU GRAND PRIX CORPORATION, a Delaware corporation
TUCSON MGPC, INC., an Arizona corporation
FRESNO MGPC, INC., a California corporation
NORTH HOLLYWOOD CASTLE MGPC, INC., a California corporation
PUENTE HILLS MGPC, INC., a California corporation
PUENTE HILLS SHOWBOAT MGPC, INC., a California corporation
REDONDO REACH CASTLE MGPC, INC., a California corporation
REDWOOD CITY CASTLE MGPC, INC., a California corporation
REDWOOD CITY MGPC, INC., a California corporation
SAN DIEGO MGPC, INC., a California corporation
PORTLAND MGPC, INC., an Oregon corporation
AUSTIN MGPC, INC., a Texas corporation
DALLAS CASTLE MGPC, INC., a Texas corporation
SAN ANTONIO CASTLE MGPC, INC., a Texas corporation
SAN ANTONIO MGPC, INC., a Texas corporation
MOUNTASIA DEVELOPMENT COMPANY, a Georgia corporation
MALIBU GRAND PRIX DESIGN & MANUFACTURING, INC., a California corporation
MALIBU GRAND PRIX FINANCIAL SERVICES, INC., a California corporation
OFF TRACK MANAGEMENT, INC., a California corporation
MGP SPECIAL, INC., a California corporation
MUSEMENT MANAGEMENT FLORIDA, INC., a Florida corporation
MALIBU GRAND PRIX CONSULTING, INC., a California corporation
MOUNTASIA - MEI INTERNATIONAL, INC., a Georgia corporation
MOUNTASIA - MEI LIMITED COMPANY, INC., a California corporation
MOUNTASIA - MEI CALIFORNIA, INC., a California corporation
MOUNTASIA - MEI INTERNATIONAL, INC., a Georgia corporation, in its capacity as
general partner of MOUNTASIA - MEI CALIFORNIA LIMITED PARTNERSHIP, a California
limited partnership
By: RICHARD N. BECKERT
--------------------------------
Richard N. Beckert
President
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: KEVIN M. COYLE
--------------------------------
Kevin M. Coyle
Senior Vice President
6
<PAGE> 1
EXHIBIT 10.24
LOAN AGREEMENT
THIS LOAN AGREEMENT (as amended, restated, replaced, supplemented or
otherwise modified from time to time, this "AGREEMENT") is dated as of November
16, 1998 by and between SZ CAPITAL, L.P., a Delaware limited partnership
("LENDER"), and MALIBU ENTERTAINMENT WORLDWIDE, INC., a Georgia corporation
("BORROWER").
Certain capitalized terms used herein shall have the respective
meanings as ascribed thereto as set forth in Article I hereof.
RECITALS:
A. Borrower may, in its sole discretion, request Lender to loan funds
to Borrower from time to time and Lender may, in its sole discretion, agree to
loan such funds to Borrower.
B. In the event such funds are loaned by Lender to Borrower, the
parties desire to set forth certain terms and conditions governing such loans in
this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the covenants, agreements,
representations and warranties set forth in this Agreement, the parties hereto
hereby covenant, agree, represent and warrant as follows:
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
SECTION 1.1 DEFINITIONS. For all purposes of this Agreement, except
as otherwise expressly required or unless the context clearly indicates a
contrary intent:
"ADDITIONAL SHARES" shall have the meaning set forth in Section
8.7(b).
"ADVANCE" shall mean each advance of the Loan.
"ADVANCE REQUEST" shall have the meaning set forth in Section
3.1(a).
"AFFILIATE" shall mean, as to any Person, any other Person that,
directly or indirectly, is in control of, is controlled by or is under common
control with such Person or is a director or executive officer of such Person.
"APPLICABLE INTEREST RATE" shall mean a rate equal to ten percent
(10%) per annum, compounded annually.
"BANKRUPTCY CODE" shall mean Title 11 of the United States Code, as
amended.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
any other day on which national banks in Dallas, Texas are not open for
business.
"CERTIFICATE OF DESIGNATIONS" shall mean that certain
Certificate of Designations relating to the Series E Preferred Stock that is
attached as Exhibit "A" hereto and is made a part hereof for all purposes.
<PAGE> 2
"CLOSING DATE" shall mean the date hereof.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and
as it may be further amended from time to time, any successor statutes thereto,
and applicable U.S. Department of Treasury regulations issued pursuant thereto
in temporary or final form.
"CONVERSION DATE" shall have the meaning set forth in Section 8.2.
"CONVERSION NOTICE" shall have the meaning set forth in Section 8.2.
"CONVERSION RIGHT" shall have the meaning set forth in Section 8.1.
"DEBT" shall mean the outstanding principal amount set forth in, and
evidenced by, the Note together with all interest accrued and unpaid thereon and
all other sums due to Lender in respect of the Loan under the Note, this
Agreement, or any other Loan Documents.
"DEFAULT" shall mean the occurrence of any event which, but for the
giving of notice or the passage of time, or both, would constitute an Event of
Default.
"DEFAULT RATE" shall mean, with respect to the Loan, a rate per
annum (adjusted monthly on each Determination Date (as defined in the Note))
equal to the lesser of eighteen percent (18%) per annum and the maximum rate
permitted by applicable law.
"DISCLOSURE DOCUMENT" shall mean any publicly available filing
regarding Borrower made by Borrower under the Exchange Act, including, without
limitation, Borrower's Form 10-Q Quarterly Report filed with the SEC on November
16, 1998.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"EVENT OF DEFAULT" shall have the meaning set forth in Section
7.1.1.
"EXCHANGE ACT" shall mean the Securities and Exchange Act of 1934,
as amended.
"FINANCING PERIOD" shall have the meaning set forth in Section 2.1.
"FISCAL YEAR" shall mean each twelve month period commencing on
January 1 and ending on December 31 during the term of the Loan.
"FOOTHILL CONSENT" shall mean the written consent of Foothill
Capital Corporation to the Loan and the other transactions contemplated by this
Agreement, in form and substance acceptable to Lender in its sole and absolute
discretion.
"FOOTHILL LOAN" shall mean the indebtedness of Borrower described in
that certain Consolidated, Amended and Restated Loan and Security Agreement
dated as of August 22, 1996 by and between Borrower, various Subsidiaries of the
Borrower and Foothill Capital Corporation, as the same may be increased,
amended, restated, replaced, supplemented or otherwise modified from time to
time.
2
<PAGE> 3
"FOOTHILL SUBORDINATION AGREEMENT" shall mean that certain
Subordination Agreement of even date herewith by and among Lender, Borrower and
Foothill Capital Corporation.
"GAAP" shall mean generally accepted accounting principles in the
United States of America, consistently applied.
"GOVERNMENTAL AUTHORITY" shall mean any court, body, board, agency,
commission, office or authority of any nature whatsoever for any governmental or
regulatory unit (federal, state, county, district, municipal, city or otherwise)
whether now or hereafter in existence.
"INVESTMENT BANKER" shall have the meaning set forth in Section
5.1.11.
"JUNIOR STOCK" shall mean any class or series of preferred or other
capital stock of Borrower other than the Series E Preferred Stock.
"LIEN" shall mean any mortgage, deed of trust, lien, pledge,
hypothecation, assignment, security interest, or any other encumbrance, charge
or transfer of, on or affecting Borrower or any of its properties or assets,
including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, the filing of any financing statement, and mechanic's,
materialmen's and other similar liens and encumbrances.
"LOAN" shall mean, in the aggregate, the Advances made by Lender to
Borrower, as set forth in, and evidenced by, the Note and the other Loan
Documents.
"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the Note
and any other document executed and/or delivered by Borrower in connection with
the Loan.
"MATERIAL ADVERSE CHANGE" shall mean a material adverse change in
any of the following (i) the condition (financial or otherwise), business,
performance, operations or properties of Borrower and its Subsidiaries, taken as
a whole, (ii) the legality or validity of any Loan Documents, or (iii)
Borrower's ability to pay the Debt in accordance with the terms hereof and
otherwise substantially comply with the material terms of this Agreement.
"MATURITY DATE" shall mean the date on which the final payment of
principal of the Note becomes due and payable as therein provided, whether at
the Stated Maturity, by declaration of acceleration, or otherwise.
"MAXIMUM LOAN AMOUNT" shall have the meaning set forth in Section
2.1.
"MEI HOLDINGS LOANS" shall mean the indebtedness of Borrower
evidenced by, collectively, (i) that certain Second Amended and Restated
Subordinated Promissory Note dated as of March 27, 1998 executed by Borrower and
made payable to the order of MEI Holdings, L.P. in the original principal sum of
up to $65,000,000, and (ii) that certain Amended and Restated Promissory Note
dated as of March 27, 1998 executed by Borrower and made payable to the order of
MEI Holdings, L.P. in the original principal sum of up to $10,000,000, as each
may be increased, amended, restated, replaced, supplemented or otherwise
modified from time to time.
3
<PAGE> 4
"MEI HOLDINGS SUBORDINATION AGREEMENT" shall mean that certain
Subordination Agreement of even date herewith by and between Borrower and MEI
Holdings, L.P.
"NOTE" shall mean that certain Subordinated Convertible Promissory
Note dated as of the date hereof, made by Borrower in favor of Lender in the
original principal sum of up to $30,000,000, as the same may be increased,
amended, restated, replaced, supplemented or otherwise modified from time to
time, and all notes issued upon transfer, division or combination of, or in
substitution for, the Note
"OBLIGATIONS" shall mean any and all debt, liabilities and
obligations of Borrower to Lender in connection with the Loan, including,
without limiting the generality of the foregoing, the Debt.
"OFFICERS' CERTIFICATE" shall mean a certificate delivered to Lender
by Borrower which is signed by any authorized senior officer of the Borrower.
"OTHER PROPERTY" shall have the meaning set forth in Section 8.8.
"PERSON" shall mean any individual, corporation, partnership,
limited liability company, joint venture, estate, trust, unincorporated
association, any federal, state, county or municipal government or any bureau,
department or agency thereof and any fiduciary acting in such capacity on behalf
of any of the foregoing.
"SEC " shall mean the U.S. Securities Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SERIES E PREFERRED STOCK" shall mean the preferred stock of the
Borrower having the terms set forth in the Certificate of Designations attached
as Exhibit "A" and made a part hereof for all purposes.
"STATED MATURITY" shall mean August 31, 2001.
"STOCK EXCHANGE" shall mean the principal national securities
exchange on which the shares of common stock of Borrower 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.
"SUBSIDIARIES" shall mean any corporation, limited liability
company, partnership or other entity whose outstanding equity interests are
owned 50% or more by Borrower, by Borrower and one or more Subsidiaries or by
one or more Subsidiaries or which is otherwise controlled directly or indirectly
by Borrower to the extent necessary to require consolidation of its annual
statements with those of Borrower for financial reporting purposes in accordance
with GAAP.
SECTION 1.2 PRINCIPLES OF CONSTRUCTION. All references to sections,
schedules and exhibits are to sections, schedules and exhibits in or to this
Agreement unless otherwise specified. Unless otherwise specified, the words
"hereof," "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any
4
<PAGE> 5
particular provision of this Agreement. Unless otherwise specified, all meanings
attributed to defined terms herein shall be equally applicable to both the
singular and plural forms of the terms so defined.
II. GENERAL TERMS
SECTION 2.1 ADVANCES. From and including the Closing Date until
the date that its thirty (30) days prior to the Maturity Date (the "FINANCING
PERIOD"), subject to and upon the terms and conditions set forth herein, Lender
may, in its sole and absolute discretion, make one or more Advances to Borrower
pursuant to this Agreement; provided, however, that (1) Lender will have no
obligation to make any such Advances under any circumstances, (2) the making of
any such Advances will not obligate Lender to make any further Advances, and (3)
in no event will Lender make Advances totaling in excess of $30,000,000 (the
"MAXIMUM LOAN AMOUNT") to Borrower hereunder.
SECTION 2.2 THE NOTE. The Loan shall be evidenced by the Note of
Borrower. The Loan shall bear interest and shall be subject to repayment as
provided in the Note and in Section 2.4 hereof. The holder of the Note shall be
entitled to the benefits of this Agreement.
SECTION 2.3 USE OF PROCEEDS. Borrower shall use the proceeds of
the Loan solely to fund its working capital requirements and to repay
indebtedness of the Borrower or any Subsidiaries thereof, the proceeds of which
were used by Borrower or such Subsidiaries solely to fund the working capital
requirements of the Borrowers or such Subsidiaries (if applicable).
SECTION 2.4 LOAN REPAYMENT AND PREPAYMENT. Borrower shall repay
any outstanding principal indebtedness of the Loan in full on the Maturity Date
of the Loan, together with interest thereon at the Applicable Interest Rate up
to (but excluding) the date of repayment. Borrower may, at its option and upon
ten (10) Business Days' prior written notice from Borrower to Lender, prepay the
Debt in whole or in part without payment of any other premium or penalty.
SECTION 2.5 RECOURSE. The Obligations are full recourse
obligations of Borrower.
SECTION 2.6 DEFAULT RATE. Borrower agrees that upon the
occurrence of an Event of Default, Lender shall be entitled to receive, and
Borrower shall pay to Lender, interest on the entire unpaid principal sum of the
Loan and any other amounts due at the Default Rate. Interest at the Default
Rate, to the extent not paid, shall be added to the Debt. This Section, however,
shall not be construed as an agreement or privilege to extend the date of
payment of the Debt, nor as a waiver of any other right or remedy accruing to
Lender by reason of the occurrence of any Event of Default. Lender retains its
rights under the Loan Documents to accelerate and to continue to demand payment
of the Debt upon the occurrence of any Event of Default.
SECTION 2.7 PAYMENTS AND COMPUTATIONS.
2.7.1 MAKING OF PAYMENTS. Each payment by Borrower hereunder or
under the Note shall be made in immediately available funds by 11:00 a.m.,
Dallas, Texas time, on the date such payment is due, to Lender by deposit to a
bank account specified by Lender from time to time in writing. Whenever any
payment hereunder or under the Note shall be stated to be due on a day which is
not a Business Day, such payment shall be made on the first Business Day
thereafter.
5
<PAGE> 6
2.7.2 COMPUTATIONS. Interest payable hereunder or under the Note
shall be computed on the basis of the actual number of days elapsed based upon a
360-day year.
SECTION 2.8 RANKING AND SUBORDINATION. The Debt will rank senior
to the MEI Holdings Loans as set forth in the MEI Holdings Subordination
Agreement and the Debt will rank junior to the Foothill Loan as set forth in the
Foothill Subordination Agreement.
III. CONDITIONS PRECEDENT
SECTION 3.1 CONDITIONS PRECEDENT TO EACH ADVANCE. Without
limiting the Lender's ability to require Borrower to satisfy other conditions in
Lender's sole and absolute discretion, Lender's willingness to make each Advance
hereunder may be conditioned upon the fulfillment by Borrower or waiver by
Lender of the following conditions precedent no later than the date such Advance
is requested:
(a) Advance Request. Borrower shall have delivered to Lender a
written request for the Advance (such request, the "ADVANCE REQUEST"). The
Advance Request shall indicate the proposed amount of the Advance requested by
Borrower and the date on which Borrower requests Lender to make the Advance. In
the event Lender requires a specific written form of the Advance Request,
Borrower agrees to use such reasonable form proposed by Lender.
(b) Representations and Warranties; Compliance with Conditions.
The representations and warranties of Borrower contained in this Agreement and
the other Loan Documents shall be true and correct in all material respects on
and as of the Closing Date with the same effect as if made on and as of such
date, and no Default or Event of Default shall have occurred and be continuing;
and Borrower shall be in compliance in all material respects with all terms and
conditions set forth in this Agreement and in each other Loan Document on its
part to be observed or performed and no Material Adverse Change shall have
occurred.
(c) Agreement and Note. Lender shall have received a copy of this
Agreement and the Note, in each case duly executed and delivered on behalf of
Borrower.
(d) Related Documents. The MEI Holdings Subordination Agreement,
the Foothill Subordination Agreement, the Foothill Consent and each additional
document not specifically referenced herein, but requested by Lender and
relating to the transactions contemplated herein, shall have been duly
authorized, executed and delivered by all parties thereto and Lender shall have
received and approved originals thereof.
(e) Delivery of Organizational Documents. Borrower shall have
delivered or caused to be delivered to Lender certified copies of all such
organizational documentation related to Borrower as Lender may request in its
sole discretion, including, without limitation, such good standing certificates,
qualifications to do business in the appropriate jurisdictions, resolutions
authorizing the entering into of the Loan and incumbency certificates as may be
requested by Lender.
(f) Completion of Proceedings. All corporate consents,
resolutions and other proceedings taken or to be taken in connection with the
transactions contemplated by this Agreement and the other Loan Documents and all
documents incidental thereto shall be
6
<PAGE> 7
satisfactory in form and substance to Lender, and Lender shall have received all
such counterpart originals or certified copies of such documents as Lender may
reasonably request.
(g) Financial Statements. Lender shall have received a certified
copy of the Borrower's certified financial statements for such periods as Lender
may request.
(h) Certificates and Legal Matters. Such certificates and
documentation relating to the Advance (including, without limitation, all
corporate and other proceedings) as Lender shall reasonably require, all
documents and all legal matters in connection with the Advance shall be
reasonably satisfactory in form and substance to Lender.
(i) Advance Certificate. Lender shall have received a certificate
(the "ADVANCE CERTIFICATE") executed by an authorized officer, general partner
or managing member of the Borrower, as applicable, certifying, as of the date of
the Advance, as to (i) the matters set forth in this Section 3.1, and (ii) the
principal amount outstanding under the Notes, after taking into account the
requested Advance. In the event Lender requires a specific written form of the
Advance Certificate, Borrower agrees to use such reasonable form proposed by
Lender.
(j) Expenses. Borrower shall have paid all reasonable out of
pocket expenses of the transactions to be consummated on the date of the
Advance, including, without limitation, all reasonable attorneys' fees,
appraisal fees, accounting fees, consultant fees, and other expenses of Lender.
(k) Amendments to Loan Documents. Borrower shall execute such
amendments to the Loan Documents as reasonably requested by Lender, to ensure
that the Loan Documents secure the Loan after giving effect to the requested
Advance, and such amendments shall be in form and substance satisfactory to
Lender.
(l) No Injunction. On the date of the requested Advance, no law
or regulation shall have been adopted, no order, judgment or decree of any
Governmental Authority shall have been issued and no litigation shall be pending
or threatened which, in the good faith judgment of Lender, would enjoin,
prohibit or restrain, or impose or result in the imposition of, any material
adverse condition upon the making or repayment of the Advance or the Loan, or
the consummation of the transactions contemplated by this Agreement or the other
Loan Documents.
(m) Acceptance of Borrowings. The acceptance by Borrower of the
proceeds of the Advance shall constitute a representation and warranty by
Borrower to Lender that all of the conditions to be satisfied under this Section
3.1 in connection with the making of the Advance have been satisfied or waived
by Lender.
(n) Form of Documents and Related Matters. The certificates,
agreements, and other documents and papers referred to in this Section 3.1 shall
be delivered to Lender in form and substance reasonably satisfactory to Lender.
IV. REPRESENTATIONS AND WARRANTIES
SECTION 4.1 BORROWER REPRESENTATIONS. Borrower represents and
warrants as follows as the Closing Date, except as otherwise disclosed in
Borrower's Disclosure Documents:
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(a) Organization. Borrower has been duly organized and is validly
existing and in good standing under the laws of the State of Georgia, with
requisite corporate power and authority to own its properties and to transact
the businesses in which it is now engaged. Borrower is duly qualified to do
business and is in good standing in each jurisdiction where it is required to be
so qualified in connection with its properties, businesses and operations.
Borrower possesses all rights, licenses, permits and authorizations,
governmental or otherwise, necessary to entitle it to own its properties and to
transact the businesses in which it is now engaged.
(b) Proceedings. Borrower has taken all necessary action to
authorize the execution, delivery and performance of this Agreement and the
other Loan Documents. This Agreement and such other Loan Documents have been
duly executed and delivered by or on behalf of Borrower and constitute legal,
valid and binding obligations of Borrower enforceable against Borrower in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization and similar laws affecting rights of creditors
generally and subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law).
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the other Loan Documents by Borrower will not conflict with or
result in a breach of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge or
encumbrance (other than pursuant to the Loan Documents) upon any of the property
or assets of Borrower or any Subsidiary pursuant to the terms of any indenture,
mortgage, deed of trust, loan agreement, partnership agreement, operating
agreement or other agreement or instrument to which Borrower or any Subsidiary
is a party or by which any of Borrower's or any Subsidiary's property or assets
is subject, nor will such action result in any violation of the provisions of
any statute or any order, rule or regulation of any Governmental Authority
having jurisdiction over Borrower, any Subsidiary or any of their respective
properties or assets, and any consent, approval, authorization, order,
registration or qualification of or with any Governmental Authority required for
the execution, delivery and performance by Borrower of this Agreement or any
other Loan Documents has been obtained and is in full force and effect.
(d) Litigation. There are no actions, suits or proceedings at law
or in equity by or before any Governmental Authority or other agency now pending
or threatened against or affecting Borrower or any Subsidiary, which actions,
suits or proceedings, if determined against Borrower or any Subsidiary, might
result in a Material Adverse Change.
(e) Agreements. Neither Borrower nor any Subsidiary is a party to
any agreement or instrument or subject to any restriction which might materially
and adversely affect Borrower, any Subsidiary or Borrower's or any Subsidiary's
business, properties or assets, operations or condition (financial or
otherwise). Neither Borrower nor any Subsidiary is in default in any material
respect in the performance, observance or fulfillment of any obligations,
covenants or conditions contained in any agreement or instrument, material to
Borrower or any Subsidiary, to which Borrower or any Subsidiary is a party or by
which Borrower or any Subsidiary is bound.
(f) Full and Accurate Disclosure. No statement of fact made by
Borrower (i) in this Agreement or in any of the other Loan Documents, (ii) in
any Disclosure Document, or (iii) in any written materials relating to the
business, operations or condition (financial or otherwise) of Borrower or any
Subsidiary that have been supplied by or on behalf of Borrower or any Subsidiary
to Lender in connection with the Loan (other than financial projections in
respect of which no representation is made) contains (or, in the case of such
written material, at the time supplied contained) any
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untrue statement of a material fact or omits (or omitted, as the case may be) to
state any material fact necessary to make the statements contained herein or
therein not misleading.
(g) No Plan Assets. Borrower is not an "employee benefit plan"
(as defined in Section 3(3) of ERISA), subject to Title I of ERISA, and none of
the assets of Borrower constitutes or will constitute "plan assets" of one or
more such plans within the meaning of 29 C.F.R. Section 2510.3-101. In addition,
(i) Borrower is not a "governmental plan" within the meaning of Section 3(32) of
ERISA and (ii) transactions by or with Borrower are not subject to state
statutes regulating investments of, and fiduciary obligations with respect to,
governmental plans.
(h) Financial Information.
(i) All financial data, including, without
limitation, the statements of cash flow and income and operating
expense, that have been delivered to Lender in respect of Borrower, (A)
are true, complete and correct in all material respects, (B) accurately
present the financial condition of Borrower as of the date of such
reports, and (C) have been prepared in accordance with GAAP
consistently applied throughout the periods covered, except as
disclosed therein. Borrower does not have any material contingent
liabilities, liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable
commitments that are known to Borrower and reasonably likely to have a
materially adverse effect on Borrower. Since the date of such financial
statements, there has been no materially adverse change in the
financial condition, operations or business of Borrower from that set
forth in such financial statements.
(ii) All federal and state income tax returns have
been filed by Borrower and each Subsidiary and there are no income
taxes due and owing by Borrower or any Subsidiary.
(i) Federal Reserve Regulations. No part of the proceeds of the
Loan will be used for the purpose of purchasing or acquiring any "margin stock"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System or for any other purpose which would be inconsistent with such
Regulation U or any other Regulations of such Board of Governors, or for any
purposes prohibited by applicable laws or by the terms and conditions of this
Agreement or the other Loan Documents.
(j) Enforceability. The Loan Documents are not subject to any
right of rescission, set-off, counterclaim or defense by Borrower, including the
defense of usury, nor would the operation of any of the terms of the Loan
Documents, or the exercise of any right thereunder, render the Loan Documents
unenforceable except to the extent such unenforceability may be the result of
bankruptcy, insolvency, reorganization or similar laws affecting rights of
creditors generally or general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law), and Borrower has not
asserted any right of rescission, set-off, counterclaim or defense with respect
thereto.
(k) No Outstanding Preferred Stock. There is no issued and
outstanding preferred stock of Borrower of any series.
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SECTION 4.2 SURVIVAL OF REPRESENTATIONS. Borrower agrees that all
of the representations and warranties of Borrower set forth in Section 4.1 and
elsewhere in this Agreement and in the other Loan Documents shall survive for so
long as any Obligations or other amounts remain owing to Lender by Borrower
under this Agreement, the Note or any of the other Loan Documents and thereafter
for so long as any shares of Series E Preferred Stock remain issued and
outstanding. All representations, warranties, covenants and agreements made by
Borrower in this Agreement or in the other Loan Documents shall be deemed to
have been relied upon by Lender notwithstanding any investigation heretofore or
hereafter made by Lender or on its behalf.
V. AFFIRMATIVE COVENANTS
SECTION 5.1 BORROWER COVENANTS. From the date hereof and until
payment and performance in full of all Obligations of, and all other amounts due
and owing by, Borrower under the Loan Documents, Borrower hereby covenants and
agrees with Lender that:
5.1.1 EXISTENCE; COMPLIANCE WITH LAW. Borrower shall (i) do or
cause to be done all things necessary to preserve, renew and keep in full force
and effect its own and each of its Subsidiaries' existence and material rights,
licenses, permits and franchises, and (ii) comply with all laws applicable to it
and each of its Subsidiaries. Borrower shall at all times maintain, preserve and
protect all franchises and trade names and preserve all the remainder of its
property used or useful in, and material to, the conduct of its business, and
from time to time make, or cause to be made, all reasonably necessary repairs,
renewals, replacements, betterments and improvements thereto.
5.1.2 LITIGATION. Borrower shall give prompt written notice to
Lender of any litigation or governmental proceedings pending or threatened
against Borrower or any Subsidiary which might result in a Material Adverse
Change.
5.1.3 NOTICE OF MATERIAL ADVERSE CHANGES AND DEFAULTS. Borrower
shall promptly advise Lender in writing of any Material Adverse Change, Default
or Event of Default of which Borrower has knowledge.
5.1.4 COOPERATION IN LEGAL PROCEEDINGS. Borrower shall cooperate
fully with Lender with respect to any proceedings before any court, board or
other Governmental Authority which may in any way affect the rights of Lender
hereunder or any rights obtained by Lender under any of the other Loan Documents
and, in connection therewith, permit Lender, at its election, to participate in
any such proceedings.
5.1.5 FURTHER ASSURANCES. Borrower shall, at Borrower's sole cost
and expense:
(a) furnish to Lender each and every document, certificate,
agreement and instrument required to be furnished by Borrower pursuant to the
terms of this Agreement or the other Loan Documents or reasonably requested by
Lender in connection therewith;
(b) execute and deliver to Lender such documents, instruments,
certificates, assignments and other writings, and do such other acts necessary
or desirable, to evidence, preserve and/or protect the collateral at any time
securing or intended to secure the obligations of Borrower under the Loan
Documents, as Lender may reasonably require; and
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(c) do and execute, as appropriate, all and such further lawful
and reasonable acts, conveyances and assurances for the better and more
effective carrying out of the intents and purposes of this Agreement and the
other Loan Documents as Lender shall reasonably require from time to time.
5.1.6 FINANCIAL REPORTING.
(a) Borrower will furnish to Lender annually, within 90 days
following the end of each Fiscal Year, financial statements of Borrower for each
such fiscal year, certified by the chief financial officer of Borrower, to have
been prepared in accordance with GAAP, together with a certificate of such
officer, addressed to Lender, stating that, to such officer's knowledge, no
Event of Default is in existence. Such certified financial statements shall
include a balance sheet, profit and loss statement, and statement of cash flow.
(b) Together with the foregoing, Borrower shall also deliver to
Lender (A) Borrower's Form 10-Q Quarterly Reports, Form 10-K Annual Reports, and
Form 8-K Current Reports as filed under the Exchange Act, and any other filings
made by Borrower with the U.S. Securities and Exchange Commission, as soon as
the same are filed, (B) all other information, including financial reports,
provided by Borrower to its Lenders, and (C) any other report reasonably
requested by Lender relating to the financial condition of Borrower and its
Subsidiaries.
5.1.7 ESTOPPEL STATEMENTS. Within ten (10) days after any request
by Lender, Borrower shall furnish Lender with an Officer's Certificate setting
forth (A) the amount of the original principal amount of the Note, (B) the
unpaid principal amount of the Note, (C) the Applicable Interest Rate of the
Note, (D) the date installments of interest and principal were last paid, (E)
any offsets or defenses to the payment of the Debt, if any, and (F) assurances
that the Note, this Agreement and the other Loan Documents are valid, legal and
binding obligations of Borrower and have not been modified or, if modified,
giving particulars of such modification.
5.1.8 LOAN PROCEEDS. Borrower shall use the proceeds of the Loan
only for the purposes set forth in Section 2.3 hereof.
5.1.9 OFFICE OF BORROWER. As long as the Debt remains outstanding,
Borrower shall maintain an office or agency (which may be the principal
executive offices of Borrower) where the Note may be presented for exercise of
the Conversion Right, registration of transfer, division or combination as
provided in this Agreement.
5.1.10 AMENDMENT OF NOTE PRIOR TO CONVERSION UPON ADVICE OF
INVESTMENT BANKER. If Lender so requests at any time prior to the conversion of
the Debt into Series E Preferred Stock, Lender and the members of the Board of
Directors of Borrower not affiliated with Lender or employed by Borrower will,
within twenty (20) days after such request, select Merrill Lynch, Pierce Fenner
& Smith Incorporated or, if such firm is unwilling or unable to serve, another
nationally recognized investment banking firm (the "INVESTMENT BANKER") to
advise Lender and Borrower (in a written term sheet, not a formal opinion) as to
additional terms of the Note (not inconsistent with anything in this Agreement)
that would be required to ensure that the proceeds to Lender of an immediate
sale of the Note would be sufficient to repay the sum of (i) the
then-outstanding Debt, and (ii) all third party costs that would be expected to
be incurred by Borrower and Lender in an assumed secondary public offering by
Lender of the Note (or replacement
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promissory notes evidencing the Debt), including, without limitation any SEC or
other filing fees, printing expenses, underwriting discounts and fees and other
fees and expenses (including attorneys' and accountants' fees and expenses). In
its engagement of the Investment Banker, Borrower will obtain the Investment
Banker's agreement to render such advice as promptly as is practicable and in no
event later than thirty (30) days after the engagement commences. Within ten
(10) days after their receipt of the Investment Banker's advice, Borrower and
Lender will amend and restate the Note, or issue replacement promissory notes,
to incorporate such additional terms, which amended, restated or replacement
instruments shall thereafter be collectively deemed to constitute the "Note"
hereunder.
VI. NEGATIVE COVENANTS
SECTION 6.1 BORROWER'S NEGATIVE COVENANTS. From the date hereof
until payment and performance in full of all Obligations of, and all other
amounts due and owing by, Borrower under the Loan Documents, Borrower covenants
and agrees with Lender that it will not do, directly or indirectly, any of the
following without Lender's prior written consent:
(a) Dissolution. Borrower shall not dissolve, terminate or
liquidate.
(b) Operations of Borrower. Borrower shall not make any material
change in the scope or nature of its business objectives, purposes or
operations, or undertake or participate in activities other than its present
business and activities related or incidental thereto.
(c) Principal Place of Business. Borrower shall not change its
principal place of business set forth in Section 9.7 without first giving Lender
thirty (30) days prior written notice.
(d) Other Indebtedness. Borrower shall not create, incur or assume
any debt other than the Debt and other indebtedness not to exceed $500,000 in
the aggregate.
(e) Release of Claims. Borrower shall not cancel or otherwise
forgive or release any claim or debt owed to Borrower by any Person, except for
adequate consideration and in the ordinary course of Borrower's business.
(f) Amendments to Articles of Incorporation. Borrower shall not
amend the Articles of Incorporation of Borrower in any way, whether by amending
the terms of the Certificate of Designations or any other provision of such
Articles of Incorporation, that adversely affects any of the powers,
designations, preferences and relative, participating, optional and other
special rights of the Series E Preferred Stock, and the qualifications,
limitations or restrictions thereof, whether by direct amendment or in
connection with or pursuant to a merger, consolidation or any other transaction
involving any change in such Articles of Incorporation.
(g) Dividends. Borrower shall not declare or pay any dividends on,
or make any other distributions in respect of, any other shares of capital stock
of Borrower, including any Junior Stock.
(h) Redemptions. Borrower shall not redeem or purchase or
otherwise acquire for consideration any shares of any Junior Stock (except in
connection with the exercise of employee stock options).
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(i) Issuance of Capital Stock. Borrower shall not authorize,
designate or issue any shares of capital stock ranking prior or superior to, or
on parity with, the Series E Preferred Stock with respect to dividends,
liquidation preference or other distributions or upon liquidation, dissolution
or winding up of Borrower (except to employees of Borrower under Borrower's
stock option or long term incentive plans).
(j) Mergers. Borrower shall not effect any merger, consolidation,
combination, recapitalization, reorganization or other transaction in which
shares of capital stock of any class of Borrower are converted into or exchanged
for cash, stock or securities of Borrower or any other entity or other property.
(k) Changes to Series E Preferred Stock. Borrower shall not
subdivide or otherwise change shares of Series E Preferred Stock into a
different number of shares whether in a merger, consolidation, combinations,
recapitalization, reorganization or otherwise.
(l) Issuance of Series E Preferred Stock. Borrower shall not issue
any shares of Series E Preferred Stock other than upon conversion of the Debt
pursuant to this Agreement.
(m) Acquisition of Stock by Subsidiaries. Borrower shall not
permit any Subsidiary of Borrower to purchase or otherwise acquire for
consideration any shares of stock of Borrower unless Borrower could purchase or
otherwise acquire such shares at such time and in such manner in accordance with
the restrictions set forth in this Section 6.1.
VII. DEFAULTS
SECTION 7.1 EVENT OF DEFAULT.
7.1.1 Each of the following events shall constitute an event of
default hereunder (an "EVENT OF DEFAULT"):
(a) any principal of or interest on the Debt, or any other
Obligation, is not paid within five (5) days of the date such principal
and/or interest payment on the Debt or other Obligation is due.
(b) any representation or warranty made by Borrower herein or in
any other Loan Document, or in any report, certificate, financial
statement or other instrument, agreement or document furnished by or on
behalf of Borrower to Lender, shall have been false or misleading in
any material respect as of the date the representation or warranty was
made; provided, however, if such false or misleading representation or
warranty was not intentional or grossly negligent and is capable of
being cured within thirty (30) days, the same shall be an Event of
Default hereunder only if the same is not cured within a reasonable
time not to exceed thirty (30) days after notice from Lender.
(c) Borrower shall make an assignment for the benefit of
creditors.
(d) a receiver, liquidator or trustee shall be appointed for
Borrower, or Borrower shall be adjudicated a bankrupt or insolvent, or
any petition for bankruptcy, reorganization or arrangement pursuant to
federal bankruptcy law, or any similar federal or state law, shall be
filed by or against, consented to or acquiesced in by Borrower, or any
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proceeding for the dissolution or liquidation of Borrower shall be
instituted; provided, however, that if such appointment, adjudication,
petition or proceeding was involuntary and not consented to by
Borrower, then the same shall be an Event of Default hereunder only
if the same is not discharged, stayed or dismissed within sixty (60)
days after the date of such appointment or adjudication, the date such
petition is first filed or the date such proceeding is instituted, as
the case may be.
(e) Borrower shall attempt to assign its rights under this
Agreement or any of the other Loan Documents or any interest herein or
therein in contravention of the Loan Documents.
(f) Borrower shall breach any of its covenants contained in
Sections 5.1 and 6.1 hereof.
(g) Borrower shall continue to be in Default under any of the
other terms, covenants or conditions of this Agreement not specified in
this Section 7.1.1, for ten (10) days after notice to Borrower from
Lender, in the case of any Default which can be cured by the payment of
a sum of money, or for thirty (30) days after notice to Borrower from
Lender in the case of any other Default; provided, however, that if
such non-monetary Default is capable of being cured but cannot
reasonably be cured within such 30-day period and provided further that
Borrower shall have commenced to cure such Default within such 30- day
period and thereafter diligently and expeditiously proceeds to cure the
same, such 30- day period shall be extended for such time as is
reasonably necessary for Borrower in the exercise of due diligence to
cure such Default, such additional period not to exceed sixty (60)
days.
(h) there shall be default under any of the other Loan Documents
beyond any applicable cure periods contained in such documents, or any
other such event shall occur or condition shall exist, if the effect of
such event or condition is to accelerate the maturity of any portion of
the Debt or to permit Lender to accelerate the maturity of all or any
portion of the Debt.
(i) Borrower or any Subsidiary shall be in default with respect to
indebtedness in excess of $100,000 or any event specified in any note,
agreement, indenture or other document evidencing or relating to any
such indebtedness of such person, if the effect of such event is to
cause, or (with the giving of any notice or the lapse of time or both)
to permit the holder or holders of such indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause such indebtedness
to become due or to be prepaid in full (whether by redemption, purchase
or otherwise) prior to its stated maturity.
(j) Any final non-appealable judgment is rendered against Borrower
and/or any Subsidiary in excess of $100,000 and Borrower fails to
satisfy such judgment within the earlier of (a) ten (10) days after the
date such judgment is rendered or (b) the date the judgment creditor
commences the process to execute and recover on said judgment.
7.1.2 Upon the occurrence of an Event of Default (other than
an Event of Default described in subsections (c), (d) or (e) above) and at any
time thereafter, Lender may, in addition to any other rights or remedies
available to it pursuant to this Agreement and the other Loan
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Documents or at law or in equity, take such action, without notice or demand, as
Lender deems advisable to protect and enforce its rights against Borrower,
including, without limitation, declaring the Debt to be immediately due and
payable, and Lender may enforce or avail itself of any or all rights or remedies
provided in the Loan Documents against Borrower, including, without limitation,
all rights or remedies available at law or in equity; and upon any Event of
Default described in subsections (c), (d) or (e) above, the Debt and all other
obligations of Borrower hereunder and under the other Loan Documents shall
immediately and automatically become due and payable, without notice or demand,
and Borrower hereby expressly waives any such notice or demand, notwithstanding
anything contained herein or in any other Loan Document to the contrary.
SECTION 7.2 REMEDIES. Upon the occurrence of an Event of
Default, all or any one or more of the rights, powers, privileges and other
remedies available to Lender against Borrower under this Agreement or any of the
other Loan Documents executed and delivered by, or applicable to, Borrower or at
law or in equity may be exercised by Lender at any time and from time to time,
whether or not all or any of the Debt shall be declared due and payable, and
whether or not Lender shall have commenced any foreclosure proceeding or other
action for the enforcement of its rights and remedies under any of the Loan
Documents with respect to any collateral for the Loan. Any such actions taken by
Lender shall be cumulative and concurrent and may be pursued independently,
singly, successively, together or otherwise, at such time and in such order as
Lender may determine in its sole discretion, to the fullest extent permitted by
law, without impairing or otherwise affecting the other rights and remedies of
Lender permitted by law, equity or contract or as set forth herein or in the
other Loan Documents.
SECTION 7.3 REMEDIES CUMULATIVE. The rights, powers and
remedies of Lender under this Agreement shall be cumulative and not exclusive of
any other right, power or remedy which Lender may have against Borrower pursuant
to this Agreement or the other Loan Documents, or existing at law or in equity
or otherwise. Lender's rights, powers and remedies may be pursued singly,
concurrently or otherwise, at such time and in such order as Lender may
determine in Lender's sole discretion. No delay or omission to exercise any
remedy, right or power accruing upon an Event of Default shall impair any such
remedy, right or power or shall be construed as a waiver thereof, but any such
remedy, right or power may be exercised from time to time and as often as may be
deemed expedient. A waiver of any one or more Defaults or Events of Default with
respect to Borrower shall not be construed to be a waiver of any subsequent
Default or Event of Default by Borrower or to impair any remedy, right or power
consequent thereon. Any and all amounts collected or retained by Lender while an
Event of Default has occurred and is continuing, including, but not limited to,
interest at the Default Rate, late charges or any escrowed amount, may be
applied by Lender to payment of the Debt in any order or priority that Lender in
its sole discretion may elect.
VIII. CONVERSION OF THE DEBT.
SECTION 8.1 CONVERSION OF THE DEBT INTO SERIES E PREFERRED
STOCK. Lender shall have the right (the "CONVERSION RIGHT"), at any time on or
prior to the Maturity Date (or within five (5) business days thereafter in the
case of (i) an acceleration of the Debt, or (ii) Borrower's failure to repay the
Debt and all other Obligations in full on the Maturity Date), even if Borrower
has previously delivered a notice of prepayment under Section 2.4 hereof, at its
option, subject to the provisions of this Article VIII, to convert all or any
part of the Debt into shares of Series E Preferred Stock. The amount of Debt to
be converted must be an integral multiple of $100,000 unless the entire Debt is
being converted. The number of shares of Series E Preferred Stock to be issued
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in such conversion will equal the quotient obtained by dividing the amount of
the Debt, or such portion of the Debt to be converted, on the date of the
Conversion Notice (defined below) by $100,000. All shares of Series E Preferred
Stock issuable upon the exercise of the Conversion Right shall be validly
issued, fully paid and nonassessable and without any preemptive rights.
SECTION 8.2 MANNER OF EXERCISE. Lender may exercise the
Conversion Right on any Business Day, prior to 5:00 p.m. Dallas, Texas time, on
or before the Maturity Date (or within five (5) Business Days thereafter in the
case of (i) an acceleration of the Debt, or (ii) Borrower fails to repay the
Debt and all other Obligations in full on the Maturity Date). In order to
exercise the Conversion Right, Lender must (i) deliver to Borrower written
notice of its election to exercise the Conversion Right (the "CONVERSION
NOTICE"), and (ii) notify Borrower that it is ready, willing and able to
surrender to Borrower the Note upon receipt of the certificates and, if
applicable, the new Note described Section 8.3 below. The date of delivery of
the Conversion Notice is the "CONVERSION DATE".
SECTION 8.3 ISSUANCE OF CERTIFICATES. As soon as practicable,
and in any event within two (2) Business Days after the Conversion Date,
Borrower will file the Certificate of Designations with the Secretary of State
of Georgia (if not previously filed) and will execute, issue and deliver to
Lender, upon Lender's tender of the Note to Borrower, a certificate or
certificates representing the aggregate number of shares of Series E Preferred
Stock to be issuable upon such conversion and, if the Conversion Right was
exercised in part and either Borrower or Lender so requests, a new Note
identical as to terms and conditions to the Note on the Conversion Date except
as to reflect the new reduced principal amount thereof. The stock certificate or
certificates so delivered shall be, to the extent possible, in such
denominations as Lender shall request in the Conversion Notice and shall be
registered in the name of Lender or such other name as Lender shall request in
the Conversion Notice. The Note (or portion thereof for which the Conversion
Right was exercised) shall be deemed to have been converted, and such
certificate or certificates shall be deemed to have been issued, and Lender or
any other Person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the Conversion
Date.
SECTION 8.4 SHAREHOLDER APPROVAL. If Lender is advised by
nationally recognized or Lender's regular legal counsel that shareholder
approval of the issuance of a new Note or the issuance of the Series E Preferred
Stock upon conversion of the Note is required by law or by the rules of the
Stock Exchange, Borrower will seek such shareholder approval at the earlier of
the next annual or special meeting of the shareholders of Borrower after the
date hereof, or if no such meeting is scheduled to be held within 60 calendar
days after the date of the Conversion Notice, Borrower agrees to cause its
secretary to call such special meeting within 30 calendar days after the date of
the Conversion Notice at the place and upon the notice provided by law and in
the Bylaws of the Company 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 of Borrower within such 30 calendar day period, then Lender 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 Borrower. 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 Lender.
SECTION 8.5 CONVERSION EXPENSES AND TAXES. No fees will be
charged by Borrower to Lender with respect to any conversion hereunder. Borrower
will be responsible for all of its and Lender's fees and expenses (including the
Investment Banker's and any attorneys' fees
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and expenses) in connection with the conversion and any of the other actions
described in this Article VIII. Borrower will also be responsible for all taxes
and other governmental charges that may be imposed with respect to the issuance
or delivery of the shares, unless such tax or charge is imposed by law upon
Lender or transfer taxes are payable because the shares are to be issued in the
name of a Person other than Lender, in which case such taxes or charges shall be
paid by Lender.
SECTION 8.6 REGISTRABLE SECURITIES. The Note and the Series E
Preferred Stock will be "Registrable Securities" under the Registration Rights
Agreement of even date herewith by and between Borrower and Lender.
SECTION 8.7 REORGANIZATION, RECLASSIFICATION, MERGER,
CONSOLIDATION OR DISPOSITION OF ASSETS; ANTI-DILUTION PROTECTION.
(a) In case Borrower shall reorganize its capital, reclassify
its capital stock, consolidate or merge with or into another corporation (where
Borrower is not the surviving corporation or where there is a change in or
distribution with respect to the preferred stock of Borrower), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of capital stock or other securities or property of any nature
whatsoever (including warrants or other subscription or purchase rights) in
addition to or in lieu of common stock of the successor or acquiring corporation
("OTHER PROPERTY"), are to be received by or distributed to the holders of
capital stock of Borrower, then Lender shall have the right thereafter to
receive, upon exercise of the Conversion Right, the number of shares of
preferred stock of the successor or acquiring corporation or of Borrower, if it
is the surviving corporation, and Other Property that would have been receivable
upon or as a result of such reorganization, reclassification, merger,
consolidation or disposition of assets by a holder of the number of shares of
Series E Preferred Stock had the Note been converted into Series E Preferred
Stock immediately prior to such event, it being agreed that if such event occurs
before the Lender has exercised the Conversion Right, the Note shall be treated
as being exercisable as of the date immediately prior to such event as if such
date were the Conversion Date. In case of any such reorganization,
reclassification, merger, consolidation, or disposition of assets, the successor
or acquiring corporation (if other than Borrower) shall expressly assume the due
and punctual observance and performance of each and every covenant and condition
of the Note to be performed and observed by Borrower and all the obligations and
liabilities hereunder, and the Note shall be convertible, on the terms set forth
herein, for preferred stock of the successor or acquiring corporation having
substantially identical terms to those set forth in the Certificate of
Designations. For purposes of this Section 8.7, "preferred stock of the
successor or acquiring corporation" shall mean capital stock having terms no
less favorable to the holder thereof than the terms of the Series E Preferred
Stock. The foregoing provisions of this Section 8.7. shall similarly apply to
successive reorganizations, reclassifications, mergers, consolidations or
disposition of assets.
(b) In the event that any time and from time to time (i) all
or any part of the Debt is converted into shares of Series E Preferred Stock in
accordance with this Article VIII and (ii) any event or circumstance occurs
after the date hereof but prior to the date of any such conversion which, had it
occurred after the issuance of such shares of Series E Preferred Stock, would
have required an adjustment in the Conversion Rate Cap (as such term is defined
in the Certificate of Designations) under Section 2.5.7 of the Certificate of
Designations (or any other adjustment covered thereby), then in each such event
the Borrower shall concurrently with each such
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conversion of Debt into shares of Series E Preferred Stock take such action as
is reasonably necessary to ensure that the holder of such shares of Series E
Preferred Stock is entitled to receive upon or in connection with the conversion
of such shares of Series E Preferred Stock that additional number of shares of
the common stock of Borrower (the "ADDITIONAL SHARES") that such holder would
have been entitled to receive under the Certificate of Designations as a result
of the occurrence of such event or circumstance if such holder had acquired such
shares of Series E Preferred Stock on the date hereof. Such actions may include,
among other things, the amendment by the Borrower of the Certificate of
Designations to provide for the appropriate adjustment to the Conversion Rate
Cap (or to provide for any other appropriate adjustments) or, in the event the
Borrower does not reasonably believe that it is practicable to amend the
Certificate of Designations, then such actions may include, in lieu of such an
amendment, (i) the written agreement of the Borrower to issue to such holder
such Additional Shares upon the exercise by such holder of such shares of Series
E Preferred Stock, for a per share consideration of the Additional Shares not to
exceed the then-current par value of such Additional Shares, (ii) the
establishment by the Borrower of another series of convertible preferred stock
and the issuance by the Borrower to the holder of that number of shares of such
convertible preferred stock that would be convertible into the Additional
Shares, with such shares of convertible preferred stock having a per share
consideration not to exceed the then-current par value of such convertible
preferred stock and with such shares being convertible solely in connection with
the conversion of shares of Series E Preferred Stock, or (iii) the issuance by
the Borrower to such holder, for no cash consideration, of warrants to acquire
the Additional Shares, with such warrants having an exercise price not to exceed
the then-current par value of the Additional Shares and with such warrants being
exercisable solely in connection with the conversion of shares of Series E
Preferred Stock.
(c) Nothing in this Section 8.7 shall be deemed to permit, or
constitute Lender's consent to, any action that is otherwise prohibited by
Section 6.1 or any other provision hereof.
SECTION 8.8 NOTICES TO LENDER.
8.8.1 NOTICE OF ADJUSTMENTS. Whenever an event specified in
Section 8.7 shall occur, Borrower shall forthwith prepare a certificate to be
executed by the chief financial officer of Borrower describing, in reasonable
detail, the event requiring the giving of such notice and describing the number
and kind of any other shares of stock or Other Property for which the Note is
exercisable. Borrower shall promptly cause a signed copy of such certificate to
be delivered to Lender. Borrower shall keep at its principal office referred to
in Section 5.1.9. or the office or agency designated pursuant to Section 5.1.9.
copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by any Lender or any
prospective purchaser of a Note designated by a Lender thereof.
8.8.2 NOTICE OF CORPORATE ACTIONS. If at any time:
(a) Borrower shall take a record of the holders of its Series
E Preferred Stock for the purpose of entitling them to receive a dividend (other
than a cash dividend payable out of earnings or earned surplus legally available
for the payment of dividends under the laws of the jurisdiction of incorporation
of Borrower) or other distribution, or any right to subscribe for or purchase
any evidences of its indebtedness, any shares of stock of any class or any other
securities or property, or to receive any other right, or
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(b) there shall be any capital reorganization of Borrower, any
reclassification or recapitalization of the capital stock of Borrower or any
consolidation or merger of Borrower with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of
Borrower to, another corporation, or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of Borrower;
then, in any one or more of such cases, Borrower shall give to Lender at least
30 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Such notice in accordance with the foregoing clause also shall specify (i)
the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Series E
Preferred Stock shall be entitled to any such dividend, distribution or right,
and the amount and character thereof, and (ii) the date on which any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up is to take place and the
time, if any such time is to be fixed, as of which the holders of Series E
Preferred Stock shall be entitled to exchange their shares of Series E Preferred
Stock for securities or other property deliverable upon such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up. Each such written notice shall be
sufficiently given if addressed to Lender at the last address of Lender
appearing on the books of Borrower and delivered in accordance with Section 9.7.
SECTION 8.9 NO IMPAIRMENT. Borrower shall not by any action,
including, without limitation, amending its certificate of incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, seek to
avoid the observance or performance of any of the terms of this Agreement, and
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such actions as may be necessary or appropriate to protect
the rights of Lender against impairment. Without limiting the generality of the
foregoing, Borrower will (a) not take any of the actions specified in Section
2.5.2 of the Certificate of Designation attached hereto as Exhibit "A", (b) take
all such action as may be necessary or appropriate in order that Borrower may
validly and legally issue fully paid and nonassessable shares of Series E
Preferred Stock upon exercise of the Conversion Right and fully paid and
nonassessable shares of common stock upon the conversion of the shares of Series
E Preferred Stock, and (c) use its best efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable Borrower to perform its
obligations under the Note.
SECTION 8.10 RESERVATION AND AUTHORIZATION OF SERIES E
PREFERRED STOCK AND COMMON STOCK. Borrower shall at all times reserve and keep
available for issue upon the exercise of the Conversion Right such number of its
authorized but unissued shares of Series E Preferred Stock as will be sufficient
to permit the exercise in full of the Conversion Right and shall at all times
reserve and keep available for issue upon the conversion of Series E Preferred
Stock such number of its authorized but unissued shares of common stock as would
be sufficient to permit the conversion in full of the Series E Preferred Stock
(assuming conversion in full of the Debt into Series E Preferred Stock).
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SECTION 8.11 TAKING OF RECORD; STOCK AND NOTE TRANSFER BOOKS.
In the case of all dividends or other distributions by Borrower to the holders
of its Series E Preferred Stock with respect to which any provision hereof
refers to the taking of a record of such holders, Borrower will not at any time,
except upon dissolution, liquidation or winding up of Borrower, close its stock
transfer books or Note transfer books so as to result in preventing or delaying
the exercise of any Conversion Right or the transfer of any Note.
SECTION 8.12 LIMITATION OF LIABILITY. No provision hereof, in
the absence of affirmative action by Lender to purchase shares of Series E
Preferred Stock, and no enumeration herein of the rights or privileges of
Borrower hereof, shall give rise to any liability of Lender for the purchase
price of any Series E Preferred Stock or as a stockholder of Borrower, whether
such liability is asserted by Borrower or by creditors of Borrower.
IX. MISCELLANEOUS
SECTION 9.1 TRANSFER, DIVISION AND COMBINATION.
9.1.1 TRANSFER. If the Lender should decide to dispose of the
Note (in whole or in part), the Lender understands and agrees that it may do so
only (i) pursuant to an effective registration statement under the Securities
Act, (ii) to the Borrower or (iii) pursuant to an available exemption or
exclusion from the registration requirements of the Securities Act. In
connection with any transfer of the Note other than pursuant (i) to an effective
registration statement, (ii) to the Borrower, (iii) to an affiliate of the
Lender which is an "accredited investor" within the meaning of Rule 501(a) under
the Securities Act, provided that any such transferee shall agree to be bound by
the terms of this Agreement, or (iv) in reliance on Rule 144 under the
Securities Act, the Borrower may require that the transferor provide to the
Borrower an opinion, in form and substance reasonably satisfactory to the
Borrower, of counsel experienced in the area of United States Securities laws
selected by the transferor to the effect that such transfer does not require
registration of the Note under the Securities Act. Transfer of the Note and all
rights thereunder, in whole or in part, shall be registered on the books of
Borrower to be maintained for such purpose, upon surrender of the Note at the
principal office of Borrower referred to in Section 5.1.10 or the office or
agency designated by Borrower pursuant to Section 5.1.10, together with a
written assignment of the Note duly executed by Lender and funds sufficient to
pay any transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, Borrower shall execute and deliver a
new Note or Notes in the name of the assignee or assignees and in the
denominations specified in such instrument or assignment, and shall issue to the
assignor a new Note evidencing the portion of the Note not so assigned, and the
surrendered Note shall promptly be canceled. A Conversion Right in a new Note
that has been assigned may be exercised by a new Lender for the purchase of
shares of Series E Preferred Stock without having the new Note issued. The Note
(and any new Notes issued from time to time under this Section 9.1.1) will
contain a legend governing restrictions upon the disposition of such Note
imposed by applicable securities laws. Such legend will be removed by the
Borrower by delivery of substitute Notes without such legend in the event that
such legend is no longer required for purposes of applicable securities laws
upon receipt by the Borrower of an opinion of counsel to the effect that such
legend is no longer so required.
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9.1.2 DIVISION AND COMBINATION. The Note may be divided or
combined with other Notes upon presentation thereof at the aforesaid office or
agency of Borrower, together with a written notice specifying the names and
denominations in which new News are to be issued, signed by Lender. Subject to
compliance with Section 9.1.1. as to any transfer which may be involved in such
division or combination, Borrower shall execute and deliver a new Note or Notes
in exchange for the Note or Notes to be divided or combined in accordance with
such notice.
9.1.3 EXPENSES. Borrower shall prepare, issue and deliver at
its own expense (other than transfer taxes required to be paid by Lender under
Section 9.1.1., if any) the new Note or Notes under this Section 9.1.
9.1.4 MAINTENANCE OF BOOKS. Borrower agrees to maintain, at
its aforesaid office or agency, books for the registration and the registration
or transfer of the Notes.
SECTION 9.2 SURVIVAL. This Agreement and all covenants,
agreements, representations and warranties made herein and in the certificates
delivered pursuant hereto shall survive the making by Lender of the Loan and the
execution and delivery to Lender of the Note, and shall continue in full force
and effect so long as all or any of the Debt is outstanding and unpaid or any
other Obligations or other amounts remain owing under the Loan Documents unless
a longer period is expressly set forth herein or in the other Loan Documents.
Whenever in this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the successors and assigns of such party.
All covenants, promises and agreements in this Agreement, by or on behalf of
Borrower, shall inure to the benefit of the legal representatives, successors
and assigns of Lender.
SECTION 9.3 LENDER'S DISCRETION. Whenever pursuant to this
Agreement, Lender exercises any right given to it to approve or disapprove any
document or action, or any arrangement or term is to be satisfactory to Lender,
the decision of Lender to approve or disapprove such document or action or to
decide whether arrangements or terms are satisfactory or not satisfactory shall
(except as is otherwise specifically herein provided) be in the sole discretion
of Lender and shall be final and conclusive.
SECTION 9.4 GOVERNING LAW.
9.4.1 THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF TEXAS, AND
MADE BY LENDER AND ACCEPTED BY BORROWER IN THE STATE OF TEXAS, AND THE PROCEEDS
OF THE NOTE DELIVERED PURSUANT HERETO WERE OR ARE TO BE DISBURSED FROM THE STATE
OF TEXAS, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE
PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS,
INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS
ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF TEXAS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH
STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT LAWS) AND ANY APPLICABLE LAW OF
THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE
CREATION, PERFECTION AND ENFORCEMENT OF ANY LIENS
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AND SECURITY INTERESTS CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN
DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE
IN WHICH THE APPLICABLE PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE
FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF TEXAS
SHALL GOVERN THE CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS
AND ALL OF THE OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO THE FULLEST
EXTENT PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES
ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS
AGREEMENT AND THE NOTE, AND THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
9.4.2 ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR
BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY AT LENDER'S OPTION BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF DALLAS, COUNTY OF
DALLAS, TEXAS, AND BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER
HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR
PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY
SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. BORROWER DOES HEREBY AGREE THAT
SERVICE OF PROCESS UPON AN OFFICER OF BORROWER AT BORROWER'S ADDRESS SET FORTH
IN SECTION 9.7 HEREOF AND WRITTEN NOTICE OF SUCH SERVICE MAILED OR DELIVERED TO
BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT
EFFECTIVE SERVICE OF PROCESS UPON BORROWER, IN ANY SUCH SUIT, ACTION OR
PROCEEDING IN THE STATE OF TEXAS. BORROWER (I) SHALL GIVE PROMPT NOTICE TO
LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY
TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN
OFFICE IN DALLAS, TEXAS (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED
AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY
DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN
DALLAS, TEXAS OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
SECTION 9.5 MODIFICATION; WAIVER IN WRITING. No modification,
amendment, extension, discharge, termination or waiver of any provision of this
Agreement, or of the Note, or of any other Loan Document, nor consent to any
departure by Borrower therefrom, shall in any event be effective unless the same
shall be in a writing signed by the party against whom enforcement is sought,
and then such waiver or consent shall be effective only in the specific
instance, and for the purpose, for which given. Except as otherwise expressly
provided herein, no notice to, or demand on Borrower, shall entitle Borrower to
any other or future notice or demand in the same, similar or other
circumstances.
SECTION 9.6 DELAY NOT A WAIVER. Neither any failure nor any
delay on the part of Lender in insisting upon strict performance of any term,
condition, covenant or agreement, or exercising any right, power, remedy or
privilege hereunder, or under the Note or under any other Loan Document, or any
other instrument given as security therefor, shall operate as or constitute
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a waiver thereof, nor shall a single or partial exercise thereof preclude any
other future exercise, or the exercise of any other right, power, remedy or
privilege. In particular, and not by way of limitation, by accepting payment
after the due date of any amount payable under this Agreement, the Note or any
other Loan Document, Lender shall not be deemed to have waived any right either
to require prompt payment when due of all other amounts due under this
Agreement, the Note or the other Loan Documents, or to declare a default for
failure to effect prompt payment of any such other amount.
SECTION 9.7 NOTICES. All notices, consents, approvals and
requests required or permitted hereunder or under any other Loan Document shall
be given in writing (including by facsimile) and shall be effective for all
purposes if hand delivered or sent by (a) certified or registered United States
mail, postage prepaid, or (b) expedited prepaid delivery service, either
commercial or United States Postal Service, with receipt of delivery, or (c)
facsimile (with acknowledged transmission), addressed as follows:
If to Borrower: Malibu Entertainment Worldwide, Inc.
717 North Harwood, Suite 1650,
Dallas, Texas 75201
Attn: Chief Financial Officer
Facsimile: (214) 210-8702
If to Lender: SZ Capital, L.P.
Texas Commerce Tower,
2200 Ross Ave., Suite 4200-W,
Dallas, Texas 75201
Attn: Secretary/Treasurer
Facsimile: (214) 220-4948
or at such other address and person as shall be designated from time to time by
any party hereto, as the case may be, in a written notice to the other parties
hereto in the manner provided for in this Section. A notice shall be deemed to
have been given: in the case of hand delivery, at the time of delivery; in the
case of registered or certified mail, when delivered or the first attempted
delivery on a Business Day; in the case of expedited prepaid delivery, upon the
first attempted delivery on a Business Day; or in the case of facsimile, upon
acknowledged transmission (if a copy thereof is also sent by another method
authorized hereunder) on a Business Day.
SECTION 9.8 TRIAL BY JURY. BORROWER HEREBY AGREES NOT TO ELECT
A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO
TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER
ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER, AND IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY
JURY WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS
PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.
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SECTION 9.9 HEADINGS. The Article and/or Section headings in
this Agreement are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose.
SECTION 9.10 SEVERABILITY. Wherever possible, each provision
of this Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
SECTION 9.11 PREFERENCES. Lender shall have the continuing and
exclusive right to apply or reverse and reapply any and all payments by Borrower
to any portion of the obligations of Borrower hereunder. To the extent Borrower
makes a payment or payments to Lender, which payment or proceeds or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law or equitable cause,
then, to the extent of such payment or proceeds received, the obligations
hereunder or part thereof intended to be satisfied shall be revived and continue
in full force and effect, as if such payment or proceeds had not been received
by Lender.
SECTION 9.12 WAIVER OF NOTICE. Borrower shall not be entitled
to any notices of any nature whatsoever from Lender except with respect to
matters for which this Agreement or the other Loan Documents specifically and
expressly provide for the giving of notice by Lender to Borrower and except with
respect to matters for which Borrower is not, pursuant to applicable law,
permitted to waive the giving of notice. To the fullest extent permitted by
applicable law, Borrower hereby expressly waives the right to receive any notice
from Lender with respect to any matter for which this Agreement or the other
Loan Documents do not specifically and expressly provide for the giving of
notice by Lender to Borrower.
SECTION 9.13 REMEDIES OF BORROWER. In the event that a claim
or adjudication is made that Lender or its agents have acted unreasonably or
unreasonably delayed acting in any case where, by law or under this Agreement or
the other Loan Documents, Lender or such agent, as the case may be, has an
obligation to act reasonably or promptly, Borrower agrees that neither Lender
nor its agents shall be liable for any monetary damages, and Borrower's sole
remedies shall be limited to commencing an action seeking injunctive relief or
declaratory judgment. The parties hereto agree that any action or proceeding to
determine whether Lender has acted reasonably shall be determined by an action
seeking declaratory judgment.
SECTION 9.14 EXPENSES. Borrower covenants and agrees to pay,
or, if Borrower fails to pay, to reimburse, Lender upon receipt of written
notice from Lender for all reasonable costs and expenses (including reasonable
attorneys' fees and disbursements) incurred by Lender in connection with (i) the
preparation, negotiation, execution and delivery of this Agreement and the other
Loan Documents and the consummation of the transactions contemplated hereby and
thereby and all the costs of furnishing all opinions by counsel for Borrower
(including, without limitation, any opinions requested by Lender as to any legal
matters arising under this Agreement or the other Loan Documents); (ii)
Borrower's ongoing performance of and compliance with Borrower's respective
agreements and covenants contained in this Agreement and the other Loan
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Documents on its part to be performed or complied with after the Closing Date,
including, without limitation, performance of its Obligations upon receipt of a
Conversion Notice from Lender and confirming compliance with environmental and
insurance requirements; (iii) Lender's ongoing performance and compliance with
all agreements and conditions contained in this Agreement and the other Loan
Documents on its part to be performed or complied with after the Closing Date;
(iv) the negotiation, preparation, execution, delivery and administration of any
consents, amendments, waivers or other modifications to this Agreement and the
other Loan Documents and any other documents or matters requested by Lender; (v)
the filing and recording of the Loan Documents, and reasonable fees and expenses
of counsel for providing to Lender all required legal opinions, and other
similar expenses incurred in creating and perfecting the Liens in favor of
Lender pursuant to this Agreement and the other Loan Documents; (vi) enforcing
or preserving any rights, in response to third party claims or the prosecuting
or defending of any action or proceeding or other litigation, in each case
against, under or affecting Borrower, this Agreement, the other Loan Documents
or any other security given for the Loan; and (vii) enforcing any obligations of
or collecting any payments due from Borrower under this Agreement, the other
Loan Documents or in connection with any refinancing or restructuring of the
credit arrangements provided under this Agreement in the nature of a "work-out"
or of any insolvency or bankruptcy proceedings; provided, however, that Borrower
shall not be liable for the payment of any such costs and expenses to the extent
the same arise by reason of the gross negligence, illegal acts, fraud or willful
misconduct of Lender.
SECTION 9.15 EXHIBITS AND SCHEDULES INCORPORATED. Any exhibits
and schedules annexed hereto are hereby incorporated herein as a part of this
Agreement with the same effect as if set forth in the body hereof.
SECTION 9.16 OFFSETS, COUNTERCLAIMS AND DEFENSES. Any assignee
of Lender's interest in and to this Agreement, the Note and the other Loan
Documents shall take the same free and clear of all offsets, counterclaims or
defenses which are unrelated to such documents which Borrower may otherwise have
against any assignor of such documents, and no such unrelated counterclaim or
defense shall be interposed or asserted by Borrower in any action or proceeding
brought by any such assignee upon such documents and any such right to interpose
or assert any such unrelated offset, counterclaim or defense in any such action
or proceeding is hereby expressly waived by Borrower.
SECTION 9.17 NO JOINT VENTURE OR PARTNERSHIP; NO THIRD PARTY
BENEFICIARIES.
9.17.1 Borrower and Lender intend that the relationships
created hereunder and under the other Loan Documents be solely that of borrower
and lender. Nothing herein or therein is intended to create a joint venture,
partnership, tenancy-in-common or joint tenancy relationship between Borrower
and Lender nor to grant Lender any interest in any collateral other than that of
secured party or Lender.
9.17.2 This Agreement and the other Loan Documents (unless
otherwise expressly provided therein) are solely for the benefit of Lender and
Borrower and nothing contained in this Agreement or the other Loan Documents
shall be deemed to confer upon anyone other than Lender and Borrower any right
to insist upon or to enforce the performance or observance of any of the
obligations contained herein or therein. All conditions to the willingness of
Lender to make
25
<PAGE> 26
the Loan hereunder are imposed solely and exclusively for the benefit of Lender
and no other Person shall have standing to require satisfaction of such
conditions in accordance with their terms or be entitled to assume that Lender
will refuse to make the Loan in the absence of strict compliance with any or all
thereof and no other Person shall under any circumstances be deemed to be a
beneficiary of such conditions, any or all of which may be freely waived in
whole or in part by Lender if, in Lender's sole discretion, Lender deems it
advisable or desirable to do so.
SECTION 9.18 WAIVER OF COUNTERCLAIM. Borrower hereby waives
the right to assert a counterclaim, other than a compulsory counterclaim, in any
action or proceeding brought against it by Lender or its agents.
SECTION 9.19 CONFLICT; CONSTRUCTION OF DOCUMENTS; RELIANCE. In
the event of any conflict between the provisions of this Agreement and any of
the other Loan Documents, the provisions of this Agreement shall control. The
parties hereto acknowledge that they were represented by competent counsel in
connection with the negotiation, drafting and execution of the Loan Documents
and that such Loan Documents shall not be subject to the principle of construing
their meaning against the party which drafted same. Borrower acknowledges that,
with respect to the Loan, Borrower shall rely solely on its own judgment and
advisors in entering into the Loan without relying in any manner on any
statements, representations or recommendations of Lender or any parent,
subsidiary or Affiliate of Lender. Lender shall not be subject to any limitation
whatsoever in the exercise of any rights or remedies available to it under any
of the Loan Documents or any other agreements or instruments which govern the
Loan by virtue of the ownership by it or any parent, subsidiary or Affiliate of
Lender of any equity interest any of them may acquire in Borrower, and Borrower
hereby irrevocably waives the right to raise any defense or take any action on
the basis of the foregoing with respect to Lender's exercise of any such rights
or remedies. Borrower acknowledges that Lender may engage in the business of
real estate, entertainment and amusement financings and other transactions and
investments which may be viewed as adverse to or competitive with the business
of Borrower or its Affiliates.
SECTION 9.20 BROKERS AND FINANCIAL ADVISORS. Borrower hereby
represents that it has dealt with no financial advisors, brokers, underwriters,
placement agents, agents or finders in connection with the transactions
contemplated by this Agreement. Borrower hereby agrees to indemnify and hold
Lender harmless from and against any and all claims, liabilities, costs and
expenses of any kind in any way relating to or arising from a claim by any
Person that such Person acted on behalf of Borrower in connection with the
transactions contemplated herein. The provisions of this Section 9.20 shall
survive the expiration and termination of this Agreement and the payment of the
Debt.
SECTION 9.21 LOSS OR MUTILATION. Upon receipt by Borrower from
Lender of evidence reasonably satisfactory to it of the ownership of and the
loss, theft, destruction or mutilation of the Note and indemnity reasonably
satisfactory to it, and in case of mutilation upon surrender and cancellation
hereof, Borrower will execute and deliver in lieu hereof a new Note of like
tenor to Lender; provided, in the case of mutilation, no indemnity shall be
required if the Note in identifiable form is surrendered to Borrower for
cancellation.
SECTION 9.22 PRIOR AGREEMENTS. THE LOAN DOCUMENTS EMBODY THE
FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND
26
<PAGE> 27
ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER
WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OR PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS
AMONG THE PARTIES THERETO.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
27
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized representatives, all as of the day and
year first above written.
SZ CAPITAL, L.P.,
a Delaware limited partnership
By: SZ GENPAR, L.P.
its general partner
By: HH GenPar Partners, its general partner
By: Hampstead Associates, Inc.,
a managing general partner
By: /s/ KURT C. READ
---------------------------------
Name: Kurt C. Read
-------------------------------
Title: Vice President
------------------------------
MALIBU ENTERTAINMENT WORLDWIDE, INC.
a Georgia corporation
By: /s/ Richard N. Beckert
--------------------------------------------------
Richard N. Beckert
Chief Executive Officer
<PAGE> 29
EXHIBIT "A"
CERTIFICATE OF DESIGNATIONS OF SERIES E 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 "Company"), hereby certifies as follows:
1. The name of the corporation is Malibu Entertainment Worldwide, Inc.
2. No shares of the Company's Series E Preferred Stock, as designated
by the Articles of Amendment of the Company's Articles of Incorporation filed on
March 29, 1996 with respect to the designation of the terms of Series E
Preferred Stock of the Company, have been issued by the Company.
3. In accordance with the authority of the Company's Board of Directors
(the "Board") pursuant to Section 14-2-602 of the Code and the Articles of
Incorporation of the Company (the "Charter"), the Board hereby amends the number
of shares and the powers, designations, preferences and relative, participating,
optional and other special rights and the qualifications, limitations or
restrictions of the unissued series of Preferred Stock, no par value, previously
designated by the Board as Series E Preferred Stock of the Company in their
entirety, in addition to those set forth in the Charter, by deleting Section 2.5
in its entirety and by substituting in lieu thereof the following:
2.5 Series E Preferred Stock. Five thousand shares of
Preferred Stock, no par value, of the Company are designated as "Series
E Preferred Stock" having the voting powers, preferences and relative
participating, optional and other special rights, and the
qualifications, limitations or restrictions thereof, are as set forth
below (the "Series E Preferred").
2.5.1 Dividends and Distributions. (a) The holders of
shares of Series E Preferred, in preference to the holders of Common
Stock (the "Common Stock") and of any other class or series of
preferred or other capital stock of the Company ("Junior Stock"), will
be entitled to receive dividends at an annual rate of $9,000 per share,
payable quarterly in arrears on the 15th day of each of January, April,
July and October of each year (except that if any such date is a
Saturday, Sunday or legal holiday, then such dividend will be
<PAGE> 30
payable on the next day that is not a legal holiday) (the "Dividend
Payment Date"), commencing with the date of the first issuance of any
shares of the Series E Preferred (the "Initial Issuance Date"), prior
and in preference to any declaration or payment of any dividend on
Junior Stock (other than a dividend or distribution solely in shares of
Common Stock and then only with Class E approval prior thereto as
provided in Section 2.5.2(b)(ii)). Such dividends will be cumulative
and accrue with respect to each share of Series E Preferred from date
of issuance of such share of Series E Preferred (the "Dividend
Commencement Date"), whether or not declared by the Board and whether
or not there are funds of the Company legally available for payment of
such dividends. No accrued or accumulated dividends on the Series E
Preferred will bear interest. Except as set forth in Sections
2.5.1(b)(i), 2.5.6, 2.5.7 and 2.5.8 hereof, the Company will have no
obligation to pay such dividends unless so declared by the Board and
unless funds are legally available therefor.
(b) Any dividends accruing prior to January 1, 2004
may at the election of the Board in its sole discretion be paid (i) by
the issuance as of the Dividend Payment Date of additional shares of
fully paid, nonassessable Series E Preferred having an aggregate
liquidation preference equal to the amount of such accrued dividends or
(ii) in cash. In the event that dividends are declared and paid by the
issuance of additional shares of Series E Preferred as provided in the
previous sentence, such dividends will be deemed paid in full and will
not accumulate. The Company will deliver certificates representing
shares of Series E Preferred issued pursuant to Section 2.5.1(a)(i)
promptly after the Dividend Payment Date.
(c) From and after January 1, 2004, dividends accrued
and payable pursuant to Section 2.5.1(a) will be payable in cash only
and will be cumulative from and after such date.
(d) Each dividend will be payable to holders of
record as they appear on the stock books of the Company on the last day
of each fiscal quarter of the Company.
2.5.2 Voting Rights. Holders of Series E Preferred
will have no voting rights and their consent will not be required for
taking any corporate action except (a) as otherwise required by law or
provided elsewhere herein and (b) that, if any share of Series E
Preferred is then outstanding, the affirmative vote or consent of the
holders of a majority of the then-outstanding shares of Series E
Preferred, voting together as a single class (a "Class E Approval"),
will be required in order for the Company to:
(i) Amend the Charter in any way, whether by amending
the terms of this Section 2.5 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 E Preferred,
and the qualifications, limitations or restrictions thereof,
whether by direct amendment or in connection with or pursuant
to a merger, consolidation or any other transaction involving
any change in the Charter;
<PAGE> 31
(ii) Declare or pay any dividends on, or make any
other distributions in respect of, any other shares of capital
stock of the Company, including any Junior Stock;
(iii) Redeem or purchase or otherwise acquire for
consideration any shares of any Junior Stock (except in
connection with the exercise of employee stock options);
(iv) Issue any shares of capital stock ranking prior
or superior to, or on parity with, the Series E Preferred with
respect to dividends or other distributions or upon
liquidation, dissolution or winding up of the Company (except
to employees of the Company under the Company's stock option
or long term incentive plans);
(v) Effect any merger, consolidation, combination,
recapitalization, reorganization or other transaction in which
shares of capital stock of any class of the Company are
converted into or exchanged for cash, stock or securities of
the Company or any other entity or other property (whether or
not any provision of Section 2.5.7 is applicable to such
transaction) or any transaction referred to in Section
2.5.7(f);
(vi) Subdivide or otherwise change shares of Series E
Preferred into a different number of shares whether in a
merger, consolidation, combinations, recapitalization,
reorganization or otherwise (whether or not any provision of
Section 2.5.7 is applicable to such transaction); or
(vii) Issue any shares of Series E Preferred other
than pursuant to the Loan Agreement, dated November 16, 1998,
between the Company and SZ Capital, L.P.
The Company will not permit any subsidiary of the Company to purchase
or otherwise acquire for consideration any shares of stock of the
Company unless the Company could purchase or otherwise acquire such
shares at such time and in such manner in accordance with the foregoing
restrictions.
2.5.3 Voting Rights in Certain Circumstances.
(a) If, for any reason,
(i) at any time after January 1, 2014, the sum of (A)
the total accrued and unpaid dividends on the Series E
Preferred plus (B) $100,000 multiplied by the number of
then-outstanding shares of Series E Preferred, exceeds $5
million;
(ii) at any time after January 1, 2004, the Board
does not declare or the Company does not pay all dividends
accruing on or after January 1, 2004 in full in cash; or
(iii) at any time after the Initial Issuance Date
when the sum of (A) the total accrued and unpaid dividends on
the Series E Preferred plus (B) $100,000
<PAGE> 32
multiplied by the number of then-outstanding shares of Series
E Preferred, exceeds $5 million, there shall have occurred or
be continuing a Material Default;
then, the holders of Series E 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 a majority of the then-outstanding Series E Preferred), by
a Class E Approval, to elect the smallest number (but not less than
two) of members of the Board necessary to constitute a majority of the
full Board (the "Board Representation Requirement"). The Company will
notify all holders of Series E Preferred as promptly as possible after
the occurrence of a Triggering Event of such occurrence and the
material facts relating thereto.
(b) For purposes of Section 2.5.3, a "Material
Default" means any of the following: (i) the Company or any of its
subsidiaries defaults in any payment of principal of or interest on any
Indebtedness (whether or not the giving of notice, the passage of time
or any other event is required thereunder or has occurred), or the
Company or any of its subsidiaries fails to perform or observe any
other agreement, term or condition contained in any agreement under
which any such Indebtedness is created (or if any other event
thereunder or under any such agreement shall occur and be continuing)
and the effect of such failure or other event is to cause, or to permit
the holder or holders of such Indebtedness (or a trustee on behalf of
such holder or holders) to cause, such Indebtedness to become due prior
to any stated maturity of such Indebtedness or to be repurchased by the
Company or any of its subsidiaries (whether of not the giving of
notice, the passage of time or any other event is required thereunder
or has not occurred) provided that the aggregate amount of all
Indebtedness as to which such a payment default occurs and is
continuing, or such failure or other event causing or permitting
acceleration or repurchase shall occur and be continuing, exceeds $5
million (which Material Default will be deemed to be continuing
regardless of whether the holder or holders of such Indebtedness (or a
trustee on behalf of such holder or holders) has given the Company a
waiver of such Material Default); (ii) the Company has publicly
disclosed, including in any filing with the Securities and Exchange
Commission, that it will be unable to pay when due any Indebtedness in
excess of $5 million in the aggregate and, prior to the exercise of the
voting rights provided for in this Section 2.5.3, such Indebtedness is
not paid or restructured or such statement is not substantially
withdrawn; or (iii) a receiver, fiscal agent or similar officer has
been appointed for the Company or any of its subsidiaries, in a
proceeding under the Bankruptcy Act or in any other proceeding under
state or federal law in which a court or governmental agency has
assumed jurisdiction over substantially all of the assets or business
of the Company or any of its subsidiaries, such jurisdiction has been
assumed by leaving the existing directors and officers in possession
but subject to the supervision and orders of a court or governmental
body or an order confirming a plan of reorganization, arrangement or
liquidation has been entered by a court or governmental authority
having supervision or jurisdiction over substantially all of the assets
or business of the Company or any of its subsidiaries. For purposes of
Sections 2.5.3(b) and 2.5.8, "Indebtedness" means any liability or
obligation of the Company (whether primary or secondary as a guarantor
or other surety other than arising out of the endorsement of checks for
collection in the ordinary course of business) for borrowed money, for
the deferred purchase price of any asset (other than inventory in the
ordinary course of business), under a capitalized
<PAGE> 33
lease or ground lease and any other liability or obligation which would
be required by generally accepted accounting principles to be shown as
indebtedness on a balance sheet of the Company, whether or not
evidenced by a note, bond or similar instrument and "subsidiary" means
any entity the financial results of which are consolidated with the
Company's financial results under generally accepted accounting
principles and specifically includes Malibu Centers, Inc. and any
special purpose, bankruptcy-remote entity owned by the Company.
(c) Whenever the right to elect directors of the
Company has accrued to the holders of Series E Preferred, the Company
may, and upon the written request of the holders of record of at least
20% of the then-outstanding shares of Series E 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 E
Preferred designees 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 E Preferred
pursuant to this Section 2.5.3, the Secretary of the Company may, and,
upon the written request of the holders of record of at least 20% of
the then-outstanding shares of the Series E Preferred, addressed to the
Secretary at the principal office of the Company, will, call a special
meeting of the holders of Series E Preferred for the election of the
directors to be elected by them 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 Company 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 E 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 Company. If any such special meeting has
been called by the Secretary of the Company or by the holders of the
Series E Preferred as above provided, and if the holders of at least a
majority of the Series E Preferred then outstanding 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 Series E Preferred present or so represented
at such meeting, the then-authorized number of directors of the Company
will be increased by twofold plus one and, at such meeting, the holders
of the Series E Preferred will be entitled to elect the additional
directors so provided for, 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 at least a
majority of such Series E 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 E Preferred. The failure to exercise,
or any delay in exercising any rights under this Section 2.5.3 as to a
particular Triggering Event will not diminish or otherwise affect the
rights hereunder.
(d) Each holder of a share of the Series E Preferred
will be entitled to receive the same prior notice of any shareholders'
meeting as provided to the holders of
<PAGE> 34
Common Stock in accordance with the Bylaws of the Company, 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.
(e) Shares of Series E Preferred owned by the Company
or any subsidiary of the Company will not be counted as outstanding for
any purpose hereof.
2.5.4 Reacquired Shares. If permitted by law, any
shares of Series E Preferred that are issued and thereafter cease to be
issued and outstanding for any reason, whether because they are
converted into Junior Stock as provided herein or are purchased or
otherwise acquired by the Company in any manner whatsoever, will be
restored to the status of authorized but unissued shares of preferred
stock of the Company, including shares of Series E Preferred, and may
be reissued as part of a new series of preferred stock of the Company
subject to the conditions and restrictions on issuance set forth herein
or in any other certificate of designations creating a series of
preferred or any similar stock of the Company.
2.5.5 Liquidation, Dissolution or Winding Up. Upon
any liquidation, dissolution or winding up of the Company, no
distribution will be made to the holders of shares of Junior Stock
unless, prior thereto, the holders of shares of Series E Preferred
shall have received $100,000 per share plus accrued and unpaid
dividends. Neither a consolidation or merger of the Company with
another corporation, nor a sale or transfer of all or part of the
Company's assets for cash, securities or other property will be
considered a liquidation, dissolution or winding up of the Company.
2.5.6 Redemption. (a) Redemption Price. Shares of
Series E Preferred (i) will not be redeemable prior to January 1, 2002
and (ii) will be redeemable (to the extent not previously redeemed or
converted and as to which no Conversion Notice has been delivered to
the Company on or before the date fixed for redemption) at any time
(A) after January 1, 2002 and prior to or on January
1, 2003, at a price per share of $104,000 plus accrued and
unpaid dividends through the date such redemption price is
paid ("Accrued Dividends");
(B) after January 1, 2003 and prior to or on January
1, 2004, at a price per share of $103,000 plus Accrued
Dividends;
(C) after January 1, 2004 and prior to or on January
1, 2005, at a price per share of $102,000 plus Accrued
Dividends;
(D) after January 1, 2005 and prior to or on January
1, 2006, at a price per share of $101,000 plus Accrued
Dividends; and
(E) after January 1, 2006, at a price per share of
$100,000 plus Accrued Dividends.
<PAGE> 35
(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 E Preferred, written notice ("Redemption Notice")
will be given by the Company by first class mail, postage prepaid, to
each holder of record of Series E 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 Company, 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 E Preferred except as
to the holder or holders to whom the Company 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 E Preferred are to be redeemed and the total
number of shares of Series E 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
Company; and
(v) that dividends on the shares of Series E
Preferred to be redeemed will cease to accumulate on the
Redemption Date unless the Company defaults on the redemption
price.
Upon surrender of the certificate(s) representing shares of Series E
Preferred that are the subject of redemption pursuant to Section
2.5.6(a), duly endorsed (or otherwise in proper form for transfer, as
determined by the Company), 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.
(c) On and after the Redemption Date, unless the
Company defaults in the payment in full of the applicable redemption
price, dividends on the Series E 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 2.5.6(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 E 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 E Preferred to be redeemed will cease
to
<PAGE> 36
accumulate and the holders thereof will cease to be shareholders of the
Company and be entitled only to receive the redemption price.
(d) If the funds of the Company legally available for
redemption of shares of Series E Preferred on the date scheduled for a
redemption are insufficient to redeem the total number of shares of
Series E Preferred to be redeemed on such date, those funds that are
legally available will be used to redeem the maximum possible number of
such shares ratably among the holders of such shares to be redeemed
based on their holdings of Series A Preferred. The shares of Series A
Preferred not redeemed will remain outstanding and entitled to all the
rights and preferences provided herein. At any time thereafter when
additional funds of the Company are legally available for the
redemption of shares of Series A Preferred, such funds will immediately
be used to redeem the balance of the shares that the Company has become
obligated to redeem on any scheduled redemption date that it has not
redeemed.
2.5.7 Conversion. (a) Conversion Rate. At any time on
or after January 1, 2000, each share of the Series E 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 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 Company; "Conversion Rate" means the number of shares
of Common Stock into which each share of Series E 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 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 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 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 admitted to trading on any Stock Exchange, any day other than
a Saturday, Sunday or a
<PAGE> 37
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 E Preferred and,
if any shares of Series E 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 E 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 Company at the Company's principal place of business of its desire
to exercise its rights to convert, specifying the number of shares of
Series E 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 Company 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 holder, the fees and expenses
of which will be paid by the Company. 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 Company agree. The
Company will, promptly upon receipt of all certificates representing
Series E 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 Company 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 Company of an opinion of 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 Company 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 Company 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 E
Preferred pursuant to Section 2.5.7(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
<PAGE> 38
of Common Stock, without a proportionate and corresponding dividend or
other distribution to holders of Series E Preferred calculated as if
all of the Series E 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 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 2.5.7(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 2.5.7(e). The adjustments provided for in this
Section 2.5.7(e) will be made successively whenever any such dividend
or distribution is made.
<PAGE> 39
(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 2.5.7) or a merger or consolidation of the
Company with or into another corporation, or the sale of all or
substantially all of the Company'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 E Preferred will thereafter be entitled to receive upon
conversion of the Series E Preferred the number of shares of stock,
securities or assets of the Company, or of the successor corporation
resulting from such merger or consolidation or sale, to which a holder
of the Common Stock deliverable upon conversion of Series E Preferred
would have been entitled on such capital reorganization, merger,
consolidation or sale (regardless of whether the Series E Preferred is
then-convertible and assuming a Conversion Price of $2.50 if such
conversion is so deemed to occur prior to January 1, 2004). In any such
case, appropriate adjustment will be made in the application of the
provisions of this Section 2.5.7 with respect to the rights of the
holders of the Series E Preferred after the reorganization, merger,
consolidation or sale to the end that the provisions of this Section
2.5.7 (including adjustment of the Conversion Price then in effect and
the number of shares purchasable upon conversion of the Series E
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 Company shall offer to any of the holders of Common Stock any
right, option or warrant to acquire additional shares of capital stock
of the Company, then each holder of a share of then-outstanding Series
E Preferred will be entitled to receive rights, options or warrants to
acquire such number of additional shares of capital stock of the
Company as such holder would have been entitled to receive had such
holders of Series E 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 or, if prior to January 1, 2000, at
a Conversion Rate using a deemed Conversion Price of $2.50.
(h) No Adjustment. 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 0.001%. Any adjustment of less
than 0.001% 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 0.001% 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 2.5.7, the Company at its expense will
promptly compute such adjustment or readjustment in accordance with the
terms hereof and cause independent public accountants selected by the
Company to verify such computation and prepare and furnish to each
holder of Series E Preferred a certificate setting forth such
adjustment or readjustment and showing in detail the facts
<PAGE> 40
upon which such adjustment or readjustment is based. The Company will,
upon the written request at any time of any holder of Series E
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 E
Preferred.
(j) Reservation of Stock Issuable Upon Conversion.
The Company 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 E 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 E 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 E Preferred,
the Company 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.
2.5.8 Repurchase Upon Change in Control. (a) In the
event of a Change in Control or if the Company enters into a definitive
agreement providing for a Change in Control, the Company 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 E
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
Company will provide written notice to holders of Series E Preferred at
such holder's address as it appears on the stock books of the Company.
The Company will extend such offer for a period of 20 business days
after commencing such offer and will purchase any shares tendered to
the Company pursuant to such offer at the end of such 20 business day
period. Dividends will cease to accrue with respect to shares of Series
E Preferred tendered and all rights of holders of such tendered shares
will terminate, except for the right to receive payment therefor, on
the date such shares are purchased and paid for by the Company.
(b) A "Change in Control" will be deemed to occur
upon (i) the occurrence of an event which would constitute under the
applicable loan documentation a "change in control" or similar event
requiring prepayment of $5 million or more of Indebtedness of the
Company or any of its subsidiaries (regardless of whether the lender or
holder of any such Indebtedness will have waived its right to require
such prepayment), or (ii) any "person" or "group" (within the meaning
of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), other than a MEI Affiliate becoming the
beneficial owner (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 50% or more of the combined voting power of the
Company's then-outstanding voting securities entitled to vote generally
in the election of directors ("Voting Stock"), whether directly by a
stock purchase or indirectly through a merger, consolidation,
recapitalization or similar transaction; provided, however, that no
event described in clause (ii) above will constitute a "Change of
Control" (A) until such time as MEI Affiliates have sold for cash or
cash equivalents at least 50% of the Voting Stock (or, if applicable,
the securities into which
<PAGE> 41
Voting Stock is converted in any merger, consolidation,
recapitalization or similar transaction) owned by them as of the
Initial Issuance Date and MEI Affiliates are no longer entitled to
elect a majority of the members of the Board or the Board of Directors
of any successor entity in any such merger, consolidation,
recapitalization or similar transaction or (B) the transaction that
would otherwise constitute a "Change of Control" has received Class E
Approval prior to the consummation of such transaction. As used herein,
"MEI Affiliate" means, collectively, MEI Holdings, L.P., SZ Capital,
L.P. 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.
2.5.9 Fractional Shares. Series E 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 and to have the benefit of all other
rights of holders of Series E Preferred.
2.5.10 Rank. The Series E Preferred will rank senior
as to all capital stock of the Company, including all Junior Stock, in
each case as to the payment of dividends or other distributions or upon
liquidation, dissolution or winding up.
2.5.11 Notice to Holders. Any notice given by the
Company to holders of record of Series E Preferred will be effective if
addressed to such holders at their last addresses as shown on the stock
books of the Company 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 E Preferred receives such notice.
2.5.12 Amendment of Terms of Series E Preferred. Upon
request of the holders of a majority of the then-outstanding shares of
Series E Preferred, the Company will amend the terms of the Series E
Preferred as set forth herein, or issue a new series of preferred stock
in exchange for such Series E Preferred, in order to make the terms of
the Series E Preferred, in the opinion (which need not be written) of a
nationally recognized financial advisor selected by the holders of a
majority of the then-outstanding shares of Series E Preferred,
consistent with terms applicable generally to preferred stock being
issued in the public securities markets by companies with comparable
credit characteristics to the Company, provided, however, that no
amendment or other change will be made under this Section 2.5.12 to the
dividend rate, Conversion Rate or Conversion Price applicable to the
Series E Preferred.
2.5.13 Certain Limitations. Notwithstanding any other
provision in the Charter or applicable law to the contrary, (a) the
vote of any holder of Series E 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 E Preferred will have only the
rights set forth herein and will have no fiduciary or similar rights,
and (c) no holder of Series E 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 E
Preferred or any other class or series of capital stock of the Company,
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
<PAGE> 42
given or withheld in the sole discretion of such holder regardless of
the effect thereof on any other person or entity.
2.5.14 Contractual Rights of Holders. The various
provisions set forth herein for the benefit of the holders of the
Series E Preferred will be deemed contract rights enforceable by them,
including without limitation, by one or more actions for specific
performance.
IN WITNESS WHEREOF, this amendment to the Certificate of
Designations is executed on behalf of the Company as of this __th day of
____________, ___.
----------------------------------------
Title:
<PAGE> 43
EXHIBIT "B"
FORM OF CONVERSION NOTICE
The undersigned is the holder of the "Note" as described in that
certain Loan Agreement dated as of November 16, 1998 (as amended, restated,
replaced, supplemented or otherwise modified from time to time, the"LOAN
AGREEMENT") by and between SZ CAPITAL, L.P., a Delaware limited partnership, as
lender, and MALIBU ENTERTAINMENT WORLDWIDE, INC., a Georgia corporation, as
borrower. Capitalized terms not otherwise defined herein have the meaning given
to them by the Loan Agreement.
This is a Conversion Notice. The undersigned hereby irrevocably elects
to convert the amount of the Debt described below into _______ shares of Series
E Preferred Stock of Malibu Entertainment Worldwide, Inc., a Georgia corporation
(the "COMPANY") according to the conditions hereof, as of the date written
below.
Conversion calculations:
-----------------------------------------------
Date to Effect Conversion ("Conversion Date")
-----------------------------------------------
Balance of Outstanding Debt
-----------------------------------------------
Amount of Debt to be Converted
-----------------------------------------------
Number of Shares of Series E Preferred Stock to
be Issued (Amount of Debt to be Converted/
100,000 rounded up to nearest whole share)
-----------------------------------------------
Amount of New Note to be Issued (if applicable)
EXECUTED this ___ day of ______, _____.
----------------------------------------------,
a
----------------------------------------------
By:
--------------------------------------------
Name:
Title:
Address:
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES
Amusement Management Florida, Inc., a Florida corporation
Austin MGPC, Inc., a Texas corporation
Dallas Castle MGPC, Inc., a Texas corporation
Fresno MGPC, Inc., a California corporation
Malibu Grand Prix Consulting, Inc., a California corporation
Malibu Grand Prix Corporation, a Delaware corporation
Malibu Grand Prix Design & Manufacturing, Inc., a California corporation
Malibu Grand Prix Financial Services, Inc., a California corporation
Malibu Management Company, a Georgia corporation
MGP Special, Inc., a California corporation
Mountasia Development Company, a Georgia corporation
Mountasia Family Entertainment Centers, Inc., a Texas corporation
Mountasia Properties, Inc., a Delaware corporation
Mountasia - MEI International, Inc., a Georgia corporation
Mountasia - MEI Limited Company, Inc., a California corporation
Mountasia - MEI California, Inc., a California corporation
Mountasia - MEI International, Inc., a Georgia corporation
North Hollywood Castle MGPC, Inc., a California corporation
Off Track Management, Inc., a California corporation
Portland MGPC, Inc., an Oregon corporation
Puente Hills MGPC, Inc., a California corporation
Puente Hills Showboat MGPC, Inc., a California corporation
Redondo Beach Castle MGPC, Inc., a California corporation
Redwood City Castle MGPC, Inc., a California corporation
Redwood City MGPC, Inc., a California corporation
San Antonio Castle MGPC, Inc., a Texas corporation
San Antonio MGPC, Inc., a Texas corporation
San Diego MGPC, Inc., a California corporation
Tucson MGPC, Inc., an Arizona corporation
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints R.
Scott Wheeler, his or her true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him or her and in his or her name,
place and stead, in any and all capacities, to sign any or all amendments to
this report, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their, his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ Richard N. Beckert
- -------------------------------------
Richard N. Beckert March 30, 1999
/s/ Robert A. Whitman
- -------------------------------------
Robert A. Whitman March 30, 1999
/s/ Richard M. FitzPatrick
- -------------------------------------
Richard M. FitzPatrick March 30, 1999
/s/ Daniel A. Decker
- -------------------------------------
Daniel A. Decker March 30, 1999
/s/ L. Scott Demerau
- -------------------------------------
L. Scott Demerau March 30, 1999
/s/ Julia E. Demerau
- -------------------------------------
Julia E. Demerau March 30, 1999
/s/ James T. Hands
- -------------------------------------
James T. Hands March 30, 1999
/s/ William M. Kearns, Jr.
- -------------------------------------
William M. Kearns, Jr. March 30, 1999
/s/ Steven D. Scheetz
- -------------------------------------
Steven D. Scheetz March 30, 1999
/s/ Bert W. Wasserman
- -------------------------------------
Bert W. Wasserman March 29, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 237,336
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 1,153,923
<CURRENT-ASSETS> 5,419,331
<PP&E> 108,843,304<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 117,430,990
<CURRENT-LIABILITIES> 44,650,027
<BONDS> 83,716,818
0
0
<COMMON> 136,386,360
<OTHER-SE> (149,108,026)
<TOTAL-LIABILITY-AND-EQUITY> 117,430,990
<SALES> 45,456,339
<TOTAL-REVENUES> 45,456,339
<CGS> 0
<TOTAL-COSTS> 64,014,171
<OTHER-EXPENSES> (767,063)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (14,838,193)
<INCOME-PRETAX> (34,163,088)
<INCOME-TAX> 0
<INCOME-CONTINUING> (34,386,247)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (34,386,247)
<EPS-PRIMARY> (.71)
<EPS-DILUTED> (.71)
<FN>
<F1>Property, plant and equipment represents net amounts
</FN>
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