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EXHIBIT 10.24
LOAN AGREEMENT
THIS LOAN AGREEMENT (as amended, restated, replaced, supplemented or
otherwise modified from time to time, this "AGREEMENT") is dated as of November
16, 1998 by and between SZ CAPITAL, L.P., a Delaware limited partnership
("LENDER"), and MALIBU ENTERTAINMENT WORLDWIDE, INC., a Georgia corporation
("BORROWER").
Certain capitalized terms used herein shall have the respective
meanings as ascribed thereto as set forth in Article I hereof.
RECITALS:
A. Borrower may, in its sole discretion, request Lender to loan funds
to Borrower from time to time and Lender may, in its sole discretion, agree to
loan such funds to Borrower.
B. In the event such funds are loaned by Lender to Borrower, the
parties desire to set forth certain terms and conditions governing such loans in
this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the covenants, agreements,
representations and warranties set forth in this Agreement, the parties hereto
hereby covenant, agree, represent and warrant as follows:
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
SECTION 1.1 DEFINITIONS. For all purposes of this Agreement, except
as otherwise expressly required or unless the context clearly indicates a
contrary intent:
"ADDITIONAL SHARES" shall have the meaning set forth in Section
8.7(b).
"ADVANCE" shall mean each advance of the Loan.
"ADVANCE REQUEST" shall have the meaning set forth in Section
3.1(a).
"AFFILIATE" shall mean, as to any Person, any other Person that,
directly or indirectly, is in control of, is controlled by or is under common
control with such Person or is a director or executive officer of such Person.
"APPLICABLE INTEREST RATE" shall mean a rate equal to ten percent
(10%) per annum, compounded annually.
"BANKRUPTCY CODE" shall mean Title 11 of the United States Code, as
amended.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
any other day on which national banks in Dallas, Texas are not open for
business.
"CERTIFICATE OF DESIGNATIONS" shall mean that certain
Certificate of Designations relating to the Series E Preferred Stock that is
attached as Exhibit "A" hereto and is made a part hereof for all purposes.
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"CLOSING DATE" shall mean the date hereof.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and
as it may be further amended from time to time, any successor statutes thereto,
and applicable U.S. Department of Treasury regulations issued pursuant thereto
in temporary or final form.
"CONVERSION DATE" shall have the meaning set forth in Section 8.2.
"CONVERSION NOTICE" shall have the meaning set forth in Section 8.2.
"CONVERSION RIGHT" shall have the meaning set forth in Section 8.1.
"DEBT" shall mean the outstanding principal amount set forth in, and
evidenced by, the Note together with all interest accrued and unpaid thereon and
all other sums due to Lender in respect of the Loan under the Note, this
Agreement, or any other Loan Documents.
"DEFAULT" shall mean the occurrence of any event which, but for the
giving of notice or the passage of time, or both, would constitute an Event of
Default.
"DEFAULT RATE" shall mean, with respect to the Loan, a rate per
annum (adjusted monthly on each Determination Date (as defined in the Note))
equal to the lesser of eighteen percent (18%) per annum and the maximum rate
permitted by applicable law.
"DISCLOSURE DOCUMENT" shall mean any publicly available filing
regarding Borrower made by Borrower under the Exchange Act, including, without
limitation, Borrower's Form 10-Q Quarterly Report filed with the SEC on November
16, 1998.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"EVENT OF DEFAULT" shall have the meaning set forth in Section
7.1.1.
"EXCHANGE ACT" shall mean the Securities and Exchange Act of 1934,
as amended.
"FINANCING PERIOD" shall have the meaning set forth in Section 2.1.
"FISCAL YEAR" shall mean each twelve month period commencing on
January 1 and ending on December 31 during the term of the Loan.
"FOOTHILL CONSENT" shall mean the written consent of Foothill
Capital Corporation to the Loan and the other transactions contemplated by this
Agreement, in form and substance acceptable to Lender in its sole and absolute
discretion.
"FOOTHILL LOAN" shall mean the indebtedness of Borrower described in
that certain Consolidated, Amended and Restated Loan and Security Agreement
dated as of August 22, 1996 by and between Borrower, various Subsidiaries of the
Borrower and Foothill Capital Corporation, as the same may be increased,
amended, restated, replaced, supplemented or otherwise modified from time to
time.
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"FOOTHILL SUBORDINATION AGREEMENT" shall mean that certain
Subordination Agreement of even date herewith by and among Lender, Borrower and
Foothill Capital Corporation.
"GAAP" shall mean generally accepted accounting principles in the
United States of America, consistently applied.
"GOVERNMENTAL AUTHORITY" shall mean any court, body, board, agency,
commission, office or authority of any nature whatsoever for any governmental or
regulatory xxxx (xxxxxxx, xxxxx, xxxxxx, xxxxxxxx, xxxxxxxxx, xxxx or otherwise)
whether now or hereafter in existence.
"INVESTMENT BANKER" shall have the meaning set forth in Section
5.1.11.
"JUNIOR STOCK" shall mean any class or series of preferred or other
capital stock of Borrower other than the Series E Preferred Stock.
"LIEN" shall mean any mortgage, deed of trust, lien, pledge,
hypothecation, assignment, security interest, or any other encumbrance, charge
or transfer of, on or affecting Borrower or any of its properties or assets,
including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, the filing of any financing statement, and mechanic's,
materialmen's and other similar liens and encumbrances.
"LOAN" shall mean, in the aggregate, the Advances made by Lender to
Borrower, as set forth in, and evidenced by, the Note and the other Loan
Documents.
"LOAN DOCUMENTS" shall mean, collectively, this Agreement, the Note
and any other document executed and/or delivered by Borrower in connection with
the Loan.
"MATERIAL ADVERSE CHANGE" shall mean a material adverse change in
any of the following (i) the condition (financial or otherwise), business,
performance, operations or properties of Borrower and its Subsidiaries, taken as
a whole, (ii) the legality or validity of any Loan Documents, or (iii)
Borrower's ability to pay the Debt in accordance with the terms hereof and
otherwise substantially comply with the material terms of this Agreement.
"MATURITY DATE" shall mean the date on which the final payment of
principal of the Note becomes due and payable as therein provided, whether at
the Stated Maturity, by declaration of acceleration, or otherwise.
"MAXIMUM LOAN AMOUNT" shall have the meaning set forth in Section
2.1.
"MEI HOLDINGS LOANS" shall mean the indebtedness of Borrower
evidenced by, collectively, (i) that certain Second Amended and Restated
Subordinated Promissory Note dated as of March 27, 1998 executed by Borrower and
made payable to the order of MEI Holdings, L.P. in the original principal sum of
up to $65,000,000, and (ii) that certain Amended and Restated Promissory Note
dated as of March 27, 1998 executed by Borrower and made payable to the order of
MEI Holdings, L.P. in the original principal sum of up to $10,000,000, as each
may be increased, amended, restated, replaced, supplemented or otherwise
modified from time to time.
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"MEI HOLDINGS SUBORDINATION AGREEMENT" shall mean that certain
Subordination Agreement of even date herewith by and between Borrower and MEI
Holdings, L.P.
"NOTE" shall mean that certain Subordinated Convertible Promissory
Note dated as of the date hereof, made by Borrower in favor of Lender in the
original principal sum of up to $30,000,000, as the same may be increased,
amended, restated, replaced, supplemented or otherwise modified from time to
time, and all notes issued upon transfer, division or combination of, or in
substitution for, the Note
"OBLIGATIONS" shall mean any and all debt, liabilities and
obligations of Borrower to Lender in connection with the Loan, including,
without limiting the generality of the foregoing, the Debt.
"OFFICERS' CERTIFICATE" shall mean a certificate delivered to Lender
by Borrower which is signed by any authorized senior officer of the Borrower.
"OTHER PROPERTY" shall have the meaning set forth in Section 8.8.
"PERSON" shall mean any individual, corporation, partnership,
limited liability company, joint venture, estate, trust, unincorporated
association, any federal, state, county or municipal government or any bureau,
department or agency thereof and any fiduciary acting in such capacity on behalf
of any of the foregoing.
"SEC " shall mean the U.S. Securities Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SERIES E PREFERRED STOCK" shall mean the preferred stock of the
Borrower having the terms set forth in the Certificate of Designations attached
as Exhibit "A" and made a part hereof for all purposes.
"STATED MATURITY" shall mean August 31, 2001.
"STOCK EXCHANGE" shall mean the principal national securities
exchange on which the shares of common stock of Borrower are listed or admitted
to trading or, if the shares are not listed or admitted to trading on any
national securities exchange, the National Association of Securities Dealers,
Inc. Automated Quotation System or any similar national system on which the
common stock is quoted or traded.
"SUBSIDIARIES" shall mean any corporation, limited liability
company, partnership or other entity whose outstanding equity interests are
owned 50% or more by Borrower, by Borrower and one or more Subsidiaries or by
one or more Subsidiaries or which is otherwise controlled directly or indirectly
by Borrower to the extent necessary to require consolidation of its annual
statements with those of Borrower for financial reporting purposes in accordance
with GAAP.
SECTION 1.2 PRINCIPLES OF CONSTRUCTION. All references to sections,
schedules and exhibits are to sections, schedules and exhibits in or to this
Agreement unless otherwise specified. Unless otherwise specified, the words
"hereof," "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any
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particular provision of this Agreement. Unless otherwise specified, all meanings
attributed to defined terms herein shall be equally applicable to both the
singular and plural forms of the terms so defined.
II. GENERAL TERMS
SECTION 2.1 ADVANCES. From and including the Closing Date until
the date that its thirty (30) days prior to the Maturity Date (the "FINANCING
PERIOD"), subject to and upon the terms and conditions set forth herein, Lender
may, in its sole and absolute discretion, make one or more Advances to Borrower
pursuant to this Agreement; provided, however, that (1) Lender will have no
obligation to make any such Advances under any circumstances, (2) the making of
any such Advances will not obligate Lender to make any further Advances, and (3)
in no event will Lender make Advances totaling in excess of $30,000,000 (the
"MAXIMUM LOAN AMOUNT") to Borrower hereunder.
SECTION 2.2 THE NOTE. The Loan shall be evidenced by the Note of
Borrower. The Loan shall bear interest and shall be subject to repayment as
provided in the Note and in Section 2.4 hereof. The holder of the Note shall be
entitled to the benefits of this Agreement.
SECTION 2.3 USE OF PROCEEDS. Borrower shall use the proceeds of
the Loan solely to fund its working capital requirements and to repay
indebtedness of the Borrower or any Subsidiaries thereof, the proceeds of which
were used by Borrower or such Subsidiaries solely to fund the working capital
requirements of the Borrowers or such Subsidiaries (if applicable).
SECTION 2.4 LOAN REPAYMENT AND PREPAYMENT. Borrower shall repay
any outstanding principal indebtedness of the Loan in full on the Maturity Date
of the Loan, together with interest thereon at the Applicable Interest Rate up
to (but excluding) the date of repayment. Borrower may, at its option and upon
ten (10) Business Days' prior written notice from Borrower to Lender, prepay the
Debt in whole or in part without payment of any other premium or penalty.
SECTION 2.5 RECOURSE. The Obligations are full recourse
obligations of Borrower.
SECTION 2.6 DEFAULT RATE. Borrower agrees that upon the
occurrence of an Event of Default, Lender shall be entitled to receive, and
Borrower shall pay to Lender, interest on the entire unpaid principal sum of the
Loan and any other amounts due at the Default Rate. Interest at the Default
Rate, to the extent not paid, shall be added to the Debt. This Section, however,
shall not be construed as an agreement or privilege to extend the date of
payment of the Debt, nor as a waiver of any other right or remedy accruing to
Lender by reason of the occurrence of any Event of Default. Lender retains its
rights under the Loan Documents to accelerate and to continue to demand payment
of the Debt upon the occurrence of any Event of Default.
SECTION 2.7 PAYMENTS AND COMPUTATIONS.
2.7.1 MAKING OF PAYMENTS. Each payment by Borrower hereunder or
under the Note shall be made in immediately available funds by 11:00 a.m.,
Dallas, Texas time, on the date such payment is due, to Lender by deposit to a
bank account specified by Lender from time to time in writing. Whenever any
payment hereunder or under the Note shall be stated to be due on a day which is
not a Business Day, such payment shall be made on the first Business Day
thereafter.
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2.7.2 COMPUTATIONS. Interest payable hereunder or under the Note
shall be computed on the basis of the actual number of days elapsed based upon a
360-day year.
SECTION 2.8 RANKING AND SUBORDINATION. The Debt will rank senior
to the MEI Holdings Loans as set forth in the MEI Holdings Subordination
Agreement and the Debt will rank junior to the Foothill Loan as set forth in the
Foothill Subordination Agreement.
III. CONDITIONS PRECEDENT
SECTION 3.1 CONDITIONS PRECEDENT TO EACH ADVANCE. Without
limiting the Lender's ability to require Borrower to satisfy other conditions in
Lender's sole and absolute discretion, Lender's willingness to make each Advance
hereunder may be conditioned upon the fulfillment by Borrower or waiver by
Lender of the following conditions precedent no later than the date such Advance
is requested:
(a) Advance Request. Borrower shall have delivered to Lender a
written request for the Advance (such request, the "ADVANCE REQUEST"). The
Advance Request shall indicate the proposed amount of the Advance requested by
Borrower and the date on which Borrower requests Lender to make the Advance. In
the event Lender requires a specific written form of the Advance Request,
Borrower agrees to use such reasonable form proposed by Lender.
(b) Representations and Warranties; Compliance with Conditions.
The representations and warranties of Borrower contained in this Agreement and
the other Loan Documents shall be true and correct in all material respects on
and as of the Closing Date with the same effect as if made on and as of such
date, and no Default or Event of Default shall have occurred and be continuing;
and Borrower shall be in compliance in all material respects with all terms and
conditions set forth in this Agreement and in each other Loan Document on its
part to be observed or performed and no Material Adverse Change shall have
occurred.
(c) Agreement and Note. Lender shall have received a copy of this
Agreement and the Note, in each case duly executed and delivered on behalf of
Borrower.
(d) Related Documents. The MEI Holdings Subordination Agreement,
the Foothill Subordination Agreement, the Foothill Consent and each additional
document not specifically referenced herein, but requested by Lender and
relating to the transactions contemplated herein, shall have been duly
authorized, executed and delivered by all parties thereto and Lender shall have
received and approved originals thereof.
(e) Delivery of Organizational Documents. Borrower shall have
delivered or caused to be delivered to Lender certified copies of all such
organizational documentation related to Borrower as Lender may request in its
sole discretion, including, without limitation, such good standing certificates,
qualifications to do business in the appropriate jurisdictions, resolutions
authorizing the entering into of the Loan and incumbency certificates as may be
requested by Lender.
(f) Completion of Proceedings. All corporate consents,
resolutions and other proceedings taken or to be taken in connection with the
transactions contemplated by this Agreement and the other Loan Documents and all
documents incidental thereto shall be
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satisfactory in form and substance to Lender, and Lender shall have received all
such counterpart originals or certified copies of such documents as Lender may
reasonably request.
(g) Financial Statements. Lender shall have received a certified
copy of the Borrower's certified financial statements for such periods as Lender
may request.
(h) Certificates and Legal Matters. Such certificates and
documentation relating to the Advance (including, without limitation, all
corporate and other proceedings) as Lender shall reasonably require, all
documents and all legal matters in connection with the Advance shall be
reasonably satisfactory in form and substance to Lender.
(i) Advance Certificate. Lender shall have received a certificate
(the "ADVANCE CERTIFICATE") executed by an authorized officer, general partner
or managing member of the Borrower, as applicable, certifying, as of the date of
the Advance, as to (i) the matters set forth in this Section 3.1, and (ii) the
principal amount outstanding under the Notes, after taking into account the
requested Advance. In the event Lender requires a specific written form of the
Advance Certificate, Borrower agrees to use such reasonable form proposed by
Lender.
(j) Expenses. Borrower shall have paid all reasonable out of
pocket expenses of the transactions to be consummated on the date of the
Advance, including, without limitation, all reasonable attorneys' fees,
appraisal fees, accounting fees, consultant fees, and other expenses of Lender.
(k) Amendments to Loan Documents. Borrower shall execute such
amendments to the Loan Documents as reasonably requested by Lender, to ensure
that the Loan Documents secure the Loan after giving effect to the requested
Advance, and such amendments shall be in form and substance satisfactory to
Lender.
(l) No Injunction. On the date of the requested Advance, no law
or regulation shall have been adopted, no order, judgment or decree of any
Governmental Authority shall have been issued and no litigation shall be pending
or threatened which, in the good faith judgment of Lender, would enjoin,
prohibit or restrain, or impose or result in the imposition of, any material
adverse condition upon the making or repayment of the Advance or the Loan, or
the consummation of the transactions contemplated by this Agreement or the other
Loan Documents.
(m) Acceptance of Borrowings. The acceptance by Borrower of the
proceeds of the Advance shall constitute a representation and warranty by
Borrower to Lender that all of the conditions to be satisfied under this Section
3.1 in connection with the making of the Advance have been satisfied or waived
by Lender.
(n) Form of Documents and Related Matters. The certificates,
agreements, and other documents and papers referred to in this Section 3.1 shall
be delivered to Lender in form and substance reasonably satisfactory to Lender.
IV. REPRESENTATIONS AND WARRANTIES
SECTION 4.1 BORROWER REPRESENTATIONS. Borrower represents and
warrants as follows as the Closing Date, except as otherwise disclosed in
Borrower's Disclosure Documents:
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(a) Organization. Borrower has been duly organized and is validly
existing and in good standing under the laws of the State of Georgia, with
requisite corporate power and authority to own its properties and to transact
the businesses in which it is now engaged. Borrower is duly qualified to do
business and is in good standing in each jurisdiction where it is required to be
so qualified in connection with its properties, businesses and operations.
Borrower possesses all rights, licenses, permits and authorizations,
governmental or otherwise, necessary to entitle it to own its properties and to
transact the businesses in which it is now engaged.
(b) Proceedings. Borrower has taken all necessary action to
authorize the execution, delivery and performance of this Agreement and the
other Loan Documents. This Agreement and such other Loan Documents have been
duly executed and delivered by or on behalf of Borrower and constitute legal,
valid and binding obligations of Borrower enforceable against Borrower in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization and similar laws affecting rights of creditors
generally and subject, as to enforceability, to general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law).
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the other Loan Documents by Borrower will not conflict with or
result in a breach of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge or
encumbrance (other than pursuant to the Loan Documents) upon any of the property
or assets of Borrower or any Subsidiary pursuant to the terms of any indenture,
mortgage, deed of trust, loan agreement, partnership agreement, operating
agreement or other agreement or instrument to which Borrower or any Subsidiary
is a party or by which any of Borrower's or any Subsidiary's property or assets
is subject, nor will such action result in any violation of the provisions of
any statute or any order, rule or regulation of any Governmental Authority
having jurisdiction over Borrower, any Subsidiary or any of their respective
properties or assets, and any consent, approval, authorization, order,
registration or qualification of or with any Governmental Authority required for
the execution, delivery and performance by Borrower of this Agreement or any
other Loan Documents has been obtained and is in full force and effect.
(d) Litigation. There are no actions, suits or proceedings at law
or in equity by or before any Governmental Authority or other agency now pending
or threatened against or affecting Borrower or any Subsidiary, which actions,
suits or proceedings, if determined against Borrower or any Subsidiary, might
result in a Material Adverse Change.
(e) Agreements. Neither Borrower nor any Subsidiary is a party to
any agreement or instrument or subject to any restriction which might materially
and adversely affect Borrower, any Subsidiary or Borrower's or any Subsidiary's
business, properties or assets, operations or condition (financial or
otherwise). Neither Borrower nor any Subsidiary is in default in any material
respect in the performance, observance or fulfillment of any obligations,
covenants or conditions contained in any agreement or instrument, material to
Borrower or any Subsidiary, to which Borrower or any Subsidiary is a party or by
which Borrower or any Subsidiary is bound.
(f) Full and Accurate Disclosure. No statement of fact made by
Borrower (i) in this Agreement or in any of the other Loan Documents, (ii) in
any Disclosure Document, or (iii) in any written materials relating to the
business, operations or condition (financial or otherwise) of Borrower or any
Subsidiary that have been supplied by or on behalf of Borrower or any Subsidiary
to Lender in connection with the Loan (other than financial projections in
respect of which no representation is made) contains (or, in the case of such
written material, at the time supplied contained) any
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untrue statement of a material fact or omits (or omitted, as the case may be) to
state any material fact necessary to make the statements contained herein or
therein not misleading.
(g) No Plan Assets. Borrower is not an "employee benefit plan"
(as defined in Section 3(3) of ERISA), subject to Title I of ERISA, and none of
the assets of Borrower constitutes or will constitute "plan assets" of one or
more such plans within the meaning of 29 C.F.R. Section 2510.3-101. In addition,
(i) Borrower is not a "governmental plan" within the meaning of Section 3(32) of
ERISA and (ii) transactions by or with Borrower are not subject to state
statutes regulating investments of, and fiduciary obligations with respect to,
governmental plans.
(h) Financial Information.
(i) All financial data, including, without
limitation, the statements of cash flow and income and operating
expense, that have been delivered to Lender in respect of Borrower, (A)
are true, complete and correct in all material respects, (B) accurately
present the financial condition of Borrower as of the date of such
reports, and (C) have been prepared in accordance with GAAP
consistently applied throughout the periods covered, except as
disclosed therein. Borrower does not have any material contingent
liabilities, liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable
commitments that are known to Borrower and reasonably likely to have a
materially adverse effect on Borrower. Since the date of such financial
statements, there has been no materially adverse change in the
financial condition, operations or business of Borrower from that set
forth in such financial statements.
(ii) All federal and state income tax returns have
been filed by Borrower and each Subsidiary and there are no income
taxes due and owing by Borrower or any Subsidiary.
(i) Federal Reserve Regulations. No part of the proceeds of the
Loan will be used for the purpose of purchasing or acquiring any "margin stock"
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System or for any other purpose which would be inconsistent with such
Regulation U or any other Regulations of such Board of Governors, or for any
purposes prohibited by applicable laws or by the terms and conditions of this
Agreement or the other Loan Documents.
(j) Enforceability. The Loan Documents are not subject to any
right of rescission, set-off, counterclaim or defense by Borrower, including the
defense of usury, nor would the operation of any of the terms of the Loan
Documents, or the exercise of any right thereunder, render the Loan Documents
unenforceable except to the extent such unenforceability may be the result of
bankruptcy, insolvency, reorganization or similar laws affecting rights of
creditors generally or general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law), and Borrower has not
asserted any right of rescission, set-off, counterclaim or defense with respect
thereto.
(k) No Outstanding Preferred Stock. There is no issued and
outstanding preferred stock of Borrower of any series.
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SECTION 4.2 SURVIVAL OF REPRESENTATIONS. Borrower agrees that all
of the representations and warranties of Borrower set forth in Section 4.1 and
elsewhere in this Agreement and in the other Loan Documents shall survive for so
long as any Obligations or other amounts remain owing to Lender by Borrower
under this Agreement, the Note or any of the other Loan Documents and thereafter
for so long as any shares of Series E Preferred Stock remain issued and
outstanding. All representations, warranties, covenants and agreements made by
Borrower in this Agreement or in the other Loan Documents shall be deemed to
have been relied upon by Lender notwithstanding any investigation heretofore or
hereafter made by Lender or on its behalf.
V. AFFIRMATIVE COVENANTS
SECTION 5.1 BORROWER COVENANTS. From the date hereof and until
payment and performance in full of all Obligations of, and all other amounts due
and owing by, Borrower under the Loan Documents, Borrower hereby covenants and
agrees with Lender that:
5.1.1 EXISTENCE; COMPLIANCE WITH LAW. Borrower shall (i) do or
cause to be done all things necessary to preserve, renew and keep in full force
and effect its own and each of its Subsidiaries' existence and material rights,
licenses, permits and franchises, and (ii) comply with all laws applicable to it
and each of its Subsidiaries. Borrower shall at all times maintain, preserve and
protect all franchises and trade names and preserve all the remainder of its
property used or useful in, and material to, the conduct of its business, and
from time to time make, or cause to be made, all reasonably necessary repairs,
renewals, replacements, betterments and improvements thereto.
5.1.2 LITIGATION. Borrower shall give prompt written notice to
Lender of any litigation or governmental proceedings pending or threatened
against Borrower or any Subsidiary which might result in a Material Adverse
Change.
5.1.3 NOTICE OF MATERIAL ADVERSE CHANGES AND DEFAULTS. Borrower
shall promptly advise Lender in writing of any Material Adverse Change, Default
or Event of Default of which Borrower has knowledge.
5.1.4 COOPERATION IN LEGAL PROCEEDINGS. Borrower shall cooperate
fully with Lender with respect to any proceedings before any court, board or
other Governmental Authority which may in any way affect the rights of Lender
hereunder or any rights obtained by Lender under any of the other Loan Documents
and, in connection therewith, permit Lender, at its election, to participate in
any such proceedings.
5.1.5 FURTHER ASSURANCES. Borrower shall, at Borrower's sole cost
and expense:
(a) furnish to Lender each and every document, certificate,
agreement and instrument required to be furnished by Borrower pursuant to the
terms of this Agreement or the other Loan Documents or reasonably requested by
Lender in connection therewith;
(b) execute and deliver to Lender such documents, instruments,
certificates, assignments and other writings, and do such other acts necessary
or desirable, to evidence, preserve and/or protect the collateral at any time
securing or intended to secure the obligations of Borrower under the Loan
Documents, as Lender may reasonably require; and
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(c) do and execute, as appropriate, all and such further lawful
and reasonable acts, conveyances and assurances for the better and more
effective carrying out of the intents and purposes of this Agreement and the
other Loan Documents as Lender shall reasonably require from time to time.
5.1.6 FINANCIAL REPORTING.
(a) Borrower will furnish to Lender annually, within 90 days
following the end of each Fiscal Year, financial statements of Borrower for each
such fiscal year, certified by the chief financial officer of Borrower, to have
been prepared in accordance with GAAP, together with a certificate of such
officer, addressed to Lender, stating that, to such officer's knowledge, no
Event of Default is in existence. Such certified financial statements shall
include a balance sheet, profit and loss statement, and statement of cash flow.
(b) Together with the foregoing, Borrower shall also deliver to
Lender (A) Borrower's Form 10-Q Quarterly Reports, Form 10-K Annual Reports, and
Form 8-K Current Reports as filed under the Exchange Act, and any other filings
made by Borrower with the U.S. Securities and Exchange Commission, as soon as
the same are filed, (B) all other information, including financial reports,
provided by Borrower to its Lenders, and (C) any other report reasonably
requested by Lender relating to the financial condition of Borrower and its
Subsidiaries.
5.1.7 ESTOPPEL STATEMENTS. Within ten (10) days after any request
by Lender, Borrower shall furnish Lender with an Officer's Certificate setting
forth (A) the amount of the original principal amount of the Note, (B) the
unpaid principal amount of the Note, (C) the Applicable Interest Rate of the
Note, (D) the date installments of interest and principal were last paid, (E)
any offsets or defenses to the payment of the Debt, if any, and (F) assurances
that the Note, this Agreement and the other Loan Documents are valid, legal and
binding obligations of Borrower and have not been modified or, if modified,
giving particulars of such modification.
5.1.8 LOAN PROCEEDS. Borrower shall use the proceeds of the Loan
only for the purposes set forth in Section 2.3 hereof.
5.1.9 OFFICE OF BORROWER. As long as the Debt remains outstanding,
Borrower shall maintain an office or agency (which may be the principal
executive offices of Borrower) where the Note may be presented for exercise of
the Conversion Right, registration of transfer, division or combination as
provided in this Agreement.
5.1.10 AMENDMENT OF NOTE PRIOR TO CONVERSION UPON ADVICE OF
INVESTMENT BANKER. If Lender so requests at any time prior to the conversion of
the Debt into Series E Preferred Stock, Lender and the members of the Board of
Directors of Borrower not affiliated with Lender or employed by Borrower will,
within twenty (20) days after such request, select Xxxxxxx Xxxxx, Xxxxxx Xxxxxx
& Xxxxx Incorporated or, if such firm is unwilling or unable to serve, another
nationally recognized investment banking firm (the "INVESTMENT BANKER") to
advise Lender and Borrower (in a written term sheet, not a formal opinion) as to
additional terms of the Note (not inconsistent with anything in this Agreement)
that would be required to ensure that the proceeds to Lender of an immediate
sale of the Note would be sufficient to repay the sum of (i) the
then-outstanding Debt, and (ii) all third party costs that would be expected to
be incurred by Borrower and Lender in an assumed secondary public offering by
Lender of the Note (or replacement
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promissory notes evidencing the Debt), including, without limitation any SEC or
other filing fees, printing expenses, underwriting discounts and fees and other
fees and expenses (including attorneys' and accountants' fees and expenses). In
its engagement of the Investment Banker, Borrower will obtain the Investment
Banker's agreement to render such advice as promptly as is practicable and in no
event later than thirty (30) days after the engagement commences. Within ten
(10) days after their receipt of the Investment Banker's advice, Borrower and
Lender will amend and restate the Note, or issue replacement promissory notes,
to incorporate such additional terms, which amended, restated or replacement
instruments shall thereafter be collectively deemed to constitute the "Note"
hereunder.
VI. NEGATIVE COVENANTS
SECTION 6.1 BORROWER'S NEGATIVE COVENANTS. From the date hereof
until payment and performance in full of all Obligations of, and all other
amounts due and owing by, Borrower under the Loan Documents, Borrower covenants
and agrees with Lender that it will not do, directly or indirectly, any of the
following without Lender's prior written consent:
(a) Dissolution. Borrower shall not dissolve, terminate or
liquidate.
(b) Operations of Borrower. Borrower shall not make any material
change in the scope or nature of its business objectives, purposes or
operations, or undertake or participate in activities other than its present
business and activities related or incidental thereto.
(c) Principal Place of Business. Borrower shall not change its
principal place of business set forth in Section 9.7 without first giving Lender
thirty (30) days prior written notice.
(d) Other Indebtedness. Borrower shall not create, incur or assume
any debt other than the Debt and other indebtedness not to exceed $500,000 in
the aggregate.
(e) Release of Claims. Borrower shall not cancel or otherwise
forgive or release any claim or debt owed to Borrower by any Person, except for
adequate consideration and in the ordinary course of Borrower's business.
(f) Amendments to Articles of Incorporation. Borrower shall not
amend the Articles of Incorporation of Borrower in any way, whether by amending
the terms of the Certificate of Designations or any other provision of such
Articles of Incorporation, that adversely affects any of the powers,
designations, preferences and relative, participating, optional and other
special rights of the Series E Preferred Stock, and the qualifications,
limitations or restrictions thereof, whether by direct amendment or in
connection with or pursuant to a merger, consolidation or any other transaction
involving any change in such Articles of Incorporation.
(g) Dividends. Borrower shall not declare or pay any dividends on,
or make any other distributions in respect of, any other shares of capital stock
of Borrower, including any Junior Stock.
(h) Redemptions. Borrower shall not redeem or purchase or
otherwise acquire for consideration any shares of any Junior Stock (except in
connection with the exercise of employee stock options).
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(i) Issuance of Capital Stock. Borrower shall not authorize,
designate or issue any shares of capital stock ranking prior or superior to, or
on parity with, the Series E Preferred Stock with respect to dividends,
liquidation preference or other distributions or upon liquidation, dissolution
or winding up of Borrower (except to employees of Borrower under Borrower's
stock option or long term incentive plans).
(j) Mergers. Borrower shall not effect any merger, consolidation,
combination, recapitalization, reorganization or other transaction in which
shares of capital stock of any class of Borrower are converted into or exchanged
for cash, stock or securities of Borrower or any other entity or other property.
(k) Changes to Series E Preferred Stock. Borrower shall not
subdivide or otherwise change shares of Series E Preferred Stock into a
different number of shares whether in a merger, consolidation, combinations,
recapitalization, reorganization or otherwise.
(l) Issuance of Series E Preferred Stock. Borrower shall not issue
any shares of Series E Preferred Stock other than upon conversion of the Debt
pursuant to this Agreement.
(m) Acquisition of Stock by Subsidiaries. Borrower shall not
permit any Subsidiary of Borrower to purchase or otherwise acquire for
consideration any shares of stock of Borrower unless Borrower could purchase or
otherwise acquire such shares at such time and in such manner in accordance with
the restrictions set forth in this Section 6.1.
VII. DEFAULTS
SECTION 7.1 EVENT OF DEFAULT.
7.1.1 Each of the following events shall constitute an event of
default hereunder (an "EVENT OF DEFAULT"):
(a) any principal of or interest on the Debt, or any other
Obligation, is not paid within five (5) days of the date such principal
and/or interest payment on the Debt or other Obligation is due.
(b) any representation or warranty made by Borrower herein or in
any other Loan Document, or in any report, certificate, financial
statement or other instrument, agreement or document furnished by or on
behalf of Borrower to Lender, shall have been false or misleading in
any material respect as of the date the representation or warranty was
made; provided, however, if such false or misleading representation or
warranty was not intentional or grossly negligent and is capable of
being cured within thirty (30) days, the same shall be an Event of
Default hereunder only if the same is not cured within a reasonable
time not to exceed thirty (30) days after notice from Lender.
(c) Borrower shall make an assignment for the benefit of
creditors.
(d) a receiver, liquidator or trustee shall be appointed for
Borrower, or Borrower shall be adjudicated a bankrupt or insolvent, or
any petition for bankruptcy, reorganization or arrangement pursuant to
federal bankruptcy law, or any similar federal or state law, shall be
filed by or against, consented to or acquiesced in by Borrower, or any
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proceeding for the dissolution or liquidation of Borrower shall be
instituted; provided, however, that if such appointment, adjudication,
petition or proceeding was involuntary and not consented to by
Borrower, then the same shall be an Event of Default hereunder only
if the same is not discharged, stayed or dismissed within sixty (60)
days after the date of such appointment or adjudication, the date such
petition is first filed or the date such proceeding is instituted, as
the case may be.
(e) Borrower shall attempt to assign its rights under this
Agreement or any of the other Loan Documents or any interest herein or
therein in contravention of the Loan Documents.
(f) Borrower shall breach any of its covenants contained in
Sections 5.1 and 6.1 hereof.
(g) Borrower shall continue to be in Default under any of the
other terms, covenants or conditions of this Agreement not specified in
this Section 7.1.1, for ten (10) days after notice to Borrower from
Lender, in the case of any Default which can be cured by the payment of
a sum of money, or for thirty (30) days after notice to Borrower from
Lender in the case of any other Default; provided, however, that if
such non-monetary Default is capable of being cured but cannot
reasonably be cured within such 30-day period and provided further that
Borrower shall have commenced to cure such Default within such 30- day
period and thereafter diligently and expeditiously proceeds to cure the
same, such 30- day period shall be extended for such time as is
reasonably necessary for Borrower in the exercise of due diligence to
cure such Default, such additional period not to exceed sixty (60)
days.
(h) there shall be default under any of the other Loan Documents
beyond any applicable cure periods contained in such documents, or any
other such event shall occur or condition shall exist, if the effect of
such event or condition is to accelerate the maturity of any portion of
the Debt or to permit Lender to accelerate the maturity of all or any
portion of the Debt.
(i) Borrower or any Subsidiary shall be in default with respect to
indebtedness in excess of $100,000 or any event specified in any note,
agreement, indenture or other document evidencing or relating to any
such indebtedness of such person, if the effect of such event is to
cause, or (with the giving of any notice or the lapse of time or both)
to permit the holder or holders of such indebtedness (or a trustee or
agent on behalf of such holder or holders) to cause such indebtedness
to become due or to be prepaid in full (whether by redemption, purchase
or otherwise) prior to its stated maturity.
(j) Any final non-appealable judgment is rendered against Borrower
and/or any Subsidiary in excess of $100,000 and Borrower fails to
satisfy such judgment within the earlier of (a) ten (10) days after the
date such judgment is rendered or (b) the date the judgment creditor
commences the process to execute and recover on said judgment.
7.1.2 Upon the occurrence of an Event of Default (other than
an Event of Default described in subsections (c), (d) or (e) above) and at any
time thereafter, Lender may, in addition to any other rights or remedies
available to it pursuant to this Agreement and the other Loan
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Documents or at law or in equity, take such action, without notice or demand, as
Lender deems advisable to protect and enforce its rights against Borrower,
including, without limitation, declaring the Debt to be immediately due and
payable, and Lender may enforce or avail itself of any or all rights or remedies
provided in the Loan Documents against Borrower, including, without limitation,
all rights or remedies available at law or in equity; and upon any Event of
Default described in subsections (c), (d) or (e) above, the Debt and all other
obligations of Borrower hereunder and under the other Loan Documents shall
immediately and automatically become due and payable, without notice or demand,
and Borrower hereby expressly waives any such notice or demand, notwithstanding
anything contained herein or in any other Loan Document to the contrary.
SECTION 7.2 REMEDIES. Upon the occurrence of an Event of
Default, all or any one or more of the rights, powers, privileges and other
remedies available to Lender against Borrower under this Agreement or any of the
other Loan Documents executed and delivered by, or applicable to, Borrower or at
law or in equity may be exercised by Lender at any time and from time to time,
whether or not all or any of the Debt shall be declared due and payable, and
whether or not Lender shall have commenced any foreclosure proceeding or other
action for the enforcement of its rights and remedies under any of the Loan
Documents with respect to any collateral for the Loan. Any such actions taken by
Lender shall be cumulative and concurrent and may be pursued independently,
singly, successively, together or otherwise, at such time and in such order as
Lender may determine in its sole discretion, to the fullest extent permitted by
law, without impairing or otherwise affecting the other rights and remedies of
Lender permitted by law, equity or contract or as set forth herein or in the
other Loan Documents.
SECTION 7.3 REMEDIES CUMULATIVE. The rights, powers and
remedies of Lender under this Agreement shall be cumulative and not exclusive of
any other right, power or remedy which Lender may have against Borrower pursuant
to this Agreement or the other Loan Documents, or existing at law or in equity
or otherwise. Lender's rights, powers and remedies may be pursued singly,
concurrently or otherwise, at such time and in such order as Lender may
determine in Lender's sole discretion. No delay or omission to exercise any
remedy, right or power accruing upon an Event of Default shall impair any such
remedy, right or power or shall be construed as a waiver thereof, but any such
remedy, right or power may be exercised from time to time and as often as may be
deemed expedient. A waiver of any one or more Defaults or Events of Default with
respect to Borrower shall not be construed to be a waiver of any subsequent
Default or Event of Default by Borrower or to impair any remedy, right or power
consequent thereon. Any and all amounts collected or retained by Lender while an
Event of Default has occurred and is continuing, including, but not limited to,
interest at the Default Rate, late charges or any escrowed amount, may be
applied by Lender to payment of the Debt in any order or priority that Lender in
its sole discretion may elect.
VIII. CONVERSION OF THE DEBT.
SECTION 8.1 CONVERSION OF THE DEBT INTO SERIES E PREFERRED
STOCK. Lender shall have the right (the "CONVERSION RIGHT"), at any time on or
prior to the Maturity Date (or within five (5) business days thereafter in the
case of (i) an acceleration of the Debt, or (ii) Borrower's failure to repay the
Debt and all other Obligations in full on the Maturity Date), even if Borrower
has previously delivered a notice of prepayment under Section 2.4 hereof, at its
option, subject to the provisions of this Article VIII, to convert all or any
part of the Debt into shares of Series E Preferred Stock. The amount of Debt to
be converted must be an integral multiple of $100,000 unless the entire Debt is
being converted. The number of shares of Series E Preferred Stock to be issued
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in such conversion will equal the quotient obtained by dividing the amount of
the Debt, or such portion of the Debt to be converted, on the date of the
Conversion Notice (defined below) by $100,000. All shares of Series E Preferred
Stock issuable upon the exercise of the Conversion Right shall be validly
issued, fully paid and nonassessable and without any preemptive rights.
SECTION 8.2 MANNER OF EXERCISE. Lender may exercise the
Conversion Right on any Business Day, prior to 5:00 p.m. Dallas, Texas time, on
or before the Maturity Date (or within five (5) Business Days thereafter in the
case of (i) an acceleration of the Debt, or (ii) Borrower fails to repay the
Debt and all other Obligations in full on the Maturity Date). In order to
exercise the Conversion Right, Lender must (i) deliver to Borrower written
notice of its election to exercise the Conversion Right (the "CONVERSION
NOTICE"), and (ii) notify Borrower that it is ready, willing and able to
surrender to Borrower the Note upon receipt of the certificates and, if
applicable, the new Note described Section 8.3 below. The date of delivery of
the Conversion Notice is the "CONVERSION DATE".
SECTION 8.3 ISSUANCE OF CERTIFICATES. As soon as practicable,
and in any event within two (2) Business Days after the Conversion Date,
Borrower will file the Certificate of Designations with the Secretary of State
of Georgia (if not previously filed) and will execute, issue and deliver to
Lender, upon Lender's tender of the Note to Borrower, a certificate or
certificates representing the aggregate number of shares of Series E Preferred
Stock to be issuable upon such conversion and, if the Conversion Right was
exercised in part and either Borrower or Lender so requests, a new Note
identical as to terms and conditions to the Note on the Conversion Date except
as to reflect the new reduced principal amount thereof. The stock certificate or
certificates so delivered shall be, to the extent possible, in such
denominations as Lender shall request in the Conversion Notice and shall be
registered in the name of Lender or such other name as Lender shall request in
the Conversion Notice. The Note (or portion thereof for which the Conversion
Right was exercised) shall be deemed to have been converted, and such
certificate or certificates shall be deemed to have been issued, and Lender or
any other Person so designated to be named therein shall be deemed to have
become a holder of record of such shares for all purposes, as of the Conversion
Date.
SECTION 8.4 SHAREHOLDER APPROVAL. If Lender is advised by
nationally recognized or Lender's regular legal counsel that shareholder
approval of the issuance of a new Note or the issuance of the Series E Preferred
Stock upon conversion of the Note is required by law or by the rules of the
Stock Exchange, Borrower will seek such shareholder approval at the earlier of
the next annual or special meeting of the shareholders of Borrower after the
date hereof, or if no such meeting is scheduled to be held within 60 calendar
days after the date of the Conversion Notice, Borrower agrees to cause its
secretary to call such special meeting within 30 calendar days after the date of
the Conversion Notice at the place and upon the notice provided by law and in
the Bylaws of the Company for the holding of meetings of shareholders. If any
such special meeting required to be called as above provided has not been called
by the secretary of Borrower within such 30 calendar day period, then Lender may
call such meeting to be held at the place and upon the notice above provided,
and for that purpose will have access to the stock ledger of Borrower. The
foregoing remedy will not be deemed exclusive, and shall be in addition to all
other rights and remedies available at law or equity to Lender.
SECTION 8.5 CONVERSION EXPENSES AND TAXES. No fees will be
charged by Borrower to Lender with respect to any conversion hereunder. Borrower
will be responsible for all of its and Lender's fees and expenses (including the
Investment Banker's and any attorneys' fees
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and expenses) in connection with the conversion and any of the other actions
described in this Article VIII. Borrower will also be responsible for all taxes
and other governmental charges that may be imposed with respect to the issuance
or delivery of the shares, unless such tax or charge is imposed by law upon
Lender or transfer taxes are payable because the shares are to be issued in the
name of a Person other than Lender, in which case such taxes or charges shall be
paid by Lender.
SECTION 8.6 REGISTRABLE SECURITIES. The Note and the Series E
Preferred Stock will be "Registrable Securities" under the Registration Rights
Agreement of even date herewith by and between Borrower and Lender.
SECTION 8.7 REORGANIZATION, RECLASSIFICATION, MERGER,
CONSOLIDATION OR DISPOSITION OF ASSETS; ANTI-DILUTION PROTECTION.
(a) In case Borrower shall reorganize its capital, reclassify
its capital stock, consolidate or merge with or into another corporation (where
Borrower is not the surviving corporation or where there is a change in or
distribution with respect to the preferred stock of Borrower), or sell, transfer
or otherwise dispose of all or substantially all its property, assets or
business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of capital stock or other securities or property of any nature
whatsoever (including warrants or other subscription or purchase rights) in
addition to or in lieu of common stock of the successor or acquiring corporation
("OTHER PROPERTY"), are to be received by or distributed to the holders of
capital stock of Borrower, then Lender shall have the right thereafter to
receive, upon exercise of the Conversion Right, the number of shares of
preferred stock of the successor or acquiring corporation or of Borrower, if it
is the surviving corporation, and Other Property that would have been receivable
upon or as a result of such reorganization, reclassification, merger,
consolidation or disposition of assets by a holder of the number of shares of
Series E Preferred Stock had the Note been converted into Series E Preferred
Stock immediately prior to such event, it being agreed that if such event occurs
before the Lender has exercised the Conversion Right, the Note shall be treated
as being exercisable as of the date immediately prior to such event as if such
date were the Conversion Date. In case of any such reorganization,
reclassification, merger, consolidation, or disposition of assets, the successor
or acquiring corporation (if other than Borrower) shall expressly assume the due
and punctual observance and performance of each and every covenant and condition
of the Note to be performed and observed by Borrower and all the obligations and
liabilities hereunder, and the Note shall be convertible, on the terms set forth
herein, for preferred stock of the successor or acquiring corporation having
substantially identical terms to those set forth in the Certificate of
Designations. For purposes of this Section 8.7, "preferred stock of the
successor or acquiring corporation" shall mean capital stock having terms no
less favorable to the holder thereof than the terms of the Series E Preferred
Stock. The foregoing provisions of this Section 8.7. shall similarly apply to
successive reorganizations, reclassifications, mergers, consolidations or
disposition of assets.
(b) In the event that any time and from time to time (i) all
or any part of the Debt is converted into shares of Series E Preferred Stock in
accordance with this Article VIII and (ii) any event or circumstance occurs
after the date hereof but prior to the date of any such conversion which, had it
occurred after the issuance of such shares of Series E Preferred Stock, would
have required an adjustment in the Conversion Rate Cap (as such term is defined
in the Certificate of Designations) under Section 2.5.7 of the Certificate of
Designations (or any other adjustment covered thereby), then in each such event
the Borrower shall concurrently with each such
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conversion of Debt into shares of Series E Preferred Stock take such action as
is reasonably necessary to ensure that the holder of such shares of Series E
Preferred Stock is entitled to receive upon or in connection with the conversion
of such shares of Series E Preferred Stock that additional number of shares of
the common stock of Borrower (the "ADDITIONAL SHARES") that such holder would
have been entitled to receive under the Certificate of Designations as a result
of the occurrence of such event or circumstance if such holder had acquired such
shares of Series E Preferred Stock on the date hereof. Such actions may include,
among other things, the amendment by the Borrower of the Certificate of
Designations to provide for the appropriate adjustment to the Conversion Rate
Cap (or to provide for any other appropriate adjustments) or, in the event the
Borrower does not reasonably believe that it is practicable to amend the
Certificate of Designations, then such actions may include, in lieu of such an
amendment, (i) the written agreement of the Borrower to issue to such holder
such Additional Shares upon the exercise by such holder of such shares of Series
E Preferred Stock, for a per share consideration of the Additional Shares not to
exceed the then-current par value of such Additional Shares, (ii) the
establishment by the Borrower of another series of convertible preferred stock
and the issuance by the Borrower to the holder of that number of shares of such
convertible preferred stock that would be convertible into the Additional
Shares, with such shares of convertible preferred stock having a per share
consideration not to exceed the then-current par value of such convertible
preferred stock and with such shares being convertible solely in connection with
the conversion of shares of Series E Preferred Stock, or (iii) the issuance by
the Borrower to such holder, for no cash consideration, of warrants to acquire
the Additional Shares, with such warrants having an exercise price not to exceed
the then-current par value of the Additional Shares and with such warrants being
exercisable solely in connection with the conversion of shares of Series E
Preferred Stock.
(c) Nothing in this Section 8.7 shall be deemed to permit, or
constitute Lender's consent to, any action that is otherwise prohibited by
Section 6.1 or any other provision hereof.
SECTION 8.8 NOTICES TO LENDER.
8.8.1 NOTICE OF ADJUSTMENTS. Whenever an event specified in
Section 8.7 shall occur, Borrower shall forthwith prepare a certificate to be
executed by the chief financial officer of Borrower describing, in reasonable
detail, the event requiring the giving of such notice and describing the number
and kind of any other shares of stock or Other Property for which the Note is
exercisable. Borrower shall promptly cause a signed copy of such certificate to
be delivered to Lender. Borrower shall keep at its principal office referred to
in Section 5.1.9. or the office or agency designated pursuant to Section 5.1.9.
copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by any Lender or any
prospective purchaser of a Note designated by a Lender thereof.
8.8.2 NOTICE OF CORPORATE ACTIONS. If at any time:
(a) Borrower shall take a record of the holders of its Series
E Preferred Stock for the purpose of entitling them to receive a dividend (other
than a cash dividend payable out of earnings or earned surplus legally available
for the payment of dividends under the laws of the jurisdiction of incorporation
of Borrower) or other distribution, or any right to subscribe for or purchase
any evidences of its indebtedness, any shares of stock of any class or any other
securities or property, or to receive any other right, or
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(b) there shall be any capital reorganization of Borrower, any
reclassification or recapitalization of the capital stock of Borrower or any
consolidation or merger of Borrower with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of
Borrower to, another corporation, or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of Borrower;
then, in any one or more of such cases, Borrower shall give to Lender at least
30 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Such notice in accordance with the foregoing clause also shall specify (i)
the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Series E
Preferred Stock shall be entitled to any such dividend, distribution or right,
and the amount and character thereof, and (ii) the date on which any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up is to take place and the
time, if any such time is to be fixed, as of which the holders of Series E
Preferred Stock shall be entitled to exchange their shares of Series E Preferred
Stock for securities or other property deliverable upon such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up. Each such written notice shall be
sufficiently given if addressed to Lender at the last address of Lender
appearing on the books of Borrower and delivered in accordance with Section 9.7.
SECTION 8.9 NO IMPAIRMENT. Borrower shall not by any action,
including, without limitation, amending its certificate of incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, seek to
avoid the observance or performance of any of the terms of this Agreement, and
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such actions as may be necessary or appropriate to protect
the rights of Lender against impairment. Without limiting the generality of the
foregoing, Borrower will (a) not take any of the actions specified in Section
2.5.2 of the Certificate of Designation attached hereto as Exhibit "A", (b) take
all such action as may be necessary or appropriate in order that Borrower may
validly and legally issue fully paid and nonassessable shares of Series E
Preferred Stock upon exercise of the Conversion Right and fully paid and
nonassessable shares of common stock upon the conversion of the shares of Series
E Preferred Stock, and (c) use its best efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable Borrower to perform its
obligations under the Note.
SECTION 8.10 RESERVATION AND AUTHORIZATION OF SERIES E
PREFERRED STOCK AND COMMON STOCK. Borrower shall at all times reserve and keep
available for issue upon the exercise of the Conversion Right such number of its
authorized but unissued shares of Series E Preferred Stock as will be sufficient
to permit the exercise in full of the Conversion Right and shall at all times
reserve and keep available for issue upon the conversion of Series E Preferred
Stock such number of its authorized but unissued shares of common stock as would
be sufficient to permit the conversion in full of the Series E Preferred Stock
(assuming conversion in full of the Debt into Series E Preferred Stock).
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SECTION 8.11 TAKING OF RECORD; STOCK AND NOTE TRANSFER BOOKS.
In the case of all dividends or other distributions by Borrower to the holders
of its Series E Preferred Stock with respect to which any provision hereof
refers to the taking of a record of such holders, Borrower will not at any time,
except upon dissolution, liquidation or winding up of Borrower, close its stock
transfer books or Note transfer books so as to result in preventing or delaying
the exercise of any Conversion Right or the transfer of any Note.
SECTION 8.12 LIMITATION OF LIABILITY. No provision hereof, in
the absence of affirmative action by Lender to purchase shares of Series E
Preferred Stock, and no enumeration herein of the rights or privileges of
Borrower hereof, shall give rise to any liability of Lender for the purchase
price of any Series E Preferred Stock or as a stockholder of Borrower, whether
such liability is asserted by Borrower or by creditors of Borrower.
IX. MISCELLANEOUS
SECTION 9.1 TRANSFER, DIVISION AND COMBINATION.
9.1.1 TRANSFER. If the Lender should decide to dispose of the
Note (in whole or in part), the Lender understands and agrees that it may do so
only (i) pursuant to an effective registration statement under the Securities
Act, (ii) to the Borrower or (iii) pursuant to an available exemption or
exclusion from the registration requirements of the Securities Act. In
connection with any transfer of the Note other than pursuant (i) to an effective
registration statement, (ii) to the Borrower, (iii) to an affiliate of the
Lender which is an "accredited investor" within the meaning of Rule 501(a) under
the Securities Act, provided that any such transferee shall agree to be bound by
the terms of this Agreement, or (iv) in reliance on Rule 144 under the
Securities Act, the Borrower may require that the transferor provide to the
Borrower an opinion, in form and substance reasonably satisfactory to the
Borrower, of counsel experienced in the area of United States Securities laws
selected by the transferor to the effect that such transfer does not require
registration of the Note under the Securities Act. Transfer of the Note and all
rights thereunder, in whole or in part, shall be registered on the books of
Borrower to be maintained for such purpose, upon surrender of the Note at the
principal office of Borrower referred to in Section 5.1.10 or the office or
agency designated by Borrower pursuant to Section 5.1.10, together with a
written assignment of the Note duly executed by Lender and funds sufficient to
pay any transfer taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, Borrower shall execute and deliver a
new Note or Notes in the name of the assignee or assignees and in the
denominations specified in such instrument or assignment, and shall issue to the
assignor a new Note evidencing the portion of the Note not so assigned, and the
surrendered Note shall promptly be canceled. A Conversion Right in a new Note
that has been assigned may be exercised by a new Lender for the purchase of
shares of Series E Preferred Stock without having the new Note issued. The Note
(and any new Notes issued from time to time under this Section 9.1.1) will
contain a legend governing restrictions upon the disposition of such Note
imposed by applicable securities laws. Such legend will be removed by the
Borrower by delivery of substitute Notes without such legend in the event that
such legend is no longer required for purposes of applicable securities laws
upon receipt by the Borrower of an opinion of counsel to the effect that such
legend is no longer so required.
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9.1.2 DIVISION AND COMBINATION. The Note may be divided or
combined with other Notes upon presentation thereof at the aforesaid office or
agency of Borrower, together with a written notice specifying the names and
denominations in which new News are to be issued, signed by Lender. Subject to
compliance with Section 9.1.1. as to any transfer which may be involved in such
division or combination, Borrower shall execute and deliver a new Note or Notes
in exchange for the Note or Notes to be divided or combined in accordance with
such notice.
9.1.3 EXPENSES. Borrower shall prepare, issue and deliver at
its own expense (other than transfer taxes required to be paid by Lender under
Section 9.1.1., if any) the new Note or Notes under this Section 9.1.
9.1.4 MAINTENANCE OF BOOKS. Borrower agrees to maintain, at
its aforesaid office or agency, books for the registration and the registration
or transfer of the Notes.
SECTION 9.2 SURVIVAL. This Agreement and all covenants,
agreements, representations and warranties made herein and in the certificates
delivered pursuant hereto shall survive the making by Lender of the Loan and the
execution and delivery to Lender of the Note, and shall continue in full force
and effect so long as all or any of the Debt is outstanding and unpaid or any
other Obligations or other amounts remain owing under the Loan Documents unless
a longer period is expressly set forth herein or in the other Loan Documents.
Whenever in this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the successors and assigns of such party.
All covenants, promises and agreements in this Agreement, by or on behalf of
Borrower, shall inure to the benefit of the legal representatives, successors
and assigns of Lender.
SECTION 9.3 LENDER'S DISCRETION. Whenever pursuant to this
Agreement, Lender exercises any right given to it to approve or disapprove any
document or action, or any arrangement or term is to be satisfactory to Lender,
the decision of Lender to approve or disapprove such document or action or to
decide whether arrangements or terms are satisfactory or not satisfactory shall
(except as is otherwise specifically herein provided) be in the sole discretion
of Lender and shall be final and conclusive.
SECTION 9.4 GOVERNING LAW.
9.4.1 THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF TEXAS, AND
MADE BY LENDER AND ACCEPTED BY BORROWER IN THE STATE OF TEXAS, AND THE PROCEEDS
OF THE NOTE DELIVERED PURSUANT HERETO WERE OR ARE TO BE DISBURSED FROM THE STATE
OF TEXAS, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE
PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS,
INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS
ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF TEXAS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH
STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT LAWS) AND ANY APPLICABLE LAW OF
THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE
CREATION, PERFECTION AND ENFORCEMENT OF ANY LIENS
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AND SECURITY INTERESTS CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN
DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE
IN WHICH THE APPLICABLE PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE
FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF TEXAS
SHALL GOVERN THE CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS
AND ALL OF THE OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO THE FULLEST
EXTENT PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES
ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS
AGREEMENT AND THE NOTE, AND THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
9.4.2 ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR
BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY AT LENDER'S OPTION BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF DALLAS, COUNTY OF
DALLAS, TEXAS, AND BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER
HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR
PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY
SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. BORROWER DOES HEREBY AGREE THAT
SERVICE OF PROCESS UPON AN OFFICER OF BORROWER AT BORROWER'S ADDRESS SET FORTH
IN SECTION 9.7 HEREOF AND WRITTEN NOTICE OF SUCH SERVICE MAILED OR DELIVERED TO
BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT
EFFECTIVE SERVICE OF PROCESS UPON BORROWER, IN ANY SUCH SUIT, ACTION OR
PROCEEDING IN THE STATE OF TEXAS. BORROWER (I) SHALL GIVE PROMPT NOTICE TO
LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY
TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN
OFFICE IN DALLAS, TEXAS (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED
AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY
DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN
DALLAS, TEXAS OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
SECTION 9.5 MODIFICATION; WAIVER IN WRITING. No modification,
amendment, extension, discharge, termination or waiver of any provision of this
Agreement, or of the Note, or of any other Loan Document, nor consent to any
departure by Borrower therefrom, shall in any event be effective unless the same
shall be in a writing signed by the party against whom enforcement is sought,
and then such waiver or consent shall be effective only in the specific
instance, and for the purpose, for which given. Except as otherwise expressly
provided herein, no notice to, or demand on Borrower, shall entitle Borrower to
any other or future notice or demand in the same, similar or other
circumstances.
SECTION 9.6 DELAY NOT A WAIVER. Neither any failure nor any
delay on the part of Lender in insisting upon strict performance of any term,
condition, covenant or agreement, or exercising any right, power, remedy or
privilege hereunder, or under the Note or under any other Loan Document, or any
other instrument given as security therefor, shall operate as or constitute
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a waiver thereof, nor shall a single or partial exercise thereof preclude any
other future exercise, or the exercise of any other right, power, remedy or
privilege. In particular, and not by way of limitation, by accepting payment
after the due date of any amount payable under this Agreement, the Note or any
other Loan Document, Lender shall not be deemed to have waived any right either
to require prompt payment when due of all other amounts due under this
Agreement, the Note or the other Loan Documents, or to declare a default for
failure to effect prompt payment of any such other amount.
SECTION 9.7 NOTICES. All notices, consents, approvals and
requests required or permitted hereunder or under any other Loan Document shall
be given in writing (including by facsimile) and shall be effective for all
purposes if hand delivered or sent by (a) certified or registered United States
mail, postage prepaid, or (b) expedited prepaid delivery service, either
commercial or United States Postal Service, with receipt of delivery, or (c)
facsimile (with acknowledged transmission), addressed as follows:
If to Borrower: Malibu Entertainment Worldwide, Inc.
000 Xxxxx Xxxxxxx, Xxxxx 0000,
Xxxxxx, Xxxxx 00000
Attn: Chief Financial Officer
Facsimile: (000) 000-0000
If to Lender: SZ Capital, L.P.
Texas Commerce Tower,
0000 Xxxx Xxx., Xxxxx 0000-X,
Xxxxxx, Xxxxx 00000
Attn: Secretary/Treasurer
Facsimile: (000) 000-0000
or at such other address and person as shall be designated from time to time by
any party hereto, as the case may be, in a written notice to the other parties
hereto in the manner provided for in this Section. A notice shall be deemed to
have been given: in the case of hand delivery, at the time of delivery; in the
case of registered or certified mail, when delivered or the first attempted
delivery on a Business Day; in the case of expedited prepaid delivery, upon the
first attempted delivery on a Business Day; or in the case of facsimile, upon
acknowledged transmission (if a copy thereof is also sent by another method
authorized hereunder) on a Business Day.
SECTION 9.8 TRIAL BY JURY. BORROWER HEREBY AGREES NOT TO ELECT
A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO
TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER
ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER, AND IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY
JURY WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS
PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.
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SECTION 9.9 HEADINGS. The Article and/or Section headings in
this Agreement are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose.
SECTION 9.10 SEVERABILITY. Wherever possible, each provision
of this Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
SECTION 9.11 PREFERENCES. Lender shall have the continuing and
exclusive right to apply or reverse and reapply any and all payments by Borrower
to any portion of the obligations of Borrower hereunder. To the extent Borrower
makes a payment or payments to Lender, which payment or proceeds or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law or equitable cause,
then, to the extent of such payment or proceeds received, the obligations
hereunder or part thereof intended to be satisfied shall be revived and continue
in full force and effect, as if such payment or proceeds had not been received
by Lender.
SECTION 9.12 WAIVER OF NOTICE. Borrower shall not be entitled
to any notices of any nature whatsoever from Lender except with respect to
matters for which this Agreement or the other Loan Documents specifically and
expressly provide for the giving of notice by Lender to Borrower and except with
respect to matters for which Borrower is not, pursuant to applicable law,
permitted to waive the giving of notice. To the fullest extent permitted by
applicable law, Borrower hereby expressly waives the right to receive any notice
from Lender with respect to any matter for which this Agreement or the other
Loan Documents do not specifically and expressly provide for the giving of
notice by Lender to Borrower.
SECTION 9.13 REMEDIES OF BORROWER. In the event that a claim
or adjudication is made that Lender or its agents have acted unreasonably or
unreasonably delayed acting in any case where, by law or under this Agreement or
the other Loan Documents, Lender or such agent, as the case may be, has an
obligation to act reasonably or promptly, Borrower agrees that neither Lender
nor its agents shall be liable for any monetary damages, and Borrower's sole
remedies shall be limited to commencing an action seeking injunctive relief or
declaratory judgment. The parties hereto agree that any action or proceeding to
determine whether Lender has acted reasonably shall be determined by an action
seeking declaratory judgment.
SECTION 9.14 EXPENSES. Borrower covenants and agrees to pay,
or, if Borrower fails to pay, to reimburse, Lender upon receipt of written
notice from Lender for all reasonable costs and expenses (including reasonable
attorneys' fees and disbursements) incurred by Lender in connection with (i) the
preparation, negotiation, execution and delivery of this Agreement and the other
Loan Documents and the consummation of the transactions contemplated hereby and
thereby and all the costs of furnishing all opinions by counsel for Borrower
(including, without limitation, any opinions requested by Lender as to any legal
matters arising under this Agreement or the other Loan Documents); (ii)
Borrower's ongoing performance of and compliance with Borrower's respective
agreements and covenants contained in this Agreement and the other Loan
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Documents on its part to be performed or complied with after the Closing Date,
including, without limitation, performance of its Obligations upon receipt of a
Conversion Notice from Lender and confirming compliance with environmental and
insurance requirements; (iii) Lender's ongoing performance and compliance with
all agreements and conditions contained in this Agreement and the other Loan
Documents on its part to be performed or complied with after the Closing Date;
(iv) the negotiation, preparation, execution, delivery and administration of any
consents, amendments, waivers or other modifications to this Agreement and the
other Loan Documents and any other documents or matters requested by Lender; (v)
the filing and recording of the Loan Documents, and reasonable fees and expenses
of counsel for providing to Lender all required legal opinions, and other
similar expenses incurred in creating and perfecting the Liens in favor of
Lender pursuant to this Agreement and the other Loan Documents; (vi) enforcing
or preserving any rights, in response to third party claims or the prosecuting
or defending of any action or proceeding or other litigation, in each case
against, under or affecting Borrower, this Agreement, the other Loan Documents
or any other security given for the Loan; and (vii) enforcing any obligations of
or collecting any payments due from Borrower under this Agreement, the other
Loan Documents or in connection with any refinancing or restructuring of the
credit arrangements provided under this Agreement in the nature of a "work-out"
or of any insolvency or bankruptcy proceedings; provided, however, that Borrower
shall not be liable for the payment of any such costs and expenses to the extent
the same arise by reason of the gross negligence, illegal acts, fraud or willful
misconduct of Lender.
SECTION 9.15 EXHIBITS AND SCHEDULES INCORPORATED. Any exhibits
and schedules annexed hereto are hereby incorporated herein as a part of this
Agreement with the same effect as if set forth in the body hereof.
SECTION 9.16 OFFSETS, COUNTERCLAIMS AND DEFENSES. Any assignee
of Lender's interest in and to this Agreement, the Note and the other Loan
Documents shall take the same free and clear of all offsets, counterclaims or
defenses which are unrelated to such documents which Borrower may otherwise have
against any assignor of such documents, and no such unrelated counterclaim or
defense shall be interposed or asserted by Borrower in any action or proceeding
brought by any such assignee upon such documents and any such right to interpose
or assert any such unrelated offset, counterclaim or defense in any such action
or proceeding is hereby expressly waived by Borrower.
SECTION 9.17 NO JOINT VENTURE OR PARTNERSHIP; NO THIRD PARTY
BENEFICIARIES.
9.17.1 Borrower and Lender intend that the relationships
created hereunder and under the other Loan Documents be solely that of borrower
and lender. Nothing herein or therein is intended to create a joint venture,
partnership, tenancy-in-common or joint tenancy relationship between Borrower
and Lender nor to grant Lender any interest in any collateral other than that of
secured party or Lender.
9.17.2 This Agreement and the other Loan Documents (unless
otherwise expressly provided therein) are solely for the benefit of Lender and
Borrower and nothing contained in this Agreement or the other Loan Documents
shall be deemed to confer upon anyone other than Lender and Borrower any right
to insist upon or to enforce the performance or observance of any of the
obligations contained herein or therein. All conditions to the willingness of
Lender to make
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the Loan hereunder are imposed solely and exclusively for the benefit of Lender
and no other Person shall have standing to require satisfaction of such
conditions in accordance with their terms or be entitled to assume that Lender
will refuse to make the Loan in the absence of strict compliance with any or all
thereof and no other Person shall under any circumstances be deemed to be a
beneficiary of such conditions, any or all of which may be freely waived in
whole or in part by Lender if, in Lender's sole discretion, Lender deems it
advisable or desirable to do so.
SECTION 9.18 WAIVER OF COUNTERCLAIM. Borrower hereby waives
the right to assert a counterclaim, other than a compulsory counterclaim, in any
action or proceeding brought against it by Lender or its agents.
SECTION 9.19 CONFLICT; CONSTRUCTION OF DOCUMENTS; RELIANCE. In
the event of any conflict between the provisions of this Agreement and any of
the other Loan Documents, the provisions of this Agreement shall control. The
parties hereto acknowledge that they were represented by competent counsel in
connection with the negotiation, drafting and execution of the Loan Documents
and that such Loan Documents shall not be subject to the principle of construing
their meaning against the party which drafted same. Borrower acknowledges that,
with respect to the Loan, Borrower shall rely solely on its own judgment and
advisors in entering into the Loan without relying in any manner on any
statements, representations or recommendations of Lender or any parent,
subsidiary or Affiliate of Lender. Lender shall not be subject to any limitation
whatsoever in the exercise of any rights or remedies available to it under any
of the Loan Documents or any other agreements or instruments which govern the
Loan by virtue of the ownership by it or any parent, subsidiary or Affiliate of
Lender of any equity interest any of them may acquire in Borrower, and Borrower
hereby irrevocably waives the right to raise any defense or take any action on
the basis of the foregoing with respect to Lender's exercise of any such rights
or remedies. Borrower acknowledges that Lender may engage in the business of
real estate, entertainment and amusement financings and other transactions and
investments which may be viewed as adverse to or competitive with the business
of Borrower or its Affiliates.
SECTION 9.20 BROKERS AND FINANCIAL ADVISORS. Borrower hereby
represents that it has dealt with no financial advisors, brokers, underwriters,
placement agents, agents or finders in connection with the transactions
contemplated by this Agreement. Borrower hereby agrees to indemnify and hold
Lender harmless from and against any and all claims, liabilities, costs and
expenses of any kind in any way relating to or arising from a claim by any
Person that such Person acted on behalf of Borrower in connection with the
transactions contemplated herein. The provisions of this Section 9.20 shall
survive the expiration and termination of this Agreement and the payment of the
Debt.
SECTION 9.21 LOSS OR MUTILATION. Upon receipt by Borrower from
Lender of evidence reasonably satisfactory to it of the ownership of and the
loss, theft, destruction or mutilation of the Note and indemnity reasonably
satisfactory to it, and in case of mutilation upon surrender and cancellation
hereof, Borrower will execute and deliver in lieu hereof a new Note of like
tenor to Lender; provided, in the case of mutilation, no indemnity shall be
required if the Note in identifiable form is surrendered to Borrower for
cancellation.
SECTION 9.22 PRIOR AGREEMENTS. THE LOAN DOCUMENTS EMBODY THE
FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND
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ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER
WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OR PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS
AMONG THE PARTIES THERETO.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized representatives, all as of the day and
year first above written.
SZ CAPITAL, L.P.,
a Delaware limited partnership
By: SZ GENPAR, L.P.
its general partner
By: HH GenPar Partners, its general partner
By: Hampstead Associates, Inc.,
a managing general partner
By: /s/ XXXX X. READ
---------------------------------
Name: Xxxx X. Read
-------------------------------
Title: Vice President
------------------------------
MALIBU ENTERTAINMENT WORLDWIDE, INC.
a Georgia corporation
By: /s/ Xxxxxxx X. Xxxxxxx
--------------------------------------------------
Xxxxxxx X. Xxxxxxx
Chief Executive Officer
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EXHIBIT "A"
CERTIFICATE OF DESIGNATIONS OF SERIES E PREFERRED STOCK
ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION
OF
MALIBU ENTERTAINMENT WORLDWIDE, INC.
In accordance with Section 14-2-1006 of the Georgia Business
Corporation Code (the "Code"), Malibu Entertainment Worldwide, Inc., a Georgia
corporation (the "Company"), hereby certifies as follows:
1. The name of the corporation is Malibu Entertainment Worldwide, Inc.
2. No shares of the Company's Series E Preferred Stock, as designated
by the Articles of Amendment of the Company's Articles of Incorporation filed on
March 29, 1996 with respect to the designation of the terms of Series E
Preferred Stock of the Company, have been issued by the Company.
3. In accordance with the authority of the Company's Board of Directors
(the "Board") pursuant to Section 14-2-602 of the Code and the Articles of
Incorporation of the Company (the "Charter"), the Board hereby amends the number
of shares and the powers, designations, preferences and relative, participating,
optional and other special rights and the qualifications, limitations or
restrictions of the unissued series of Preferred Stock, no par value, previously
designated by the Board as Series E Preferred Stock of the Company in their
entirety, in addition to those set forth in the Charter, by deleting Section 2.5
in its entirety and by substituting in lieu thereof the following:
2.5 Series E Preferred Stock. Five thousand shares of
Preferred Stock, no par value, of the Company are designated as "Series
E Preferred Stock" having the voting powers, preferences and relative
participating, optional and other special rights, and the
qualifications, limitations or restrictions thereof, are as set forth
below (the "Series E Preferred").
2.5.1 Dividends and Distributions. (a) The holders of
shares of Series E Preferred, in preference to the holders of Common
Stock (the "Common Stock") and of any other class or series of
preferred or other capital stock of the Company ("Junior Stock"), will
be entitled to receive dividends at an annual rate of $9,000 per share,
payable quarterly in arrears on the 15th day of each of January, April,
July and October of each year (except that if any such date is a
Saturday, Sunday or legal holiday, then such dividend will be
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payable on the next day that is not a legal holiday) (the "Dividend
Payment Date"), commencing with the date of the first issuance of any
shares of the Series E Preferred (the "Initial Issuance Date"), prior
and in preference to any declaration or payment of any dividend on
Junior Stock (other than a dividend or distribution solely in shares of
Common Stock and then only with Class E approval prior thereto as
provided in Section 2.5.2(b)(ii)). Such dividends will be cumulative
and accrue with respect to each share of Series E Preferred from date
of issuance of such share of Series E Preferred (the "Dividend
Commencement Date"), whether or not declared by the Board and whether
or not there are funds of the Company legally available for payment of
such dividends. No accrued or accumulated dividends on the Series E
Preferred will bear interest. Except as set forth in Sections
2.5.1(b)(i), 2.5.6, 2.5.7 and 2.5.8 hereof, the Company will have no
obligation to pay such dividends unless so declared by the Board and
unless funds are legally available therefor.
(b) Any dividends accruing prior to January 1, 2004
may at the election of the Board in its sole discretion be paid (i) by
the issuance as of the Dividend Payment Date of additional shares of
fully paid, nonassessable Series E Preferred having an aggregate
liquidation preference equal to the amount of such accrued dividends or
(ii) in cash. In the event that dividends are declared and paid by the
issuance of additional shares of Series E Preferred as provided in the
previous sentence, such dividends will be deemed paid in full and will
not accumulate. The Company will deliver certificates representing
shares of Series E Preferred issued pursuant to Section 2.5.1(a)(i)
promptly after the Dividend Payment Date.
(c) From and after January 1, 2004, dividends accrued
and payable pursuant to Section 2.5.1(a) will be payable in cash only
and will be cumulative from and after such date.
(d) Each dividend will be payable to holders of
record as they appear on the stock books of the Company on the last day
of each fiscal quarter of the Company.
2.5.2 Voting Rights. Holders of Series E Preferred
will have no voting rights and their consent will not be required for
taking any corporate action except (a) as otherwise required by law or
provided elsewhere herein and (b) that, if any share of Series E
Preferred is then outstanding, the affirmative vote or consent of the
holders of a majority of the then-outstanding shares of Series E
Preferred, voting together as a single class (a "Class E Approval"),
will be required in order for the Company to:
(i) Amend the Charter in any way, whether by amending
the terms of this Section 2.5 or any other provision of the
Charter, that adversely affects any of the powers,
designations, preferences and relative, participating,
optional and other special rights of the Series E Preferred,
and the qualifications, limitations or restrictions thereof,
whether by direct amendment or in connection with or pursuant
to a merger, consolidation or any other transaction involving
any change in the Charter;
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(ii) Declare or pay any dividends on, or make any
other distributions in respect of, any other shares of capital
stock of the Company, including any Junior Stock;
(iii) Redeem or purchase or otherwise acquire for
consideration any shares of any Junior Stock (except in
connection with the exercise of employee stock options);
(iv) Issue any shares of capital stock ranking prior
or superior to, or on parity with, the Series E Preferred with
respect to dividends or other distributions or upon
liquidation, dissolution or winding up of the Company (except
to employees of the Company under the Company's stock option
or long term incentive plans);
(v) Effect any merger, consolidation, combination,
recapitalization, reorganization or other transaction in which
shares of capital stock of any class of the Company are
converted into or exchanged for cash, stock or securities of
the Company or any other entity or other property (whether or
not any provision of Section 2.5.7 is applicable to such
transaction) or any transaction referred to in Section
2.5.7(f);
(vi) Subdivide or otherwise change shares of Series E
Preferred into a different number of shares whether in a
merger, consolidation, combinations, recapitalization,
reorganization or otherwise (whether or not any provision of
Section 2.5.7 is applicable to such transaction); or
(vii) Issue any shares of Series E Preferred other
than pursuant to the Loan Agreement, dated November 16, 1998,
between the Company and SZ Capital, L.P.
The Company will not permit any subsidiary of the Company to purchase
or otherwise acquire for consideration any shares of stock of the
Company unless the Company could purchase or otherwise acquire such
shares at such time and in such manner in accordance with the foregoing
restrictions.
2.5.3 Voting Rights in Certain Circumstances.
(a) If, for any reason,
(i) at any time after January 1, 2014, the sum of (A)
the total accrued and unpaid dividends on the Series E
Preferred plus (B) $100,000 multiplied by the number of
then-outstanding shares of Series E Preferred, exceeds $5
million;
(ii) at any time after January 1, 2004, the Board
does not declare or the Company does not pay all dividends
accruing on or after January 1, 2004 in full in cash; or
(iii) at any time after the Initial Issuance Date
when the sum of (A) the total accrued and unpaid dividends on
the Series E Preferred plus (B) $100,000
32
multiplied by the number of then-outstanding shares of Series
E Preferred, exceeds $5 million, there shall have occurred or
be continuing a Material Default;
then, the holders of Series E Preferred will be entitled, at any annual
meeting of the shareholders or any special meeting called for such
purpose (which meeting will be called upon the request of the holders
of a majority of the then-outstanding Series E Preferred), by
a Class E Approval, to elect the smallest number (but not less than
two) of members of the Board necessary to constitute a majority of the
full Board (the "Board Representation Requirement"). The Company will
notify all holders of Series E Preferred as promptly as possible after
the occurrence of a Triggering Event of such occurrence and the
material facts relating thereto.
(b) For purposes of Section 2.5.3, a "Material
Default" means any of the following: (i) the Company or any of its
subsidiaries defaults in any payment of principal of or interest on any
Indebtedness (whether or not the giving of notice, the passage of time
or any other event is required thereunder or has occurred), or the
Company or any of its subsidiaries fails to perform or observe any
other agreement, term or condition contained in any agreement under
which any such Indebtedness is created (or if any other event
thereunder or under any such agreement shall occur and be continuing)
and the effect of such failure or other event is to cause, or to permit
the holder or holders of such Indebtedness (or a trustee on behalf of
such holder or holders) to cause, such Indebtedness to become due prior
to any stated maturity of such Indebtedness or to be repurchased by the
Company or any of its subsidiaries (whether of not the giving of
notice, the passage of time or any other event is required thereunder
or has not occurred) provided that the aggregate amount of all
Indebtedness as to which such a payment default occurs and is
continuing, or such failure or other event causing or permitting
acceleration or repurchase shall occur and be continuing, exceeds $5
million (which Material Default will be deemed to be continuing
regardless of whether the holder or holders of such Indebtedness (or a
trustee on behalf of such holder or holders) has given the Company a
waiver of such Material Default); (ii) the Company has publicly
disclosed, including in any filing with the Securities and Exchange
Commission, that it will be unable to pay when due any Indebtedness in
excess of $5 million in the aggregate and, prior to the exercise of the
voting rights provided for in this Section 2.5.3, such Indebtedness is
not paid or restructured or such statement is not substantially
withdrawn; or (iii) a receiver, fiscal agent or similar officer has
been appointed for the Company or any of its subsidiaries, in a
proceeding under the Bankruptcy Act or in any other proceeding under
state or federal law in which a court or governmental agency has
assumed jurisdiction over substantially all of the assets or business
of the Company or any of its subsidiaries, such jurisdiction has been
assumed by leaving the existing directors and officers in possession
but subject to the supervision and orders of a court or governmental
body or an order confirming a plan of reorganization, arrangement or
liquidation has been entered by a court or governmental authority
having supervision or jurisdiction over substantially all of the assets
or business of the Company or any of its subsidiaries. For purposes of
Sections 2.5.3(b) and 2.5.8, "Indebtedness" means any liability or
obligation of the Company (whether primary or secondary as a guarantor
or other surety other than arising out of the endorsement of checks for
collection in the ordinary course of business) for borrowed money, for
the deferred purchase price of any asset (other than inventory in the
ordinary course of business), under a capitalized
33
lease or ground lease and any other liability or obligation which would
be required by generally accepted accounting principles to be shown as
indebtedness on a balance sheet of the Company, whether or not
evidenced by a note, bond or similar instrument and "subsidiary" means
any entity the financial results of which are consolidated with the
Company's financial results under generally accepted accounting
principles and specifically includes Malibu Centers, Inc. and any
special purpose, bankruptcy-remote entity owned by the Company.
(c) Whenever the right to elect directors of the
Company has accrued to the holders of Series E Preferred, the Company
may, and upon the written request of the holders of record of at least
20% of the then-outstanding shares of Series E Preferred will, promptly
satisfy the Board Representation Requirement by increasing the size of
the Board and/or using reasonable efforts to secure the resignations of
such number of directors as is necessary to enable the Series E
Preferred designees to promptly be elected to the Board. If the Board
Representation Requirement is not so satisfied, then, at any time after
the right to elect directors has vested in the Series E Preferred
pursuant to this Section 2.5.3, the Secretary of the Company may, and,
upon the written request of the holders of record of at least 20% of
the then-outstanding shares of the Series E Preferred, addressed to the
Secretary at the principal office of the Company, will, call a special
meeting of the holders of Series E Preferred for the election of the
directors to be elected by them as herein above provided, to be held
within 30 calendar days after such call and at the place and upon the
notice provided by law and in the Bylaws of the Company for the holding
of meetings of shareholders. If any such special meeting required to be
called as above provided has not been called by the Secretary within 30
calendar days after receipt of any such request, then the holders of
record of at least 20% of the then-outstanding Series E Preferred may
designate in writing one of their number to call such meeting, and the
person so designated may call such meeting to be held at the place and
upon the notice above provided, and for that purpose will have access
to the stock ledger of the Company. If any such special meeting has
been called by the Secretary of the Company or by the holders of the
Series E Preferred as above provided, and if the holders of at least a
majority of the Series E Preferred then outstanding and entitled to
vote at such meeting are present or represented by proxy at such
meeting or any adjournment thereof, then, by vote of the holders of at
least a majority of such Series E Preferred present or so represented
at such meeting, the then-authorized number of directors of the Company
will be increased by twofold plus one and, at such meeting, the holders
of the Series E Preferred will be entitled to elect the additional
directors so provided for, but any directors so elected will hold
office only until their respective successors are duly elected and
qualified at the annual meeting of shareholders or special meeting held
in place thereof next succeeding their election, at which time their
successors will be elected by vote of the holders of at least a
majority of such Series E Preferred present or so represented at such
meeting. The foregoing remedy will not be deemed exclusive, and shall
be in addition to all other rights and remedies available at law or
equity to the holders of Series E Preferred. The failure to exercise,
or any delay in exercising any rights under this Section 2.5.3 as to a
particular Triggering Event will not diminish or otherwise affect the
rights hereunder.
(d) Each holder of a share of the Series E Preferred
will be entitled to receive the same prior notice of any shareholders'
meeting as provided to the holders of
34
Common Stock in accordance with the Bylaws of the Company, as well as
prior notice of all shareholder actions to be taken by legally
available means in lieu of meeting, and will vote separately as a class
to the extent herein provided. Fractional votes will be permitted, and
any fractions will be counted in computing voting rights.
(e) Shares of Series E Preferred owned by the Company
or any subsidiary of the Company will not be counted as outstanding for
any purpose hereof.
2.5.4 Reacquired Shares. If permitted by law, any
shares of Series E Preferred that are issued and thereafter cease to be
issued and outstanding for any reason, whether because they are
converted into Junior Stock as provided herein or are purchased or
otherwise acquired by the Company in any manner whatsoever, will be
restored to the status of authorized but unissued shares of preferred
stock of the Company, including shares of Series E Preferred, and may
be reissued as part of a new series of preferred stock of the Company
subject to the conditions and restrictions on issuance set forth herein
or in any other certificate of designations creating a series of
preferred or any similar stock of the Company.
2.5.5 Liquidation, Dissolution or Winding Up. Upon
any liquidation, dissolution or winding up of the Company, no
distribution will be made to the holders of shares of Junior Stock
unless, prior thereto, the holders of shares of Series E Preferred
shall have received $100,000 per share plus accrued and unpaid
dividends. Neither a consolidation or merger of the Company with
another corporation, nor a sale or transfer of all or part of the
Company's assets for cash, securities or other property will be
considered a liquidation, dissolution or winding up of the Company.
2.5.6 Redemption. (a) Redemption Price. Shares of
Series E Preferred (i) will not be redeemable prior to January 1, 2002
and (ii) will be redeemable (to the extent not previously redeemed or
converted and as to which no Conversion Notice has been delivered to
the Company on or before the date fixed for redemption) at any time
(A) after January 1, 2002 and prior to or on January
1, 2003, at a price per share of $104,000 plus accrued and
unpaid dividends through the date such redemption price is
paid ("Accrued Dividends");
(B) after January 1, 2003 and prior to or on January
1, 2004, at a price per share of $103,000 plus Accrued
Dividends;
(C) after January 1, 2004 and prior to or on January
1, 2005, at a price per share of $102,000 plus Accrued
Dividends;
(D) after January 1, 2005 and prior to or on January
1, 2006, at a price per share of $101,000 plus Accrued
Dividends; and
(E) after January 1, 2006, at a price per share of
$100,000 plus Accrued Dividends.
35
(b) Redemption Procedures. At least 30 calendar days
and not more than 60 calendar days prior to the date fixed for any
redemption of Series E Preferred, written notice ("Redemption Notice")
will be given by the Company by first class mail, postage prepaid, to
each holder of record of Series E Preferred on the record date fixed
for such redemption by the Board at such holder's address as it appears
on the stock books of the Company, provided that no failure to give
such notice nor any deficiency therein will affect the validity of the
procedure for redemption of any shares of Series E Preferred except as
to the holder or holders to whom the Company has failed to give such
notice or whose notice was defective. The Redemption Notice will state:
(i) the redemption price;
(ii) whether all or fewer than all of the outstanding
shares of Series E Preferred are to be redeemed and the total
number of shares of Series E Preferred being redeemed;
(iii) the date fixed for redemption by the Board,
which date will occur within the applicable redemption period
specified in clause (a) above (the "Redemption Date");
(iv) the place or places and manner in which the
holder is to surrender his or her certificate(s) to the
Company; and
(v) that dividends on the shares of Series E
Preferred to be redeemed will cease to accumulate on the
Redemption Date unless the Company defaults on the redemption
price.
Upon surrender of the certificate(s) representing shares of Series E
Preferred that are the subject of redemption pursuant to Section
2.5.6(a), duly endorsed (or otherwise in proper form for transfer, as
determined by the Company), in the manner and at the place designated
in the Redemption Notice and on the Redemption Date, the full
redemption price for such shares will be paid in cash to the person or
entity whose name appears on such certificate(s) as the owner thereof,
and each surrendered certificate will be canceled and retired. In the
event that fewer than all of the shares represented by any one
certificate are redeemed, a new certificate will be issued representing
the unredeemed shares.
(c) On and after the Redemption Date, unless the
Company defaults in the payment in full of the applicable redemption
price, dividends on the Series E Preferred to be redeemed will cease to
accumulate, and all rights of the holders thereof will terminate with
respect thereto on the Redemption Date, other than the right to receive
the redemption price, provided, however, that if a Redemption Notice
has been given as provided in Section 2.5.6(b) and the funds necessary
for redemption (including an amount in cash in respect of all dividends
that will accumulate to the Redemption Date) have been irrevocably
deposited in trust with a bank having an aggregate shareholders' equity
of at least $5.0 billion for the equal and ratable benefit of all
holders of shares of Series E Preferred that are to be redeemed, then,
at the close of business on the day on which such funds are deposited
in trust, dividends on the Series E Preferred to be redeemed will cease
to
36
accumulate and the holders thereof will cease to be shareholders of the
Company and be entitled only to receive the redemption price.
(d) If the funds of the Company legally available for
redemption of shares of Series E Preferred on the date scheduled for a
redemption are insufficient to redeem the total number of shares of
Series E Preferred to be redeemed on such date, those funds that are
legally available will be used to redeem the maximum possible number of
such shares ratably among the holders of such shares to be redeemed
based on their holdings of Series A Preferred. The shares of Series A
Preferred not redeemed will remain outstanding and entitled to all the
rights and preferences provided herein. At any time thereafter when
additional funds of the Company are legally available for the
redemption of shares of Series A Preferred, such funds will immediately
be used to redeem the balance of the shares that the Company has become
obligated to redeem on any scheduled redemption date that it has not
redeemed.
2.5.7 Conversion. (a) Conversion Rate. At any time on
or after January 1, 2000, each share of the Series E Preferred will be
convertible, at the option of the holder thereof, into the number of
fully paid and nonassessable shares of Common Stock determined, subject
to adjustment as described below, by dividing $100,000 plus the total
accrued and unpaid dividends through the date of conversion by the
Conversion Price. As used herein, "Conversion Price" means the lesser
of (i) $2.50 (the "Conversion Rate Cap") and (ii) 1.2 multiplied by the
Sales Price for the 20 consecutive Trading Days ending two full Trading
Days prior to the date that a Conversion Notice with respect thereto is
received by the Company; "Conversion Rate" means the number of shares
of Common Stock into which each share of Series E Preferred may be
converted; "Sales Price" with respect to any period of time means the
(x) volume times the sales prices for each regular way trade during the
measurement period divided by the total volume during such period
(referred to as the "volume weighted average" on the Bloomberg News
Service and derived therefrom, or, if such service no longer publishes
such information or ceases to exist, such alternative service as the
Board may select in good faith) or, in case no such sale takes place on
such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction
reporting system, quotation system or such other similar system of the
Stock Exchange as reported on the Bloomberg News Service, or, if such
service no longer publishes such information or ceases to exist, such
alternative service as the Board may select in good faith, (y) if on
any such date the Common Stock is not traded or quoted by any Stock
Exchange, the average of the closing bid and asked prices furnished by
a professional market maker making a market in the Common Stock
selected by the Board in good faith, or (z) if no market maker is
making a market in the Common Stock, the fair value of such shares on
such date as determined by the Board in good faith; "Stock Exchange"
means the principal national securities exchange on which the shares of
Common Stock are listed or admitted to trading or, if the shares are
not listed or admitted to trading on any national securities exchange,
the National Association of Securities Dealers, Inc. Automated
Quotation System or any similar national system on which the Common
Stock is quoted or traded; and "Trading Day" means any day on which the
Stock Exchange is open for trading or, if the Common Stock is not
listed or admitted to trading on any Stock Exchange, any day other than
a Saturday, Sunday or a
37
day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
(b) No Fractional Shares. No fractional shares of
Common Stock will be issued upon conversion of Series E Preferred and,
if any shares of Series E Preferred surrendered by a holder, in the
aggregate, for conversion would otherwise result in a fractional share
of Common Stock, then such fractional share will be redeemed at the
then-effective Conversion Price per share, payable as promptly as
possible when funds are legally available therefor.
(c) Mechanics of Conversion. Before any holder of
shares of Series E Preferred will be entitled to convert the same into
shares of Common Stock, such holder must deliver a written notice (a
"Conversion Notice") to the attention of the Secretary or Treasurer of
the Company at the Company's principal place of business of its desire
to exercise its rights to convert, specifying the number of shares of
Series E Preferred to be converted and the holder's calculation of the
Conversion Rate. Such computation will be deemed correct for all
purposes hereof absent manifest error. In the event of any disagreement
between the Company and the holder as to the correct Conversion Price,
the Conversion Price will be finally determined by an investment
banking or brokerage firm selected by the holder, the fees and expenses
of which will be paid by the Company. Such conversion will be deemed to
have been made as of the close of business on the fifth business day
after such notice has been so delivered or such other date as the
holder exercising such conversion right and the Company agree. The
Company will, promptly upon receipt of all certificates representing
Series E Preferred as have been issued to such holder that are to be
converted, issue the appropriate number of shares of Common Stock to
such holder. All certificates issued upon the exercise of the
conversion will contain a legend governing restrictions upon the
disposition of such shares imposed by applicable securities laws. Such
legend will be removed by the Company by delivery of substitute
certificates without such legend in the event that such legend is no
longer required for purposes of applicable securities laws upon receipt
by the Company of an opinion of counsel to the effect that such legend
is no longer so required.
(d) Adjustment for Subdivisions or Combinations of
Common Stock. In the event that the Company at any time or from time to
time after the Initial Issuance Date effects a subdivision or
combination of its outstanding Common Stock into a greater or lesser
number of shares, then and in each such event the Conversion Rate Cap
will be increased or decreased proportionately.
(e) Adjustments for Dividends, Distributions on
Common Stock. In the event the Company at any time or from time to time
after the Initial Issuance Date makes or issues, or fixes a record date
for the determination of holders of Common Stock entitled to receive a
dividend or other distribution (a "Common Stock Distribution") payable
in additional shares of Common Stock or other securities or rights
(other than the rights, options or warrants offered to Series E
Preferred pursuant to Section 2.5.7(g)) that are convertible into or
entitling the holder thereof to receive additional shares of Common
Stock (such other securities or rights, "Common Stock Equivalents")
without payment of any consideration by such holder of such Common
Stock Equivalents for the additional shares
38
of Common Stock, without a proportionate and corresponding dividend or
other distribution to holders of Series E Preferred calculated as if
all of the Series E Preferred had been converted in accordance with the
terms hereof as of the record date for such dividend or other
distribution, then and in each such event, the Conversion Rate Cap will
be decreased as of the time of such issuance or, in the event such a
record date will have been fixed, as of the close of business on such
record date, by multiplying the Conversion Rate Cap by a fraction,
(i) the numerator of which will be the total number
of (A) shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of
business on such record date, plus (B) the maximum number of
shares of Common Stock (not including any shares described in
clause (ii)(B) immediately below) issuable upon conversion or
exercise of all outstanding Common Stock Equivalents as of
immediately prior to the time of such issuance or the close of
business on such record date (the sum of the shares described
in clauses (A) and (B) immediately above, the "Outstanding
Shares"); and
(ii) the denominator of which will be the total
number of (A) Outstanding Shares, plus (B) the number of
shares of Common Stock issuable in payment of such dividend or
distribution or upon conversion or exercise of such Common
Stock Equivalents;
provided, however, (i) if such record date shall have been fixed and
such dividend is not fully paid or if such distribution is not fully
made on the date fixed therefor, the Conversion Rate Cap will be
recomputed accordingly as of the close of business on such record date
and thereafter the Conversion Rate Cap will be adjusted pursuant to
this Section 2.5.7(e) as of the time of actual payment of such
dividends or distributions; (ii) if such Common Stock Equivalents
provide, with the passage of time or otherwise, for any decrease or
increase in the number of shares of Common Stock issuable upon
conversion or exercise thereof, the Conversion Rate Cap computed upon
the original issue thereof, and any subsequent adjustments based
thereon, will, upon any such decrease or increase becoming effective,
be recomputed to reflect such decrease or increase insofar as it
affects the rights of conversion or exercise of the Common Stock
Equivalents then outstanding; (iii) upon the expiration of any rights
of conversion or exercise under any unexercised Common Stock
Equivalents, the Conversion Rate Cap computed upon the original issue
thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, will, upon such
expiration, be recomputed as if the only additional shares of Common
Stock issued were the shares of such stock, if any, actually issued
upon the conversion or exercise of such Common Stock Equivalents; or
(iv) in the event of issuance of Common Stock Equivalents which expire
by their terms not more than 60 calendar days after the date of
issuance thereof, no adjustments of the Conversion Rate Cap will be
made until the expiration or exercise of all such Common Stock
Equivalents, whereupon such adjustment will be made in the manner
provided in this Section 2.5.7(e). The adjustments provided for in this
Section 2.5.7(e) will be made successively whenever any such dividend
or distribution is made.
39
(f) Reorganization, Merger, Consolidation or Sale of
Assets. If at any time or from time to time there shall be a capital
reorganization of the Common Stock (other than a subdivision,
combination, reclassification or exchange of shares provided for
elsewhere in this Section 2.5.7) or a merger or consolidation of the
Company with or into another corporation, or the sale of all or
substantially all of the Company's properties and assets to any other
person which is effected so that holders of Common Stock are entitled
to receive (either directly or upon subsequent liquidation) stock,
securities or assets with respect to or in exchange for Common Stock,
then, as a part of such capital reorganization, merger, consolidation
or sale, proper provision will be made so that the holders of the
Series E Preferred will thereafter be entitled to receive upon
conversion of the Series E Preferred the number of shares of stock,
securities or assets of the Company, or of the successor corporation
resulting from such merger or consolidation or sale, to which a holder
of the Common Stock deliverable upon conversion of Series E Preferred
would have been entitled on such capital reorganization, merger,
consolidation or sale (regardless of whether the Series E Preferred is
then-convertible and assuming a Conversion Price of $2.50 if such
conversion is so deemed to occur prior to January 1, 2004). In any such
case, appropriate adjustment will be made in the application of the
provisions of this Section 2.5.7 with respect to the rights of the
holders of the Series E Preferred after the reorganization, merger,
consolidation or sale to the end that the provisions of this Section
2.5.7 (including adjustment of the Conversion Price then in effect and
the number of shares purchasable upon conversion of the Series E
Preferred) will be applicable after that event as nearly equivalent as
may be practicable. This provision will apply to successive capital
reorganizations, mergers, consolidations or sales.
(g) Rights Offering. If at any time or from time to
time the Company shall offer to any of the holders of Common Stock any
right, option or warrant to acquire additional shares of capital stock
of the Company, then each holder of a share of then-outstanding Series
E Preferred will be entitled to receive rights, options or warrants to
acquire such number of additional shares of capital stock of the
Company as such holder would have been entitled to receive had such
holders of Series E Preferred been converted immediately prior to the
record date for the offering of such rights, options or warrants, at
the Conversion Rate then in effect or, if prior to January 1, 2000, at
a Conversion Rate using a deemed Conversion Price of $2.50.
(h) No Adjustment. No adjustment to the Conversion
Rate Cap will be made if such adjustment would result in a change in
the Conversion Rate Cap of less than 0.001%. Any adjustment of less
than 0.001% which is not made will be carried forward and will be made
at the time of and together with any subsequent adjustment which, on a
cumulative basis, amounts to an adjustment of 0.001% or more in the
Conversion Rate Cap.
(i) Certificate as to Adjustments. Upon the
occurrence of each adjustment or readjustment of the Conversion Rate
Cap pursuant to this Section 2.5.7, the Company at its expense will
promptly compute such adjustment or readjustment in accordance with the
terms hereof and cause independent public accountants selected by the
Company to verify such computation and prepare and furnish to each
holder of Series E Preferred a certificate setting forth such
adjustment or readjustment and showing in detail the facts
40
upon which such adjustment or readjustment is based. The Company will,
upon the written request at any time of any holder of Series E
Preferred, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, (ii)
the Conversion Rate at that time in effect, and (iii) the number of
shares of Common Stock and the amount, if any, of other property which
at that time would be received upon the conversion of Series E
Preferred.
(j) Reservation of Stock Issuable Upon Conversion.
The Company will at all times reserve and keep available out of its
authorized but unissued shares of Common Stock solely for the purpose
of effecting the conversion of the shares of the Series E Preferred
such number of its shares of Common Stock as will from time to time be
sufficient to effect the conversion of all then-outstanding shares of
the Series E Preferred; and if at any time the number of authorized but
unissued shares of Common Stock will not be sufficient to effect the
conversion of all then-outstanding shares of the Series E Preferred,
the Company will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as will be sufficient
for such purpose.
2.5.8 Repurchase Upon Change in Control. (a) In the
event of a Change in Control or if the Company enters into a definitive
agreement providing for a Change in Control, the Company will, within
30 calendar days after such Change in Control or the execution of such
an agreement, offer to purchase each then-outstanding share of Series E
Preferred for an amount per share equal to $100,000 plus accrued and
unpaid dividends through the date of purchase. Within 10 calendar days
after such Change in Control or the execution of such an agreement, the
Company will provide written notice to holders of Series E Preferred at
such holder's address as it appears on the stock books of the Company.
The Company will extend such offer for a period of 20 business days
after commencing such offer and will purchase any shares tendered to
the Company pursuant to such offer at the end of such 20 business day
period. Dividends will cease to accrue with respect to shares of Series
E Preferred tendered and all rights of holders of such tendered shares
will terminate, except for the right to receive payment therefor, on
the date such shares are purchased and paid for by the Company.
(b) A "Change in Control" will be deemed to occur
upon (i) the occurrence of an event which would constitute under the
applicable loan documentation a "change in control" or similar event
requiring prepayment of $5 million or more of Indebtedness of the
Company or any of its subsidiaries (regardless of whether the lender or
holder of any such Indebtedness will have waived its right to require
such prepayment), or (ii) any "person" or "group" (within the meaning
of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), other than a MEI Affiliate becoming the
beneficial owner (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 50% or more of the combined voting power of the
Company's then-outstanding voting securities entitled to vote generally
in the election of directors ("Voting Stock"), whether directly by a
stock purchase or indirectly through a merger, consolidation,
recapitalization or similar transaction; provided, however, that no
event described in clause (ii) above will constitute a "Change of
Control" (A) until such time as MEI Affiliates have sold for cash or
cash equivalents at least 50% of the Voting Stock (or, if applicable,
the securities into which
41
Voting Stock is converted in any merger, consolidation,
recapitalization or similar transaction) owned by them as of the
Initial Issuance Date and MEI Affiliates are no longer entitled to
elect a majority of the members of the Board or the Board of Directors
of any successor entity in any such merger, consolidation,
recapitalization or similar transaction or (B) the transaction that
would otherwise constitute a "Change of Control" has received Class E
Approval prior to the consummation of such transaction. As used herein,
"MEI Affiliate" means, collectively, MEI Holdings, L.P., SZ Capital,
L.P. and any person that directly, or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common
control with, such entities.
2.5.9 Fractional Shares. Series E Preferred may be
issued in fractions of a share which will entitle the holder, in
proportion to such holder's fractional shares, to receive dividends,
participate in distributions and to have the benefit of all other
rights of holders of Series E Preferred.
2.5.10 Rank. The Series E Preferred will rank senior
as to all capital stock of the Company, including all Junior Stock, in
each case as to the payment of dividends or other distributions or upon
liquidation, dissolution or winding up.
2.5.11 Notice to Holders. Any notice given by the
Company to holders of record of Series E Preferred will be effective if
addressed to such holders at their last addresses as shown on the stock
books of the Company and deposited in the U.S. mail, sent first-class,
and will be conclusively presumed to have been duly given, whether or
not the holder of the Series E Preferred receives such notice.
2.5.12 Amendment of Terms of Series E Preferred. Upon
request of the holders of a majority of the then-outstanding shares of
Series E Preferred, the Company will amend the terms of the Series E
Preferred as set forth herein, or issue a new series of preferred stock
in exchange for such Series E Preferred, in order to make the terms of
the Series E Preferred, in the opinion (which need not be written) of a
nationally recognized financial advisor selected by the holders of a
majority of the then-outstanding shares of Series E Preferred,
consistent with terms applicable generally to preferred stock being
issued in the public securities markets by companies with comparable
credit characteristics to the Company, provided, however, that no
amendment or other change will be made under this Section 2.5.12 to the
dividend rate, Conversion Rate or Conversion Price applicable to the
Series E Preferred.
2.5.13 Certain Limitations. Notwithstanding any other
provision in the Charter or applicable law to the contrary, (a) the
vote of any holder of Series E Preferred will not be affected by any
direct or indirect interest of the holder or any affiliate or associate
or other person or entity in the matter under consideration or any
other matter, (b) holders of Series E Preferred will have only the
rights set forth herein and will have no fiduciary or similar rights,
and (c) no holder of Series E Preferred or any affiliate or associate
thereof will have any liabilities or obligations to any other person or
entity, including without limitation any other holder of Series E
Preferred or any other class or series of capital stock of the Company,
by reason of the giving or withholding of any vote or consent hereunder
or otherwise, it being the expectation and intention that such vote or
consent will be so
42
given or withheld in the sole discretion of such holder regardless of
the effect thereof on any other person or entity.
2.5.14 Contractual Rights of Holders. The various
provisions set forth herein for the benefit of the holders of the
Series E Preferred will be deemed contract rights enforceable by them,
including without limitation, by one or more actions for specific
performance.
IN WITNESS WHEREOF, this amendment to the Certificate of
Designations is executed on behalf of the Company as of this __th day of
____________, ___.
----------------------------------------
Title:
43
EXHIBIT "B"
FORM OF CONVERSION NOTICE
The undersigned is the holder of the "Note" as described in that
certain Loan Agreement dated as of November 16, 1998 (as amended, restated,
replaced, supplemented or otherwise modified from time to time, the"LOAN
AGREEMENT") by and between SZ CAPITAL, L.P., a Delaware limited partnership, as
lender, and MALIBU ENTERTAINMENT WORLDWIDE, INC., a Georgia corporation, as
borrower. Capitalized terms not otherwise defined herein have the meaning given
to them by the Loan Agreement.
This is a Conversion Notice. The undersigned hereby irrevocably elects
to convert the amount of the Debt described below into _______ shares of Series
E Preferred Stock of Malibu Entertainment Worldwide, Inc., a Georgia corporation
(the "COMPANY") according to the conditions hereof, as of the date written
below.
Conversion calculations:
-----------------------------------------------
Date to Effect Conversion ("Conversion Date")
-----------------------------------------------
Balance of Outstanding Debt
-----------------------------------------------
Amount of Debt to be Converted
-----------------------------------------------
Number of Shares of Series E Preferred Stock to
be Issued (Amount of Debt to be Converted/
100,000 rounded up to nearest whole share)
-----------------------------------------------
Amount of New Note to be Issued (if applicable)
EXECUTED this ___ day of ______, _____.
----------------------------------------------,
a
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By:
--------------------------------------------
Name:
Title:
Address:
