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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, 1999
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MALIBU ENTERTAINMENT WORLDWIDE, INC.
717 NORTH HARWOOD, SUITE 1650
DALLAS, TEXAS 75201
(214) 210-8701
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<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 24, 2000, there were 57,142,547 shares of the Company's common
stock outstanding. The aggregate market value of the 18.8 million common shares
held by nonaffiliates of the Company was approximately $8.2 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 2000 annual meeting of
shareholders, which will be filed prior to April 29, 2000, 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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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 Company's ability to obtain additional capital
resources and/or working capital, the Company's operations and results of
operations of the Company and the success of the Company's business plan,
including competitive factors and pricing pressures and ability to complete
asset sales; 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(R) 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 "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 in 1998 and is anticipating the sale of 5 parks in
2000 that the Company determined did not meet the long-term objectives of the
Company. As of March 25, 2000, the Company operated or had ownership interests
in 20 FECs and 3 SpeedZones.
PROPERTIES
At March 25, 2000, the Company owned and operated three SpeedZones and 18
FECs located in eight states. The land for nine FECs and one SpeedZone is owned
and the land for nine FECs and two SpeedZones is leased. Lease payments in 1999
under these land leases (which expire on various dates from 2000 to 2022)
totaled $4.4 million. The Company has minority ownership interests in two FECs
that are owned by limited partnerships. The SpeedZones and 18 Company owned FECs
are located in California (3), Florida (3), Georgia (3), Nevada (1), Ohio (2),
Oregon (1), South Carolina (1), and Texas (7), generally in large metropolitan
areas and the two Partnership FECs are located in Texas and Colorado.
As of March 25, 2000, the Company and its subsidiaries employed
approximately 1025 persons, none of whom was represented by a union.
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LIQUIDITY AND CAPITAL RESOURCES; SIGNIFICANT RECENT DEVELOPMENTS
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 historically funded its operations and capital
expenditures principally through external financing, including financing from
its largest shareholder and cash flow from operations. The Company presently
expects that it will not have sufficient cash resources to fund its operations
after the end of December 2000 unless it is able to generate cash through asset
sales or other transactions. Furthermore, the Company will not have sufficient
cash resources to fund its debt obligations through June 2000 without selling
assets, obtaining other financing or in modifying the terms of its existing
indebtedness. Therefore, the Company is seeking to sell certain non-core assets.
If the Company is unsuccessful in selling these non-core assets, in obtaining
other financing, modifying the terms of its existing indebtedness or, if the
proceeds of such sales are significantly less than their recorded value, the
Company will be required to take extraordinary steps to preserve cash and
satisfy its obligations or to restructure its obligations, including seeking to
curtail normal operations at various facilities, liquidating assets or otherwise
significantly altering its operations. There can be no assurance that the
Company will be able to take such actions or, if so, as to the timing, terms or
effects thereof.
In December 1999, the Company renegotiated the terms of its line of credit
and term revolver which had a total balance of $19.2 million at December 31,
1999. Under the new agreement, the Company's primary lender agreed to advance a
total of an additional $4.8 million to the Company, $2.4 million of which was
advanced as of December 31, 1999. In addition, the Company is required to
maintain certain earnings thresholds as well as other loan covenants.
Furthermore, the Company is required to pay down the primary lender's note
balance to $10 million by June 30, 2000. Under certain conditions, including
that the Company has contracted to sell certain assets on terms acceptable to
the lender, the pay down may be extended to August 31, 2000.
In December 1999, in connection with the negotiated agreement with the
Company's primary lender, the Company adopted a plan to sell certain non-core
assets. The Company expects to use the proceeds to pay down the line of credit
and term loan revolver. As such, the Company transferred six properties to
assets held for sale which the Company expects to sell in fiscal year 2000. The
book value of the assets held for sale at December 31, 1999 is $14.8 million.
The Company intends to operate these properties while actively pursuing
alternatives for their sale. The six properties moved to assets held for sale
had revenues of $6.9 million, $7.9 million and $7.0 million and earnings before
interest, taxes, depreciation and amortization of $0.6 million, $0.2 million and
$(0.5) million for the years ended December 31, 1999, 1998 and 1997,
respectively.
On February 17, 2000, the Company sold its McAllen, Texas location for a
profit participation based on future income earned at the location for the next
5 years. Substantially all of the assets were transferred to the new owner. In
March 2000, the Company entered into an agreement to sell four properties that
it determined to be non-core assets. The net proceeds of the sale, which, if
completed, would be used to pay down the lender's note. The sale agreement is
subject to customary closing conditions, such as the buyer's satisfaction with
its due diligence review. There can be no assurance that the sale transaction
will close or as to the timing of such transaction.
At December 31, 1999, the Company had $19.8 million of current assets
(including $1.9 million of unrestricted cash) and $19.1 million of current
liabilities (including $9.7 million of current debt); or working capital of $0.7
million (compared to negative working capital of $39.2 million at December 31,
1998, which amount included $0.2 million of unrestricted cash). As of December
31, 1999, the Company's total shareholder's equity was $24.0 million, compared
to a negative $12.7 million at December 31, 1998.
The Company's principal uses of cash during the year were to fund
operations ($4.5 million) and capital investment ($6.0 million). The Company
financed its operations during 1999 through a combination of $0.2 million of
unrestricted cash on hand as of the beginning of the year, debt financings
provided by an entity related to the Company's largest shareholder and outside
financing ($10.9 million in the aggregate) and the sale of a property held for
sale for proceeds of $0.7 million.
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On July 20, 1999 the Company completed its previously announced
recapitalization and the land sale and leaseback transaction (together, the
"Recapitalization") relating to its Willowbrook, Texas and Puente Hills,
California entertainment parks (the "Sale and Leaseback").
The principal components of the Recapitalization were as follows
- Repayment of $11.4 million to one of the Company's principal lenders.
$9.1 million of the $11.4 million came from the proceeds of the Sale and
Leaseback with the balance being provided by an entity related to the
Company's largest shareholder.
- This lender, which held $21.4 million of secured debt of a subsidiary of
the Company and $21.0 million of other indebtedness advanced through the
Company's largest shareholder as an accommodation to the Company, also
exchanged the remaining $33.0 million of debt (including $2.0 million of
accrued interest) for non-convertible preferred stock of the Company. The
lender also received 6,000,000 of the Company's common shares. If the
Company has not redeemed the non-convertible preferred stock by December
31, 2000, the lender will be entitled to an additional 2,000,000 of the
Company's common shares plus 4,000,000 of common shares from the
Company's largest shareholder.
- The elimination of $500,000 per month principal amortization payment
under the Company's debt to its next largest lender that would have been
payable had the Recapitalization not been completed.
- Conversion of $50.0 million of debt (including $8.0 million of accrued
interest) to the Company's largest shareholder into preferred stock of
the Company that is convertible into Company common stock at any time at
$2.50 per common share. In addition, $12.0 million of debt (including
$400,000 of accrued interest) to an entity related to the Company's
largest shareholder was converted into preferred stock of the Company
which is convertible into Company common stock at any time after
September 30, 2000 at a per common share price of the lower of $2.50 or
120% of market at the time of conversion. This convertible preferred
stock has the right to vote with the Company common stock on a "as
converted" basis.
In addition, an entity related to the Company's largest shareholder
purchased, $2.8 million of additional shares of preferred stock of the Company.
That entity and the Company's largest shareholder have the right, but not the
obligation, to purchase up to $4.5 million worth of additional shares of
preferred stock of the Company.
The Company's total indebtedness was reduced by $106.4 million (including
accrued interest) in the Recapitalization.
During the fourth quarter of 1999, the Company renegotiated the terms of
its Top Eliminator contract. Under the amended contract, the Company made a
payment of $1,100,000 and issued stock worth $1,500,000 to pay for completed
work in process. No future lane purchases are required.
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 is also 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
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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
None.
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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 American Stock Exchange
("AMEX") under the symbol "MBE". The following table indicates for each calendar
quarter in 1999 and 1998 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>
1999
Fourth Quarter............................................ $1.00 $0.17
Third Quarter............................................. $1.44 $0.50
Second Quarter............................................ $1.56 $1.25
First Quarter............................................. $1.94 $1.00
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
</TABLE>
As of March 24, 2000, there were approximately 174 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.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA (AMOUNTS IN THOUSANDS, EXCEPT PER
SHARE DATA)
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<CAPTION>
YEARS ENDED THREE MONTHS
--------------------------------------------------------- ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1999 1998 1997 1996 1995(1) 1995
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<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues............. $ 42,286 $ 45,456 $ 44,607 $ 37,430 $6,754 $46,207
Operating expenses(2).......... 93,786 64,014 95,089 77,239 10,417 47,765
Operating loss................. (51,500) (18,558) (50,482) (39,809) (3,663) (1,558)
Interest expense............... 7,226 14,838 6,185 6,579 2,754 4,108
Loss before other income
(expenses)................... (58,726) (33,396) (56,667) (46,388) (6,417) (5,666)
Other (expenses) income........ (84) (767) (2,597) 1,648 (680) 1,514
(Provision) benefit for income
taxes........................ -0- -0- -0- (2,184) 2,692 1,310
Net loss....................... (58,810) (34,386) (59,303) (47,633) (4,494) (3,201)
Basic and diluted loss per
share of common stock........ $ (1.26) $ (0.71) $ (1.41) $ (2.91) $(0.77) $ (0.53)
Weighted average shares of
common stock outstanding..... 49,357 48,457 41,960 17,407 8,375 7,720
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1999 1998 1997 1996 1995
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<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........................... $ 762 $(39,231) $ (1,824) $ 16,210 $ (8,253)
Total assets.............................. 61,001 117,431 135,350 122,097 101,139
Long-term obligations, excluding current
Portion................................. 12,617 83,717 95,733 25,538 15,545
Convertible subordinated debentures....... -0- -0- -0- 16,521 14,150
Total liabilities......................... 36,957 130,153 114,614 57,088 51,702
Total shareholders' equity................ $24,044 $(12,722) $ 20,736 $ 64,231 $ 48,059
</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 limited partnerships
of $44.5 million and $0 million, respectively, for the year ended December
31, 1999; $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.
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
For discussion of the Company's liquidity and capital resources and
significant recent developments, see "Liquidity and Capital Resources;
Significant Recent Developments" under Items 1 and 2 of this Report.
Noncomparability
In January 1999, the Company sold one property held for sale for proceeds
of $0.7 million and recorded a gain of $0.2 million. As of December 31, 1999,
the Company is holding seven properties for sale that have an aggregate book
value of $14.8 million. Six of these properties were transferred to assets held
for sale in 1999.
In 1999, the Company completed a recapitalization and land sale and
leaseback transaction relating to its Willowbrook, Texas and Puente Hills,
California parks. The Company's total indebtedness was reduced by $106.4
million. See "Significant Recent Developments" under Items 1 and 2 of this
Report. In addition, in 1999, the Company recorded a $44.5 million charge for
impairment of assets. 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 limited
partnerships 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.
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, 1999 COMPARED TO FISCAL YEAR DECEMBER 1998
Net Loss
The Company had a net loss to common shareholders of $62.2 million ($1.26
per common share) in 1999 as compared to a net loss of $34.4 million ($0.71 per
common share) in the comparable period in the prior year. All per share amounts
in the foregoing are calculated on a diluted basis. The net loss for 1999
included a $44.5 million charge under Statement of Financial Accounting
Standards No. 121 ("SFAS121") for impairment of assets and adjustments in
carrying values. The writedown consists of $14.5 million on assets that the
Company intends to sell in 2000, and $30.0 million on assets the Company intends
to continue to operate. Included in the writedown was $33.1 million on the three
SpeedZone locations due to revaluation of the estimated future cash flows which
was below the recorded net book value.
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Operating Revenues
Entertainment revenue decreased by $2.7 million (or 6%) in 1999 from $44.3
million to $41.6 million. The decrease in revenue is primarily due to the
decrease in entertainment revenue from the FECs that were closed in 1998 ($1.7
million) and less advertising/marketing expenditures in 1999 which resulted in a
general decrease in customer traffic.
Operating Expenses
Total 1999 operating expenses were $93.8 million, an increase of $29.8
million or 47% over 1998. The increase in operating expenses is primarily due to
an increase in the loss due to impairment of assets which is offset by decreases
in entertainment expenses, general and administration, and depreciation and
amortization. This is described in detail below.
Entertainment expenses decreased by $7.6 million (or 18%) from $43.2
million to $35.6 million. This was due to better aligning payroll with revenue
and staff reductions ($4.3 million), reductions in other operating costs and
decreases in expenses from the FECs that were closed in 1998 ($1.4 million). The
principal categories of entertainment expenses were cost of goods sold ($5.5
million in 1999 compared to $5.6 million in 1998), payroll ($14.0 million in
1999 compared to $18.3 million in 1998), repairs and maintenance ($3.0 million
in 1999 compared to $3.4 million in 1998), facilities operating and utilities
expense ($4.2 million in 1999 compared to $5.3 million in 1998), advertising
($2.5 million in 1999 compared to $3.2 million in 1998), corporate expenses
($2.5 in 1999 compared to $3.6 million in 1998), and rent ($3.9 million in 1999
compared to $3.8 million in 1998).
General and administrative expenses decreased $3.5 million (or 43%),
primarily as a result of a reduction in operating expenses ($0.6 million) and
reduction in fixed expenses ($2.6 million).
Depreciation and amortization decreased by $1.6 million due principally to
acceleration of game depreciation in 1998.
During 1999 and 1998, the Company recognized a loss due to impairment of
assets of $44.5 million and $0.1 million, respectively, principally as a result
of adjustments to the carrying value of assets resulting from the determination
that the carry value of certain assets was higher than their undiscounted
expected future cash flows. (See Note 5 of the consolidated financial statements
contained elsewhere in this report.)
Other (Expenses)/Income
Interest expense decreased by $7.6 million, as compared to the prior year
due to the recapitalization described in Note 2 of the notes to the Company's
consolidated financial statements appearing in Item 1 of this Report.
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 as compared to a net loss of $59.3
million ($1.41 per share) for the year ended December 31, 1997.
The net loss for 1998 included a $0.1 million charge under 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.
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Operating Revenues
Entertainment revenues 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.
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 expenses 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
($18.3 million in 1998 compared to $18.9 million in 1997), repairs and
maintenance ($3.4 million in 1998 compared to $3.3 million in 1997), facilities
operating and utilities expense ($5.3 million in 1998 compared to $7.0 million
in 1997), advertising($3.2 million in 1998 compared to $5.7 million in 1997),
corporate expenses ($3.6 million in 1998 compared to $3.6 million in 1997) and
rent and other expenses ($3.8 million in 1998 compared to $7.1 million in 1997).
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 reduced
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.
AMEX LISTING REQUIREMENTS
The Company's common shares are listed for trading on AMEX. Based on its
historical results of operations, the Company has been notified that it does not
currently meet the published guidelines of the AMEX for continued listing.
However, as discussed above, the Company's completed Recapitalization and
generation of cash through sales of non-core assets are intended to improve the
Company's financial position and results of operations. Accordingly, the Company
has requested that AMEX continue to list the Company's common shares for
trading. There can be no assurance that the AMEX will continue the Company's
listing.
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If the AMEX were to delist the Company's common shares, it is possible that
the shares would continue to trade in the over-the-counter market or that price
quotations would be reported by other sources. The public market for the
Company's common shares and the availability of such quotations would, however,
depend on the number of holders of Company common shares at that time and the
interest in maintaining a market for the common stock on the part of securities
firms. Accordingly, there can be no assurance that there would be a market for
the shares or that any securities firm would maintain a market in or quote
prices for the shares. If the AMEX were to delist the Company's common shares,
the market for the shares could be adversely affected.
The Company's common shares are currently "margin securities," as that term
is defined under the rules of the Board of Governors of the Federal Reserve
System. Because they are margin securities, among other things, brokers are
allowed to extend credit on the collateral of the shares. If the shares were to
be delisted by the AMEX and were not otherwise publicly traded or quoted, it is
possible that the shares would no longer constitute margin securities and,
therefore, could no longer be used as collateral for loans made by brokers.
IMPACT OF YEAR 2000 ISSUES
The Company was required to modify or replace portions of its computer
software and certain hardware so that those systems would properly utilize dates
beyond December 31, 1999. The cost of those modifications and replacements is
described below. With modifications or replacements of existing software and
certain hardware, the Company was not materially adversely affected by the year
2000 issues.
The Company relies on a significant number of computer programs and
computer technologies (collectively, "IT") and non-IT systems for its key
operations, including point of sales systems, race car timing and safety systems
and finance and various administrative functions. The Company engaged a year
2000 consultant to evaluate the systems and prepare a plan for addressing
compliance, which was completed during 1998.
The consultant requested confirmation from all vendors of their products'
status relative to year 2000 compliance. The consultant reviewed the Company's
systems and provided a report to the Company identifying information, compliance
requirements and criticality of each system. As of December 31, 1999, one
hundred percent of all mission critical systems were upgraded and tested for
compliance. Additionally, the initial cost projections for compliance were
reduced from $300,000 to approximately $40,000 due primarily to cost savings on
hardware, projected travel expenses, the reduction of the number of parks to
refit and reduction in installation fees by using in-house personnel. Costs
incurred were $40,000.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
A 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 Consolidated Financial Statements, which are
incorporated herein by reference. At December 31, 1999, 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, 1999, the Company has determined that there is no material
interest rate risk exposures to the Company's financial position, results of
operations or cash flows as of such date.
9
<PAGE> 11
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-5
Notes to Consolidated Financial Statements......... F-6 through F-22
</TABLE>
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
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 2000 Annual
Meeting of Shareholders, which will be filed with the Securities and Exchange
Commission prior to April 30, 2000 (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
On July 20, 1999, in connection with the Recapitalization, the Company
issued 6,000,000 shares of common stock to one of its principal lenders. The
Company also issued non-convertible preferred stock to this lender in exchange
for $33.0 million of debt.
In the recapitalization, the Company issued convertible preferred stock to
the Company's largest shareholder and a related entity in exchange for an
aggregate of $62.0 million of debt held by those entities on the terms described
in Note 2 of the notes to the Company's consolidated financial statements in
Item 1 of this Report. These securities were exempt from registration with the
Securities and Exchange Commission pursuant to Section 4(2) of the Securities
Act of 1933 as amended.
In December 1999, the Company agreed to issue 4,633,922 shares of common
stock in connection with a settlement with the manufacturer of its Top
Eliminator(R) attraction relating to past and future orders of the attraction.
These shares were issued in February 2000 and were exempt from registration with
the Securities and Exchange Commission pursuant to Section 4(2) of the
Securities Act of 1933 as amended.
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.
10
<PAGE> 12
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
NUMBER 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"))
3.3 -- Certificate of Designations for Series AA Preferred Stock
dated July 20, 1999 (incorporated by reference to the
1999 Third Quarter 10-Q
3.4 -- Certificate of Designation for Series BB Preferred Stock
dated July 20, 1999 (incorporated by reference to the
1999 Third Quarter 10-Q
3.5 -- Certificate of Designation for Series CC Preferred Stock
dated July 20, 1999 (incorporated by reference to the
1999 Third Quarter 10-Q
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"))
10.2 -- 1993 Company Non-employee 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 (incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended December
31, 1998)
10.7 -- Warrant, dated August 28, 1996, by the Company
(incorporated by reference to MEI Holdings' 1996 13D-1)
</TABLE>
11
<PAGE> 13
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.8 -- Registration Rights Agreement, dated August 28, 1996,
between the Company and MEI Holdings (incorporated by
reference to MEI Holdings' 1996 13D-1)
10.9 -- 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)
10.10 -- 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)
10.11 -- Promissory Note by Malibu Centers, Inc. in favor of
Nomura for $21,390,375 (incorporated by reference to the
2nd Q 1997 10-Q)
10.12 -- Guaranty, dated June 27, 1997, of MEI Holdings in favor
of Nomura (incorporated by reference to the 2nd Q 1997
10-Q)
10.13 -- 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)
10.14 -- 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"))
10.15 -- 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)
10.16 -- 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)
10.17 -- 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)
10.18 -- Second Amended and Restated Recapitalization Agreement,
dated July 20, 1999, by and among Malibu Entertainment
Worldwide, Inc., Malibu Centers, Inc., Nomura Asset
Capital Corporation, Partnership Acquisition Trust V, MEI
Holdings, L.P., and S.Z. Capital, L.P., (incorporated by
reference to Amendment No. 21 to the Schedule 13D-1 filed
by MEI Holdings on July 20, 1999) (incorporated by
reference to the 1999 Third Quarter 10-Q)
10.19 -- Registration Rights Agreement, dated July 20, 1999, by
and between Malibu Entertainment Worldwide and SZ
Capital, L.P. (incorporated by reference to Amendment No.
21 to the Schedule 13D-1 filed by MEI Holdings on July
20, 1999) (incorporated by reference to the 1999 Third
Quarter 10-Q)
10.20 -- Registration Rights Agreement, dated July 20, 1999, by
and between Malibu Entertainment Worldwide and MEI
Holdings (incorporated by reference to Amendment No. 21
to the Schedule 13D-1 filed by MEI Holdings on July 20,
1999) (incorporated by reference to the 1998 Third
Quarter 10-Q)
10.21 -- Registration Rights Agreement, dated July 20, 1999, by
and between Malibu Entertainment Worldwide and Nomura
Capital Asset Corporation (incorporated by reference to
the 1999 Third Quarter 10-Q)
</TABLE>
12
<PAGE> 14
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.22 -- Mutual Release between Malibu Entertainment Worldwide,
Inc., Malibu Centers, Inc., MEI Holdings, L.P., SZ
Capital, L.P. and Nomura Asset Capital Corporation
(incorporated by reference to Amendment No. 21 to the
Schedule 13D-1 filed by MEI Holdings on July 20, 1999
(incorporated by reference to the 1999 Third Quarter
10-Q)
10.23 -- Agreement dated February 21, 2000 between the Company and
Scott and Julia Demerau (filed herewith)
10.24 -- Amendment Number Nine to Consolidated Amended and
Restated Loan and Security Agreement, dated December 21,
1999, between the Company and Foothill Capital
Corporation (filed herewith)
10.25 -- Amendment Number Ten to Consolidated Amended and Restated
Loan and Security Agreement, dated February 9, 2000,
between the Company and Foothill Capital Corporation
(filed herewith)
10.26 -- Amendment Number Eleven to Consolidated Amended and
Restated Loan and Security Agreement, dated March 22,
2000, between the Company and Foothill Capital
Corporation (filed herewith)
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 1999.
13
<PAGE> 15
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 29, 2000
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 29, 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
- -----------------------------------------------------
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
14
<PAGE> 16
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, 1999 and 1998, and the related consolidated statements of
operations, shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 1999. 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, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999 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 and has current maturities of debt obligations in amounts
greater than its present cash resources, which raises 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
February 25, 2000
F-1
<PAGE> 17
MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------- -------------
<S> <C> <C>
ASSETS
Current
Cash and cash equivalents................................. $ 1,873,074 $ 237,336
Restricted cash........................................... 1,527,493 1,388,396
Inventories............................................... 1,066,042 1,153,923
Current portion of notes receivable....................... 25,436 17,000
Assets held for sale...................................... 14,771,621 1,615,217
Prepaid expenses.......................................... 553,545 1,007,459
------------- -------------
Total current assets............................... 19,817,211 5,419,331
------------- -------------
Property and equipment, less accumulated depreciation....... 38,915,251 108,843,304
------------- -------------
Other noncurrent
Investments in and advances to limited partnerships....... 188,986 335,836
Notes receivable.......................................... -- 26,405
Other assets.............................................. 152,341 154,965
Debt issuance costs, less accumulated amortization........ 1,145,009 1,655,784
Intangible assets, less accumulated amortization.......... 782,076 995,365
------------- -------------
Total other noncurrent assets...................... 2,268,412 3,168,355
------------- -------------
$ 61,000,874 $ 117,430,990
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of notes payable.......................... $ 9,726,776 $ 22,182,802
Current portion of notes payable to shareholder........... -- 8,000,000
Accounts payable.......................................... 2,353,195 4,249,065
Accrued expenses.......................................... 6,363,829 9,406,008
Accrued expenses related to assets held for sale.......... 610,902 812,152
------------- -------------
Total current liabilities.......................... 19,054,702 44,650,027
Noncurrent liabilities
Line of credit............................................ 7,500,000 7,500,000
Term loan revolver........................................ 2,500,000 10,000,000
Notes payable to shareholder.............................. -- 57,809,603
Notes payable............................................. 2,616,666 3,012,691
Accrued interest due to shareholder....................... -- 5,394,524
Dividends on preferred stock.............................. 3,383,475 --
Other accrued expenses.................................... 1,901,784 1,785,811
------------- -------------
Total liabilities.................................. 36,956,627 130,152,656
------------- -------------
Commitments and contingencies
Shareholders' equity
Preferred stock, 6,000,000 shares authorized with no par
value; $100,000 liquidation value
Series AA, 5,000 shares authorized; 143.71
outstanding............................................ 14,370,897 --
Series BB, 5,000 shares authorized; 327.12
outstanding............................................ 26,711,089 --
Series CC, 5,000 shares authorized; 500.58
outstanding............................................ 50,058,192 --
Series F, 2,700,000 authorized; none outstanding
Series G, 213,551 authorized; none outstanding
Common stock, 100,000,000 shares authorized with no par
value; 57,142,547 and 46,508,625 shares issued and
outstanding............................................. 145,745,010 136,386,360
Outstanding warrants...................................... 435,100 1,974,600
Accumulated deficit....................................... (213,276,041) (151,082,626)
------------- -------------
Total shareholders' equity......................... 24,044,247 (12,721,666)
------------- -------------
$ 61,000,874 $ 117,430,990
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE> 18
MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING REVENUES
Entertainment revenue.............................. $ 41,601,482 $ 44,267,680 $ 43,523,933
Other.............................................. 684,949 1,188,659 1,083,545
------------ ------------ ------------
Total operating revenues................. 42,286,431 45,456,339 44,607,478
------------ ------------ ------------
OPERATING EXPENSES
Entertainment expenses............................. 35,585,738 43,157,091 51,837,953
General and administrative expenses................ 4,610,272 8,131,576 9,248,877
Other expenses..................................... 522,626 690,247 632,402
Depreciation and amortization...................... 8,577,851 10,181,821 9,995,090
Provision for loss due to impairment of assets..... 44,489,935 127,073 20,869,962
Provision for allowance for accounts receivable
from partnerships................................ -- 1,726,363 --
Provision for environmental costs.................. -- -- 1,900,000
Provision for loss on investments in limited
partnerships..................................... -- -- 604,957
------------ ------------ ------------
Total operating expenses................. 93,786,422 64,014,171 95,089,241
------------ ------------ ------------
Operating loss..................................... (51,499,991) (18,557,832) (50,481,763)
OTHER (EXPENSE) INCOME
Interest expense................................... (7,226,186) (14,838,193) (6,184,502)
Interest income.................................... 68,600 91,306 608,570
Office closing expense............................. -- -- (2,410,000)
Other, net......................................... (152,363) (858,369) (795,576)
------------ ------------ ------------
Loss before provision for income taxes and
extraordinary item............................... (58,809,940) (34,163,088) (59,263,271)
Equity in net losses of limited partnerships, net
of tax of $0..................................... -- (223,159) (39,240)
------------ ------------ ------------
Net loss........................................... $(58,809,940) $(34,386,247) $(59,302,511)
============ ============ ============
NET LOSS APPLICABLE TO COMMON STOCK
Net loss........................................... $(58,809,940) $(34,386,247) $(59,302,511)
Less: Preferred stock dividends.................. 3,383,475 -- --
------------ ------------ ------------
Net loss applicable to common stock................ $(62,193,415) $(34,386,247) $(59,302,511)
============ ============ ============
Basic and diluted loss per share of common stock... $ (1.26) $ (0.71) $ (1.41)
============ ============ ============
Weighted average number of shares of common stock
used in calculating net loss per share........... 49,356,864 48,457,099 41,959,558
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 19
MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss.................................................... $(58,809,940) $(34,386,247) $(59,302,511)
Adjustments to reconcile net loss to net cash used in
operating activities
Equity in net loss of limited partnerships.................. -- 223,159 39,240
Increase in allowance for doubtful accounts................. -- 1,726,363 244,502
Depreciation and amortization............................... 8,577,851 10,181,821 9,995,090
Interest expense associated with amortization of loan
costs..................................................... 910,775 4,141,012 1,337,411
Realized loss on securities/investments in affiliates....... -- -- 604,957
(Gain) loss on sales or write-off of property and
equipment................................................. (81,563) 1,218,938 845,135
Loss on impairment of assets................................ 44,489,935 127,073 20,869,962
Decrease (increase) in inventories.......................... 87,881 822,601 (676,873)
Decrease in prepaid expenses................................ 456,538 21,327 162,063
Increase in intangible assets............................... -- (8,173) (113,653)
(Decrease) increase in accounts payable..................... (1,895,870) (1,374,842) 3,269,084
(Decrease) increase in accrued expenses..................... (1,471,464) 68,936 2,819,905
Decrease in accrued expenses related to assets held for
sale...................................................... (201,250) (261,562) (571,647)
Increase in accrued interest due to shareholder............. 3,409,899 4,299,743 1,094,781
------------ ------------ ------------
Cash used in operating activities........................... (4,527,208) (13,199,851) (19,382,554)
------------ ------------ ------------
INVESTING ACTIVITIES:
Purchases of property and equipment......................... (5,968,456) (8,064,181) (63,210,827)
Proceeds from sales of property and equipment............... 9,967,171 1,568,287 4,491,247
Increase in notes receivable................................ -- -- (68,750)
Principal payments under notes receivable................... 17,969 78,345 147,049
Increase in restricted cash................................. (139,097) (85,672) (336,649)
Decrease (increase) in investments in limited
partnerships.............................................. 146,850 (104,948) (652,710)
------------ ------------ ------------
Cash used in investing activities........................... 4,024,437 (6,608,169) (59,630,640)
------------ ------------ ------------
FINANCING ACTIVITIES:
Proceeds from borrowings.................................... 10,859,182 17,507,938 73,657,630
Payments of borrowings...................................... (12,936,042) (1,020,501) (4,502,733)
Increase in debt issuance costs............................. (400,000) (2,641,270) (2,317,638)
Decrease in subscription receivable......................... -- -- 16,076,260
Decrease (increase) in interest on notes receivable for
employees................................................. -- 533,346 (418,076)
Issuance of preferred stock................................. 2,796,219 -- --
Issuance of common stock.................................... 1,819,150 395,000 --
Payment of guaranteed stock values.......................... -- -- (777,861)
Purchase and cancellation of common stock................... -- -- (17,280)
------------ ------------ ------------
Cash provided by financing activities....................... 2,138,509 14,774,513 81,700,302
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents............ 1,635,738 (5,033,507) 2,687,108
Cash and cash equivalents, beginning of year................ 237,336 5,270,843 2,583,735
------------ ------------ ------------
Cash and cash equivalents, end of year...................... $ 1,873,074 $ 237,336 $ 5,270,843
============ ============ ============
NON-CASH ITEMS:
Dividends on preferred stock................................ $ 3,383,475 -- --
Conversion of debt and accrued interest to equity........... $ 94,343,959 -- --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 20
MALIBU ENTERTAINMENT WORLDWIDE, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED STOCK TOTAL
-------------------------------------------------------------------- PREFERRED COMMON
SERIES AA SERIES BB SERIES CC SERIES F SERIES G STOCK STOCK
----------- ----------- ----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1996.................... 22,700,000 4,826,260 27,526,260 97,062,239
Issuance of common
stock................. 556,000
Interest on notes
receivable from
Employees.............
Purchase of stock from
employees............. (808,784)
Stock issuance costs....
Subordinated debt
converted............. 15,671,322 15,671,322 850,000
Conversion of preferred
stock................. (38,371,322) (4,826,260) (43,197,582) 43,197,582
Termination of
warrants.............. 355,000
Net loss................
----------- ----------- ----------- ------------ ----------- ------------ ------------
Balance, December 31,
1997.................... 141,212,037
Issuance of common
stock................. 395,000
Interest on notes
receivable from
Employees.............
Purchase of stock from
employees............. (5,331,177)
Expiration of
warrants.............. 110,500
Net loss................
----------- ----------- ----------- ------------ ----------- ------------ ------------
Balance, December 31,
1998.................... 136,386,360
Issuance of common
stock................. 7,500,000
Issuance of preferred
stock................. 14,370,897 26,711,089 50,058,192
Expiration of
warrants.............. 1,539,500
Dividends...............
Compensation costs...... 319,150
Net Loss................
----------- ----------- ----------- ------------ ----------- ------------ ------------
Balance, December 31,
1999.................... $14,370,897 $26,711,089 $50,058,192 $ $ $ $145,745,010
=========== =========== =========== ============ =========== ============ ============
<CAPTION>
NOTES
RECEIVABLE
OUTSTANDING FROM ACCUMULATED
WARRANTS EMPLOYEES DEFICIT TOTAL
----------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Balance, December 31,
1996.................... 2,440,100 (5,681,951) (57,115,369) 64,231,279
Issuance of common
stock................. (556,000) --
Interest on notes
receivable from
Employees............. (418,076) (418,076)
Purchase of stock from
employees............. 791,504 (17,280)
Stock issuance costs.... (278,499) (278,499)
Subordinated debt
converted............. 16,521,322
Conversion of preferred
stock................. --
Termination of
warrants.............. (355,000) --
Net loss................ (59,302,511) (59,302,511)
----------- ----------- ------------- ------------
Balance, December 31,
1997.................... 2,085,100 (5,864,523) (116,696,379) 20,736,235
Issuance of common
stock................. 395,000
Interest on notes
receivable from
Employees............. 533,346 533,346
Purchase of stock from
employees............. 5,331,177
Expiration of
warrants.............. (110,500)
Net loss................ (34,386,247) (34,386,247)
----------- ----------- ------------- ------------
Balance, December 31,
1998.................... 1,974,600 (151,082,626) (12,721,666)
Issuance of common
stock................. 7,500,000
Issuance of preferred
stock................. 91,140,178
Expiration of
warrants.............. (1,539,500) --
Dividends............... (3,383,475) (3,383,475)
Compensation costs...... 319,150
Net Loss................ (58,809,940) (58,809,940)
----------- ----------- ------------- ------------
Balance, December 31,
1999.................... $ 435,100 $ $(213,276,041) $ 24,044,247
=========== =========== ============= ============
</TABLE>
F-5
<PAGE> 21
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. Additionally, in 1999, the Company determined that another six
properties did not meet the long-term objectives of the Company and as such
moved these properties to assets held for sale. As of March 25, 2000, the
Company owned, leased or had ownership interests in 20 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 the lower of cost less accumulated
depreciation or fair market value if writedowns were required by SFAS121, as
discussed in Note 5. 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-6
<PAGE> 22
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, 1999, 1998 and 1997,
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.
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, 1999 and 1998.
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 5, 6 & 20).
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.
F-7
<PAGE> 23
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Reclassifications
Certain prior year amounts have been reclassified to conform with current
year presentation.
2. CURRENT OPERATING ENVIRONMENT
In December 1999, the Company renegotiated the terms of its line of credit
and term revolver. Under the new agreement, the Company's primary lender agreed
to advance a total of an additional $4.8 million to the Company, $2.4 million of
which was advanced as of December 31, 1999. In addition, the Company is required
to maintain certain earnings thresholds as well as other loan covenants.
Furthermore, the Company is required to pay down the primary lender's note
balance to $10 million by June 30, 2000. Under certain conditions, the pay down
may be extended to August 31, 2000. (See Note 11).
In connection with the renegotiated agreement, the Company adopted a plan
to sell certain non-core assets. As such, the Company transferred six properties
to assets held for sale which the Company expects to sell in fiscal year 2000.
The Company has been actively pursuing the sale of these six properties and
another property previously being held for sale and is currently in discussions
with potential buyers. The value of the assets held for sale at December 31,
1999 is $14.8 million. (See Notes 5 and 6 for further discussions.)
The Company renegotiated the terms of its Top Eliminator contract. Under
the amended contract, the Company made a payment of $1,100,000 and issued stock
worth $1,500,000 to pay for completed work in process. No future lane purchases
are required.
On July 20, 1999 the Company completed its previously announced
recapitalization and the land sale and leaseback transaction (together, the
"Recapitalization") relating to its Willowbrook, Texas and Puente Hills,
California entertainment parks (the "Sale and Leaseback").
The principal components of the Recapitalization were as follows:
- Repayment of $11.4 million to one of the Company's principal lenders.
$9.1 million of the $11.4 million came from the proceeds of the Sale and
Leaseback with the balance being provided by an entity related to the
Company's largest shareholder.
- This lender, which held $21.4 million of secured debt of a subsidiary of
the Company and $21.0 million of other indebtedness advanced through the
Company's largest shareholder as an accommodation to the Company, also
exchanged the remaining $33.0 million of debt (including $2.0 million of
accrued interest) for non-convertible preferred stock of the Company. The
lender also received 6,000,000 of the Company's common shares. If the
Company has not redeemed the non-convertible preferred stock by December
31, 2000, the lender will be entitled to an additional 2,000,000 of the
Company's common shares plus 4,000,000 of common shares from the
Company's largest shareholder.
- The elimination of $500,000 per month principal amortization payment
under the Company's debt to its next largest lender that would have been
payable had the Recapitalization not been completed.
- Conversion of $50.0 million of debt (including $8.0 million of accrued
interest) to the Company's largest shareholder into preferred stock of
the Company that is convertible into Company common stock at any time at
$2.50 per common share. In addition, $12.0 million of debt (including
$400,000 of accrued interest) to an entity related to the Company's
largest shareholder was converted into preferred stock of the Company
which is convertible into Company common stock at any time after
September 30, 2000 at a per common share price of the lower of $2.50 or
120% of market at the time of conversion. This convertible preferred
stock has the right to vote with the Company common stock on a "as
converted" basis.
F-8
<PAGE> 24
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's total indebtedness was reduced by $106.4 million (including
accrued interest) in the Recapitalization.
3. 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 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 reimbursed 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 $0, $287,000 and $636,000 for the years ended December 31,
1999, 1998 and 1997, respectively.
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. Pursuant to the terms of the agreement, the MEI Holdings notes
were convertible into preferred stock of the Company as part of the
Recapitalization. (See Notes 2 and 14 for additional discussion.)
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 1999, all required advances have been made and were converted into
preferred stock of the Company as part of the Recapitalization. (See Notes 2 and
14 for additional discussion.) 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.
4. NOTES RECEIVABLE
Notes receivable are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<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
OTHER
Note receivable from Swingtime, Inc., interest at 9.5%; due
in January 2001, secured by real and personal property.... 25,436 43,405
Notes receivable from an individual, interest at 12%; due on
Demand, unsecured......................................... 30,000 30,000
-------- --------
105,436 123,405
Less: Current portion....................................... (25,436) (17,000)
-------- --------
Long-term portion........................................... 80,000 106,405
Less: Reserve for uncollectible notes receivable............ (80,000) (80,000)
-------- --------
$ -- $ 26,405
======== ========
</TABLE>
F-9
<PAGE> 25
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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>
2000...................................................... 49,896
2001...................................................... 55,540
--------
$105,436
========
</TABLE>
5. PROPERTY AND EQUIPMENT, NET
Property and equipment, net are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Land..................................................... $ 5,053,196 $ 25,579,812
Racetracks, miniature golf courses and clubhouses........ 31,425,090 75,006,917
Equipment................................................ 4,943,710 9,377,554
Games.................................................... 5,724,214 9,978,465
Racing lanes............................................. 2,909,534 8,198,448
------------ ------------
50,055,744 128,141,196
Less: Accumulated depreciation........................... (11,140,493) (19,297,892)
------------ ------------
$ 38,915,251 $108,843,304
============ ============
</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.
The Company accounts for impairment of long-lived assets in accordance with
Statement of Financial Accounting Standards ("SFAS") 121. SFAS 121 requires that
a Company review long-lived assets and certain identifiable intangibles for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The Company evaluates at
each balance sheet date whether events and circumstances have occurred that
indicate possible impairment.
Based on the projected net cash flows and recorded book value of the
properties, the Company determined that 10 properties were impaired and as such,
the carrying values of these assets were written down to the Company's estimates
of fair value. Fair value was based on current loan appraisal values, or other
estimates of fair value, including multiples of cash flow for which other
properties have been sold, and based on market conditions that the Company
believes approximates current value. Accordingly, actual results could vary
significantly from such estimates.
The total amount of the 1999 writedown was $44.5 million, and is reflected
as provision for loss due to impairment of assets in the accompanying
consolidated financial statements. The writedown consists of $14.5 million on
assets that the Company intends to sell in 2000, (see Note 6 for further
discussion) and $30.0 million on assets the Company intends to continue to
operate. Included in the writedown was $33.1 million on the three SpeedZone
locations due to revaluation of the estimated future cash flows which was below
the recorded net book value.
F-10
<PAGE> 26
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. ASSETS HELD FOR SALE
At December 31, 1998, the Company held two non-operating properties for
sale with recorded value of approximately $1.6 million.
In January, 1999, the Company sold one property held for sale for $0.7
million and recorded a gain of $0.2 million.
In December 1999, in connection with an agreement with the Company's
primary lender, the Company adopted a plan to sell certain non-core assets. The
Company expects to use the proceeds to pay down the line of credit and term loan
revolver (See Note 11 for further discussion). As such, the Company transferred
six properties to assets held for sale which the Company expects to sell in
fiscal year 2000. The value of the assets held for sale at December 31, 1999 is
$14.8 million. The Company intends to operate these properties while pursuing
alternatives for their sale. The six properties moved to assets held for sale
had revenues of $6.9 million, $7.9 million and $7.0 million and earnings before
interest, taxes, depreciation and amortization of $0.6 million, $0.2 million and
$(0.5) million for the years ended December 31, 1999, 1998 and 1997,
respectively. In March 2000, The Company entered into a contract to sell four of
these properties. (See Note 5 for further discussion.)
7. INVESTMENTS IN AND TRANSACTIONS WITH LIMITED PARTNERSHIPS
The Company charged 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, 1999, 1998 and 1997 were $5,000, $78,000,
$64,000, respectively.
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.
On September 24, 1999, the Company sold all but a small fraction of its
interest in one of its limited partnerships and its interest in a construction
receivable from the partnership for a consideration of $0.5 million and the
indemnification from a $1.6 million loan guaranty and recorded a gain from such
sales of $0.4 million. The proceeds from the sale were used to reduce the
principal balance to the Company's primary lender.
8. INTANGIBLE ASSETS, NET
Intangible assets, net are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Goodwill.................................................... $ 870,786 $1,049,910
Trademarks.................................................. 134,556 134,556
---------- ----------
1,005,342 1,184,466
Less: accumulated amortization.............................. (223,266) (189,101)
---------- ----------
$ 782,076 $ 995,365
========== ==========
</TABLE>
During 1999 and 1997, the Company wrote down the carrying value of goodwill
associated with certain impaired assets by $179,124 and $1,593,000, respectively
(Notes 6 and 20).
F-11
<PAGE> 27
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Payroll and related expenses................................ $2,174,791 $2,303,090
Environmental............................................... 1,097,324 1,778,510
Insurance................................................... 927,267 1,289,263
Accrued rent................................................ 547,918 551,338
Sales tax................................................... 469,147 458,957
Property taxes.............................................. 320,890 257,328
Interest.................................................... 201,499 280,294
Accrued legal............................................... 75,281 248,903
Racing lanes................................................ -- 1,100,000
MEI Holdings................................................ -- 604,551
Other....................................................... 549,712 533,774
---------- ----------
$6,363,829 $9,406,008
========== ==========
</TABLE>
Total long-term and short-term environmental reserves were $1,097,324 and
$1,778,510 in 1999 and 1998, respectively. Environmental expenses paid and
expensed in 1999, 1998 and 1997 were $681,186, and $0; $1,220,943 and $0; and
$563,691 and $1,900,000, respectively.
10. 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 was for $10.0 million bore
interest at LIBOR plus 350 basis points, was unsecured and was payable in July
1999 and the second promissory note was for maximum borrowings of up to $65.0
million with interest at 10% and was to mature in August 2001. In connection
with the Recapitalization, these notes were converted into preferred stock. (See
Notes 2 and 14 for additional discussions.) MEI Holdings has the option, but is
not obligated, to purchase preferred stock amounts in excess of the amounts
initially converted.
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
as of December 31, 1998.
During 1998, the Company entered into an unsecured promissory note with SZ
Capital (an entity related to MEI Holdings) with terms management believed were
comparable to terms which would be attainable from third parties. SZ Capital
may, but was not obligated to, advance up to $30,000,000. In connection with the
Recapitalization, the note was converted into preferred stock. SZ Capital has
the option, but is not obligated, to purchase preferred stock in excess of the
amounts initially converted. At December 31, 1998, SZ Capital had advanced the
Company approximately $2.9 million plus accrued interest. Prior to the
Recapitalization, SZ Capital had advanced $6.0 million to the Company in 1999.
In addition, SZ Capital purchased $2.8 million worth of additional preferred
stock as of December 31, 1999. (See Note 2 for further discussions.)
F-12
<PAGE> 28
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. LINE OF CREDIT AND TERM LOAN REVOLVER
In 1996, the Company entered into a loan agreement ("Senior Credit
Facility"), which was amended during 1997 and again in 1999, with a U.S. based
financial institution to provide $20 million in senior credit facilities. The
Senior Credit Facility was comprised of a $12.5 million senior secured term loan
and a $7.5 million secured revolving credit facility.
In December 1999, the Company renegotiated the terms of its term loan and
revolver. Under the new agreement, the Company will receive an additional $4.8
million, $2.4 million of which was advanced as of December 31, 1999. The terms
of the agreement require the Company to maintain operating earnings levels for
core assets and a pay down of the notes to $10,000,000 by June 30, 2000. Under
certain conditions, the pay down may be extended to August 31, 2000.
The remaining balance of the loans mature in August 2001. The credit
facilities are secured by substantially all of the Company's assets and bear
interest at a floating reference rate plus 3.0% until required pay down and 2.0%
thereafter.
In 1999, the Company paid $666,000 on the note. At December 31, 1999 and
1998, the outstanding balance under the term loan and revolver were $11,734,000
and $7,500,000, respectively and $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, 1999 the Company was in compliance with these covenants.
12. NOTES PAYABLE AND SUBORDINATED DEBENTURES
Notes payable are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Mortgage note bearing interest at LIBOR plus 350 basis
points, payable in July 1999; secured by real estate.... $ -- $ 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........ 861,625 870,169
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............................................ 240,098 563,100
Note payable to a former shareholder...................... 2,007,639 2,371,849
---------- ------------
3,109,362 25,195,493
Less: Current portion..................................... (492,696) (22,182,802)
---------- ------------
$2,616,666 $ 3,012,691
========== ============
</TABLE>
F-13
<PAGE> 29
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>
2000..................................................... $ 492,696
2001..................................................... 396,145
2002..................................................... 351,288
2003..................................................... 333,377
2004..................................................... 333,377
Thereafter............................................... 1,202,479
----------
$3,109,362
==========
</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, and 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.
13. INCOME TAXES
The provision for income taxes is as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Federal taxes -- current........................ $-- $-- $--
Deferred income taxes........................... -- -- --
--- --- ---
Provision for income taxes...................... $-- $-- $--
=== === ===
</TABLE>
As of December 31, 1999, the Company has a tax net operating loss
carryforward of approximately $153,530,000 for income tax purposes which expires
in 2005-2019. In addition, the Company has a capital loss carryforward of
$368,900 which expires in 2006. 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 and the Company believes that it is possible that the
application of this carryforward could be subject to stringent restrictions.
The primary differences between the statutory income tax rate and the
Company's effective income tax rate are changes in the valuation allowances. 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, 1999 due to the uncertainty
related to the recoverability of that asset.
F-14
<PAGE> 30
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the Company's net deferred income tax assets are
as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Deferred tax liabilities:
Depreciation........................................... $ 11,782,072 $ 9,562,003
Syndication revenue.................................... 1,235,190 1,235,190
Other.................................................. 61,525 256,509
------------ ------------
Gross deferred tax liabilities......................... 13,078,787 11,053,702
Deferred tax assets:
Net operating loss carryforward........................ (58,341,387) (47,111,232)
Equity in net earnings of limited Partnerships......... (5,464) (738,906)
Minimum tax credit carryforward........................ (292,060) (292,060)
Loss on impairment of assets........................... (24,946,193) (15,668,515)
Bad debts.............................................. (514,328) --
Accrued expenses....................................... (2,139,284) --
Capital loss carryforward.............................. (368,910) --
Other.................................................. (1,843,908) (2,463,258)
------------ ------------
Gross deferred tax assets.............................. (88,451,534) (66,273,971)
------------ ------------
(75,372,747) (55,220,269)
Less: Valuation allowance................................ 75,372,747 55,220,269
------------ ------------
$ -- $ --
============ ============
</TABLE>
14. 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, 1999, 1998, and 1997, the Company
purchased and canceled 0, 1,974,761, and 291,875 shares of common stock.
On July 20, 1999, in connection with the Recapitalization, the Company
issued 6,000,000 shares of common stock to one of its principal lenders.
In December 1999, the Company issued 4,633,922 shares of common stock in
connection with a settlement with the manufacturer of its Top Eliminator(R)
attraction relating to past and future orders of the attraction.
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.
F-15
<PAGE> 31
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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
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 & All shares were converted into equivalent common shares
G.........
</TABLE>
On July 20, 1999, in connection with the Recapitalization, the Company
issued 115.75 shares of Series AA Preferred Stock ("Series AA"), 327.12 shares
of Series BB Preferred Stock ("Series BB") and 500.58 shares of Series CC
Preferred Stock ("Series CC"). Additional shares were purchased after the
initial issuance to bring the yearend total for Series AA Preferred Stock to
143.71 shares.
At any time prior to January 1, 2004, 9% per annum cumulative dividends
will be payable quarterly on Series AA in cash or in kind at the Company's
option. Dividends will not be paid in kind on or after January 1, 2004 unless
the Company so elects and the holders of the Series AA agree. Series AA is
senior in dividend and liquidation preference to all other capital stock at
$100,000 per share plus accrued and unpaid dividends. Series AA is redeemable by
the Company at liquidation value plus accrued dividends until January 1, 2001.
Thereafter, Series AA is redeemable as follows: (i) between January 1, 2001 and
January 1, 2002 at 105% of liquidation value plus accrued and unpaid dividends
and (ii) during each of the next 4 one year periods thereafter, at a premium to
liquidation value that decreases 1% each year plus accrued and unpaid dividends.
Beginning September 30, 2000, Series AA is convertible at any time at the
holder's option into the Company's common stock at 120% of market at the time of
the conversion, calculated on the volume weighted trading price for the 20 day
period prior to conversion, but not to exceed $2.50 per share.
At any time prior to January 1, 2002, 9% per annum cumulative dividends
will be payable quarterly on Series BB in cash or in kind at the Company's
option. Dividends may not be paid in kind on or after January 1, 2002 unless the
Company so elects and the holders of the Series BB agree. Series BB is senior in
dividend and liquidation preference to all other capital stock except Series AA
at $100,000 per share plus accrued and unpaid dividends. Series BB is redeemable
by the Company at liquidation value plus accrued dividends until January 1,
2001. Thereafter, Series BB is redeemable as follows: (i) between January 1,
2001 and January 1, 2002 at 105% of liquidation value plus accrued and unpaid
dividends and (ii) during each of the next 4 one year periods thereafter, at a
premium to liquidation value that decreases 1% each year plus accrued and unpaid
dividends. Unless waived by a majority of the holders of Series AA, no shares of
Series BB may be redeemed if any Series AA remains outstanding. The Company has
committed to issue an additional 2 million shares of common stock and the
majority shareholder of the Company has committed to issue an additional 4
million shares of common stock of the Company to the holder of Series BB if the
Series BB has not been redeemed prior to December 31, 2000.
At any time prior to January 1, 2002, 7% per annum cumulative dividends
will be payable quarterly on Series CC in cash or in kind at the Company's
option. Dividends may not be paid in kind on or after January 1, 2002 unless the
Company so elects and the holders of the Series CC agree. Series CC is junior to
Series AA and Series BB but senior to all other capital stock at $100,000 plus
accrued and unpaid dividends. Series CC is redeemable by the Company at
liquidation value plus accrued dividends until January 1, 2001. Thereafter,
Series CC is redeemable as follows: (i) between January 1, 2001 and January 1,
2002 at 105% of liquidation value plus accrued and unpaid dividends and (ii)
during each of the next 4 one year periods
F-16
<PAGE> 32
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
thereafter, at a premium to liquidation value that decreases 1% each year plus
accrued and unpaid dividends. Unless waived by a majority of the holders of each
of the Series AA and Series BB, no Series CC may be redeemed if any Series AA or
Series BB remains outstanding. Series CC is convertible into common stock at
$2.50 per share.
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 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 consolidated financial statements. 26,697 vested shares remain
outstanding.
F-17
<PAGE> 33
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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. There was no activity in 1999
under 1993 Plan. Previous year activity is as follows:
<TABLE>
<CAPTION>
1998 1997
------------------ ------------------
OPTIONS WTD. OPTIONS WTD.
TO AVERAGE TO AVERAGE
ACQUIRE EXERCISE ACQUIRE EXERCISE
SHARES PRICE SHARES PRICE
------- -------- ------- --------
<S> <C> <C> <C> <C>
Outstanding as of January 1,..................... 21,700 8.00 25,700 8.00
Granted........................................ -- -- -- --
Exercised...................................... -- -- -- --
Expired or forfeited........................... (21,700) 8.00 (4,000) 8.00
------- ---- ------ ----
Outstanding as of December 31,................... -- -- 21,700 8.00
------- ---- ------ ----
Exercisable as of December 31,................... -- -- 21,700 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 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>
1999 1998 1997
------------------ ------------------ -------------------
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,.......................... 65,000 4.62 73,000 4.81 168,000 6.89
Granted..................... 10,000 1.19 10,000 1.31 30,000 4.88
Exercised................... -- -- -- -- -- --
Expired or forfeited........ -- -- (18,000) 3.59 (125,000) 7.62
------ ---- ------- ---- -------- ----
Outstanding as of December
31,......................... 75,000 4.16 65,000 4.62 73,000 4.81
------ ---- ------- ---- -------- ----
Exercisable as of December
31,......................... 75,000 4.16 65,000 4.62 73,000 4.81
</TABLE>
The options at December 31, 1999 have a range of exercise prices of $1.19
to $8.75 with a weighted average life of 6 years remaining before expiration.
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. The option expired November 15, 1999.
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 and restricted shares
up to 4,000,000 shares. No options or restricted share were granted in 1997. As
of December 31, 1999 and 1998, the Company had issued, at market value, 209,000
and 918,100, respectively, options at prices ranging from $0.38
F-18
<PAGE> 34
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 7.8 years. Option activity under the 1997 Plan is as follows:
<TABLE>
<CAPTION>
1999 1998
-------------------- -------------------
OPTIONS OPTIONS
TO WTD. AVG. TO WTD. AVG.
ACQUIRE EXERCISE ACQUIRE EXERCISE
SHARES PRICE SHARES PRICE
-------- --------- ------- ---------
<S> <C> <C> <C> <C>
Outstanding as of January 1,.................. 918,100 2.33 -- --
Granted..................................... 209,000 0.83 918,100 2.33
Exercised................................... -- -- -- --
Expired or forfeited........................ (215,400) 3.00 -- --
-------- ------- ------- -------
Outstanding as of December 31,................ 911,700 1.68 918,100 2.33
-------- ------- ------- -------
Exercisable as of December 31,................ 175,675 2.33 -- --
</TABLE>
Under the 1997 Plan, the Company also authorized and issued, at market
value, to a key officer, 500,000 shares of restricted stock with 100% cliff
vesting on August 17, 2002.
In September 1998, the Company authorized and issued, at market value,
1,000,000 options to the same key employee 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 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 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,
---------------------------------------------------------------------------------
1999 1998 1997
------------------------- ------------------------- -------------------------
AS REPORTED PROFORMA AS REPORTED PROFORMA AS REPORTED PROFORMA
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net loss................. (62,193,415) (62,966,860) (34,386,247) (34,687,590) (59,302,511) (59,327,511)
Basic and dilutive loss
per share.............. (1.26) (1.28) (.71) (.72) (1.41) (1.41)
</TABLE>
At December 31, 1999, 1998 and 1997, the weighted average fair value of
options granted was $0.85, $2.16, and $2.75, 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 1999, 1998 and 1997, respectively; risk free interest rates of 6.26%,
5.32%, and 6.99%, expected dividend yields of 0.0%, 0.0%, and 0.0%, expected of
lives of 10 years and expected volatility of 65.84%, 57.89%, 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 1999, 550,000 warrants with a recorded value of $1.5 million expired. At
December 31, 1999, 223,103 warrants remain outstanding.
F-19
<PAGE> 35
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. 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 VESTING
OF 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 $9,900,
$61,000 and $60,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.
16. 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>
2000.................................................... 4,411,763
2001.................................................... 4,221,898
2002.................................................... 3,493,413
2003.................................................... 2,899,564
2004.................................................... 2,345,515
Thereafter.............................................. 30,459,760
-----------
$47,831,913
===========
</TABLE>
Rental expense totaled approximately $4,353,000, $4,300,000, and
$3,971,000, for the years ended December 31, 1999, 1998, and 1997, respectively.
F-20
<PAGE> 36
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has entered into sponsorship contracts with three entities that
have relationships with NASCAR and CART drivers. The contracts expire at various
dates through 2002; however, the Company has the right to terminate the
agreements under certain conditions. Future annual payments under these
contracts are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C>
2000...................................................... 207,080
2001...................................................... 100,000
2002...................................................... 100,000
--------
$407,080
========
</TABLE>
17. SUPPLEMENTAL CASH FLOW INFORMATION
The Company paid interest of approximately $1,800,000, $8,739,000, and
$5,485,000 for the years ended December 31, 1999, 1998, 1997, respectively.
During 1998, the Company reduced its debt by $3.6 million in connection with the
disposal of an asset.
18. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial information for the periods ended December 31, 1999 and
1998 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999
--------------------------------------
FIRST SECOND THIRD FOURTH
------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Operating revenues............................ $ 8,419 $12,346 $12,865 $ 8,656
Operating expenses............................ 11,194 12,957 13,799 55,836
Operating loss................................ (2,775) (610) (934) (47,180)
Net loss...................................... (5,323) (3,590) (2,129) (47,768)
Preferred dividends........................... -- -- 1,485 1,898
Net loss to common shareholders............... (5,323) (3,590) (3,614) (49,666)
Loss per common share(A)...................... $ (.11) $ (.08) $ (.07) $ (1.00)
</TABLE>
<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>
- ---------------
(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.
19. 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.
F-21
<PAGE> 37
MALIBU ENTERTAINMENT WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
20. FOURTH QUARTER CHARGES
During the fourth quarters of each of 1999, 1998 and 1997 the Company
recorded a loss due to impairment of assets in accordance with the provisions of
SFAS 121 of $44.5 million, $0.1 million, and $20.9 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- million, and $0.6 million in the
respective fourth quarters of 1999, 1998 and 1997. 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, the Company recorded charges of $1.9
million for environmental costs based upon analyses completed by the Company's
environmental consultants.
21. SUBSEQUENT EVENT
On February 17, 2000, the Company sold its McAllen, Texas location for a
profit participation based on future income earned at the location for the next
5 years. Substantially all of the assets were transferred to the new owner.
In March 2000, the Company entered into an agreement to sell four
properties that it determined to be non-core assets. The net proceeds of the
sale, which, if completed, would be used to pay down the lender's note. The sale
agreement is subject to customary closing conditions, such as the buyer's
satisfaction with its due diligence review. There can be no assurance that the
sale transaction will close or as to the timing of such transaction.
F-22
<PAGE> 38
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER 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"))
3.3 -- Certificate of Designations for Series AA Preferred Stock
dated July 20, 1999 (incorporated by reference to the
1999 Third Quarter 10-Q
3.4 -- Certificate of Designation for Series BB Preferred Stock
dated July 20, 1999 (incorporated by reference to the
1999 Third Quarter 10-Q
3.5 -- Certificate of Designation for Series CC Preferred Stock
dated July 20, 1999 (incorporated by reference to the
1999 Third Quarter 10-Q
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"))
10.2 -- 1993 Company Non-employee 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 (incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended December
31, 1998)
10.7 -- Warrant, dated August 28, 1996, by the Company
(incorporated by reference to MEI Holdings' 1996 13D-1)
10.8 -- Registration Rights Agreement, dated August 28, 1996,
between the Company and MEI Holdings (incorporated by
reference to MEI Holdings' 1996 13D-1)
10.9 -- 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)
10.10 -- 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)
10.11 -- Promissory Note by Malibu Centers, Inc. in favor of
Nomura for $21,390,375 (incorporated by reference to the
2nd Q 1997 10-Q)
10.12 -- Guaranty, dated June 27, 1997, of MEI Holdings in favor
of Nomura (incorporated by reference to the 2nd Q 1997
10-Q)
</TABLE>
<PAGE> 39
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.13 -- 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)
10.14 -- 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"))
10.15 -- 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)
10.16 -- 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)
10.17 -- 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)
10.18 -- Second Amended and Restated Recapitalization Agreement,
dated July 20, 1999, by and among Malibu Entertainment
Worldwide, Inc., Malibu Centers, Inc., Nomura Asset
Capital Corporation, Partnership Acquisition Trust V, MEI
Holdings, L.P., and S.Z. Capital, L.P., (incorporated by
reference to Amendment No. 21 to the Schedule 13D-1 filed
by MEI Holdings on July 20, 1999) (incorporated by
reference to the 1999 Third Quarter 10-Q)
10.19 -- Registration Rights Agreement, dated July 20, 1999, by
and between Malibu Entertainment Worldwide and SZ
Capital, L.P. (incorporated by reference to Amendment No.
21 to the Schedule 13D-1 filed by MEI Holdings on July
20, 1999) (incorporated by reference to the 1999 Third
Quarter 10-Q)
10.20 -- Registration Rights Agreement, dated July 20, 1999, by
and between Malibu Entertainment Worldwide and MEI
Holdings (incorporated by reference to Amendment No. 21
to the Schedule 13D-1 filed by MEI Holdings on July 20,
1999) (incorporated by reference to the 1998 Third
Quarter 10-Q)
10.21 -- Registration Rights Agreement, dated July 20, 1999, by
and between Malibu Entertainment Worldwide and Nomura
Capital Asset Corporation (incorporated by reference to
the 1999 Third Quarter 10-Q)
10.22 -- Mutual Release between Malibu Entertainment Worldwide,
Inc., Malibu Centers, Inc., MEI Holdings, L.P., SZ
Capital, L.P. and Nomura Asset Capital Corporation
(incorporated by reference to Amendment No. 21 to the
Schedule 13D-1 filed by MEI Holdings on July 20, 1999
(incorporated by reference to the 1999 Third Quarter
10-Q)
10.23 -- Agreement dated February 21, 2000 between the Company and
Scott and Julia Demerau (filed herewith)
10.24 -- Amendment Number Nine to Consolidated Amended and
Restated Loan and Security Agreement, dated December 21,
1999, between the Company and Foothill Capital
Corporation (filed herewith)
10.25 -- Amendment Number Ten to Consolidated Amended and Restated
Loan and Security Agreement, dated February 9, 2000,
between the Company and Foothill Capital Corporation
(filed herewith)
</TABLE>
<PAGE> 40
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.26 -- Amendment Number Eleven to Consolidated Amended and
Restated Loan and Security Agreement, dated March 22,
2000, between the Company and Foothill Capital
Corporation (filed herewith)
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 1999.
<PAGE> 1
EXHIBIT 10.23
AGREEMENT
This Agreement ("AGREEMENT") is entered into this ___ day of
February, 2000 between L. Scott Demerau ("SCOTT DEMERAU") and Julia Demerau
(together with Scott Demerau, the "DEMERAUS") and Malibu Entertainment
Worldwide, Inc., a Georgia corporation ("MALIBU").
RECITALS:
A. The Demeraus have been serving as members of the Board of
Directors of Malibu.
B. On or about December 4, 1997, the parties entered into a
Separation Agreement (the "SEPARATION AGREEMENT"), which created certain
obligations on the part of Malibu and the Demeraus.
C. Simultaneously herewith, each of the Demeraus has tendered
their resignation effective immediately from Malibu's Board of Directors in the
forms attached hereto as Exhibit A and B.
D. The parties have determined to terminate Malibu's
obligations under the Separation Agreement and to memorialize certain other
understandings between the parties.
Now, therefore, in consideration of the premises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Payment. Malibu hereby agrees to pay to Scott Demerau two
payments each in the amount of $135,000, for a total of $270,000, subject to
applicable withholding taxes. The initial payment shall be made upon execution
of this Agreement. The second payment shall be made on or before May 15, 2000.
The Demeraus acknowledge that these payments are in lieu of any and all payments
that may otherwise be available to the Demeraus pursuant to the Separation
Agreement or any other agreement or relationship between the parties.
2. Releases.
(a) In consideration for Malibu's covenants under this
Agreement, the Demeraus release and discharge Malibu, The Hampstead Group,
L.L.C., MEI Holdings, L.P. and their affiliates and their respective officers,
directors, employees, attorneys, assigns, successors, agents and representatives
(collectively, the "RELEASED PARTIES"), from any and all claims, demands,
liabilities, damages, expenses, contracts, obligations and causes of action, of
every kind and nature whatsoever, known or unknown, which the Demeraus, their
affiliates, agents, representatives, heirs, successors or assigns, have or may
have against them based upon, related to or arising out of (i) the Demeraus'
membership on Malibu's Board of Directors or relationship as shareholders,
employees or officers of Malibu and its subsidiaries or otherwise or (ii)
Malibu's obligations under the Separation Agreement. The provisions of this
paragraph shall not apply to a breach of any agreements, obligations or
covenants (other than any of the foregoing contained in the Separation
Agreement) of Malibu or its subsidiaries with respect to contribution or
indemnification of its officers and directors of Malibu or its subsidiaries.
(b) In consideration for the Demeraus' covenants under
this Agreement, Malibu releases and discharges the Demeraus from all claims,
demands, liabilities, damages, expenses, obligations and causes of action, of
every kind and nature whatsoever, known or unknown which Malibu has or may have
against them based upon, related to or arising out of (i) the Demeraus'
membership on
<PAGE> 2
Malibu's Board of Directors, or their relationship as shareholders, employees or
officers of Malibu and its subsidiaries or otherwise or (ii) the Demeraus'
obligations under the Separation Agreement other than the obligations of the
Demeraus set forth in Sections 12, 13 and 15 of the Separation Agreement,
provided, however, the provisions of this paragraph shall not apply to any
claims against the Demeraus arising out of or relating to (A) a breach of this
Agreement; (B) any false representations made by the Demeraus in this Agreement;
or (C) transactions in Malibu securities in violation of federal or applicable
state securities laws. Without limiting the generality or effect of the
foregoing, the provisions set forth in Sections 12, 13 and 15 of the Settlement
Agreement shall remain in full force and effect.
3. Representations, Warranties and Covenants.
(a) The Demeraus hereby represent and warrant that they
have not assigned any claims, demands, liabilities, damages, expenses,
contracts, obligations or causes of action released pursuant to this Agreement
to any affiliates, agents, representatives, heirs or successors of the Demeraus
or to any other person or entity.
(b) Unless otherwise required by law or court order, the
Demeraus hereby agree that they shall not, directly or indirectly, initiate,
solicit, provoke, cause, assist, or participate (including, without limitation,
furnishing information) in any third parties' assertion of claims or causes of
action against the Released Parties that are based upon, related to or arise out
of Malibu's business or the Demeraus' membership on Malibu's Board of Directors
or relationship as shareholders, employees or officers of Malibu and its
subsidiaries or otherwise.
(c) The Demeraus hereby represent and warrant that they
(i) are not knowlingly making and have not knowlingly made, nor do they know or
have reason to know that any family member or controlled affiliate is knowingly
making or has knowingly made, any dishonest or fraudulent statement with respect
to or in connection with the business or shares or other securities of Malibu
and (ii) are not engaging in and have not engaged in, nor do they know or have
reason to know that any family member or controlled affiliate is engaging or has
engaged in, any dishonest or fraudulent conduct with respect to or in connection
with the business operations or shares or other securities of Malibu.
(d) Unless otherwise required by law or court order, the
Demeraus hereby covenant and agree that they shall not discuss with any party
not a signatory to this Agreement, and shall maintain as confidential, any and
all information concerning past, present or future business of Malibu, provided
however, that this paragraph 3(d) shall not apply to the Demeraus' exercise of
their rights as shareholders of Malibu. The Demeraus agree to refer any
inquiries they receive regarding Malibu to Malibu's management.
(e) Malibu hereby covenants and agrees that unless (i)
required by law, or (ii) any of Malibu, its affiliates or their respective
officers, directors, employees, attorneys, assigns, successors, agents or
representatives is sued or brought into any action related to a transaction by
the Demeraus in Malibu securities in violation of federal or applicable state
securities laws, Malibu shall not bring suit against the Demeraus for any such
transaction.
4. Severability. Should any provision of this Agreement be
held invalid or illegal, such invalidity or illegality shall not invalidate the
whole of this Agreement, but, rather, the Agreement shall be construed as if it
did not contain the invalid or illegal part, and the rights and obligations of
the parties shall be construed and enforced accordingly.
2
<PAGE> 3
5. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas notwithstanding any
conflicts of laws provisions. Any future litigation between the parties relating
to this Agreement shall be filed in Dallas County, Texas.
6. Amendments, Supplements. This Agreement may be amended or
supplemented at any time by a written instrument executed by the parties hereto.
3
<PAGE> 4
7. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
- --------------------------------- MALIBU ENTERTAINMENT WORLDWIDE, INC.
L. Scott Demerau
By:
-------------------------------------
- --------------------------------- Name: Richard Beckert
Julia Demerau Title: Chief Executive Officer
4
<PAGE> 1
EXHIBIT 10.24
AMENDMENT NUMBER NINE TO CONSOLIDATED, AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NUMBER NINE TO CONSOLIDATED, AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT (this "Amendment"), is entered into as of December 21, 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> 2
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 (i) to amend the Loan Agreement to the
extent necessary to provide for the extension of an Overadvance to Borrower
in excess of the amount otherwise available under the terms and conditions
of the Loan Agreement in the amount of up to $4,800,000 (the "Requested
Overadvance"), which will be disbursed in stages as set forth herein.
C. Foothill is willing to so amend the Loan Agreement to extend the Requested
Overadvance to Borrower in accordance with the terms and conditions hereof.
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:
2
<PAGE> 3
"EBITDA" means, for any period, determined on a consolidated basis, the sum
of (a) net income (or net loss) exclusive of any reduction in the bad debt
reserves to the extent any such reduction results in an increase in net income,
(b) interest expense, (c) income tax expense, (d) depreciation expense, (e)
amortization expense, and (f) non-cash charges relating to non-recurring write
downs of furniture, fixtures and equipment and general intangibles, in each case
determined in accordance with GAAP for such period; provided, that, in
connection with any disposition of any FunCenter, required levels of EBITDA
shall be adjusted to exclude such disposed-of FunCenter, effective with the
month of disposition of such FunCenter, such adjustments to be based on the
projected levels of EBITDA for such FunCenter contained in the formal business
projections of Borrower for its fiscal year 2000 to be delivered to Foothill no
later than January 31, 2000.
"Ninth Amendment" means that certain Amendment Number Nine to Consolidated,
Amended, and Restated Loan and Security Agreement, dated as of December 21,
1999.
"Ninth Amendment Closing Date" means the date on which each of the
conditions precedent set forth in Section 3 of the Ninth Amendment are satisfied
in full.
"Permanent Reduction Date" means the date on which Borrower shall repay the
outstanding Obligations to an aggregate amount of not more than $10,000,000.
"Permitted Overadvance Amount" means: (a) on and after the Ninth Amendment
Closing Date and prior to December 29, 1999, $1,800,000 (of which $300,000
represents a ratable portion of the Permitted Overadvance Fee); (b) on and after
December 29, 1999 and prior to January 5, 2000, $2,400,000 (of which $400,000
represents a ratable portion of the Permitted Overadvance Fee); (c) on and after
January 5, 2000 and prior to January 19, 2000, $3,000,000 (of which $500,000
represents a ratable portion of the Permitted Overadvance Fee); (d) on and after
January 19, 2000 and prior to February 2, 2000, $3,600,000 (of which $600,000
represents a ratable portion of the Permitted Overadvance Fee); (e) on and after
February 2, 2000 and prior to February 16, 2000, $4,200,000 (of which $700,000
represents a ratable portion of the Permitted Overadvance Fee); (f) on and after
February 16, 2000 and prior to June 30, 1999, $4,800,000 (of which $800,000
represents a ratable portion of the Permitted Overadvance Fee); and (f) on and
after July 1, 2000, zero dollars; provided, however, that, at any time prior to
the date of the mandatory reduction in the Permitted Overadvance Amount as set
forth above, Borrower may prepay all or part of the outstanding amount of any
Overadvance without penalty (except as otherwise provided in Section 2.10(f)
with respect to the Permitted Overadvance Fee), and on and after the date of any
such prepayment, the Permitted Overadvance Amount shall be permanently reduced
by an amount equal to any such prepayment amount.
"Required Pay-Down Date" means June 30, 2000, or, if Borrower shall have
entered into binding agreements for Permitted Dispositions of Collateral, in
each instance satisfactory to Foothill in its reasonable discretion (including,
without limitation, providing for the payment to Borrower or into escrow in
connection therewith of earnest money (in the form of cash deposits or an
equivalent acceptable to Foothill refundable only on conditions reasonably
acceptable to Foothill) in an amount equal to or greater than 5% of the gross
sales price of the Collateral subject thereto) and in an aggregate amount
sufficient to reduce the aggregate amount
3
<PAGE> 4
of the Obligations outstanding to not more than $10,000,000 on or before August
31, 2000, then August 31, 2000.
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:
"Required Amount" means the greater of (i) an amount equal to 75% of the
Net Cash Proceeds received by Borrower in connection with such Permitted
Disposition, (ii) an amount equal to 125% of the net book value (as of the most
recently completed fiscal quarter) of the Equipment or Real Property that is the
subject of such Permitted Disposition, or (iii) if the Equipment or Real
Property that is the subject of the Permitted Disposition is a FunCenter or
other operating unit of Borrower, an amount equal to 3 times the Operating Cash
Flow (prior to any overhead allocation and for the 12 months ended as of
Borrower's most recently completed fiscal quarter) of such FunCenter or other
operating unit (or such other lesser amount as shall be consented to by Foothill
in writing in connection therewith); provided, however, that anything contained
in the forgoing to the contrary notwithstanding, (a) the Required Amount in
connection with the Permitted Disposition of Borrower's FunCenter located in
Redwood City, California shall be equal to or greater than $6,000,000; (b) the
Required Amount in connection with the Permitted Disposition of Borrower's
FunCenter known as Miami Castle shall be equal to or greater than $4,149,000;
(c) the Required Amount in connection with the Permitted Disposition of
Borrower's FunCenter known as Columbus MEI shall be equal to or greater than
$1,870,500; (d) the Required Amount in connection with the Permitted Disposition
of Borrower's FunCenter known as Atlanta Speedzone shall be equal to or greater
than $2,909,500; (e) the Required Amount in connection with the Permitted
Disposition of Borrower's FunCenter known as Spartanburg MEI shall be equal to
or greater than $523,000; (f) the Required Amount in connection with the
Permitted Disposition of Borrower's FunCenter known as Tampa Complex shall be
equal to or greater than $2,344,500; (g) the Required Amount in connection with
the Permitted Disposition of Borrower's Real Property known as Arlington raw
land shall be equal to or greater than $725,500; (h) the Required Amount in
connection with the Permitted Disposition of Borrower's Real Property known as
Charlotte raw land shall be equal to or greater than $530,000; and (i) the
aggregate minimum combined Required Amounts for the properties covered by
clauses (b) through (h), inclusive, above, shall be equal to or greater than
$13,052,000.
"Term Loans" shall mean Term Loan A.
c. Section 1.1 of the Loan Agreement hereby is amended by deleting
each of the following definitions in their entirety:
"Average Unused Portion of the Term Loan A Commitment"
"Term Loan A Commitment"
"Term Loan A Repayment Date"
"Term Loan B"
4
<PAGE> 5
"Term Loan B Commitment"
d. Subsections 2.1(a) and (b) of the Loan Agreement hereby are
amended and restated in their entirety, and a new subsection (d)
is hereby added to Section 2.1 of the Loan agreement, as follows:
2.1 ADVANCES.
(a) Subject to the terms and conditions of this Agreement, Foothill agrees
to make advances ("Advances") to Borrower in an amount at any one time
outstanding not to exceed the Maximum Revolving Amount plus the then applicable
Permitted Overadvance Amount.
(b) Amounts borrowed pursuant to this Section 2.1 may be repaid at any time
without penalty. Once repaid, Advances may not be reborrowed.
(c) From and after the Ninth Amendment Closing Date and until June 30,
2000, subject to the terms and conditions of this Agreement, Foothill commits to
make Overadvances to Borrower at any time up to the Permitted Overadvance Amount
in the aggregate, which Overadvances shall be funded automatically as they
become available (e.g. $1,500,000 of cash plus $300,000 of related accrued fee
on the Ninth Amendment Closing Date, $500,000 of cash plus $100,000 of related
accrued fee on December 29, 1999, etc.).
e. Section 2.2 of the Loan Agreement hereby is amended and restated
in its entirety as follows:
2.2 TERM LOAN. (a) On the Closing Date, a portion of the Existing Loans
shall be converted into a term loan (the "Term Loan A") in the original
principal amount of $12,500,000. The outstanding principal balance and all
accrued and unpaid interest under Term Loan A shall be due and payable upon the
earlier of (i) the Maturity Date, or (ii) the date of termination of this
Agreement, whether by its terms, by prepayment, by acceleration, or otherwise.
The unpaid principal balance of Term Loan A may be prepaid in whole or in part
without penalty or premium (except to the extent, if any, that the Exit Fee or
Early Termination Premium may be applicable) at any time during the term of this
Agreement upon 15 days prior written notice by Borrower to Foothill; provided,
however, that, any prepayment of Term Loan A shall be deemed to constitute and
shall result in a permanent reduction of the principal amount of Term Loan A.
All amounts outstanding under Term Loan A shall constitute Obligations.
f. Section 2.3 of the Loan Agreement hereby is amended and restated
in its entirety as follows:
2.3 [INTENTIONALLY OMITTED.]
g. Section 2.4 of the Loan Agreement hereby is amended and restated
in its entirety as follows:
5
<PAGE> 6
2.4 OVERADVANCES. If, at any time or for any reason, the amount of
Obligations owed by Borrower to Foothill pursuant to Section 2.1 is greater than
the Dollar limitations set forth in Section 2.1 less (without duplication) any
applicable reserves (any such excess, an "Overadvance") by an amount greater
than the then applicable Permitted Overadvance Amount, Borrower immediately
shall pay to Foothill, in cash, the amount of such excess to be used by Foothill
to repay Advances outstanding under Section 2.1.
h. Subsections 2.5(a), (b), and (c) of the Loan Agreement hereby are
amended and restated in their entirety as follows:
2.5 INTEREST: RATES, PAYMENTS, AND CALCULATIONS.
(a) Interest Rate. Except as provided in clause (b) below, (i) prior to the
Permanent Reduction Date, all Obligations shall bear interest at a per annum
rate of 3.0 percentage points above the Reference Rate, and (ii) on and after
the Permanent Reduction Date, all Obligations shall bear interest at a per annum
rate of 2.0 percentage points above the Reference Rate.
(b) Default Rate. From and after and during the continuation of an Event of
Default, all Obligations shall bear interest at a per annum rate equal to 6.0
percentage points above the Reference Rate.
(c) Minimum Interest. In no event shall the rate of interest chargeable
hereunder for any day be less than 8.5% per annum. To the extent that interest
accrued hereunder at the rate set forth herein would be less than the foregoing
minimum daily rate, the interest rate chargeable hereunder for such day
automatically shall be deemed increased to the minimum rate.
i. Subsections 2.10(b) and (c) of the Loan Agreement hereby are
amended and restated in their entirety as follows:
(b) [Intentionally omitted.]
(c) Unused Commitment Fee. On the first day of each month during the term
of this Agreement, an unused commitment fee in an amount equal to 0.5% per annum
times the Average Unused Portion of the Maximum Revolving Amount (provided that
this fee does not apply with respect to any Overadvance);
j. Section 2.10 of the Loan Agreement hereby is amended by deleting
the "and" at the end of existing subsection (d), replacing the
period at the end of existing subsection (e) with "; and" and
amending and restating existing subsection (f) in its entirety as
follows:
(f) Permitted Overadvance Fee: In connection with the Ninth Amendment, a
fee of $800,000 shall be payable by Borrower to Foothill as follows: On the
Ninth Amendment Closing Date, $300,000 of such fee shall accrue and be charged
to Borrower's Loan Account. On December 29, 1999, $100,000 of such fee shall
accrue and be charged to Borrower's Loan Account. On January 5, 2000, $100,000
of such fee shall accrue and be charged to Borrower's
6
<PAGE> 7
Loan Account. On January 19, 2000, $100,000 of such fee shall accrue and be
charged to Borrower's Loan Account. On February 2, 2000, $100,000 of such fee
shall accrue and be charged to Borrower's Loan Account. On February 16, 2000,
$100,000 of such fee shall accrue and be charged to Borrower's Loan Account. The
foregoing notwithstanding, the entire $800,000 of such fee shall be fully earned
and non-refundable as of the Ninth Amendment Closing Date without regard to
whether Borrower ever fully utilizes the entire Overadvance provided for by the
Ninth Amendment. In the event of any termination of this Agreement prior to the
date that the full amount of such fee has accrued as set forth above, or in the
event that the maturity of the Obligations is accelerated or the Obligations are
prepaid in full prior to the date that the full amount of such fee has accrued
as set forth above, then, in any such event, the full amount of such fee
immediately shall accrue and shall be due and payable on such date.
k. Section 2.12 of the Loan Agreement hereby is amended and restated
in its entirety as follows:
2.12 MANDATORY PREPAYMENTS AND COMMITMENT REDUCTIONS.
(a) On or before the Required Pay-Down Date, Borrower shall:
(i) repay the Permitted Overadvance Amount outstanding as of the date
of any such repayment from the Net Cash Proceeds of any Permitted
Dispositions of the Collateral in an amount equal to the Required Amount
applicable thereto, and the amount so prepaid shall permanently reduce the
Permitted Overadvance Amount; and
(ii) if the Permitted Overadvance Amount has been repaid in full
pursuant to clause (i) above, repay Term Loan A from the Net Cash Proceeds of
any Permitted Dispositions of the Collateral in an amount equal to the
Required Amount applicable thereto (or the balance remaining after the
repayment of the Permitted Overadvance Amount pursuant to clause (i) above,
as applicable) sufficient to reduce the aggregate amount of the Obligations
outstanding to not more than $10,000,000, and the amount so prepaid shall
permanently reduce Term Loan A; and
(iii) if the Permitted Overadvance Amount and Term Loan A have been
repaid or prepaid in full pursuant to clauses (i) and (ii) above and the
aggregate amount of the Obligations outstanding remains in excess of
$10,000,000, then repay the Advances made by Foothill to Borrower under
Section 2.1 from the Net Cash Proceeds of any such Permitted Dispositions of
the Collateral in an amount equal to the Required Amount applicable thereto
(or the balance remaining after the prepayment of the Permitted Overadvance
Amount and Term Loan A pursuant to clauses (i) and (ii) above) sufficient to
reduce the aggregate amount of the Obligations outstanding to not more than
$10,000,000, and the amount so prepaid automatically shall permanently reduce
the Maximum Revolving Amount, on a dollar-for-dollar basis.
(b) Thereafter, immediately upon receipt by Borrower of Net Cash Proceeds
of any Permitted Disposition (other than an Ordinary Course Disposition),
Borrower shall:
7
<PAGE> 8
(i) prepay the Permitted Overadvance Amount outstanding (if any) as of
the date of any such repayment in an amount equal to the Required Amount
applicable to such Permitted Disposition and the amount so prepaid shall
permanently reduce the Permitted Overadvance Amount; and
(ii) if the Permitted Overadvance Amount outstanding (if any) has been
repaid in full pursuant to clause (i) above or otherwise, prepay Term Loan A
in an amount equal to the Required Amount applicable to such Permitted
Disposition (or the balance remaining after the repayment of the Permitted
Overadvance Amount outstanding pursuant to clause (i) above, as applicable)
and the amount so prepaid shall permanently reduce Term Loan A; and
(iii) if the Permitted Overadvance Amount outstanding (if any) and
Term Loan A have been repaid or prepaid in full pursuant to clauses (i) and
(ii) above, prepay the Advances made by Foothill to Borrower under Section
2.1 in an amount equal to the Required Amount applicable to such Permitted
Disposition (or the balance remaining after the prepayment of the Permitted
Overadvance Amount outstanding and Term Loan A pursuant to clauses (i) and
(ii) above, as applicable), and the amount so prepaid automatically shall
permanently reduce the Maximum Revolving Amount, on a dollar-for-dollar
basis.
(c) On the date on which the remaining aggregate amount of the Obligations
outstanding, after giving effect to any repayments or prepayments made in
accordance with this Section 2.12 or otherwise, shall be $3,750,000 or less,
then Borrower shall repay the entire remaining outstanding amount of the
Obligations in full, in cash.
l. Section 3.2 of the Loan Agreement hereby is amended and restated
in its entirety as follows:
3.2 [INTENTIONALLY OMITTED.]
m. Section 3.9 of the Loan Agreement hereby is amended and restated
in its entirety as follows:
3.9 [INTENTIONALLY OMITTED.]
n. The following new Section 6.16 hereby inserted in its entirety
immediately following existing Section 6.15 of the Loan
Agreement:
6.16 ENVIRONMENTAL TESTING. At any time that Borrower elects to obtain
same, Borrower shall deliver updated phase-I environmental reports and real
estate surveys to Foothill with respect to the Real Property Collateral or any
portion thereof. Once a year, at Borrower's expense, Foothill may cause its
environmental consultant to review any environmental reports, records or real
estate surveys held by Borrower with respect to the Real Property Collateral or
any portion thereof, to advise Foothill of their contents or adequacy.
8
<PAGE> 9
o. The following new subsection 7.19(e) hereby inserted in its
entirety immediately following existing subsection 7.19(d) of the
Loan Agreement:
(e) Minimum EBITDA. EBITDA, on a consolidated basis, as of the last day of
each 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 EBITDA
------------- --------------
<S> <C>
6/30/2000 and each period thereafter To be determined by Foothill on or before
2/28/2000 on the basis of Borrower's
projections to be delivered
to Foothill on or before 1/31/2000.
</TABLE>
2. Condition 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 (except for (b), which, if
not fulfilled by the date required below, shall result in an Event of Default),
each of which (except for (b)) is a condition precedent:
a. Foothill shall have received the portion of the Permitted
Overadvance fee that accrues on the Ninth Amendment Closing Date
(which may be effected by charging Borrower's Loan Account, which
Borrower hereby authorizes).
b. Within 30 days after the Ninth Amendment Closing Date, Foothill,
Borrower, and all other necessary Persons shall have entered into
bailee agreements together with any such other documents,
instruments, financing statements and agreements as Foothill
shall require to evidence Foothill's security interest in
Borrower's thirty five (35) Top Eliminator lanes currently
located in the State of Utah, or wherever elsewhere located.
c. On or before the date hereof, Foothill shall have received a
certificate of the Assistant 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;
d. 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
9
<PAGE> 10
date hereof as though made on such date (except to the extent
that such representations and warranties relate solely to an
earlier date);
e. 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;
f. 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;
g. 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;
h. SZ Capital shall have funded the remainder of its commitment
(approximately $1,300,000) to purchase shares of preferred stock
of MEWI; and
i. 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. 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.
4. 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.
5. 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
10
<PAGE> 11
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
Foothill under the Loan Agreement, as in effect prior to the date hereof.
6. 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]
11
<PAGE> 12
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:
----------------------------------
Name:
Title:
FOOTHILL CAPITAL CORPORATION,
a California corporation
By:
----------------------------------
Name:
Title:
12
<PAGE> 1
EXHIBIT 10.25
AMENDMENT NUMBER TEN TO CONSOLIDATED, AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NUMBER TEN TO CONSOLIDATED, AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT (this "Amendment"), is entered into as of February 9, 2000,
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> 2
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 amend the Loan Agreement to specify the
levels of Minimum EBITDA required to be maintained by Borrower as
contemplated by Amendment Number Nine to the Loan Agreement entered into as
of December 21, 1999.
C. Foothill is willing to so amend the Loan Agreement in accordance with the
terms and conditions hereof.
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:
"Tenth Amendment" means that certain Amendment Number Ten to
Consolidated, Amended, and Restated Loan and Security Agreement, dated as of
February 9, 2000.
2
<PAGE> 3
"Tenth Amendment Closing Date" means the date on which each of
the conditions precedent set forth in Section 2 of the Tenth Amendment are
satisfied in full.
b. Subsection 7.19(e) of the Loan Agreement hereby is amended
and restated in its entirety to read as follows:
(e) Minimum EBITDA. EBITDA, on a consolidated basis, as of the last day
of each 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 EBITDA
------------- --------------
<S> <C>
6/30/00 $350,000
9/30/00 $1,625,000
12/31/00 $775,000
3/31/2001 and each period thereafter To be determined by Foothill on
or before 2/28/2001 on the basis of
Borrower's projections to be delivered
to Foothill on or before 1/31/2001.
</TABLE>
2. Condition 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 precedent:
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; and
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.
3
<PAGE> 4
3. 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.
4. 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.
5. 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 Foothill under the Loan Agreement,
as in effect prior to the date hereof.
6. 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, the Seventh Amendment, the Eighth
Amendment, the Ninth 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,
the Eighth Amendment, the Ninth Amendment, and this
Amendment.
c. This Amendment shall be governed by and construed in
accordance with the laws of the State of California.
4
<PAGE> 5
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> 6
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:
------------------------------------
Name:
Title:
FOOTHILL CAPITAL CORPORATION,
a California corporation
By:
------------------------------------
Name:
Title:
6
<PAGE> 1
EXHIBIT 10.26
AMENDMENT NUMBER ELEVEN TO CONSOLIDATED, AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NUMBER ELEVEN TO CONSOLIDATED, AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT (this "Amendment"), is entered into as of
March 22, 2000, 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
<PAGE> 2
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, 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 amend the Loan Agreement to permit
the disposition by Borrower of certain assets (the McAllen and North
Richland parks), to agree on the application of the proceeds of those
asset dispositions, and to modify the levels of Adjusted Net Worth
required to be maintained by Borrower.
C. Foothill is willing to so amend the Loan Agreement in accordance with
the terms and conditions hereof.
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:
2
<PAGE> 3
"Eleventh Amendment" means that certain Amendment Number
Eleven to Consolidated, Amended, and Restated Loan and Security Agreement, dated
as of March 22, 2000.
"Eleventh Amendment Closing Date" means the date on which each
of the conditions precedent set forth in Section 2 of the Eleventh Amendment are
satisfied in full.
b. Subsection 7.19(c) of the Loan Agreement hereby is
amended and restated in its entirety to read as
follows:
(c) Minimum Adjusted Net Worth. Adjusted Net Worth of at least
the amount shown below as of the corresponding dates set forth below:
<TABLE>
<CAPTION>
Period Ending Minimum Adjusted Net Worth
------------- --------------------------
<S> <C>
12/31/99 $23,000,000
3/31/2000 $17,500,000
6/30/2000 $16,750,000
9/30/2000 $16,000,000
12/31/2000 $14,250,000
3/31/2001 $12,000,000
6/30/2001 $11,500,000
</TABLE>
c. Section 7.4 of the Loan Agreement hereby is amended to
add the following sentence at the end thereof: "The
foregoing notwithstanding, Borrower may dispose of
those certain assets consisting of its limited
partnership interest in the North Richland Hills park
and settlement of the related construction note
receivable, and the assets relating to the McAllen
park, in accordance with the terms of that certain
letter dated March 8, 2000 from Borrower to Foothill
with respect to North Richland Hills, and in accordance
with the terms of that certain letter dated February
22, 2000 from Borrower to Foothill with respect to
McAllen, provided that the combined gross proceeds from
such dispositions shall total at least $258,242 and
shall be applied such that Foothill will receive 70% of
such proceeds, but in any event not less than $180,000,
to be applied as a permanent paydown of the Term Loans,
with the Borrower being entitled to retain the
3
<PAGE> 4
balance of such proceeds to be used for general working
capital purposes."
2. Condition 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 precedent:
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; and
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. Payment to Foothill in cash of a non-refundable and
fully-earned amendment fee of $5,000.
3. 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.
4. 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.
5. 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
4
<PAGE> 5
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
Foothill under the Loan Agreement, as in effect prior to the date hereof.
6. 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,
the Seventh Amendment, the Eighth Amendment, the Ninth
Amendment, the Tenth 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, the Eighth
Amendment, the Ninth Amendment, the Tenth 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> 6
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:
--------------------------
Name:
Title:
FOOTHILL CAPITAL CORPORATION,
a California corporation
By:
--------------------------
Name:
Title:
6
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES
Amusement Management Florida, Inc., a Florida 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 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 true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, for him and in his 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,a nd 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 might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or any of them, or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
/s/ Richard N. Beckert March 30, 2000
- -------------------------------------
Richard N. Beckert
/s/ Robert A. Whitman March 30, 2000
- -------------------------------------
Robert A. Whitman
/s/ Richard M. FitzPatrick March 30, 2000
- -------------------------------------
Richard M. FitzPatrick
/s/ Daniel A. Decker March 30, 2000
- -------------------------------------
Daniel A. Decker
/s/ James T. Hands March 30, 2000
- -------------------------------------
James T. Hands
/s/ William M. Kearns, Jr. March 30, 2000
- -------------------------------------
William M. Kearns, Jr.
/s/ Steven D. Scheetz March 30, 2000
- -------------------------------------
Steven D. Scheetz
/s/ Bert W. Wasserman March 30, 2000
- -------------------------------------
Bert W. Wasserman
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,873,074
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 1,066,042
<CURRENT-ASSETS> 19,817,211
<PP&E> 38,915,251<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 61,000,874
<CURRENT-LIABILITIES> 19,054,702
<BONDS> 12,616,666
0
91,140,178
<COMMON> 145,745,010
<OTHER-SE> (212,840,941)
<TOTAL-LIABILITY-AND-EQUITY> 61,000,874
<SALES> 41,601,482
<TOTAL-REVENUES> 42,286,431
<CGS> 0
<TOTAL-COSTS> 49,296,487
<OTHER-EXPENSES> 44,573,698
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,226,186
<INCOME-PRETAX> (58,809,940)
<INCOME-TAX> 0
<INCOME-CONTINUING> (58,809,940)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,809,940)
<EPS-BASIC> (1.26)
<EPS-DILUTED> (1.26)
<FN>
<F1>PP & E is net of Accumulated Depreciation
</FN>
</TABLE>
