<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 24, 1998
REGISTRATION NO. 333-50297
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
JEEPERS! INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 7999 74-2596237
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL CLASSIFICATION IDENTIFICATION NO.)
INCORPORATION OR CODE NUMBERS)
ORGANIZATION) 60 HICKORY DRIVE
WALTHAM, MA 02154
(781) 890-1800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------
MR. NABIL N. EL-HAGE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
JEEPERS! INC.
60 HICKORY DRIVE
WALTHAM, MA 02154
(781) 890-1800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
NORMAN D. CHIRITE, ESQ. MARY A. BERNARD, ESQ.
WEIL, GOTSHAL & MANGES LLP KING & SPALDING
767 FIFTH AVENUE 1185 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10153 NEW YORK, NEW YORK 10036
(212) 310-8000 (212) 556-2100
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated April 24, 1998
Prospectus
dated , 1998
Shares
[LOGO OF JEEPERS AND VARIOUS CARTOON CHARACTERS APPEAR HERE]
Common Stock
All of the shares of Common Stock offered hereby are being issued and
sold by Jeepers! Inc. (the "Company").
Prior to this offering (the "Offering"), there has been no public market for
the Common Stock of the Company. It is currently estimated that the initial
public offering price will be between $ and $ per share. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price. Application will be made for listing of the
Common Stock on the Nasdaq Stock Market's National Market ("Nasdaq") under the
symbol "JPRS."
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share................................... $ $ $
- --------------------------------------------------------------------------------
Total(3).................................... $ $ $
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</TABLE>
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(1) The Company and certain stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) Certain stockholders have granted the Underwriters 30-day options to
purchase up to an aggregate of additional shares of Common Stock
solely to cover over-allotments, if any, at the per share Price to Public
less the Underwriting Discount. If the Underwriters exercise these options
in full, the total Price to Public, Underwriting Discount and Proceeds to
Company will be $ , $ and $ , respectively. See
"Underwriting."
The shares of Common Stock are offered by the several Underwriters subject to
prior sale when, as and if delivered to and accepted by the Underwriters, and
subject to their right to reject orders in whole or in part. It is expected
that certificates for such shares will be available for delivery at the offices
of Piper Jaffray Inc. in Minneapolis, Minnesota on or about , 1998.
Piper Jaffray inc.
Cowen & Company
Gerard Klauer Mattison & Co., Inc.
<PAGE>
[Interior Photographs of the Company's Parks]
Jeepers! and the Jeepers! logo, as well as certain additional names and logos
appearing in this Prospectus, are registered trademarks of the Company. This
Prospectus also includes names and trademarks of companies other than the
Company.
The Company intends to furnish its stockholders with annual reports containing
audited consolidated financial statements and quarterly reports for the first
three quarters of each fiscal year containing unaudited interim consolidated
financial information.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF THE
COMPANY, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS
IN SUCH SECURITIES, AND THE IMPOSITION OF A PENALTY BID, DURING AND AFTER THIS
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and the Consolidated Financial
Statements and Notes thereto appearing elsewhere in this Prospectus. Unless
otherwise indicated, all the information in this Prospectus (i) assumes no
exercise of the Underwriters' over-allotment options, (ii) gives effect to the
conversion of all outstanding shares of the Company's Preferred Stock into
Common Stock, which conversion will occur concurrently with the closing of the
Offering (the "Preferred Conversion"), and (iii) reflects the one-for-ten
reverse stock split of the Company's Common Stock effected in April 1998. See
"Description of Capital Stock." All references in this Prospectus to the
"Company" include, unless the context otherwise requires, Jeepers! Inc. and its
subsidiaries.
THE COMPANY
The Company owns and operates 15 indoor family theme parks (the "Parks")
throughout the United States and is pursuing a rapid expansion strategy. The
Company strives to create a unique entertainment destination for families with
children ages 2 to 12 by combining a variety of interactive attractions,
including amusement park rides, skill games, state-of-the-art simulator games
and comfortable family dining, all in a whimsical jungle-themed atmosphere.
Jeepers! Parks feature a 1950's-style diner with a diverse menu of high quality
food appealing to both children and their parents and offer a full range of
birthday party packages that include ride admissions, game tokens, food and
special entertainment activities. The Company believes the quality and
diversity of attractions and food available at its Parks are a significant
competitive advantage and help drive repeat customer visits.
The Parks average approximately 25,000 square feet in size and incorporate a
high level of thematic design, including whimsical jungle imagery, vivid
graphics and proprietary mascot characters, creating a unique personality and
brand identity. The costumed mascots appear regularly in the Jeepers! Parks to
participate in promotional and entertainment activities and are featured on
Jeepers! television commercials and logoed merchandise. The Company's
interactive attractions include indoor roller coasters known as the Python Pit
and the Yak Attack, a multi-level maze of tubes, slides and play elements known
as the Jeepers Creepers! Sky Maze and skill games such as Skee Ball and Whack-
a-Gator that award tickets redeemable for prizes. The Tiny Rhino Diner offers
kids' favorites, such as Pizza Hut(R) pizza, hamburgers, hot dogs and chicken
strips, as well as a selection of entrees targeted to adults, such as chicken
caesar salads, pasta, and grilled chicken sandwiches. The Company believes the
quality and selection of its menu items are a significant attraction for
parents.
The Company enjoys a balanced revenue mix reflecting the diverse attractions
at its Parks. The Company generated total Park revenues of approximately $16.4
million in 1997, distributed among four principal revenue sources as follows:
amusement park rides, 25.9%; skill and simulator games, 21.2%; dining, 26.0%;
and birthday parties, 24.2%. The Company believes this balanced revenue
distribution evidences customers' attraction to each of the four key elements
of its Parks.
The Company's objective is to become a leading brand in the location-based
entertainment industry. With approximately 40 million children in the United
States between the ages of 5 and 14, the Company believes a significant
opportunity exists to meet the currently underserved and increasing demand for
wholesome family entertainment. In order to capitalize on this opportunity, the
Company's growth strategy includes: (i) aggressive development of new Parks,
with 12 new Jeepers! Parks planned for 1998 (of which two have already opened
and ten are under development) and approximately 24 Jeepers! Parks planned for
1999; (ii) building the Jeepers! brand; and (iii) enhancing Park performance.
3
<PAGE>
The Company has attracted significant attention from shopping center
developers as a result of its Parks' proven ability to increase high quality
consumer traffic in both new and existing enclosed malls and outdoor strip
centers. The Company believes that developers view Jeepers! Parks as an
opportunity to distinguish new retail developments from competitors and to
revitalize existing properties. In addition, each Jeepers! Park consists of
modular components that can be arranged in various combinations to fit into
odd-shaped sites. The Company believes that the demonstrated success of the
Jeepers! concept in a variety of retail environments, as well as its modular
Park design, facilitate the Company's rapid expansion.
The Company believes its Jeepers! Parks produce attractive unit economics.
Future Jeepers! Parks are expected to generate average annual revenues of
approximately $2.2 million and average Park EBITDA margin of approximately 20%,
although there can be no assurance that such levels will be achieved. The
Company expects that future Jeepers! Parks will require an average initial cash
investment, including pre-opening costs, of approximately $900,000, net of
landlord contributions, loans and other incentives, although there can be no
assurance that actual costs will not exceed anticipated amounts.
The Company was incorporated in 1988 in Texas and was reincorporated in
Delaware in 1991. The Company's principal executive offices are located at 60
Hickory Drive, Waltham, Massachusetts 02154 and its telephone number is (781)
890-1800.
----------------
The Company has adopted a fiscal year of 52 or 53 weeks that ends on the
Sunday closest to December 31. In this Prospectus, the fiscal years ended on
January 2, 1994, January 1, 1995, December 31, 1995, December 29, 1996,
December 28, 1997, January 3, 1999 and January 2, 2000 are referred to as
fiscal 1993, 1994, 1995, 1996, 1997, 1998 and 1999, respectively. Each of these
fiscal years contains 52 weeks, except for fiscal 1998, which will contain 53
weeks.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the shares
Company...........................
Common Stock to be outstanding shares (1)
after the Offering................
Use of proceeds.................... To fund the development of new Parks and
for general corporate purposes. See "Use of
Proceeds."
Proposed Nasdaq symbol............. JPRS
</TABLE>
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(1) Excludes (i) 524,550 shares of Common Stock issuable upon exercise of
options outstanding as of the date of this Prospectus, (ii) 152,500 shares
of Common Stock issuable upon exercise of warrants outstanding as of the
date of this Prospectus, and (iii) 275,000 shares of Common Stock reserved
for issuance under the 1998 Stock Option Plan. See "Management--Employment
Agreement," "Management--Stock Option Plans," "Certain Relationships and
Related Transactions" and "Description of Capital Stock."
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data and Park operating data)
<TABLE>
<CAPTION>
FISCAL YEAR QUARTER ENDED
--------------------------- -------------------
MARCH 30, MARCH 29,
1995 1996 1997 1997 1998
------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues.................... $ 7,648 $10,070 $ 16,372 $ 3,667 $ 7,206
Costs and expenses:
Cost of revenues.......... 1,270 2,263 3,495 823 1,307
Operating payroll and
benefit costs............ 2,422 2,961 4,594 1,020 1,875
Other operating expenses.. 2,983 3,303 5,908 1,096 2,306
General and administrative
expenses................. 3,001 3,038 4,114 849 1,141
Pre-opening costs......... -- 202 369 14 16
Depreciation and
amortization............. 681 867 1,173 263 419
Impairment and park
closing costs............ 8 750 1,648 -- --
------- ------- --------- ------- ---------
Income (loss) from
operations................. (2,717) (3,314) (4,929) (398) 142
Interest income (expense),
net........................ 99 (278) 329 98 4
------- ------- --------- ------- ---------
Net income (loss) (1)....... $(2,618) $(3,592) $ (4,600) $ (300) $ 146
======= ======= ========= ======= =========
Unaudited pro forma net
income (loss) per share of
common stock (2)........... $ (1.03) $ 0.03
========= =========
Weighted average number of
shares used in calculating
unaudited pro forma net
income (loss) per share of
common stock............... 4,458,697 4,545,702
========= =========
SELECTED PARK OPERATING DATA
(3):
Number of Parks owned at
period end:................
Jeepers! Parks............ 0 2 8 2 9
All Parks (4)............. 5 7 14 7 14
Average weekly sales:
Jeepers! Parks............ $ -- $44,965 $ 42,175 $54,968 $44,935
All Parks (4)............. 20,715 29,380 31,870 35,305 38,352
Average Park EBITDA margin
(4)(5)..................... 16.4% 14.7% 15.3% 20.9% 24.8%
</TABLE>
<TABLE>
<CAPTION>
MARCH 29, 1998
-----------------------------
PRO FORMA AS
PRO FORMA (6) ADJUSTED (6)(7)
------------- ---------------
<S> <C> <C> <C>
BALANCE SHEET
DATA:
Cash and cash
equivalents..... $ 3,914 $
Working capital.. (47)
Total assets..... 22,739
Long-term debt,
including
current portion. 2,425
Stockholders'
equity.......... 15,236
</TABLE>
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(1) Since its inception, the Company has incurred net operating losses.
Accordingly, the Company has made no provision for income taxes payable. At
December 28, 1997, the Company had a net operating loss carryforward of
approximately $16.0 million, subject to limitations as set forth in
Internal Revenue Code Section 382. A full valuation reserve has been
established for all net deferred tax assets. See Note 10 of Notes to
Consolidated Financial Statements.
(2) Unaudited pro forma net income (loss) per share of common stock was
computed by dividing net income (loss) applicable to common stock by the
weighted average number of shares outstanding after giving effect to the
Preferred Conversion. See Notes 6 and 13 of Notes to Consolidated Financial
Statements.
(3) Excludes two Jeepers Jr! centers opened in 1996 which are operated inside
Toys "R" Us Kids World superstores. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
(4) Includes Jeepers! Parks and earlier-generation Parks known as Jungle Jim's
Playlands. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
(5) Represents, for each period presented, income from Park operations before
Park-level depreciation and amortization divided by Park revenue.
(6) Pro forma to reflect the Preferred Conversion.
(7) Adjusted to reflect the sale of the shares of Common Stock offered
hereby at an assumed initial offering price of $ per share and the
application of the net proceeds therefrom. See "Use of Proceeds" and
"Capitalization."
5
<PAGE>
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. In addition to the other information in this Prospectus, the following
risk factors should be carefully considered in evaluating an investment in the
Common Stock offered hereby. The discussion in this Prospectus contains
forward-looking statements which are subject to risks and uncertainties. When
used anywhere in this Prospectus, the words "anticipate," "believe," "could,"
"estimate," "expect," "intend," "may," "plan," "will," "should" or the
negative thereof and similar expressions as they relate to the Company or its
management are intended to identify such forward-looking statements. The
Company's actual results could differ significantly from those discussed in
this Prospectus.
LIMITED RELEVANT OPERATING HISTORY AND HISTORY OF LOSSES
The Company opened its first-generation Jungle Jim's Playland family theme
park in 1988 and has reevaluated and updated its concept, introducing its
second-generation Jungle Jim's Playland in 1993. The Company first introduced
the Jeepers! Park concept in January 1996, and the Jeepers! Parks are expected
to account for the substantial majority of the Company's revenues in the
foreseeable future. Consequently, the Company has a limited relevant operating
history upon which an evaluation of its prospects can be based. The Company
has incurred net losses and experienced negative cash flow from operations
since inception and expects to incur a net loss in fiscal 1998. The Company
experienced net losses of approximately $3.6 million and $4.6 million in
fiscal 1996 and fiscal 1997, respectively, and net income of $146,000 in the
quarter ended March 29, 1998. At March 29, 1998, the Company had an
accumulated deficit of approximately $19.9 million. There can be no assurance
that the Company will be able to achieve or sustain revenue growth or
profitability. See "Selected Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
RISKS ASSOCIATED WITH EXPANSION
The Company's continued growth depends on its ability to successfully open
new Jeepers! Parks on a timely and profitable basis. The Company currently
plans to open 12 new Parks in 1998 (of which two have already been opened) and
approximately 24 new Parks in 1999. The Company's ability to achieve its
expansion plans will depend on a variety of factors, some of which are beyond
its control. These factors include, among others, availability of attractive
sites on acceptable terms, securing required governmental permits and
approvals in a timely fashion, adequate supervision of construction, hiring,
training and retention of skilled management and other personnel, availability
of adequate financing, timely completion of new retail developments in which
the Company plans to open new Parks, and successful integration of new Parks
into the Company's existing operations. There can be no assurance that the
Company will be successful in opening the planned number of Parks in a timely
manner, or that, if opened, such Parks will be operated profitably. The
Company's expansion plans contemplate entering new geographic regions in which
the Company has no operating experience and which may have different
demographic characteristics than its existing markets. There can be no
assurance as to the level of demand for the Jeepers! concept in markets
outside of the regions in which the existing Jeepers! Parks are located.
Profitability may be adversely affected by costs associated with developing a
significant number of new Parks over a relatively short time period. New Parks
typically incur above-average operating costs during the first several months
of operation, which have a material adverse effect on the profitability of
such Parks during such period. There can be no assurance that the Company will
be able to achieve its planned expansion or that its expansion will be
profitable. Failure of the Company to achieve its planned expansion on a
profitable basis would have a material adverse effect on the Company's
business, financial condition and results of operations.
DEPENDENCE ON ABILITY TO SECURE SITES
The success of the Company's growth strategy and expansion plans are
dependent on its ability to develop Parks in attractive locations with
acceptable lease terms. The availability of attractive sites can be adversely
6
<PAGE>
affected by changes in the national, regional and local economic climate,
demographic changes, and changes in real estate, zoning and tax laws. In
addition, the Company faces intense competition for available space from a
variety of large format retailers. As a result of the foregoing, there can be
no assurance that the Company will be able to locate, lease or develop
attractive sites on terms it considers acceptable. The failure of the Company
to develop Parks in attractive locations or to lease Parks on acceptable terms
could result in an inability to implement fully its growth strategy, which
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business--Growth Strategy" and
"Business--Site Selection."
FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING
The Company estimates that capital expenditures during fiscal 1998 will be
approximately $12.0 million in the aggregate and that capital expenditures
during fiscal 1999 will be approximately $22.0 million in the aggregate.
Although the Company expects that the net proceeds of the Offering, combined
with the cash flow from operations, equipment leases and the Company's $5.0
million secured loan facility will be sufficient to fund its capital
requirements at least through the end of fiscal 1999, there can be no
assurance that this will be the case. If actual cash flows from operations
fail to meet the Company's expectations, costs and capital expenditures exceed
the amounts anticipated, landlord contributions, loans and other incentives
are lower than expected or the Company is required to reduce prices in order
to respond to competitive pressures, the Company may be required to seek
additional capital earlier than anticipated. There can be no assurance that
such additional financing will be available on acceptable terms. Further, the
Company anticipates that it may need additional capital to continue its
expansion plans beyond 1999. There can be no assurance that additional capital
to fund expansion beyond 1999 will be obtained on terms acceptable to the
Company, if at all. The issuance of additional equity securities by the
Company will result in dilution to the then-existing stockholders. Moreover,
if adequate funds are not available, the Company may be required to curtail
its projected growth, which would have a material adverse effect on the
Company's business, financial condition and results of operations. See "Use of
Proceeds" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
MANAGEMENT OF GROWTH
The Company's rapid expansion has strained the Company's existing
management, information systems and financial controls. There can be no
assurance that the Company will be able to respond on a timely basis to all of
the changing demands that its planned expansion will impose on management and
such systems and controls. The failure to continue to evaluate and improve
management, information systems and financial controls or unexpected
difficulties encountered during expansion could have a material adverse effect
on the Company's business, financial condition and results of operations.
The Company may seek acquisition opportunities in order to gain access to
attractive real estate in strategic markets throughout the United States. The
Company does not currently have any acquisitions planned or under negotiation.
Furthermore, there can be no assurance that the Company will be able to
successfully identify suitable acquisition candidates, obtain financing on
acceptable terms, complete acquisitions or expand into new markets. There can
also be no assurance that future acquisitions will not have a material adverse
effect upon the Company's operating results, particularly in the fiscal
quarters immediately following the completion of an acquisition while the
acquisition is being integrated into the Company's operations. As of the date
of this Prospectus, the Company does not have any definitive agreements,
arrangements or understandings regarding any particular acquisition.
SMALL PARK BASE
The Company currently operates 15 Parks. As a result, the operating results
achieved to date by the Company's relatively small number of Parks may not be
indicative of the future operating results of the Company with a larger number
of Parks. In addition, due to the Company's small Park base, poor operating
results at any one Park could have a material adverse effect on the results of
operations of the Company as a whole.
7
<PAGE>
DEPENDENCE UPON KEY PERSONNEL
The Company's future success depends in large part on the continued services
of its senior management and the Company's ability to attract, motivate and
retain highly qualified employees. In particular, the Company is highly
dependent on the services of Nabil N. El-Hage, the Company's President, Chief
Executive Officer and Chairman of the Board of Directors (the "Board"). In
addition, as the Company expands its operations, the success of its business
will depend increasingly upon the Company's ability to attract and retain
additional skilled management personnel. Competition for such employees is
intense. Accordingly, the loss of services of Mr. El-Hage or other members of
senior management or the inability to attract additional personnel as needed
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Management."
COMPETITION
Competition in the location-based entertainment industry is intense. The
Company competes principally with national chains such as Chuck-E-Cheese,
Discovery Zone and potentially Club Disney, as well as a broad array of
smaller chains and independent operators in each of its markets. While the
Company believes that its Parks are distinctive in design and unique in the
variety of entertainment attractions offered, it is aware that its competitors
may operate with similar concepts. There can be no assurance that the
Company's competitors will not adopt concepts similar to those of the Company
or be more successful in establishing businesses using similar concepts, or
that such competitors will not be more successful than the Company in
developing and marketing other concepts. Many of the Company's competitors are
well established with significantly greater financial, marketing and other
resources than the Company. Some of the Company's competitors have been in
existence for substantially longer periods than the Company and may be better
established in the areas where the Company's Parks are located or in the
markets where the Company plans to expand in the future. In addition, the
Company's profitability depends not only on its ability to compete
successfully against similar or comparable businesses, but also upon
consumers' choice of the type of entertainment the Company's Parks provide
over other available forms of entertainment, including, but not limited to,
movies, sporting events, local youth sports leagues and other seasonal
activities. There can be no assurance that the Company will be able to respond
to various competitive factors affecting the location-based entertainment
industry. See "Business--Competition."
RELIANCE ON RELATIONSHIP WITH PIZZA HUT
The Company has entered into certain non-exclusive license arrangements
(collectively, the "Pizza Hut Agreements") with Pizza Hut, Inc. ("Pizza Hut"),
pursuant to a master license agreement. The Pizza Hut Agreements enable the
Company to market Pizza Hut(R) pizza and other products in the Company's
Parks. The Pizza Hut Agreements provide for a license-term of ten years from
the commencement of the license at each licensed location and may be
terminated under certain circumstances. There can be no assurance that such
arrangements will not be terminated or that the Company will be able to extend
any of its license arrangements upon their expiration. In addition, in
franchised Pizza Hut territories, it may be necessary to obtain the consent of
the franchisee to enter into a Pizza Hut Agreement. The Company was unable to
obtain a Pizza Hut license with respect to one of its first-generation Jungle
Jim's Playlands. There can be no assurance that the Company will be able to
obtain Pizza Hut licenses for its new Parks in the future on terms acceptable
to the Company, if at all. The termination of the Pizza Hut Agreements and the
inability of the Company to replace such agreements with comparable
arrangements or the inability to obtain Pizza Hut Agreements or comparable
arrangements for new Parks, could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Relationship with Pizza Hut."
SUPPLY RISKS
The Company is dependent on a limited number of suppliers for its amusement
park rides. Each of the Company's amusement park rides is currently supplied
by a single supplier. Although the Company believes alternative suppliers for
its amusement park rides are available, there can be no assurance that the
Company
8
<PAGE>
would be able to replace any of its existing suppliers in a timely manner or
on terms acceptable to the Company. The Company's inability to obtain
amusement park rides from its existing suppliers could result in delays,
interruptions and increased costs in the opening of new Parks and the
operation of existing Parks, which could have a material adverse effect on the
Company's business, financial condition and results of operations. In
addition, the Company is dependent on frequent deliveries of fresh or frozen
poultry, beef, produce and other foods. Shortages or interruptions in the
supply of fresh or frozen poultry, beef, produce and other foods, which may be
caused by adverse weather or other conditions, could have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Business--Park Operations and Management."
GOVERNMENT REGULATION AND LABOR COSTS
The Company is subject to federal, state and local government regulation
relating to the operation of its amusement park rides and food service
facilities, as well as regulations relating to building and zoning
requirements, environmental compliance, and the Company's relationship with
its employees, including minimum wage requirements, health benefits,
unemployment taxes and sales taxes, overtime and working conditions, and
citizenship requirements. The failure to obtain or retain required licenses
could adversely affect the operations of the Company's Parks. A significant
number of the Company's hourly personnel at its Parks are paid at rates
related to the federal minimum wage. Accordingly, legislated increases in the
federal minimum wage, as well as increases in additional labor cost
components, such as employee benefit costs, workers' compensation insurance
rates or other costs associated with employees, would increase the labor costs
at the Company's Parks, which could have a material adverse effect on the
Company's business, financial condition and results of operations. In
addition, the Company is subject to local health board ordinances for the
manufacture, handling, storage and labeling of food products in its kitchens.
The failure by the Company to comply with laws regulating its business,
together with future changes in existing regulations, may adversely affect the
Company's business. See "Business--Government Regulation and Labor Costs."
RISK OF INJURY CLAIMS
The nature of the activities conducted in the Company's Parks entail the
potential risk of bodily injuries to children participating in such
activities, for which the Company maintains liability insurance. Although the
Company's Parks are designed, constructed and tested with an emphasis on
children's safety and security, there can be no assurance that injuries will
not occur in the future or that claims against the Company will not be
asserted as a result of such injuries. Any successful claim against the
Company could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, the potential harm
to the Company's reputation that may result from bodily injuries occurring in
its Parks could result in loss of market share and could have a material
adverse effect on the Company's business, financial condition and results of
operations.
VARIABILITY OF RESULTS OF OPERATIONS; FLUCTUATIONS IN QUARTERLY RESULTS
The Company's sales and earnings fluctuate seasonally. Although Parks in
different markets are subject to different seasonal influences (including
seasonal changes in weather and school vacation periods), historically the
Company has generated the highest average Park revenue during its first and
third fiscal quarters and the lowest average Park revenue during the fourth
fiscal quarter. In addition, quarterly results are significantly affected by
the timing of new Park openings, since new Parks are less profitable during
their first several months of operation and the Company expenses pre-opening
costs as incurred. Accordingly, to the extent that Park openings are
concentrated in any fiscal period, results of operations for such fiscal
period may be materially adversely affected. As a result of the combined
impact of seasonality and the timing of new Park openings, operating margins
and profitability may fluctuate significantly from quarter to quarter. Results
for any quarter are not indicative of results that will be achieved for any
other quarter or for the full fiscal year. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Seasonality and
Quarterly Results."
9
<PAGE>
INTELLECTUAL PROPERTY
Jeepers!, Jeepers! Food, Fun and a Monkey, Jeepers Jr!, and Jungle Jim's
Playland, together with their associated logos, as well as Jungle Play and
Kidding Around, are registered trademarks of the Company. All depictions of
any characters illustrated herein, including the designs for each of "JJ,"
"Trish," "Kronkle" and "Jungle Jim," represent trademarks currently used by
the Company in its business. The Company believes that such trademarks have
significant value to the Company and are important to the marketing of the
Company's concepts. There can be no assurance that the steps taken by the
Company to protect its proprietary rights will be adequate to prevent
misappropriation of the Company's rights or the use by others of features
based upon, or otherwise similar to, those of the Company. In addition,
although the Company believes that its trademarks have been independently
developed, there can be no assurance that any of the trademarks used by the
Company do not or will not violate the proprietary rights of others, that the
trademarks will be upheld if challenged, or that the Company will not be
prevented from using the trademarks, any of which could have a material
adverse effect on the Company. See "Business--Intellectual Property."
RISKS ASSOCIATED WITH THE LOCATION-BASED ENTERTAINMENT INDUSTRY
The location-based entertainment industry can be affected significantly by
many factors, including changes in consumer tastes and preferences,
seasonality, demographic trends, traffic patterns and the type, number and
location of competitors. Factors such as inflation, increased food, labor and
health costs and the lack of availability of an adequate number of hourly
employees may also adversely affect the Company's industry. Further, the
Company's profits are dependent on discretionary spending by consumers,
particularly by consumers living in the communities in which the Parks are
located. A significant weakening in the national economy or any of the local
economies in which the Company operates may cause the Company's patrons to
curtail discretionary spending which, in turn, could have a material adverse
effect on the Company's business, financial condition and results of
operations.
ABSENCE OF PUBLIC MARKET FOR COMMON STOCK; DETERMINATION OF INITIAL PUBLIC
OFFERING PRICE
Prior to the Offering, there has been no public market for the Common Stock.
The initial public offering price of the Common Stock will be determined by
negotiations among the Company and the representatives of the Underwriters.
There can be no assurance that an active trading market for the Common Stock
will develop or continue after the completion of the Offering or that the
market price of the Common Stock will not decline below the initial public
offering price. See "Underwriting."
POSSIBLE VOLATILITY OF COMMON STOCK PRICE
The market price of the Common Stock could fluctuate significantly in
response to quarterly operating results and other factors, including many over
which the Company has no control and that may not be directly related to the
Company. The stock market has from time to time experienced extreme price and
volume fluctuations, which have often been unrelated or disproportionate to
the operating performance of particular companies. Fluctuations or decreases
in the trading price of the Common Stock may adversely affect the liquidity of
the trading market for the Common Stock and, in the event that the Company
seeks to raise capital through future equity financings, the Company's ability
to raise such equity capital. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Results of Operations."
CONTROL BY CERTAIN STOCKHOLDERS
Following the Offering, Centre Capital Investors L.P., a private investment
partnership ("CCI"), and its affiliates and related entities will beneficially
own or control approximately % of the outstanding shares of Common Stock.
Accordingly, CCI will have the ability to significantly influence the results
of any matter submitted to the stockholders for approval, including
fundamental corporate transactions and the election of directors. See
"Principal Stockholders."
10
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
shares of Common Stock, of which the shares sold pursuant to the
Offering will be freely tradeable without restriction or further registration
under the Securities Act, except for any of such shares held by "affiliates"
(as defined under Rule 405 of the Securities Act) of the Company. The holders
of the remaining 4,601,325 shares of Common Stock (the "Restricted Shares")
will be entitled to sell their shares in the public securities market without
registration under the Securities Act to the extent permitted by Rule 144
promulgated thereunder or otherwise in accordance with the Securities Act. All
of the Restricted Shares have been owned by the holders thereof for more than
one year. Of such Restricted Shares, 521,666 are owned by non-affiliates of
the Company and, as a result, will be tradeable upon completion of the
Offering without compliance with the restrictions under Rule 144, and
4,079,659 are owned by affiliates of the Company and, as a result, will be
eligible for sale pursuant to Rule 144, subject to certain restrictions, upon
completion of the Offering. Certain holders of Common Stock have agreed to
certain restrictions on their ability to sell Common Stock for 180 days
following the Offering. See "Underwriting." The Company intends to file a
registration statement on Form S-8 covering all shares of Common Stock
issuable upon exercise of stock options in effect on the date of this
Prospectus. The Company has outstanding stock options with respect to an
aggregate of approximately 524,550 shares of Common Stock as of the date of
this Prospectus. Upon such registration on Form S-8 or upon compliance with
the requirements of Rule 701 under the Securities Act, an additional 524,550
shares of Common Stock will be eligible for sale in the public market. In
addition, the stockholders' agreement that the Company and its principal
stockholders will enter into prior to or upon the completion of the Offering
will provide for certain demand and "piggyback" registration rights to the
stockholders party thereto upon meeting certain conditions. Sales of
substantial amounts of Common Stock in the public market, or the perception
that such sales may occur, could adversely affect the prevailing market price
of the Common Stock and the ability of the Company to raise capital through a
public offering of its equity securities. See "Shares Eligible for Future
Sale," "Principal Stockholders" and "Description of Capital Stock."
NO DIVIDENDS
The Company has never declared or paid cash dividends. The Company currently
intends to retain all future earnings for the operation and expansion of its
business and does not anticipate paying cash dividends on the Common Stock in
the foreseeable future. See "Dividend Policy."
IMMEDIATE AND SUBSTANTIAL DILUTION
The purchasers of Common Stock offered hereby will suffer an immediate and
substantial dilution of $ in pro forma net tangible book value per share
from the initial public offering price and may incur additional dilution upon
the exercise of stock options and warrants. See "Dilution."
ANTI-TAKEOVER PROVISIONS
Upon completion of the Offering, the Restated Certificate of Incorporation
of the Company, as amended (the "Certificate of Incorporation") will authorize
the Board to issue from time to time one or more classes or series of
preferred stock, up to an aggregate of 5,000,000 shares of preferred stock,
and to fix the rights, privileges and preferences of those shares without any
further vote or action by the stockholders. The rights of the holders of
Common Stock will be subject to, and may be adversely affected by, the rights
of the holders of any preferred shares that may be issued by the Company in
the future. Moreover, the issuance of preferred stock may make it more
difficult for a third party to acquire, or may discourage a third party from
acquiring, a majority of the voting stock of the Company. In addition, the
Company is subject to certain anti-takeover provisions of the Delaware General
Corporation Law, which could have the effect of discouraging, delaying or
preventing a change of control of the Company. See "Description of Capital
Stock--New Preferred Stock" and "Description of Capital Stock--Certain
Provisions of Delaware Law."
11
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of
Common Stock offered hereby at an assumed initial public offering price of
$ per share are estimated to be approximately $ million, after
deducting the underwriting discount and estimated Offering expenses.
The Company intends to use approximately $18.0 million of the net proceeds
of the Offering to finance the development of Jeepers! Parks during the next
twelve months. To the extent landlord contributions, loans and other
incentives are lower than expected, the Company may use a larger portion of
the net proceeds to finance the development of new Parks. The balance of the
net proceeds from the Offering will be used for general corporate purposes,
including maintenance and improvement of existing Parks and working capital.
In addition, the Company may use a portion of the net proceeds for the
acquisition of businesses that are complementary to that of the Company.
However, the Company does not currently have any acquisitions planned or under
negotiation. Pending application of the net proceeds as described above, the
Company intends to invest the net proceeds in short-term, investment-grade,
interest-bearing securities. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
DIVIDEND POLICY
The Company has never declared or paid cash dividends. The Company currently
intends to retain all future earnings for the operation and expansion of its
business and does not anticipate paying cash dividends on the Common Stock in
the foreseeable future. Any payment of cash dividends in the future will be at
the discretion of the Board and will depend upon the Company's results of
operations, earnings, capital requirements, contractual restrictions and other
factors deemed relevant by the Board. In addition, the Company anticipates
that loan facilities it may enter into in the future may restrict the
Company's ability to pay cash dividends.
12
<PAGE>
CAPITALIZATION
The following table sets forth, at March 29, 1998, (i) the cash and pro
forma capitalization of the Company, giving effect to the Preferred Conversion
and the authorization of 5,000,000 shares of undesignated preferred stock, and
(ii) such cash and pro forma capitalization as adjusted to reflect the sale of
the shares of Common Stock offered hereby at an assumed initial
public offering price of $ per share and the application of the estimated
net proceeds therefrom. See "Use of Proceeds." This table should be read in
conjunction with the Consolidated Financial Statements and Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 29, 1998
------------------
PRO FORMA
PRO FORMA AS ADJUSTED
--------- -----------
<S> <C> <C>
Cash and cash equivalents............................ $ 3,914 $
======== =======
Long-term debt (including current portion)........... $ 2,425 $
Stockholders' equity:
Preferred Stock, $0.01 par value, 5,000,000 shares
authorized; no shares issued and outstanding...... -- --
Common Stock, $0.01 par value, 30,000,000 shares
authorized; 4,601,325 shares issued and
outstanding, pro forma; shares issued
and outstanding, pro forma as adjusted (1)........ 46
Additional paid-in capital......................... 35,128
Unrealized gain on available-for-sale marketable
securities........................................ 10
Accumulated deficit................................ (19,948)
-------- -------
Total stockholders' equity....................... 15,236
-------- -------
Total capitalization............................. $ 17,661 $
======== =======
</TABLE>
- --------
(1) Excludes (i) 524,550 shares of Common Stock issuable upon exercise of
options outstanding as of the date of this Prospectus, (ii) 152,500 shares
of Common Stock issuable upon exercise of warrants outstanding as of the
date of this Prospectus, and (iii) 275,000 shares of Common Stock reserved
for issuance under the 1998 Stock Option Plan. See "Management--Employment
Agreement," "Management--Stock Option Plans," "Certain Relationships and
Related Transactions" and "Description of Capital Stock."
13
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of March 29, 1998,
giving effect to the Preferred Conversion, was approximately $15.1 million, or
$3.28 per share of Common Stock. Pro forma net tangible book value per share
is determined by dividing the Company's net tangible worth (tangible assets
less liabilities) by the aggregate number of shares of Common Stock
outstanding pro forma for the Preferred Conversion. After giving effect to the
sale of the shares of Common Stock offered hereby at an assumed
initial public offering price of $ per share and the application of the
net proceeds therefrom, the pro forma net tangible book value of the Company
as of March 29, 1998 would have been approximately $ million, or $ per
share of Common Stock. This represents an immediate increase in pro forma net
tangible book value of $ per share to existing stockholders and an
immediate dilution of $ per share to new investors. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share (mid-range).... $
Pro forma net tangible book value per share as of March 29,
1998........................................................ $
Increase per share attributable to new investors.............
-----
Pro forma net tangible book value per share after the Offering.
------
Dilution per share to new investors............................ $
======
</TABLE>
The following table sets forth as of March 29, 1998, giving effect to the
Preferred Conversion, the difference between the number of shares of Common
Stock purchased from the Company, the total consideration paid to the Company
and the average price per share paid by existing stockholders and by new
investors (at an assumed initial offering price of $ per share):
<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE
----------------- ------------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ------- ----------- ------- -------
<S> <C> <C> <C> <C> <C>
Existing stockholders.......... 4,601,325 % $35,890,368 % $7.80
New investors..................
--------- ---- ----------- ----
Total...................... 100% $ 100% $
========= ==== =========== ====
</TABLE>
The foregoing table excludes (i) 524,550 shares of Common Stock issuable
upon exercise of options outstanding as of the date of this Prospectus (at a
weighted average exercise price of $6.50 per share), (ii) 152,500 shares of
Common Stock issuable upon exercise of warrants outstanding as of the date of
this Prospectus (at a weighted average exercise price of $14.71 per share),
and (iii) 275,000 shares of Common Stock reserved for issuance under the 1998
Stock Option Plan. To the extent these options and warrants are exercised,
there will be further dilution to new investors. See "Management--Employment
Agreement," "Management--Stock Option Plans," "Certain Relationships and
Related Transactions" and "Description of Capital Stock."
14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data and Park operating data)
The following selected consolidated financial data for each of the five
years in the period ended December 28, 1997 are derived from the Consolidated
Financial Statements of the Company which have been audited by Ernst & Young
LLP, independent auditors. The financial data for the quarters ended March 30,
1997 and March 29, 1998 are derived from unaudited financial statements. The
unaudited financial statements include all adjustments, consisting of normal
recurring accruals, which the Company considers necessary for a fair
presentation of the financial position and the results of operations for these
periods. Operating results for the quarter ended March 29, 1998 are not
necessarily indicative of the results that may be expected for the entire year
ending January 3, 1999. The data should be read in conjunction with the
Consolidated Financial Statements and Notes thereto, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and other
financial information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR QUARTER ENDED
-------------------------------------------------------- ----------------------
MARCH 30, MARCH 29,
1993 1994 1995 1996 1997 1997 1998
------- ---------- ---------- ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $ 7,281 $ 7,466 $ 7,648 $ 10,070 $ 16,372 $ 3,667 $ 7,206
Costs and expenses:
Cost of revenues...... 932 986 1,270 2,263 3,495 823 1,307
Operating payroll and
benefit costs........ 2,835 2,431 2,422 2,961 4,594 1,020 1,875
Other operating
expenses............. 2,712 3,144 2,983 3,303 5,908 1,096 2,306
General and
administrative
expenses............. 2,429 3,065 3,001 3,038 4,114 849 1,141
Pre-opening costs..... -- -- -- 202 369 14 16
Depreciation and
amortization......... 671 593 681 867 1,173 263 419
Impairment and park
closing costs........ 11 1,451 8 750 1,648 -- --
------- ------- -------- -------- --------- -------- ---------
Income (loss) from
operations............. (2,309) (4,204) (2,717) (3,314) (4,929) (398) 142
Interest income
(expense), net......... (185) 80 99 (278) 329 98 4
------- ------- -------- -------- --------- -------- ---------
Net income (loss) (1)... (2,494) (4,124) (2,618) (3,592) (4,600) (300) 146
Accretion of redeemable
convertible preferred
stock.................. (643) (1,523) (2,032) (2,032) (3,509) (877) (877)
------- ------- -------- -------- --------- -------- ---------
Net income (loss)
applicable to common
stock.................. $(3,137) $(5,647) $ (4,649) $ (5,624) $ (8,109) $ (1,177) $ (731)
======= ======= ======== ======== ========= ======== =========
Basic and diluted net
income (loss) per share
of common stock........ $(18.90) $(34.12) $ (28.09) $ (33.98) $ (49.00) $ (7.11) $ (4.05)
======= ======= ======== ======== ========= ======== =========
Weighted average number
of shares used in
calculating basic and
diluted net income
(loss) per share of
common stock........... 165,500 165,500 165,500 165,500 165,500 165,500 180,500
======= ======= ======== ======== ========= ======== =========
Unaudited pro forma net
income (loss) per share
of common stock (2).... $ (1.03) $ 0.03
========= =========
Weighted average number
of shares used in
calculating unaudited
pro forma net income
(loss) per share of
common stock........... 4,458,697 4,545,702
========= =========
<CAPTION>
JANUARY 2, JANUARY 1, DECEMBER 31, DECEMBER 29, DECEMBER 28, MARCH 29,
1994 1995 1995 1996 1997 1998
---------- ---------- ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents............ $ 274 $ 7,774 $ 4,405 $ 14,033 $ 6,643 $ 3,914
Working capital......... (494) 5,297 1,878 8,911 1,338 (47)
Total assets............ 6,868 14,900 11,943 23,705 24,159 22,739
Long-term debt,
including current
portion................ 1,965 1,563 1,549 3,423 2,926 2,425
Redeemable convertible
preferred stock........ 10,602 22,831 24,663 39,233 45,491 46,318
Stockholders' deficit... (6,819) (12,467) (17,116) (22,432) (30,361) (31,082)
</TABLE>
- -------
(1) Since its inception, the Company has incurred net operating losses.
Accordingly, the Company has made no provision for income taxes payable.
At December 28, 1997, the Company had a net operating loss carryforward of
approximately $16.0 million, subject to limitations as set forth in
Internal Revenue Code Section 382. A full valuation reserve has been
established for all net deferred tax assets. See Note 10 of Notes to
Consolidated Financial Statements.
(2) Unaudited pro forma net income (loss) per share of common stock was
computed by dividing net income (loss) applicable to common stock by the
weighted average number of shares outstanding after giving effect to the
Preferred Conversion. See Notes 6 and 13 of Notes to Consolidated
Financial Statements.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of
operations should be read in conjunction with Company's Consolidated Financial
Statements and Notes thereto appearing elsewhere in this Prospectus.
GENERAL
The Company owns and operates 15 indoor family theme Parks in various
markets throughout the United States. The Company's first Park opened in 1988
in San Antonio, Texas under the Jungle Jim's Playland tradename. During the
next four years, the Company opened seven additional Jungle Jim's Playlands,
one of which closed before 1993. In addition, the Company entered into
franchise agreements for two more such Parks, one of which was terminated
before 1993. In 1993, the Company developed a second-generation Jungle Jim's
Playland prototype and upgraded three of its existing Jungle Jim's Playlands
to the new format. In 1995, under new management, the Company developed its
current Jeepers! prototype Park and subsequently opened ten new Jeepers!
Parks. With the introduction of the Jeepers! concept, the Company adopted a
single-brand strategy. Pursuant to such strategy, the Company has upgraded two
second-generation Jungle Jim's Playlands to the Jeepers! concept and closed
three Jungle Jim's Playlands, including two first-generation facilities in
1995. In addition, the Company acquired the remaining franchised Jungle Jim's
Playland in 1997, which it intends to convert to the Jeepers! concept in late
1998.
During their first year of operation, Jeepers! Parks typically experience
higher revenues than in subsequent years of operation, during which years
revenues are expected to remain relatively stable. The Company believes that
the key factors driving the growth of the Company's earnings will be the
opening of new Jeepers! Parks and increases in the efficiency of existing
Parks, rather than increases in revenues at existing Parks.
The Company derives revenue from four principal sources: rides, games,
dining, and birthday parties. As demonstrated in the charts below, the Company
enjoys a balanced revenue mix, reflecting the diverse attractions at its
Parks.
PIE CHART PIE CHART
Dining 27.6% Dining 26.0%
Rides 26.0% Rides 25.9%
Birthday Parties 24.0% Birthday Parties 24.2%
Games 19.4% Games 21.2%
Other 3.1% Other 2.7%
Fiscal 1996 Fiscal 1997
Cost of revenues includes the direct costs incurred in connection with
generating the Company's revenues. With respect to games, cost of revenues
includes revenue sharing fees paid to independent vendors who own and maintain
certain games in the Company's Parks, as well as the cost of redemption
prizes, tickets and tokens. Food and beverage costs include the direct costs
of food and beverage, as well as related costs of paper products and supplies.
Birthday party costs include all of the component costs of the party packages,
which may include food (pizza, soda and cake/ice cream), game tokens, T-shirts
and redemption merchandise, as well as paper products and supplies used in the
party.
16
<PAGE>
Operating payroll and benefit costs include payroll, taxes and benefits
incurred in the operation of the Parks. Other Park operating expenses include
facilities charges (rent, utilities, taxes and insurance), advertising,
repairs and maintenance and Park administrative costs.
The Company has a tax net operating loss carryover of approximately $16.0
million available for future use. The Company's ability to utilize loss
carryforwards is subject to limitations as set forth in Internal Revenue Code
Section 382. The Company has not been required to pay federal income taxes
since inception.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain selected
statement of operations data expressed as a percentage of revenues.
<TABLE>
<CAPTION>
FISCAL YEAR QUARTER ENDED
--------------------- -------------------
MARCH 30, MARCH 29,
1995 1996 1997 1997 1998
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues........................... 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of revenues.................. 16.6 22.5 21.3 22.4 18.1
Operating payroll and benefit
costs............................ 31.7 29.4 28.0 27.8 26.0
Other operating expenses.......... 39.0 32.8 36.1 29.9 32.0
General and administrative
expenses......................... 39.2 30.2 25.1 23.2 15.8
Pre-opening costs................. -- 2.0 2.3 0.4 0.2
Depreciation and amortization..... 8.9 8.6 7.2 7.2 5.8
Impairment and park closing costs. 0.1 7.4 10.1 -- --
----- ----- ----- ----- -----
Income (loss) from operations...... (35.5) (32.9) (30.1) (10.9) 2.1
Interest income (expense), net..... 1.3 (2.8) 2.0 2.7 0.1
----- ----- ----- ----- -----
Net income (loss).................. (34.2)% (35.7)% (28.1)% (8.2)% 2.2%
===== ===== ===== ===== =====
</TABLE>
QUARTER ENDED MARCH 29, 1998 COMPARED TO QUARTER ENDED MARCH 30, 1997
Revenues. Revenues increased to $7.2 million for the first quarter of fiscal
1998 from $3.7 million in the same period in fiscal 1997, an increase of
94.6%. This increase was driven primarily by the opening of six new Jeepers!
Parks (opened during the last three quarters of fiscal 1997) and the Company's
acquisition of its Des Plaines, Illinois franchisee in March 1997.
Cost of Revenues. Cost of revenues decreased to 18.1% of revenues in the
first quarter of fiscal 1998 from 22.4% in the same period in fiscal 1997.
This decrease was primarily attributable to a reduction in revenue sharing
fees on game revenue, reflecting the Company's ongoing strategy to purchase
more games, and lower food and beverage costs experienced at all Jeepers!
Parks.
Operating Payroll and Benefit Costs. Operating payroll and benefit costs
decreased to 26.0% of revenues in the first quarter of fiscal 1998 from 27.8%
in the same period in fiscal 1997. This decrease reflected the impact of lower
hourly labor costs achieved through staffing efficiencies realized at the Park
level.
Other Operating Expenses. Other operating expenses increased to 32.0% of
revenues in the first quarter of fiscal 1998 from 29.9% in the same period in
fiscal 1997. This increase reflected the impact of higher facilities costs,
including real estate taxes, associated with the more attractive real estate
sites on which Jeepers! Parks are located, partially offset by lower repair
and maintenance costs.
General and Administrative Expenses. General and administrative expenses
decreased to 15.8% of revenues in the first quarter of fiscal 1998 from 23.2%
in the same period in fiscal 1997. This decrease was primarily the result of
leverage from a larger revenue base. In the aggregate, general and
administrative expenses
17
<PAGE>
increased to $1.1 million in the first quarter of fiscal 1998 from $800,000 in
the same period in fiscal 1997. This absolute increase reflects the impact of
a broader management and support infrastructure established during the second
half of fiscal 1997.
Depreciation and Amortization. Depreciation and amortization increased to
$419,000 in the first quarter of fiscal 1998 from $263,000 in the same period
in fiscal 1997. This increase was primarily attributable to new Park openings
over the twelve-month period ended March 29, 1998.
Interest Income (Expense). Interest income decreased to $70,000 in the first
quarter of fiscal 1998 from $142,000 in the same period in fiscal 1997. This
decrease primarily reflected the declining cash balance. Interest income was
offset by interest expense of $66,000 in the first quarter of fiscal 1998 and
$44,000 in the same period in fiscal 1997. The increase in interest expense
was primarily attributable to interest costs associated with capital lease
obligations and other indebtedness incurred by the Company during fiscal 1997.
FISCAL 1997 COMPARED TO FISCAL 1996
Revenues. Revenues increased to $16.4 million in fiscal 1997 from $10.1
million in fiscal 1996, an increase of 62.4%. This increase was driven
primarily by the opening of six new Jeepers! Parks in 1997, the Company's
acquisition of its Des Plaines, Illinois franchisee in March 1997, and the
full-year impact of two Jeepers! Parks and two Jeepers Jr! centers opened
during 1996.
Cost of Revenues. Cost of revenues decreased to 21.4% of revenues in fiscal
1997 from 22.5% in fiscal 1996. This decrease was primarily attributable to a
reduction in revenue sharing fees on game revenue driven by the Company's new
strategy of purchasing certain games, partially offset by an increase in food
and beverage costs associated with the broader menu served in Jeepers! Parks
as compared to Jungle Jim's Playlands.
Operating Payroll and Benefit Costs. Operating payroll and benefit costs
decreased to 28.1% of revenues in fiscal 1997 from 29.4% in fiscal 1996. This
decrease reflected the impact of lower hourly labor costs achieved through
staffing efficiencies realized at the Park level, partially offset by an
increase in the minimum wage rate.
Other Operating Expenses. Other operating expenses increased to 36.1% of
revenues in fiscal 1997 from 32.8% in fiscal 1996. This increase reflected
higher facilities costs associated with the more attractive real estate sites
on which Jeepers! Parks are located as compared to Jungle Jim's Playlands, as
well as higher repair and maintenance costs.
General and Administrative Expenses. General and administrative expenses
decreased to 25.1% of revenues in fiscal 1997 from 30.2% in fiscal 1996. This
decrease was primarily the result of spreading such expenses over a larger
revenue base. In the aggregate, general and administrative expenses increased
to $4.1 million in fiscal 1997 from $3.0 million in fiscal 1996. This absolute
increase was driven by costs associated with developing a broader management
and support infrastructure in anticipation of future expansion.
Depreciation and Amortization. Depreciation and amortization increased to
$1.2 million in fiscal 1997 from $867,000 in fiscal 1996. This increase was
primarily attributable to new Park openings in 1997.
Interest Income (Expense). Interest income increased to $517,000 in fiscal
1997 from $88,000 in fiscal 1996. This increase reflected interest earned on
proceeds aggregating $15.5 million from the sale of convertible preferred
stock in December 1996. Interest income was offset by interest expense of
$187,000 in fiscal 1997 and $366,000 in fiscal 1996. The decrease in interest
expense from fiscal 1996 to fiscal 1997 was primarily attributable to the
conversion of $3.5 million of convertible notes that were outstanding for two
months in fiscal 1996.
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<PAGE>
FISCAL 1996 COMPARED TO FISCAL 1995
Revenues. Revenues increased to $10.1 million in fiscal 1996 from $7.6
million in fiscal 1995, an increase of 32.9%. This increase was primarily
attributable to the opening of two Jeepers! Parks and two Jeepers Jr! centers
in 1996, and by an increase in Jungle Jim's Playlands sales of approximately
11.5% as compared to the prior year.
Cost of Revenues. Cost of revenues increased to 22.5% of revenues in fiscal
1996 from 16.6% in fiscal 1995. This increase was primarily attributable to
increased revenue sharing fees associated with the Company's decision to
increase the number of revenue-shared games in its Jungle Jim's Playlands, and
to the development of new birthday party packages that generated incremental
revenue and Park contribution, but at lower gross margins due to certain
higher cost components included in the new packages.
Operating Payroll and Benefit Costs. Operating payroll and benefit costs
decreased to 29.4% of revenues in fiscal 1996 from 31.7% in fiscal 1995. This
decrease primarily reflected the impact of lower management and hourly labor
costs achieved through staffing efficiencies realized at the Park level.
Other Operating Expenses. Other operating expenses decreased to 32.8% of
revenues in fiscal 1996 from 39.0% in fiscal 1995. This decrease was primarily
attributable to the closing of two low volume first-generation Jungle Jim's
Playlands and to lower advertising costs in fiscal 1996.
General and Administrative Expenses. General and administrative expenses
decreased to 30.2% of revenues in fiscal 1996 from 39.2% in fiscal 1995. This
decrease was primarily the result of spreading such expenses over a larger
revenue base. In the aggregate, general and administrative expenses remained
relatively flat at approximately $3.0 million in each of fiscal 1996 and 1995.
Depreciation and Amortization. Depreciation and amortization increased to
$867,000 in fiscal 1996 from $681,000 in fiscal 1995. This increase was
primarily attributable to new Park openings in fiscal 1996.
Interest Income (Expense). Interest income decreased to $88,000 in fiscal
1996 from $328,000 in fiscal 1995. This decrease primarily reflected the
declining cash balance remaining from the proceeds of the sale of convertible
preferred stock in fiscal 1994. Interest income was offset by interest expense
of $366,000 in fiscal 1996 and $229,000 in fiscal 1995. The increase in
interest expense from fiscal 1995 to fiscal 1996 was primarily attributable to
the issuance of $3.5 million of convertible notes in late fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company has generally funded its working capital requirements with the
net proceeds received from the issuance of preferred stock. Since the
beginning of 1994, the Company has received net proceeds totaling
approximately $25.8 million from the issuance of preferred stock. Such
proceeds have been used primarily to develop and construct ten Jeepers! Parks,
develop two Jeepers Jr! centers, upgrade two Jungle Jim's Playlands to
Jeepers! Parks, purchase new rides and games for its existing Parks and
finance operating losses and working capital requirements.
The Company's future working capital requirements are directly related to
the development of new Jeepers! Parks. During 1998 and 1999, the Company
expects to open approximately 36 Jeepers! Parks. In addition, the Company
plans to continually review the attractions at existing Parks and replace
existing attractions and add new ones as necessary. The Company expects that
such initiatives will require capital expenditures of approximately $34.0
million in fiscal 1998 and 1999, assuming the Company continues to receive
landlord contributions, loans and incentives consistent with historical
levels.
The Company has secured a term loan, which permits borrowing up to $5.0
million for purposes of financing rides and equipment. Borrowings under the
loan facility bear interest at a coupon rate of 10.0% per
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<PAGE>
annum and are secured by the underlying rides and equipment. Amounts drawn
under the facility must be repaid over 48 months. Pursuant to the facility,
additional payments are to be made at the end of the loan period that increase
the effective cost of borrowings to approximately 15.3%. As of the date of
this Prospectus, the entire $5.0 million was available to be drawn.
At March 29, 1998, the Company had cash and cash equivalents of
approximately $3.9 million. The Company expects that the net proceeds of the
Offering, combined with its current cash and cash equivalents, cash flow from
operations, equipment leases, landlord contributions, loans and incentives and
borrowings under the secured loan facility, will be sufficient to fund its
capital requirements at least through the end of fiscal 1999. However, the
Company anticipates that it may need additional capital to continue its
expansion plan beyond fiscal 1999. There can be no assurance that such
additional capital will be available on terms acceptable to the Company, if at
all. See "Risk Factors--Future Capital Needs and Uncertainty of Additional
Funding."
SEASONALITY AND QUARTERLY RESULTS
The Company's sales and earnings fluctuate seasonally. Although Parks in
different markets are subject to different seasonal influences (including
seasonal changes in weather and school vacation periods), historically the
Company has generated the highest average Park revenue during its first and
third fiscal quarters and the lowest average Park revenue during the fourth
fiscal quarter. In addition, quarterly results are significantly affected by
the timing of new Park openings, since new Parks are less profitable during
their first several months of operation and the Company expenses pre-opening
costs as incurred. Accordingly, to the extent that Park openings are
concentrated in any fiscal period, results of operations for such fiscal
period may be materially adversely affected. As a result of the combined
impact of seasonality and the timing of new Park openings, operating margins
and profitability may fluctuate significantly from quarter to quarter. Results
for any quarter are not indicative of results that will be achieved for any
other quarter or for the full fiscal year. See "Risk Factors--Variability of
Results of Operations; Fluctuations in Quarterly Results."
IMPAIRMENT AND PARK CLOSING COSTS
In 1996, the Company adopted the provisions of SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of."
SFAS No. 121 requires the Company to evaluate the carrying value of long-lived
assets, including equipment and leaseholds, whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. Under
SFAS No. 121, an assessment is made to determine if the sum of the expected
future undiscounted cash flows from the use and eventual disposition of the
assets is less than the carrying value. If the sum of the expected
undiscounted cash flows is less than the carrying value, an impairment loss is
recognized by measuring the excess of carrying value over fair value
(generally estimated by projected future discounted cash flows from the
applicable operation or independent appraisal).
During 1996, the Company developed two Jeepers Jr! centers, which are 2,000
to 3,000 square foot facilities operated by the Company within Toys "R" Us
Kids World ("Kids World") superstores pursuant to a license agreement. In
1997, The Wall Street Journal reported that Toys "R" Us would not open
additional Kids World superstores. Further, due to the uncertainty of future
cash flows associated with both Jeepers Jr! centers, the Company recorded an
impairment charge of approximately $1.3 million. The provision includes
charges for impairments to the carrying value of all Jeepers Jr! assets,
including rides, games, leasehold improvements and concept development costs.
In 1996, the Company recorded an impairment charge of approximately $600,000
relating to certain leasehold improvements, rides and games of the Jungle
Jim's Playland in Shawnee, Kansas. In 1997, the Company accrued $368,000 of
exit costs, primarily for lease settlements, relating to the closing of the
same Jungle Jim's Playland. The Company closed this Jungle Jim's Playland in
April 1998.
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<PAGE>
In 1996, the Company also accrued $150,000 of additional exit costs relating
to the 1995 closing of an earlier generation Jungle Jim's Playland.
Contractual lease costs of $262,000 were charged in 1996 against the
applicable reserve established in 1994.
YEAR 2000 ISSUE
The Company has reviewed its computer programs and systems to ensure that
the programs and systems are Year 2000 compliant. The Company presently
believes that the Year 2000 problem will not pose significant operational
problems for the Company's computer systems. The estimated cost of the
Company's efforts to become Year 2000 compliant are not expected to be
material to the Company's financial position or any year's results of
operations, although there can be no assurance to this effect. In addition,
the Year 2000 problem may impact other entities with which the Company
transacts business, and the Company cannot predict the effect of the Year 2000
problem on such entities and, in turn, the impact of any such effect on the
Company.
IMPACT OF INFLATION
The Company does not believe that inflation has materially affected its
results of operations during the past three fiscal years. Substantial
increases in costs and expenses as a result of inflation, particularly food,
supplies, labor and operating expenses could have a significant impact on the
Company's operating results to the extent that such increases cannot be passed
along to customers.
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<PAGE>
BUSINESS
THE JEEPERS! CONCEPT
The Company owns and operates 15 Parks throughout the United States and is
pursuing a rapid expansion strategy. The Company strives to create a unique
entertainment destination for families with children ages 2 to 12 by combining
a variety of interactive attractions, including amusement park rides, skill
games, state-of-the-art simulator games and comfortable family dining, all in
a whimsical jungle-themed atmosphere. The Company believes the quality and
diversity of attractions and food available at its Parks are a significant
competitive advantage and help drive repeat customer visits.
MULTIPLE ENTERTAINMENT ACTIVITIES. The Company distinguishes its Jeepers!
Parks from competing family entertainment destinations by featuring a broad
array of interactive entertainment attractions. The amusement park rides,
built to scale for indoor use, have imaginative names consistent with the
Jeepers! theme. These include thrill rides such as the Python Pit (a roller
coaster), JJ's Driving School (bumper cars) and Tarantula Tangle (a tilt-a-
whirl), which are popular among children between the ages of 6 to 12. Other
rides are designed for younger children, such as Jungle Patrol (kid-sized
sport utility vehicles on a simulated off-road track) and Banana Squadron (an
airplane ride). Jeepers! Parks also include the Jeepers Creepers! Sky Maze, a
multi-level maze of tubes, slides and play elements, and approximately 80 to
100 games, including skill games such as Skee Ball and Whack-a-Gator and
state-of-the-art simulator games, which appeal to both children and their
parents. The skill games award tickets that can be redeemed for toys,
stickers, sports cards, candy and other prizes at Kronkle's Big Digs, the
redemption center.
DIVERSE HIGH QUALITY MENU OFFERINGS. Each Jeepers! Park offers comfortable
family dining in the 1950's-style Tiny Rhino Diner, which seats approximately
200 guests. The Tiny Rhino Diner offers a full menu of high quality food that
includes both kids' favorites, such as Pizza Hut(R) pizza, hamburgers, hot
dogs and chicken strips, as well as a selection of entrees targeted to adults,
such as chicken caesar salads, pasta, and grilled chicken sandwiches. The
Company believes that the quality and selection of its menu items are a
significant attraction for parents.
BIRTHDAY PARTIES. The Company believes that one of its key competitive
advantages is its successful emphasis on birthday parties. The Company offers
three birthday party packages. The basic Excellent Expedition package includes
unlimited admission to all amusement park rides and play areas, a limited
number of tokens for each child, a birthday cake and special entertainment
activities. The Awesome Adventure adds pizza and a souvenir T-shirt for the
birthday child, while the Ultimate package offers, in addition, soft drinks in
logoed souvenir cups, a personalized birthday cake, goody bags and free return
passes for all the partygoers, and a candy-filled pinata. The Company believes
that each Park can accommodate more than 60 birthday parties per day,
significantly more than its competitors. The Company believes that its
birthday party business is a highly cost-effective method of generating future
Park business, both general admissions and additional birthday parties.
EXCITING THEMED ENVIRONMENT. The Jeepers! concept incorporates a high level
of thematic design, including whimsical jungle imagery, vivid graphics, bright
lighting and proprietary mascot characters, creating a unique personality and
brand identity. JJ, the Company's principal mascot, is a monkey who lives in a
treehouse that serves as the staging area for live entertainment, such as
"Storytime in the Jungle" and karoake. Trish, the Tiny Rhino, provides the
central theme for the Park diner, and Kronkle, with his cellular banana, is JJ
and Trish's mischievous friend who oversees the skill game ticket redemption
center. JJ, Trish and Kronkle appear regularly in the Parks to participate in
promotional and entertainment activities and are featured on Jeepers!
television commercials and logoed merchandise. Attractions are strategically
placed behind elaborate three-dimensional portals to establish a distinct
identity for each ride consistent with the overall theme of the Park. The
portals use bold colors, asymmetrical shapes, theatrical lighting and jungle
imagery to create a distinctive and exciting entertainment setting.
WHOLESOME FAMILY ENTERTAINMENT VENUE. The Parks are targeted exclusively at
families with young children. The Company believes that fostering parent/child
interaction will enhance families' experiences at its
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<PAGE>
Parks. In this regard, the Company encourages parents to experience the rides
with their children at no additional cost. In addition, the Jeepers! concept
is designed not to appeal to teenagers in that the theme, rides and games (all
non-violent in nature) are all targeted to kids age 12 and under. The Company
prevents teenagers from congregating in its Parks by enforcing its policy
requiring adults to accompany minors. Jeepers! Parks are designed, constructed
and tested with an emphasis on childrens' safety and security. Play areas at
all of the Company's Parks are equipped with protective cushions and padding,
and members of the staff are available to assist children through the play
activities.
GROWTH STRATEGY
The Company's objective is to become a leading brand in the location-based
entertainment industry. The Company's growth strategy includes aggressive
development of new Parks, building the Jeepers! brand and enhancing Park
performance.
AGGRESSIVELY DEVELOP NEW PARKS. The Company intends to increase revenue
primarily through the aggressive development of Jeepers! Parks, filling in the
existing markets of Baltimore, Chicago, Detroit, New York and Washington,
D.C., and expanding to new eastern and midwestern markets with potential for
clustering multiple Parks. These potential new markets include Atlanta,
Boston, Cleveland, Indianapolis, Jacksonville, Miami, Minneapolis,
Philadelphia and Pittsburgh. The Company intends to open 12 new Parks in 1998
(of which two have already opened and ten are under development) and
approximately 24 new Parks in 1999. The Company believes that the demonstrated
success of the Jeepers! concept in a variety of retail environments, as well
as its modular Park design, facilitate the Company's rapid expansion.
. Adaptability to Various Retail Environments. The Company's Parks have
demonstrated their ability to succeed in both new and existing enclosed
malls and outdoor strip centers that meet the Company's site selection
criteria. Consequently, the Company believes it can be more flexible in
selecting a site within a particular trade area than other retailers
competing with the Company for real estate.
. Modular Park Design. Each Park consists of modular components, including
rides, play areas, a diner and a birthday party room, that can be
arranged in various combinations to fit into odd-shaped sites. Such sites
are routinely avoided by other retail concepts competing with the Company
for real estate, which the Company believes is a significant advantage in
obtaining attractive sites on favorable lease terms.
BUILD THE JEEPERS! BRAND. The Jeepers! concept was designed to promote a
highly recognizable brand identity. The elaborate theming of the Jeepers!
Parks and the proprietary mascot characters, JJ, Trish and Kronkle, are
intended to create a memorable image that children and their parents will
identify with Jeepers!. The Company's continued development and promotion of
the Jeepers! theme and its proprietary mascot characters are key components of
the Company's strategy to create broad recognition of the Jeepers! brand. Each
of the Parks offers T-shirts, sweatshirts, caps, buttons, stickers and plush
toys featuring these characters and the Jeepers! jungle theme.
ENHANCE PARK PERFORMANCE. The Company continually evaluates ways to increase
Park revenues and improve Park operating margins. For example, the Company
recently began to promote more heavily its group tour packages (similar to
birthday party packages) to day-care centers and youth sports teams and to
incorporate larger toddler play areas in new Parks in an effort to expand its
Parks' target audience to younger children who do not attend school during the
week. In addition, the Company expects to improve Park operating margins by
clustering multiple Parks in each of its markets. Clustering provides
efficiencies in Park opening, marketing and management. Further, the Company
believes that initial unit level performance will improve as it further
refines the Park opening process, reducing the temporary negative impact of
new Parks on the Company as a whole.
PRICING OF ATTRACTIONS
The Company enjoys a balanced revenue mix reflecting the diverse attractions
at its Parks. The Company believes that this distribution of revenues
evidences customers' attraction to each of the four key elements of its Parks.
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In fiscal 1997, the average overall expenditure per child in Jeepers! Parks
was approximately $18.75. The Company believes that each child is accompanied
to the Park, on average, by one adult, thereby yielding an average expenditure
per person of approximately $9.00.
Amusement Park Rides. Customers have the option to purchase all-day passes
or individual ride tickets to access Jeepers! Park amusement rides and the
Jeepers Creepers! Sky Maze. Weekend passes are generally priced at $10.99 and
weekday passes at $6.99. At Jeepers! Parks, individual ride tickets may also
be purchased at a cost of $0.60 to $1.00 per ticket, depending on the number
of tickets purchased. Each of the rides requires between one and three
tickets. The Company believes its attractions are priced competitively and
provide its guests significant entertainment value.
Skill and Simulator Games. The games each require between one and four
tokens that are purchased at a cost of $0.25 per token. The skill games award
the players tickets that can be redeemed for toys, stickers, sports cards,
candy and other prizes at the Kronkle's Big Digs redemption center.
Dining. The Company believes that its prices are competitive with prices of
other family restaurants. Menu prices generally range from $1.49 for a grilled
cheese sandwich to $5.99 for a chicken caesar salad. Pizza prices range from
$9.99 for a medium cheese pizza to $16.49 for a large Super Supreme(R) pizza.
Birthday Parties. The Company currently offers three birthday party packages
that range in features and cost from $7.95 to $21.95 per child. In 1997, the
average Jeepers! Park party consisted of ten children and resulted in an
average expenditure of approximately $156.00.
PARK ECONOMICS
The Company believes its Jeepers! Parks produce attractive unit economics.
During fiscal 1997, the two Jeepers! Parks open for the entire year averaged
approximately $2.3 million in revenues. Future Jeepers! Parks are expected to
generate average annual revenues of approximately $2.2 million and average
Park EBITDA margin of approximately 20%, although there can be no assurance
that such levels will be achieved. Excluding the Company's initial Jeepers!
prototype Park, the eight Jeepers! Parks opened as of April 30, 1998 required
an average initial cash investment, including pre-opening costs, of
approximately $870,000, net of landlord contributions, loans and other
incentives. The Company expects that future Jeepers! Parks will require an
average initial cash investment of approximately $900,000, net of landlord
contributions, loans and other incentives, although there can be no assurance
that actual costs will not exceed anticipated amounts or that the Company will
continue to receive landlord contributions, loans and other incentives
consistent with historical levels.
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<PAGE>
PARK LOCATIONS
The following table provides certain information with respect to each of the
Company's Parks as of the date of this Prospectus.
<TABLE>
<CAPTION>
PARK LOCATION GROSS SQ. FT. OPENING DATE
------------- ------------- -------------
<S> <C> <C>
Jungle Jim's Playlands:
San Antonio, TX.............................. 20,700 May 1988
Des Plaines, IL (Chicago).................... 21,700 October 1991
Midvale, UT (Salt Lake City)................. 25,000 January 1992
Jeepers! Parks:
Mesa, AZ (Phoenix) (1)....................... 28,000 February 1992
Glendale, AZ (Phoenix) (1)................... 25,800 April 1993
Rockville, MD (Washington, D.C.)............. 27,300 January 1996
Greenbelt, MD (Washington, D.C.)............. 25,000 August 1996
Norridge, IL (Chicago)....................... 25,000 August 1997
Roseville, MI (Detroit)...................... 24,600 August 1997
Olathe, KS (Kansas City)..................... 30,100 August 1997
Livonia, MI (Detroit)........................ 25,100 October 1997
Albany, NY................................... 23,800 November 1997
Buffalo, NY.................................. 22,600 December 1997
Glen Burnie, MD (Baltimore).................. 25,000 March 1998
West Nyack, NY (New York City)............... 25,000 May 1998
<CAPTION>
Future Jeepers! Parks:
<S> <C> <C>
Baltimore, MD................................ 23,700 Q3 1998 (2)
Methuen, MA (Boston)......................... 26,540 Q3 1998 (2)
Cleveland, OH................................ 24,000 Q3 1998 (2)
Baltimore, MD................................ 26,500 Q3 1998 (2)
Youngstown, OH............................... 25,000 Q3 1998 (2)
East Brunswick, NJ........................... 20,000 Q4 1998 (2)
Auburn Hills, MI (Detroit)................... 26,840 Q4 1998 (2)
Kingston, NY................................. 15,000 Q4 1998 (2)
Indianapolis, IN............................. 25,000 Q4 1998 (2)
Southfield, MI (Detroit)..................... 25,000 Q4 1998 (2)
</TABLE>
--------
(1) Formerly a second-generation Jungle Jim's Playland, which was
upgraded to a Jeepers! Park in April 1998.
(2) Projected.
All of the Company's existing Parks are located on leased sites and the
Company intends to continue to lease the facilities for its future Parks. The
Company has entered into long-term leases with respect to its existing Parks
and eight additional Parks which the Company expects to open in the remainder
of 1998, having expiration dates ranging from 2011 to 2018, including renewal
option periods.
The Company leases approximately 4,750 square feet for its corporate
headquarters in Waltham, Massachusetts under a lease which expires in May
2000.
SITE SELECTION
The Company believes that the location of its Parks is essential to the
Company's long-term success and devotes significant time, effort and resources
to the investigation and evaluation of potential locations. The Company has
developed specific demographic criteria and a detailed site profile to assist
in the evaluation of potential locations. In addition to carefully analyzing
market demographics (such as population, age and median
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income levels) with respect to each prospective site, the Company considers
factors such as visibility from and accessibility to regional highway systems,
traffic patterns and activity, proximity to shopping and residential areas,
convenient customer parking, cotenancy, projected financial performance and
zoning and regulatory restrictions. The Company also carefully studies the
entertainment competition in prospective locations. The Company believes that
the high level of repeat visits enjoyed by its Parks enables the Company to
roll out its Parks and operate them profitably in less populated markets and
locations, which facilitates the Company's prospects of nationwide expansion.
In connection with the Company's evaluation of potential sites, the
Company's Senior Vice President--Development and Vice President of
Construction visit, analyze and prepare extensive reports covering all aspects
of each potential site. A committee comprised of senior management of the
Company meets regularly to consider the reports prepared with respect to
potential Park sites. Upon approval of a potential site by such committee, the
Company enters into lease negotiations with respect to a selected site. The
negotiated lease proposal is brought before the Real Estate Committee of the
Board for its recommendation and to the full Board for final approval. Prior
to entering into the lease, the Chief Executive Officer of the Company also
visits the potential site. The time required to complete construction of the
new site is typically between 90 and 120 days, although there can be no
assurance that such schedules can be maintained in the future.
As part of its site selection strategy, the Company has developed and will
continue to develop relationships with leading shopping center developers and
believes such relationships will facilitate the Company's rapid expansion. The
Company believes that developers of shopping centers view Jeepers! as an
opportunity to distinguish new retail developments from competitors and
revitalize existing properties, allowing the Company to obtain attractive
sites for its Parks on favorable lease terms. An additional advantage is
afforded by the flexible layout of the Parks, consisting of modular components
that can be arranged in various combinations to fit into odd-shaped sites,
which are routinely avoided by other retail concepts competing with the
Company for real estate.
In addition to the development of new Parks, the Company will consider the
acquisition of other businesses in order to gain access to attractive real
estate sites and build brand awareness in strategic markets. As of the date of
this Prospectus, the Company has no definitive agreements, arrangements or
understandings with respect to any such acquisitions, and there can be no
assurance that any such acquisitions will be completed. See "Risk Factors--
Management of Growth."
PARK OPERATIONS AND MANAGEMENT
The Company is committed to providing superior customer service with an
enthusiastic staff and through a high degree of interaction among the Jeepers!
employees, the younger customers and their parents. The Company works
diligently to ensure the Parks leave a strong, positive impression on all of
its consumers. The Company achieves these objectives through effective
recruiting, training and management of Park general managers, assistant
managers and other personnel.
The management at each new Park undergoes a rigorous 12-week training
process utilizing the experience and efforts of a corporate Park opening team.
The opening team, which consists of a Vice President and three opening
managers, also assists in the physical set-up of each new Park and provides
operational and administrative support up to six weeks after a new Park has
opened. Specific responsibilities also include establishing relationships with
local vendors, initiating food, beverage and merchandise orders, and orienting
and motivating employees.
Following the opening period, each Park is managed by a general manager who
is responsible for recruiting, hiring, training and scheduling a staff that
includes three assistant managers and up to 100 part-time employees throughout
most of the year, including ride operators, floor personnel, diner employees,
party organizers and crew leaders. The general manager is responsible for the
day-to-day operations of the Park, including managing all entertainment
activities, food service, birthday parties, inventories, shrinkage and other
controllable costs.
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Each of the assistant managers is typically responsible for one or more of the
profit centers: rides, games, dining and birthday parties. The Company seeks
to retain high quality Park managers by providing them with opportunities for
promotion and financial incentives based on individual Park performance. These
financial incentives include a monthly bonus program and incentive stock
options.
Each general manager reports to a regional manager who, along with the
opening team, handles the recruiting, hiring and training of the general
managers and ensures that consistent Company standards, policies and
procedures are implemented at each Park. The Company currently has three
regional managers for the existing 15 Parks and anticipates that it will
employ an additional regional manager for every four to six new Jeepers!
Parks.
The Company utilizes detailed training manuals and orientation programs that
are designed to emphasize customer service and consistency. The Company's
employees undergo extensive training in the courteous and safe operation of
attractions and the friendly, efficient and careful preparation and service of
food items. In order to enhance operating flexibility, employees are cross-
trained to perform multiple functions in the Parks.
The Company has developed detailed specifications and standards for the
products used in its Parks. These specifications and standards are developed
at the Company's headquarters, while the purchasing decisions are made by each
Park general manager after conducting price comparisons among products meeting
the Company's specifications and standards to ensure the optimal price. The
Company buys all of its Pizza Hut(R) supplies from Ameriserve, Inc.
Approximately 70% of the Company's food purchases are for its Pizza Hut(R)
products. Approximately 90% of the Parks' non-Pizza Hut(R) food products were
purchased from 11 distributors in fiscal 1997. The Company's amusement park
rides are currently purchased from a limited number of specialized suppliers.
Although the Company believes substitute rides and alternative sources of
supply are available, shortages or interruptions in the supply of any of the
products used in the Company's Parks or any inability to obtain amusement park
rides from its existing suppliers could have a material adverse effect on the
Company. See "Risk Factors--Supply Risks."
INTERNAL CONTROLS AND MANAGEMENT INFORMATION SYSTEMS
The Company maintains financial and accounting controls for each of its
Parks through the use of centralized accounting and management information
systems. The Company's information systems contain a full range of financial
and operating data capture and management capabilities. The Company uses
Micros point-of-sale devices at each Park to collect data regarding Park
performance, which is polled by corporate headquarters on a nightly basis. The
Micros system also enables the Company to collect zip code information and
other customer profile data as desired, which the Company uses for market
analysis.
The Company uses its information systems for budget analyses, planning and
inventory control. Cash is controlled through daily reconciliation to the
Micros system and deposit of receipts in local operating accounts, the
balances of which are transferred regularly to the Company's principal
operating account. Internal controls are supplemented by a weekly review of
individual Park operating results by senior level operations and financial
management. The Company believes its internal controls and information systems
are sufficient to support its growth for the foreseeable future, though it
constantly strives to upgrade the quality of such controls and systems.
The Company has reviewed its computer programs and systems to ensure that
the programs and systems are Year 2000 compliant. The Company presently
believes that the Year 2000 problem will not pose significant operational
problems for the Company's computer systems. The estimated cost of the
Company's efforts to become Year 2000 compliant are not expected to be
material to the Company's financial position or any year's results of
operations, although there can be no assurance to this effect. In addition,
the Year 2000 problem may impact other entities with which the Company
transacts business, and the Company cannot predict the effect of the Year 2000
problem on such entities and, in turn, the impact of any such effect on the
Company.
27
<PAGE>
MARKETING, ADVERTISING AND PROMOTION
The Company's marketing functions, consisting of advertising, promotions,
public relations, sales, direct marketing and telemarketing, are directed and
managed by its Corporate Marketing Department. In-house graphics specialists
design all print and collateral materials, and internal marketing personnel
script and direct all TV and radio spots. All direct mail pieces and
telemarketing scripts are written and designed in-house. The Company believes
that its in-house capabilities enable the Company to implement its marketing
programs and strategy efficiently and to react quickly to local market and
competitive situations. Media buying, public relations, printing, TV and radio
spot production and research are implemented by outside sources specializing
in the respective fields and are supervised by the Corporate Marketing
Department.
The Company's marketing initiatives, while managed at the corporate level,
are market specific. Each Park has its own marketing budget and plan, based on
local opportunities and market analyses. The consolidated marketing budget is
approximately 3.5% of the Company's gross revenue. This percentage varies by
Park based on several factors, including the number of Parks in a single
market, local media costs and the competitive environment. The Company relies
predominantly on television advertising to promote the Jeepers! concept and
build brand awareness. Print media are used strategically, either to promote
special events at a Park, to offer an incentive to a specific target audience,
or to distribute discount coupons.
Cross promotions with local retailers, movie theaters and other businesses
are an important element of the Company's marketing efforts. For example, the
Company has conducted joint coupon programs with Kay-Bee Toys, and the
Jeepers! mascots often appear at Toys "R" Us grand openings and special
promotions in joint markets. Recent cross promotions with family and
children's movies have included "Star Kid," "George of the Jungle," and "Leave
it to Beaver" and involve register-to-win premiere ticket offers, admission
discounts with ticket stubs, and character and celebrity appearances at the
Parks. Similar promotional tie-ins with local family entertainment productions
such as "Rugrats, A Live Performance," and the Harlem Globetrotters occur
periodically. In addition, local cross promotions with packaged goods have
proven effective, both in building brand awareness and increasing traffic.
These have included discount offers with Keebler Cookie proofs of purchase and
Chef Boyardee Jr. labels. Other cross promotions have at various times
included the Company's coupons on placemats at McDonald's and Burger King, and
register receipt coupons at local supermarkets.
The Company believes that word-of-mouth advertising is critical to its long-
term success and makes every effort to provide an enjoyable entertainment
experience to each and every customer. The Company capitalizes on existing
traffic and builds frequent repeat visits with in-Park handouts, posters and
coupons. The Company believes its birthday party business is a cost-effective
method of generating word-of-mouth advertising.
New Parks are opened with a preview party typically attended by over 1,000
invited guests, including local political officials, area media, and other
"VIPs." The Company selects a well-known local charity, such as the local
children's hospital, as the beneficiary of the party. Live broadcasts from the
Park on local TV news shows provide significant initial exposure for the Park,
and the party itself results in considerable word-of-mouth advertising.
The Company encourages local community involvement. The Jeepers! characters
regularly are a featured attraction at local kids' fairs and school events and
also appear in local and regional parades. The Company also supports local
charities, scouting, educational and civic organizations and not-for-profit
groups with regular donations of passes and birthday parties.
In support of its Park operations, the Company has introduced a centralized
call center located at the Company's headquarters in Waltham, Massachusetts,
which serves as an inbound customer service center and, call volume
permitting, conducts an outbound telemarketing program focused on building
group tour and special events business by targeting schools, day-care centers
and other youth organizations. One of the call center's primary functions is
to receive all calls addressed to newly opened Parks, including calls from
customers seeking
28
<PAGE>
to arrange birthday parties. This enables the Company to project a consistent
and high quality marketing message. The call center also receives all customer
comments and complaints and responds to them in a uniform and professional
manner.
RELATIONSHIP WITH PIZZA HUT
In 1993, the Company entered into a non-exclusive master license agreement
with Pizza Hut, which provides for the Pizza Hut Agreements. The Pizza Hut
Agreements enable the Company to market Pizza Hut(R) pizza and other products
in all of its Jeepers! Parks. The Company's Parks are required to pay to Pizza
Hut a royalty on sales of the licensed products at the Parks. The term of the
license granted to each licensed Jeepers! Park is ten years from the
commencement of the license at each licensed location, renewable upon
agreement by the parties and terminable for cause upon written notice by Pizza
Hut. The Company believes that the quality and breadth of food offerings at
Jeepers! Parks in general, and the availability of Pizza Hut(R) products at
Jeepers! Parks in particular, contribute significantly to the popularity of
Jeepers! Parks.
The Company believes that its relationship with Pizza Hut provides it with a
strategic competitive advantage that independent operators and smaller chains
would find difficult to replicate. However, there can be no assurance that the
Pizza Hut Agreements will not be terminated, that the Company will be able to
renew the Pizza Hut Agreements or that the Company will be able to obtain
licenses to market Pizza Hut products in new Parks on terms acceptable to the
Company, if at all. See "Risk Factors--Reliance on Relationship with Pizza
Hut."
INTELLECTUAL PROPERTY
Jeepers!, Jeepers! Food, Fun and a Monkey, Jeepers Jr!, and Jungle Jim's
Playland, together with their associated logos, as well as Jungle Play and
Kidding Around, are registered trademarks of the Company. All depictions of
any characters illustrated herein, including the designs for each of "JJ,"
"Trish," "Kronkle" and "Jungle Jim," represent trademarks currently used by
the Company in its business. The Company believes that such trademarks have
significant value to the Company and are important to the marketing of the
Company's concepts. There can be no assurance that the steps taken by the
Company to protect its proprietary rights will be adequate to prevent
misappropriation of the Company's rights or the use by others of features
based upon, or otherwise similar to, those of the Company. In addition,
although the Company believes that its trademarks have been independently
developed, there can be no assurance that any of the trademarks used by the
Company do not or will not violate the proprietary rights of others, that the
trademarks will be upheld if challenged, or that the Company will not be
prevented from using the trademarks, any of which could have a material
adverse effect on the Company. See "Risk Factors--Intellectual Property."
COMPETITION
Competition in the location-based entertainment industry is intense. The
Company competes principally with national chains such as Chuck-E-Cheese,
Discovery Zone and potentially Club Disney, as well as a broad array of
smaller chains and independent operators in each of its markets. While the
Company believes that its Parks are distinctive in design and unique in the
variety of entertainment attractions offered, it is aware that its competitors
may operate with similar concepts. There can be no assurance that the
Company's competitors will not adopt concepts similar to those of the Company
or be more successful in establishing businesses using similar concepts, or
that such competitors will not be more successful than the Company in
developing and marketing other concepts. Many of the Company's competitors are
well established with significantly greater financial, marketing and other
resources than the Company. Some of the Company's competitors have been in
existence for substantially longer periods than the Company and may be better
established in the areas where the Company's Parks are located or in the
markets where the Company plans to expand in the future. In addition, the
Company's profitability depends not only on its ability to compete
successfully against similar or comparable businesses, but also upon
consumers' choice of the type of entertainment the Company's Parks provide
over
29
<PAGE>
other available forms of entertainment, including, but not limited to, movies,
sporting events, local youth sports leagues and other seasonal activities.
There can be no assurance that the Company will be able to respond to various
competitive factors affecting the location-based entertainment industry. See
"Risk Factors--Competition."
GOVERNMENT REGULATION AND LABOR COSTS
The Company is subject to federal, state and local government regulation
relating to the operation of its amusement park rides, its food service
operation, as well as regulations relating to building and zoning requirements
and environmental compliance. The Company is also subject to regulation with
respect to its relationship with its employees, including minimum wage
requirements, health benefits, unemployment taxes and sales taxes, overtime
and working conditions, and citizenship requirements. A significant number of
the Company's hourly personnel at its Parks are paid at rates related to the
federal minimum wage. Accordingly, legislated increases in the federal minimum
wage, as well as increases in additional labor cost components, such as
employee benefit costs, workers' compensation insurance rates or other costs
associated with employees, would increase the labor costs at the Company's
Parks, which could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, the Company is
subject to local health board ordinances for the manufacture, handling,
storage and labeling of food products in its kitchens. The failure by the
Company to comply with laws regulating its business, together with future
changes in existing regulations, may adversely affect the Company's business.
The Company believes it is operating in compliance in all material respects
with applicable laws and regulations that govern its operations. See "Risk
Factors--Government Regulation and Labor Costs."
EMPLOYEES
The Company believes that a large part of its success is the result of the
training and motivation of its employees. The Company has extensive and varied
programs designed to recognize and reward employees for superior performance.
Employees are encouraged to participate in improving quality and service at
all levels of operation. At April 1, 1998, the Company employed approximately
1,250 persons, 32 of whom served in administrative or executive capacities, 61
of whom served as restaurant and entertainment management personnel, and the
remainder of whom were hourly restaurant and entertainment personnel. None of
the Company's employees are covered by collective bargaining agreements, and
the Company has never experienced an organized work stoppage, strike or labor
dispute. The Company believes its working conditions and compensation packages
are competitive with those offered by its competitors and considers relations
with its employees to be very good.
LEGAL PROCEEDINGS
The Company is involved in certain litigation arising in the normal course
of its business. The Company does not believe that any such litigation pending
or threatened, either alone or in aggregate, would have a material adverse
effect on the Company.
30
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is certain information concerning the directors and
executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
---- --- ---------------------
<S> <C> <C>
Nabil N. El-Hage.................. 39 President, Chief Executive Officer and
Chairman of the Board
Kenneth J. Sanginario............. 37 Chief Financial Officer
Carl H. Winston................... 40 Senior Vice President--Operations
Dennis J. McMullen................ 53 Senior Vice President--Development
Leonard F. Hoppe.................. 46 Vice President--Marketing
Richard J. Lynch.................. 37 Vice President--Construction
Kevin M. Smith.................... 39 Vice President--Attractions
Scott R. Woodhead................. 32 Vice President--Openings
Paul F. Balser (1)................ 56 Director
Mark E. Jennings (2).............. 36 Director
Jonathan H. Kagan................. 41 Director
Mark L. Kaufman (2)(3)............ 41 Director
Bruce G. Pollack (1)(3)........... 39 Director
</TABLE>
- --------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
(3) Member of Real Estate Committee.
Nabil N. El-Hage has served as a director of the Company since his election
in April 1993 and has served as the Company's President, Chief Executive
Officer and Chairman of the Board since January 1995. Mr. El-Hage has
extensive experience in both the restaurant industry and the private equity
investments arena. From December 1993 to January 1995, Mr. El-Hage was
associated with Advent International Corporation, where he was Vice President
from June 1994 to January 1995. From 1988 to October 1992, Mr. El-Hage served
as the Chief Financial Officer of The Westwood Group, Inc. and its restaurant
subsidiary, The Back Bay Restaurant Group, Inc., where he guided The Back Bay
Restaurant Group, Inc. through its initial public offering. From 1985 to 1988,
Mr. El-Hage was associated with TA Associates, a leading venture capital firm
located in Boston, Massachusetts. From 1984 to 1985, Mr. El-Hage served on the
finance faculty at Harvard Business School.
Kenneth J. Sanginario has served as the Company's Chief Financial Officer
since April 1995. From 1992 to April 1995, Mr. Sanginario served as Vice
President and Treasurer of The Westwood Group, Inc., a closely held company
with holdings in the entertainment and restaurant industries. From 1988 to
1992, Mr. Sanginario served as Corporate Controller of CFO Publishing Corp.
and from 1983 to 1988, Mr. Sanginario was employed by Coopers & Lybrand where
he specialized in the multi-unit retail industry.
Carl H. Winston joined the company as Senior Vice President--Operations in
June 1997. Mr. Winston has over 15 years of experience in the hospitality and
restaurant industries. Prior to joining the Company, he was Executive Vice
President of Chartwell Leisure (formerly known as Forte Hotels), a company
operating over 100 hotels, motels and restaurants in the U.S. and Canada.
Prior to joining Chartwell Leisure, Mr. Winston spent four years with Motels
of America, where he was responsible for all operational aspects as the
company grew from 16 to over 100 locations.
31
<PAGE>
Dennis J. McMullen joined the company as Senior Vice President--Development
in September 1997, following a 21 year career with CVS Corporation ("CVS"),
where he served as Senior Vice President--Real Estate. During his tenure, CVS
grew from 200 stores to 1,500 stores, followed by the acquisition of the
2,600-store Revco Drug Company. Prior to joining CVS, Mr. McMullen worked at
The Grand Union Supermarket Company of Wayne, New Jersey, as a Real Estate
Manager. He is a licensed Real Estate Broker in Massachusetts and New York.
Leonard F. Hoppe has served as the Company's Vice President--Marketing since
June 1996, after having served as Director of Marketing for the Company since
August 1994. From 1987 to 1994, Mr. Hoppe served as the National Director of
Advertising for CARQUEST Corporation, an association of approximately 2,500
auto parts stores. Prior to joining CARQUEST Corporation, Mr. Hoppe was
employed in the advertising business for 10 years, where he serviced accounts
such as Coca-Cola Bottling Co. of the Southwest, Church's Chicken and Mr.
Gatti's Pizza.
Richard J. Lynch serves as the Company's Vice President--Construction. Prior
to joining the Company in December 1996, Mr. Lynch was Manager of Construction
and Engineering for Staples Inc., where he helped design and construct over
300 new stores from 1990 to 1995. Mr. Lynch also was instrumental in the
development of the "Staples Express" concept, and designed and built stores in
New York, Washington DC, Philadelphia and Boston.
Kevin M. Smith serves as the Company's Vice President--Attractions and has
been employed by the Company since March 1995. From June 1993 until joining
the Company in 1995, Mr. Smith, directed design, leasing and construction for
two Moscow office-related developments with an affiliate of Zeckendorf Realty.
Prior to working in Russia, he was a principal in the New York firm of TLMP
Architects, where he also directed the activities of TLMP's Berlin office.
Scott R. Woodhead has served as the Company's Vice President--Openings since
June 1997. From 1993 to May 1997, Mr. Woodhead served the Company first as a
Park General Manager and later as Director of Training and Vice President--
Operations. Prior to joining the Company, Mr. Woodhead was employed by Smith's
Food & Drug Centers, Inc. where he supervised operations and personnel
training for several store locations.
Paul F. Balser has served as a director of the Company since May 1991. Since
August 1995, Mr. Balser has been a founding partner of Generation Capital
Partners L.P., a private investment partnership. From 1986 to August 1995, Mr.
Balser was a partner of Centre Partners L.P. ("Centre Partners"), the general
partner of CCI. From 1982 to 1986, Mr. Balser was a Managing Director and a
member of the Board of Directors of J. Henry Schroder Corp. Mr. Balser
currently serves as a director of Kansas City Southern Industries, Inc., The
Carbide/Graphite Group, Inc., Scientific Games Holdings Corp., Music Holdings
Corp. and a number of other private corporations.
Mark E. Jennings has served as a director of the Company since May 1991.
Since August 1995, Mr. Jennings has been a founding partner of Generation
Capital Partners L.P., a private investment partnership. Prior to August 1995,
Mr. Jennings was a partner of Centre Partners, where he was employed since
1987. From 1986 to 1987, Mr. Jennings was employed in the Corporate Finance
Department of Goldman, Sachs & Co. Mr. Jennings currently serves as a director
of Snyder Communications, Inc., Scientific Games Holdings Corp., Johnny
Rockets Group, Inc., Music Holdings Corp. and a number of other private
corporations.
Jonathan H. Kagan has served as a director of the Company since April 1998.
Since 1995, Mr. Kagan has served as Managing Director of Centre Partners
Management LLC, which was formed in December 1995 to manage investments on
behalf of Centre Capital Investors II, L.P. and affiliated entities ("Centre
Management"). Mr. Kagan has been a Managing Director of Corporate Advisers,
L.P. since 1990. Mr. Kagan has been associated with Lazard Freres & Co. LLC
since 1980 and has been a Managing Director since 1995 (prior thereto a
General Partner). Mr. Kagan also serves as a director of Firearms Training
Systems, Inc.
32
<PAGE>
Mark L. Kaufman has served as a director of the Company since his election
in April 1994. Since July 1992, Mr. Kaufman has been a Vice President with
Dickstein Partners, L.P. Prior to joining Dickstein Partners, Mr. Kaufman
served as a Senior Vice President with Oppenheimer & Co., Inc. Prior to
joining Oppenheimer & Co., Inc., Mr. Kaufman served as Vice President and Head
of Strategic Investments for GAF Corporation. Prior to joining GAF
Corporation, Mr. Kaufman served as an analyst and portfolio manager at each of
Lehman Brothers, MKI Securities, Fourteen Research Corp. and Bankers Trust
Company. Mr. Kaufman has been a Chartered Financial Analyst since 1989. Mr.
Kaufman currently serves as a director of Carson, Pirie, Scott and Company and
of the Leslie Fay Company.
Bruce G. Pollack has served as a director of the Company since his election
in September 1995. Since December 1995, Mr. Pollack has been a Managing
Director of Centre Management. Mr. Pollack is also a partner of Centre
Partners, L.P., which he joined in January 1991. Mr. Pollack currently serves
as a director of Johnny Rockets Group, Inc., Music Holdings Corp. and a number
of other private corporations.
BOARD OF DIRECTORS; COMMITTEES
Pursuant to the Bylaws of the Company, the Board consists of three or more
members, as fixed from time to time by the Board or by the stockholders.
Currently, the Board consists of six directors. Members of the Board are
elected each year at the Company's annual meeting of stockholders, and serve
until their respective successors have been elected and qualified. Within 90
days after completion of the Offering, the Company intends to elect two
additional persons as directors who will not be officers or employees of the
Company or partners, officers or employees of the Company's principal
stockholders or any of their respective affiliates.
The Compensation Committee of the Board, comprised of Messrs. Balser and
Pollack, is responsible for reviewing and establishing the compensation
structure for the Company's officers and directors, including salary rates,
participation in incentive compensation and benefit plans, stock option plans
and other forms of compensation, and, after the effective date of the initial
registration of the Company's Common Stock under Section 12(g) of the
Securities Exchange Act of 1934 (the "Exchange Act"), administering the
Company's stock option plans. See "--Stock Option Plans." The Audit Committee
of the Board, comprised of Messrs. Kaufman and Jennings, is responsible for
recommending to the Board independent auditors for the Company, analyzing the
reports and recommendations of such auditors and reviewing internal audit
procedures and controls. The Real Estate Committee of the Board, comprised of
Messrs. Kaufman and Pollack, is responsible for reviewing management's
recommendations with respect to the selection of new Park sites and making
recommendations to the full Board with respect thereto.
DIRECTOR COMPENSATION
Directors of the Company are reimbursed for certain reasonable expenses
incurred in attending Board meetings. Directors who are also employees of the
Company receive no remuneration for services as members of the Board or any
committee thereof. Directors who are not employed by the Company are entitled
to receive a fee of $1,500 each for every meeting they attend.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth information
concerning compensation for fiscal 1997 earned by the Company's President and
Chief Executive Officer and each of the Company's other most highly
compensated executive officers whose total salary and bonus for such period
exceeded $100,000 (collectively, the "Named Executive Officers").
33
<PAGE>
FISCAL 1997 SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION (1) AWARDS
------------------------------------- ------------
NAME AND SECURITIES ALL OTHER
PRINCIPAL OTHER ANNUAL UNDERLYING COMPENSATION
POSITION SALARY ($) BONUS ($) COMPENSATION ($) OPTIONS (#) ($)
--------- ---------- --------- ---------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Nabil N. El-Hage........ 278,000 180,000 -- -- --
President, Chief
Executive Officer and
Chairman
Kenneth J. Sanginario... 125,000 40,000 -- -- --
Chief Financial Officer
Carl H. Winston (2)..... 74,846 15,000 25,000 (3) 20,000 --
Senior Vice President--
Operations
</TABLE>
- --------
(1) The aggregate amount of perquisites and other personal benefits, if any,
did not exceed the lesser of $50,000 or 10% of the total annual salary and
bonus reported for each Named Executive Officer and has therefore been
omitted.
(2) Mr. Winston became an employee of the Company in June 1997.
(3) One-time allowance for relocation expenses.
Stock Option Grants Table. The following table sets forth certain
information concerning all stock options granted during fiscal 1997 to the
Named Executive Officers. The Company did not grant any stock appreciation
rights or restricted stock awards during fiscal 1997.
FISCAL 1997 STOCK OPTION GRANTS
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK
PRICE
APPRECIATION FOR
NUMBER OF PERCENT OF OPTION TERM OPTION TERM (4)
SECURITIES TOTAL OPTIONS ------------------------ -----------------
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (1) 1997 ($/SHARE) (2) DATE (3) 5% ($) 10% ($)
- ---- ----------- ------------- ------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Nabil N. El-Hage........ -- -- -- -- -- --
Kenneth J. Sanginario... -- -- -- -- -- --
Carl H.Winston.......... 20,000 31.8% $11.00 6/16/07 $138,357 $570,623
</TABLE>
- --------
(1) One-fifth of each option vests on each of the first five anniversaries of
the option grant date.
(2) The exercise price may be paid in cash, in shares of Common Stock valued
at fair market value on the exercise date, or in a combination of cash and
shares.
(3)The term of each option may not exceed ten years.
(4) The hypothetical potential appreciation shown in these columns reflects
the required calculations at annual assumed appreciation rates of 5% and
10%, as set by the Securities and Exchange Commission, and therefore is
not intended to represent either historical appreciation or anticipated
future appreciation of the Common Stock.
No stock options were exercised by the Named Executive Officers during
fiscal 1997.
34
<PAGE>
Fiscal Year-End Option Value Table. The following table sets forth certain
information concerning unexercised stock options held by the Named Executive
Officers as of fiscal 1997 year-end.
AGGREGATE 1997 FISCAL YEAR-END OPTION VALUE TABLE
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING
UNEXERCISED
OPTIONS AT FISCAL YEAR-END
------------------------------
NAME EXERCISABLE UNEXERCISABLE
---- ------------- --------------
<S> <C> <C>
Nabil N. El-Hage............................... 275,000 125,000
Kenneth J. Sanginario.......................... 6,000 14,000
Carl H. Winston................................ -- 20,000
</TABLE>
Based on management's estimate of the fair market value of the Common Stock,
as of 1997 fiscal year-end no unexercised options held by the Named Executive
Officers were in the money.
EMPLOYMENT AGREEMENT
The Company and Mr. El-Hage are parties to an employment agreement providing
for the employment of Mr. El-Hage by the Company as President, Chief Executive
Officer and Chairman of the Board, commencing on February 1, 1995 (the
"Effective Date") until the third anniversary of the completion of the
Offering. Pursuant to the terms of his employment agreement, Mr. El-Hage is
entitled to an annual salary of $275,000, subject to a cost of living
adjustment, and annual bonuses at the discretion of the Board. At the
Effective Date, Mr. El-Hage also received non-qualified options to acquire
400,000 shares of Common Stock subject to quarterly vesting over a four-year
period and exercisable for a period of eight years. Such options are
exercisable at a price of $5.50 per share.
STOCK OPTION PLANS
In June 1995, the Company adopted the 1995 Stock Option Plan (the "1995
Option Plan"). Under the 1995 Option Plan, 112,000 shares of Common Stock have
been authorized for issuance. As of the date of this Prospectus, options to
purchase 111,875 shares of Common Stock granted under the 1995 Option Plan
were outstanding at a weighted average exercise price equal to $9.55 per
share. Shares of Common Stock subject to outstanding options that expire or
terminate prior to exercise may be available for future issuance under the
1995 Option Plan. Stock options granted under the 1995 Option Plan are
typically subject to the Company's standard vesting schedule under which 20%
of an optionee's shares vest on each of the first five anniversaries of his or
her vesting commencement date. Notwithstanding the foregoing, all options
outstanding under the 1995 Option Plan immediately become exercisable upon the
occurrence of certain change-in-control events. The Company intends to
terminate the 1995 Option Plan as to future grants upon the completion of the
Offering.
In addition, a certain landlord of the Company has an option to purchase up
to 3,310 shares of Common Stock at an exercise price of $10.00 per share,
subject to the achievement of certain financial targets that the Company does
not believe will be satisfied.
In April 1998, the Company adopted the 1998 Incentive Stock Option Plan (the
"1998 Option Plan") and authorized for issuance 275,000 shares of Common Stock
under such plan. Options to be granted under the 1998 Option Plan will
typically be subject to the Company's standard vesting schedule under which
20% of an optionee's shares vest on each of the first five anniversaries of
his or her vesting commencement date. Notwithstanding the foregoing, all
options to be granted under the 1998 Option Plan will immediately become
exercisable upon the occurrence of certain change-in-control events. The
Company is contractually obligated to grant to certain executive officers
options to purchase 20,000 shares of Common Stock, which the Company
35
<PAGE>
intends to grant under the 1998 Option Plan. The 1998 Option Plan will be
administered by the Compensation Committee, which will determine the terms of
the options granted, including the exercise price, number of shares subject to
the options and exercisability of the options. See "--Board of Directors;
Committees."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Balser and Pollack. No member
of the Compensation Committee was at any time during fiscal 1997, or at any
other time, an officer or employee of the Company.
Throughout 1997 and to the date of this Prospectus, Mr. Nabil N. El-Hage,
the President, Chief Executive Officer and Chairman of the Company, also
served as a director of the Company. Mr. El-Hage has recused himself from all
discussions relating to, and abstained from voting on, resolutions of the
Board concerning his own compensation.
For a description of certain relationships and related transactions between
the Company and certain of its affiliates see "Certain Relationships and
Related Transactions."
LIMITATIONS OF LIABILITY AND INDEMNIFICATION
Pursuant to the provisions of the Delaware General Corporation Law (the
"DGCL"), the Company has adopted provisions in its Certificate of
Incorporation which provide that directors of the Company shall not be
personally liable for monetary damages to the Company or its stockholders for
a breach of fiduciary duty as a director, except for liability as a result of
(i) a breach of the director's duty of loyalty to the Company or its
stockholders; (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) an act related to
the unlawful stock repurchase or payment of a dividend under Section 174 of
the DGCL; and (iv) transactions from which the director derived an improper
personal benefit. Such limitation of liability does not affect the
availability of equitable remedies such as injunctive relief or rescission.
The Company's Certificate of Incorporation and Bylaws also obligate the
Company to indemnify its officers, directors and other agents to the fullest
extent permitted under the DGCL.
At present, there is no material pending litigation or proceeding involving
a director, officer, employee or other agent of the Company as to which
indemnification is being sought, nor is the Company aware of any pending or
threatened litigation that may result in material claims for indemnification
by any director, officer, employee or other agent.
In addition, as permitted by its Bylaws, the Company maintains an insurance
policy covering directors and officers against certain civil liabilities.
36
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On November 1, 1996, the Company issued to CCI, J.P. Morgan, Sixty Wall
Street SBIC Fund L.P., Dickstein & Co. L.P., Dickstein International Limited,
Dickstein Focus Fund L.P. and Shad Run-JJ Nominee Corporation convertible
notes due November 1, 2002 (the "Notes") in an aggregate principal amount of
$3,500,000 and warrants to purchase 70,000 shares of Common Stock, for an
aggregate purchase price of $3,500,000. The Notes were converted into
1,359,683 shares of Series F Preferred Stock and warrants to purchase 6,242
shares of Common Stock (other than the Notes held by CCI, which were redeemed
by the Company) in connection with the issuance of the Series F Preferred
Stock on December 26, 1996. The warrants issued by the Company are exercisable
into shares of Common Stock at a price of $7.33 per share, subject to
adjustment. The Series F Preferred Stock received by these holders in exchange
for the Notes will be converted into shares of Common Stock in connection with
the Offering. See "Description of Capital Stock."
Pursuant to a purchase agreement dated December 26, 1996 (the "December 1996
Agreement"), the Company issued on such date to certain of the investors
referred to above, as well as to certain affiliates of Centre Partners II LLC
("Centre Partners II") and Generation Capital Partners L.P. ("Generation
Capital Partners") and certain additional investors, 10,526,673 shares of
Series F Preferred Stock and warrants to purchase 48,325 shares of Common
Stock for an aggregate purchase price of $11,579,341. Pursuant to the December
1996 Agreement, on March 31, 1997 the Company issued to Braemar Capital
Partners I, L.P. and to certain other investors party to such agreement
2,272,727 shares of Series F Preferred Stock and warrants to purchase 10,433
shares of Common Stock, for an aggregate purchase price of $2,499,999. The
warrants issued by the Company are exercisable at a price of $7.33 per share,
subject to adjustment. The Series F Preferred Stock received by the purchasers
in this transaction will be converted into shares of Common Stock in
connection with the Offering. See "Description of Capital Stock."
In connection with the Offering, CCI, Centre Partners II, J.P. Morgan, Sixty
Wall Street SBIC Fund L.P., Dickstein & Co. L.P., Generation Capital Partners,
Dickstein International Limited, Dickstein Focus Fund L.P. and Shad Run-JJ
Nominee Corporation and certain other investors and the Company will enter
into an amended and restated stockholders' agreement (the "Amended
Stockholders' Agreement"). See "Description of Capital Stock--Stockholders'
Agreement."
For additional information, see "Management--Compensation Committee
Interlocks and Insider Participation."
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of the date hereof and as adjusted
to reflect the sale of the shares of Common Stock offered hereby, by
(i) each stockholder known by the Company to beneficially own more than five
percent of the Common Stock, (ii) each director of the Company, (iii) the
Named Executive Officers and (iv) all directors and executive officers of the
Company as a group. Except pursuant to applicable community property laws or
as otherwise noted below, each of the stockholders identified in the table has
sole voting and investment power with respect to the shares of Common Stock
beneficially owned by such person. The following table gives effect to the
Preferred Conversion, which will occur concurrently with the closing of the
Offering.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF CLASS PERCENT OF CLASS
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PRIOR TO OFFERING AFTER OFFERING
------------------------ ------------------ ----------------- ----------------
<S> <C> <C> <C>
Centre Capital Investors
L.P. (1)............... 1,626,098 35.0%
Centre Partners II LLC
(2).................... 802,177 17.3%
J.P. Morgan Capital
Corporation (3)........ 864,288 18.7%
Dickstein Partners Inc.
(4).................... 541,262 11.7%
Generation Capital
Company LLC (5)........ 356,253 7.7%
Nabil N. El-Hage (6).... 338,143 6.9%
Kenneth J. Sanginario
(7).................... 10,000 *
Carl Winston (8)........ 4,000 *
Paul F. Balser (9)...... -- --
Mark E. Jennings (9).... -- --
Mark L. Kaufman (10).... 2,671 *
Bruce G. Pollack (11)... -- --
Jonathan H. Kagan (12).. -- --
Directors and Executive
Officers as a group
(13)................... 354,814 7.2%
</TABLE>
- --------
* Less than 1%
(1) Includes warrants to purchase 40,087 shares of Common Stock exercisable
within 60 days of the date of this Prospectus. The general partner of CCI
is Centre Partners. Centre Partners may be deemed to be indirectly
controlled, through Park Road Corporation, by Lester Pollack, a managing
director of Lazard Freres & Co. LLC. The address of CCI is 30 Rockefeller
Plaza, Suite 5050, New York, New York 10020.
(2) Includes shares held as general partner of Centre Partners Coinvestment,
L.P. and Centre Parallel Management Partners L.P. and as general partner
of the general partner of Centre Capital Investors II, L.P., Centre
Partners Offshore Investors II, L.P. and Centre Capital Tax-Exempt
Investors II, L.P. In addition, includes shares held in a separate
account of State Board of Administration of Florida with respect to which
an affiliate of Centre Partners II has management authority. Includes
warrants to purchase 31,318 shares of Common Stock exercisable within 60
days of the date of this Prospectus. The address of Centre Partners II is
30 Rockefeller Plaza, Suite 5050, New York, New York 10020.
(3) Includes 8,219 shares of Common Stock held by Sixty Wall Street SBIC Fund
L.P., an affiliate of J.P. Morgan Capital Corporation. Includes warrants
to purchase 22,368 shares of Common Stock exercisable within 60 days of
the date of this Prospectus. The address of J.P. Morgan Capital
Corporation is 60 Wall Street, New York, New York 10260.
(4) Includes 490,939 shares of Common Stock beneficially owned by Dickstein &
Co., L.P., Dickstein International Limited and Dickstein Focus Fund L.P.,
each of which may be deemed to be indirectly controlled by Dickstein
Partners Inc. Includes warrants to purchase 15,462 shares of Common Stock
exercisable within 60 days of the date of this Prospectus. The address of
Dickstein Partners Inc. is 660 Madison Avenue, New York, New York 10021.
(5) Includes shares held as general partner of Generation Parallel Management
Partners L.P. and as general partner of the general partner of Generation
Capital Partners L.P. In addition, includes shares held in a
38
<PAGE>
separate account of State Board of Administration of Florida with respect
to which an affiliate of Generation Capital Company LLC has management
authority. Includes warrants to purchase 13,981 shares of Common Stock
exercisable within 60 days of the date of this Prospectus. The address of
Generation Partners is 551 Fifth Avenue, Suite 3100, New York, New York
10176.
(6) Includes options to purchase 325,000 shares of Common Stock and warrants
to purchase 348 shares of Common Stock exercisable within 60 days of the
date of this Prospectus.
(7) Includes options to purchase 10,000 shares of Common Stock exercisable
within 60 days of the date of this Prospectus.
(8) Includes options to purchase 4,000 shares of Common Stock exercisable
within 60 days of the date of this Prospectus.
(9) Excludes 356,128 shares of Common Stock beneficially owned by Generation
Capital Company LLC and 1,626,098 shares of Common Stock beneficially
owned by CCI. Each of Mr. Balser and Mr. Jennings is a Managing Director
of Generation Capital Company LLC and, as such, may be deemed to have
voting and investment power over the shares of Common Stock beneficially
owned by Generation Capital Company LLC. In addition, each of Mr. Balser
and Mr. Jennings are limited partners in CCI and may be deemed to have an
indirect pecuniary interest in the shares of Common Stock beneficially
owned by CCI. Each of Mr. Balser and Mr. Jennings disclaims any beneficial
ownership of such shares of Common Stock.
(10) Excludes 541,262 shares of Common Stock beneficially owned by Dickstein
Partners Inc. and affiliated investment entities. Mr. Kaufman is a Vice
President of Dickstein Partners, Inc. and, as such, may be deemed to have
voting and investment power over such shares of Common Stock. Mr. Kaufman
disclaims any beneficial ownership of such shares of Common Stock.
(11) Excludes 1,626,098 shares of Common Stock beneficially owned by CCI and
801,346 shares of Common Stock beneficially owned by Centre Partners II.
Mr. Pollack is a Vice President of Park Road Corporation and a Managing
Director of Centre Partners II and, as such, may be deemed to have voting
and investment power over such shares of Common Stock. Mr. Pollack
disclaims any beneficial ownership of such shares of Common Stock.
(12) Excludes 801,346 shares of Common Stock beneficially owned by Centre
Partners II. Mr. Kagan is a Managing Director of Centre Partners II and,
as such, may be deemed to have voting and investment power over such
shares of Common Stock. Mr. Kagan disclaims any beneficial ownership of
such shares of Common Stock.
(13) Includes options to purchase 339,000 shares of Common Stock and warrants
to purchase 348 shares of Common Stock exercisable within 60 days of the
date of this Prospectus.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
shares of Common Stock, of which the shares sold
pursuant to the Offering will be freely tradeable without restriction or
further registration under the Securities Act, except for any such shares held
by "affiliates" (as defined under Rule 405 of the Securities Act) of the
Company. The holders of the remaining 4,601,325 shares will be entitled to sell
their shares in the public securities market without registration under the
Securities Act to the extent permitted by Rule 144 promulgated thereunder or
otherwise in accordance with the Securities Act. Generally, Rule 144 provides
that a person who has owned Restricted Shares for at least one year, or who may
be deemed an "affiliate" of the Company, is entitled to sell, within any three-
month period, up to the number of Restricted Shares that does not exceed the
greater of (i) one percent of the then outstanding shares of Common Stock, or
(ii) the average weekly trading volume during the four calendar weeks preceding
the date on which notice of sale is filed with the Securities and Exchange
Commission (the "Commission"). Sales under Rule 144 are subject to certain
restrictions relating to manner of sale, volume of sales and the availability
of current public information about the Company. All of the Restricted Shares
have been owned by the holders thereof for more than one year. Of such
Restricted Shares, 521,666 are owned by non-affiliates of the Company and, as a
result, will be freely tradeable upon completion of the Offering without regard
to the restrictions under Rule 144 and 4,079,659 are owned by affiliates of the
Company and, as a result, will be eligible for sale pursuant to Rule 144,
39
<PAGE>
subject to certain restrictions, upon completion of the Offering. As described
below, certain holders of Common Stock have agreed to certain restrictions on
their ability to sell shares of Common Stock for a period of 180 days
following the Offering. See "Underwriting."
Rule 701 under the Securities Act permits resales of shares in reliance upon
Rule 144 but without compliance with certain restrictions, including the
holding period requirement, of Rule 144. Any employee, officer or director of
or consultant to the Company who purchased his or her shares pursuant to a
written compensatory plan or contract may be entitled to rely on the resale
provisions of Rule 701. Rule 701 permits Affiliates to sell their Rule 701
shares under Rule 144 without complying with the holding period requirements
of Rule 144. Rule 701 further provides that non-Affiliates may sell such
shares in reliance on Rule 144 without having to comply with the holding
period, public information, volume limitation or notice provisions of Rule
144. All holders of Rule 701 shares are required to wait until 90 days after
the date of this Prospectus before selling such shares.
The Company intends to file a registration statement on Form S-8 covering
all shares of Common Stock issuable upon exercise of stock options in effect
on the date of this Prospectus. The Company has outstanding stock options with
respect to an aggregate of approximately 524,550 shares of Common Stock as of
the date of this Prospectus. Upon such registration on Form S-8 or upon
compliance with the requirements of the Rule 701 referred to above, an
additional 524,550 shares of Common Stock will be eligible for sale in the
public market.
In addition, the Amended Stockholders' Agreement that the Company and its
principal stockholders will enter into prior to or upon the completion of the
Offering, will provide for registration rights exercisable following 180 days
after the date of this Prospectus, upon demand by the holders of at least %
of the outstanding shares of Common Stock held by the stockholders party
thereto and, in addition, the stockholders will be entitled to "piggyback"
registration on any public offering of equity securities by the Company
subsequent to the Offering. See "Description of Capital Stock--Stockholders'
Agreement."
Prior to the Offering, there has been no market for the Common Stock, and no
predictions can be made with respect to the effect, if any, that public sales
of shares or the availability of shares for sale will have on the market price
prevailing from time to time. Sales of substantial amounts of Common Stock in
the public market following the Offering, or the perception that such sales
may occur, could adversely affect the prevailing market price of the Common
Stock and the ability of the Company to raise capital through a public
offering of its equity securities. See "Risk Factors--Absence of Public Market
for Common Stock; Determination of Initial Public Offering Price."
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue (i) 30,000,000 shares of common stock,
par value $.01 per share, (ii) 961,377 shares of Series A Preferred Stock,
441,936 shares of Series B Preferred Stock, 11,077,508 shares of Series C
Preferred Stock, 961,377 shares of Series D Preferred Stock and 25,000,000
shares of Series F Preferred Stock, each having a par value of $1.00 per share
(collectively, the "Existing Preferred Stock"). Upon the completion of the
Offering, the Company will be authorized to issue 5,000,000 shares of "new"
undesignated preferred stock (the "New Preferred Stock"). Concurrently with
the closing of the Offering, all outstanding shares of Existing Preferred
Stock, together with all accrued and unpaid dividends thereon, will convert
automatically into shares of Common Stock at the applicable conversion price
thereof.
COMMON STOCK
In April 1998, the Company effected a one-for-ten reverse stock split of the
Common Stock and authorized an aggregate of 30,000,000 shares of Common Stock.
As of the date of this Prospectus, there were 4,601,325 shares of Common Stock
outstanding. In addition, 524,550 shares of Common Stock are covered by
employee options granted by the Company at exercise prices of between $5.50 to
$11.00 per share. The Company is also contractually obligated to grant certain
executive officers options to purchase 20,000 shares of Common Stock.
40
<PAGE>
In addition, as of the date of this Prospectus, there were outstanding
warrants to purchase an aggregate of 135,000 shares of Common Stock issued to
investors and warrants to purchase an aggregate of 17,500 shares of Common
Stock issued to certain landlords in connection with leases entered into by
the Company with respect to certain Park locations. The Company has also
committed to issuing warrants to purchase an aggregate of 11,000 shares of
Common Stock to certain landlords in connection with other leases the Company
has executed.
Holders of Common Stock are entitled to one vote per share on all matters to
be voted upon by stockholders. All shares of Common Stock rank equally as to
voting and all other matters. The shares of Common Stock have no preemptive or
conversion rights, no redemption or sinking fund provisions, are not liable
for further call or assessment, and are not entitled to cumulative voting
rights. The outstanding shares of Common Stock are fully paid and non-
assessable.
Subject to the prior rights of holders of preferred stock, the holders of
Common Stock are entitled to receive dividends when and as declared by the
Board out of funds legally available therefor, when, as and if declared and
paid to the holders of Common Stock. The Company has never declared or paid
cash dividends. The Company currently intends to retain all future earnings
for the operation and expansion of its business and does not anticipate paying
cash dividends on the Common Stock in the foreseeable future. See "Dividend
Policy."
Upon a liquidation of the Company, after creditors had been paid in full and
after shares of any series of preferred stock had received the preferential
amounts to which such shares are entitled upon liquidation, the holders of
Common Stock would be entitled to receive a pro rata distribution per share of
the excess amount.
Application will be made for listing of the Common Stock on Nasdaq under the
symbol "JPRS."
PREFERRED STOCK
As of the date of this Prospectus, the issued and outstanding Existing
Preferred Stock consists of 434,383 shares of Series B Preferred Stock,
11,077,508 shares of the Series C Preferred Stock, 961,377 shares of Series D
Preferred Stock and 14,309,091 shares of the Series Preferred F Stock.
Concurrently with the closing of the Offering, all of the outstanding shares
of Existing Preferred Stock, together with all accrued and unpaid dividends
thereon, will be converted into an aggregate of 4,425,825 shares of Common
Stock, at the applicable conversion price of each series of Preferred Stock as
provided in the Certificate of Incorporation.
NEW PREFERRED STOCK
Upon the completion of the Offering, the Board will be empowered to issue
the New Preferred Stock from time to time in one or more classes or series and
to fix the rights, priorities, privileges, qualifications, limitations and
restrictions of those shares, including dividend rights, conversion rights,
voting rights, terms of redemption, terms of sinking funds, liquidation
preferences and the number of shares constituting any series or the
designation of such series, which could decrease the amount of earnings and
assets available for distribution to holders of Common Stock or adversely
affect the rights and powers, including voting rights, of the holders of the
Common Stock without any further vote or action by the stockholders. The
rights of the holders of Common Stock will be subject to, and may be adversely
affected by, the rights of the holders of any preferred shares that may be
issued by the Company in the future. The issuance of New Preferred Stock could
have the effect of delaying or preventing a change in control of the Company
or make removal of management more difficult. Additionally, the issuance of
new preferred stock may have the effect of decreasing the market price of the
Common Stock, and may adversely affect the voting and other rights of the
holders of Common Stock. While the Company has no present intention to issue
any shares of New Preferred Stock, any such issuance could have the effect of
making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company.
STOCKHOLDERS' AGREEMENT
The Company and its principal stockholders are parties to a certain
stockholders' agreement, which provides for, among other things, (i) the
nomination and election of directors of the Company, (ii) restrictions on the
transfer of shares of capital stock of the Company, (iii) the right of certain
holders of capital stock to require the
41
<PAGE>
Company to purchase such shares and the right of the Company to purchase
shares held by terminated employees and (iv) registration rights of the
Company's stockholders. Prior to or upon completion of the Offering, the
Company and the stockholders party to the stockholders' agreement referred to
above will enter into the Amended Stockholders' Agreement to provide for the
termination of the foregoing provisions, other than with respect to the
registration rights of the stockholders.
The Amended Stockholders' Agreement will provide for registration rights
exercisable following 180 days after the date of this Prospectus, upon demand
by the holders of at least % of the outstanding shares of Common Stock held
by the stockholders party thereto. In addition, the stockholders party to such
agreement will be entitled to "piggyback" registration on any public offering
of equity securities by the Company subsequent to the Offering. The
registration rights will be subject to customary underwriter cutback and
indemnification provisions.
CERTAIN PROVISIONS OF DELAWARE LAW
The Delaware Business Combination Act. Upon completion of the Offering, the
Company will be subject to Section 203 of the DGCL (the "Delaware Business
Combination Act"), which imposes a three-year moratorium on business
combinations between a Delaware corporation whose stock generally is publicly
traded or held of record by more than 2,000 stockholders and an "interested
stockholder" (in general, a stockholder owning 15% or more of a corporation's
outstanding voting stock) or an affiliate or associate thereof unless (a)
prior to an interested stockholder becoming such, the board of directors of
the corporation approved either the business combination or the transaction
resulting in the interested stockholder becoming such, (b) upon consummation
of the transaction resulting in an interested stockholder becoming such, the
interested stockholder owns 85% of the voting stock outstanding at the time
the transaction commenced (excluding, from the calculation of outstanding
shares, shares beneficially owned by directors who are also officers and
certain employee stock plans) or (c) on or after an interested stockholder
becomes such, the business combination is approved by (i) the board of
directors and (ii) holders of at least 66 2/3% of the outstanding shares
(other than those shares beneficially owned by the interested stockholder) at
a meeting of stockholders. The term "business combination" is defined
generally to include mergers or consolidations between a Delaware corporation
and an "interested stockholder" involving the assets or stock of the
corporation or its majority-owned subsidiaries and transactions which increase
an "interested stockholder's" percentage ownership of stock.
TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company has been appointed as the transfer
agent and registrar for the Company's Common Stock.
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<PAGE>
UNDERWRITING
The Company and certain stockholders have entered into a Purchase Agreement
(the "Purchase Agreement") with the underwriters listed in the table below
(the "Underwriters"), for whom Piper Jaffray Inc., Cowen & Company and Gerard
Klauer Mattison & Co., Inc. are acting as representatives (the
"Representatives"). Subject to the terms and conditions set forth in the
Purchase Agreement, the Company has agreed to sell to the Underwriters, and
each of the Underwriters has severally agreed to purchase, the number of
shares of Common Stock set forth opposite each Underwriter's name in the table
below.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Piper Jaffray Inc..................................................
Cowen & Company....................................................
Gerard Klauer Mattison & Co., Inc..................................
------
Total..........................................................
======
</TABLE>
Subject to the terms and conditions of the Purchase Agreement, the
Underwriters have agreed to purchase all of the Common Stock being sold
pursuant to the Purchase Agreement, if any is purchased (excluding shares
covered by the over-allotment options granted therein). In the event of a
default by any Underwriter, the Purchase Agreement provides that, in certain
circumstances, purchase commitments of the nondefaulting Underwriters may be
increased or the Purchase Agreement may be terminated.
The Representatives have advised the Company that the Underwriters propose
to offer the Common Stock directly to the public initially at the public
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession of not more than $ per share.
Additionally, the Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to certain other dealers. After
the Offering, the public offering price and other selling terms may be changed
by the Underwriters.
Of the shares of Common Stock offered hereby by the Company, up to
of such shares will be reserved for sale to persons designated by the Company.
There can be no assurance that such shares will be purchased by these persons.
Shares not so purchased will be reoffered immediately by the Underwriters to
the public at the initial public offering price.
Certain stockholders have granted to the Underwriters options, exercisable
by the Representatives within 30 days after the date of the Purchase
Agreement, to purchase up to an aggregate of additional shares of
Common Stock at the same price per share to be paid by the Underwriters for
the other shares offered hereby. If the Underwriters purchase any of such
additional shares pursuant to such options, each Underwriter will be committed
to purchase such additional shares in approximately the same proportion as set
forth in the table above. The Underwriters may exercise the options only for
the purpose of covering over-allotments, if any, made in connection with the
distribution of the Common Stock offered hereby.
The Representatives have informed the Company that neither they, nor any
member of the National Association of Securities Dealers, Inc. participating
in the distribution of the Offering, will make sales of the Common Stock
offered hereby to accounts over which they exercise discretionary authority
without the prior specific written approval of the customer.
The Offering of the shares of Common Stock is made for delivery when, as and
if accepted by the Underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the Offering without notice. The Underwriters
reserve the right to reject an order for the purchase of shares in whole or in
part.
The officers, directors and certain other stockholders of the Company, who
will beneficially own in the aggregate 4,601,325 shares of Common Stock after
the Offering, have agreed that they will not offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, any shares of Common
Stock or other
43
<PAGE>
securities of the Company that are substantially similar to the shares,
including but not limited to any securities that are convertible into or
exchangeable for, or that represent the right to receive, shares of Common
Stock or any such substantially similar securities, owned by them prior to the
date of the Prospectus for a period of 180 days after the date of this
Prospectus, without the prior written consent of Piper Jaffray. The Company
has agreed that it will not, without Piper Jaffray's prior written consent,
offer, sell, contract to sell, pledge, or otherwise dispose of any shares of
Common Stock, options or warrants to acquire shares of Common Stock or
securities exchangeable for or convertible into shares of Common Stock during
the 180-day period following the date of this Prospectus, except that the
Company may issue shares upon the exercise of options and warrants granted
prior to the date hereof, and may grant options under the 1998 Option Plan.
Prior to the Offering, there has been no public market for the Common Stock.
The initial public offering price for the Common Stock offered hereby will be
determined by negotiation among the Company and the Representatives. Among the
factors to be considered in determining the initial public offering are
prevailing market and economic conditions, the Company's revenue and earnings,
estimates of the business potential and prospects of the Company, the present
state of the Company's business operations, an assessment of the Company's
management and the consideration of the above factors in relation to the
market valuations of companies in similar businesses. The initial public
offering price for the Common Stock should not be considered an indication of
the actual value of the Common Stock offered hereby. In addition, there can be
no assurance that the Common Stock can be resold at a price equal to or
greater than the initial public offering price. See "Risk Factors--Absence of
Public Market for Common Stock; Determination of Initial Public Offering
Price" and "Risk Factors--Possible Volatility of Common Stock Price."
During and after the Offering, the Underwriters may purchase and sell Common
Stock in the open market. These transactions may include over-allotment,
stabilizing transactions and purchases to cover syndicate short positions
created in connection with the Offering. The Underwriters also may impose a
penalty bid, whereby selling concessions allowed to syndicate members or other
broker-dealers in respect of the Common Stock sold in the Offering for their
account may be reclaimed by the syndicate if such securities are repurchased
by the syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Common Stock,
which may be higher than the price that might otherwise prevail in the open
market. These transactions may be effected on the Nasdaq National Market, in
the over-the-counter market or otherwise, and these activities, if commenced,
may be discontinued at any time.
The Company and certain stockholders have agreed to indemnify the
Underwriters and their controlling persons against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
the Underwriters may be required to make in respect thereof.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby and certain other
legal matters will be passed upon for the Company by Weil, Gotshal & Manges
LLP, New York, New York. The validity of the shares of Common Stock offered
hereby will be passed upon for the Underwriters by King & Spalding, New York,
New York.
EXPERTS
The Consolidated Financial Statements of the Company at December 28, 1997
and December 29, 1996 and for each of the three years in the period ended
December 28, 1997, appearing in this Prospectus and Registration Statement
have been audited by Ernst & Young LLP, independent auditors, and the
information under the caption "Selected Consolidated Financial Data" for each
of the five years in the period ended December 28, 1997, appearing in this
Prospectus and Registration Statement have been derived from the Consolidated
Financial Statements audited by Ernst & Young LLP, as set forth in their
reports thereon appearing elsewhere herein.
Such Consolidated Financial Statements and selected consolidated financial
data are included in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing.
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<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (the "Registration Statement") pursuant to the Securities Act, covering
the shares of Common Stock offered hereby. This Prospectus, which is part of
the Registration Statement, does not contain all of the information set forth
in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock, reference is
made to the Registration Statement and the exhibits and schedules contained
therein, which may be inspected without charge at the principal office of the
Commission in Washington, D.C. and copies of all or any part of which may be
obtained from the Commission upon payment of the prescribed fees. The
summaries contained in this Prospectus concerning information included in the
Registration Statement, or in any exhibit or schedule thereto, are qualified
in their entirety by reference to such information, exhibit or schedule.
The Company is not currently subject to the informational requirements of
the Exchange Act. As a result of the Offering, the Company will become subject
to the informational requirements of the Securities Exchange Act of 1934, as
amended, and in accordance therewith will file the periodic reports and other
information with the Commission. Reports, registration statements (including
the exhibits thereto), proxy statements, and other information filed with the
Commission by the Company may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, at the regional offices of the Commission at Seven World Trade
Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and from the World Wide
Web site that the commission maintains at http://www.sec.gov. Copies of such
material may be obtained at prescribed rates from the Public Reference Section
of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
45
<PAGE>
JEEPERS! INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors............................................ F-2
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 29, 1996, December 28, 1997 and
March 29, 1998 (Unaudited)............................................... F-3
Consolidated Statements of Operations for the years ended December 31,
1995, December 29, 1996, December 28, 1997 and the quarters ended March
30, 1997 (Unaudited) and March 29, 1998 (Unaudited)...................... F-4
Consolidated Statements of Redeemable Convertible Preferred Stock and
Stockholders' Deficit for the years ended December 31, 1995, December 29,
1996, December 28, 1997 and the quarter ended March 29, 1998 (Unaudited). F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1995, December 29, 1996, December 28, 1997 and the quarters ended March
30, 1997 (Unaudited) and March 29, 1998 (Unaudited)...................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Jeepers! Inc.
We have audited the accompanying consolidated balance sheets of Jeepers!
Inc. and subsidiaries as of December 28, 1997 and December 29, 1996, and the
related consolidated statements of operations, redeemable convertible
preferred stock and stockholders' deficit, and cash flows for each of the
three years in the period ended December 28, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Jeepers! Inc.
and subsidiaries at December 28, 1997 and December 29, 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 28, 1997 in conformity with generally
accepted accounting principles.
We have also previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheets as of December 31, 1995,
January 1, 1995, and January 2, 1994 and the related consolidated statements
of operations, redeemable convertible preferred stock and stockholders'
deficit, and cash flows for the years ended January 1, 1995 and January 2,
1994 (none of which are presented separately herein); and we expressed
unqualified opinions on those consolidated financial statements. In our
opinion, the information set forth in the selected consolidated financial data
for each of the five years in the period ended December 28, 1997, appearing on
page 15, is fairly stated in all material respects in relation to the
consolidated financial statements from which it has been derived.
As discussed in Note 3 to the financial statements, in 1996, the Company
adopted Statement of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of."
Ernst & Young LLP
Boston, Massachusetts
March 5, 1998, except
as to Note 13 as to
which the
date is April 6,
1998.
F-2
<PAGE>
JEEPERS! INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 28, MARCH 29,
1996 1997 1998
------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents........... $ 14,032,761 $ 6,642,780 $ 3,914,272
Amounts due from landlords.......... 187,000 1,165,079 1,206,515
Inventories......................... 168,201 253,975 278,791
Prepaid expenses and other current
assets............................. 69,194 90,490 93,881
------------ ------------ -----------
Total current assets.............. 14,457,156 8,152,324 5,493,459
Equipment and leasehold improvements:
Rides and games..................... 5,347,124 9,645,929 10,431,110
Other equipment..................... 2,155,651 3,854,758 4,129,033
Leasehold improvements.............. 5,183,979 8,418,704 8,762,105
------------ ------------ -----------
Total equipment and leasehold
improvements..................... 12,686,754 21,919,391 23,322,248
Less accumulated depreciation and
amortization........................ 3,535,488 6,232,920 6,640,268
------------ ------------ -----------
Total equipment and leasehold
improvements, net................ 9,151,266 15,686,471 16,681,981
Other assets, net.................... 96,190 320,543 564,008
------------ ------------ -----------
Total assets...................... $ 23,704,612 $ 24,159,338 $22,739,447
============ ============ ===========
LIABILITIES AND STOCKHOLDERS'
DEFICIT:
Current liabilities:
Accounts payable.................... $ 1,711,359 $ 3,560,329 $ 1,851,200
Accrued expenses.................... 892,408 1,310,202 1,650,428
Accrued park closing costs.......... 352,351 374,956 373,189
Current portion of long-term debt... 585,660 1,568,384 1,665,708
Note payable to investor............ 2,004,345 -- --
------------ ------------ -----------
Total current liabilities......... 5,546,123 6,813,872 5,540,525
Long-term debt....................... 832,919 1,357,985 759,741
Deferred rent........................ 472,862 669,237 937,766
Other long-term liabilities.......... 51,848 188,313 265,548
Commitments and contingencies (Note
7)
Redeemable convertible preferred
stock:
Series A, $1.00 par value, 961,377
shares authorized; no shares issued
and outstanding .................... -- -- --
Series B, $1.00 par value, 441,936
shares authorized; 441,936 shares
issued and outstanding at December
29, 1996 and December 28, 1997 and
434,383 issued and outstanding at
March 29, 1998 ($3,908,012
liquidation value at March 29, 1998) 3,147,258 3,470,692 3,501,550
Series C, $1.00 par value, 11,077,508
shares authorized; 11,077,508 shares
issued and outstanding ($16,486,655
liquidation value at March 29,
1998)............................... 15,115,814 16,212,487 16,486,655
Series D, $1.00 par value, 961,377
shares authorized; 961,377 shares
issued and outstanding
($9,196,253 liquidation value at
March 29, 1998)..................... 8,431,598 9,043,322 9,196,253
Series F, $1.00 par value, 25,000,000
shares authorized; 11,711,956 shares
issued and outstanding at December
29, 1996 and 14,309,091 shares
issued and outstanding at December
28, 1997 and March 29, 1998
($17,510,750 liquidation value at
March 29, 1998)..................... 12,538,616 16,764,286 17,133,523
------------ ------------ -----------
Total redeemable convertible
preferred stock.................. 39,233,286 45,490,787 46,317,981
Stockholders' deficit:
Common stock, $.01 par value,
30,000,000 shares authorized;
165,500 shares issued and
outstanding at December 29, 1996 and
180,500 shares issued and
outstanding at December 28, 1997 and
March 29, 1998 ..................... 1,655 1,805 1,805
Additional paid-in capital........... 426,043 606,143 606,143
Cumulative accretion of redeemable
convertible preferred stock......... (7,365,789) (10,874,564) (11,751,758)
Unrealized gain on available-for-sale
marketable securities............... -- -- 9,615
Accumulated deficit.................. (15,494,335) (20,094,240) (19,947,919)
------------ ------------ -----------
Total stockholders' deficit....... (22,432,426) (30,360,856) (31,082,114)
------------ ------------ -----------
Total liabilities and
stockholders' deficit............ $ 23,704,612 $ 24,159,338 $22,739,447
============ ============ ===========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
JEEPERS! INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 30, MARCH 29,
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................ $ 7,648,264 $10,069,888 $16,371,606 $ 3,666,590 $7,206,281
Costs and expenses:
Cost of revenues....... 1,269,740 2,262,741 3,495,384 822,719 1,307,325
Operating payroll and
benefit costs......... 2,422,414 2,960,983 4,594,398 1,019,851 1,874,507
Other operating
expenses.............. 2,983,596 3,302,781 5,907,768 1,096,470 2,305,955
General and
administrative
expenses.............. 3,001,024 3,038,609 4,114,001 848,727 1,141,358
Pre-opening costs...... -- 202,304 368,939 13,756 15,935
Depreciation and
amortization.......... 680,550 866,650 1,172,609 263,345 419,244
Impairment and park
closing costs......... 8,314 750,000 1,647,750 -- --
----------- ----------- ----------- ----------- ----------
10,365,638 13,384,068 21,300,849 4,064,868 7,064,324
----------- ----------- ----------- ----------- ----------
Income (loss) from
operations............. (2,717,374) (3,314,180) (4,929,243) (398,278) 141,957
Interest income......... 328,310 88,327 516,820 142,446 70,348
Interest expense........ (228,524) (365,883) (187,482) (44,143) (65,984)
----------- ----------- ----------- ----------- ----------
Net income (loss)....... (2,617,588) (3,591,736) (4,599,905) (299,975) 146,321
Accretion of redeemable
convertible preferred
stock.................. (2,031,831) (2,031,831) (3,508,775) (877,194) (877,194)
----------- ----------- ----------- ----------- ----------
Net income (loss)
applicable to common
stock.................. $(4,649,419) $(5,623,567) $(8,108,680) $(1,177,169) $ (730,873)
=========== =========== =========== =========== ==========
Basic and diluted net
income (loss) per share
of common stock........ $ (28.09) $ (33.98) $ (49.00) $ (7.11) $ (4.05)
=========== =========== =========== =========== ==========
Weighted average number
of shares used in
calculating basic
and diluted net income
(loss) per share of
common stock........... 165,500 165,500 165,500 165,500 180,500
=========== =========== =========== =========== ==========
Unaudited pro forma net
income (loss) per share
of common stock........ $ (1.03) $ 0.03
=========== ==========
Weighted average number
of shares used in
calculating unaudited
pro forma net income
(loss) per share of
common stock........... 4,458,697 4,545,702
=========== ==========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
JEEPERS! INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
UNREALIZED
CUMULATIVE GAIN ON
REDEEMABLE CONVERTIBLE ACCRETION OF AVAILABLE-
PREFERRED STOCK COMMON STOCK ADDITIONAL REDEEMABLE FOR-SALE
----------------------- -------------- PAID-IN CONVERTIBLE MARKETABLE
SHARES AMOUNT SHARES AMOUNT CAPITAL PREFERRED STOCK SECURITIES
---------- ----------- ------- ------ ---------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 1,
1995........... 12,511,032 $22,831,009 165,500 $1,655 $118,788 $ (3,302,127) $ --
Repurchase and
retirement of
Series B
preferred
stock.......... (30,211) (200,000)
Accretion of
redeemable
convertible
preferred stock
to redemption
value.......... 2,031,831 (2,031,831)
Net loss........
---------- ----------- ------- ------ -------- ------------ ------
Balance at
December 31,
1995........... 12,480,821 24,662,840 165,500 1,655 118,788 (5,333,958) --
Issuance of
warrants in
connection with
convertible
debentures..... 175,000
Issuance of
Series F
preferred stock
in December,
1996, net of
issuance costs
of $212,290.... 8,530,142 9,038,615
Issuance of
warrants in
connection with
Series F
preferred
stock.......... 132,255
Conversion of
convertible
debentures to
equity......... 3,181,814 3,500,000
Accretion of
redeemable
convertible
preferred stock
to redemption
value.......... 2,031,831 (2,031,831)
Net loss........
---------- ----------- ------- ------ -------- ------------ ------
Balance at
December 29,
1996........... 24,192,777 39,233,286 165,500 1,655 426,043 (7,365,789) --
Issuance of
Series F
preferred stock
in January,
1997........... 174,408 191,849
Issuance of
Series F
preferred stock
in connection
with business
acquisition.... 150,000 165,000
Issuance of
Series F
preferred stock
in April, 1997,
net of issuance
costs of
$77,873........ 2,272,727 2,391,877
Issuance of
warrants in
connection with
Series F
preferred
stock.......... 30,250
Issuance of
common stock in
December, 1997. 15,000 150 149,850
Accretion of
redeemable
convertible
preferred stock
to redemption
value.......... 3,508,775 (3,508,775)
Net loss........
---------- ----------- ------- ------ -------- ------------ ------
Balance at
December 28,
1997........... 26,789,912 45,490,787 180,500 1,805 606,143 (10,874,564) --
Repurchase of
Series B
preferred stock
(unaudited).... (7,553) (50,000)
Accretion of
redeemable
convertible
preferred stock
to redemption
value
(unaudited).... 877,194 (877,194)
Unrealized gain
on available-
for-sale
marketable
securities
(unaudited).... 9,615
Net income
(unaudited)....
---------- ----------- ------- ------ -------- ------------ ------
Balance at March
29, 1998
(unaudited).... 26,782,359 $46,317,981 180,500 $1,805 $606,143 $(11,751,758) $9,615
- --------------------------------------------------
========== =========== ======= ====== ======== ============ ======
<CAPTION>
TOTAL
ACCUMULATED STOCKHOLDERS'
DEFICIT DEFICIT
------------- --------------
<S> <C> <C>
Balance at
January 1,
1995........... $ (9,285,011) $(12,466,695)
Repurchase and
retirement of
Series B
preferred
stock..........
Accretion of
redeemable
convertible
preferred stock
to redemption
value.......... (2,031,831)
Net loss........ (2,617,588) (2,617,588)
------------- --------------
Balance at
December 31,
1995........... (11,902,599) (17,116,114)
Issuance of
warrants in
connection with
convertible
debentures..... 175,000
Issuance of
Series F
preferred stock
in December,
1996, net of
issuance costs
of $212,290....
Issuance of
warrants in
connection with
Series F
preferred
stock.......... 132,255
Conversion of
convertible
debentures to
equity.........
Accretion of
redeemable
convertible
preferred stock
to redemption
value.......... (2,031,831)
Net loss........ (3,591,736) (3,591,736)
------------- --------------
Balance at
December 29,
1996........... (15,494,335) (22,432,426)
Issuance of
Series F
preferred stock
in January,
1997...........
Issuance of
Series F
preferred stock
in connection
with business
acquisition....
Issuance of
Series F
preferred stock
in April, 1997,
net of issuance
costs of
$77,873........
Issuance of
warrants in
connection with
Series F
preferred
stock.......... 30,250
Issuance of
common stock in
December, 1997. 150,000
Accretion of
redeemable
convertible
preferred stock
to redemption
value.......... (3,508,775)
Net loss........ (4,599,905) (4,599,905)
------------- --------------
Balance at
December 28,
1997........... (20,094,240) (30,360,856)
Repurchase of
Series B
preferred stock
(unaudited)....
Accretion of
redeemable
convertible
preferred stock
to redemption
value
(unaudited).... (877,194)
Unrealized gain
on available-
for-sale
marketable
securities
(unaudited).... 9,615
Net income
(unaudited).... 146,321 146,321
------------- --------------
Balance at March
29, 1998
(unaudited).... $(19,947,919) $(31,082,114)
- --------------------------------------------------
============= ==============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
JEEPERS! INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------
MARCH 30, MARCH 29,
1995 1996 1997 1997 1998
----------- ----------- ----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss............... $(2,617,588) $(3,591,736) $(4,599,905) $ (299,975) $ 146,321
Adjustment to reconcile
net loss to net cash
used in operating
activities:
Interest expense...... -- 175,000 -- -- --
Depreciation and
amortization......... 680,550 866,650 1,172,609 263,345 419,244
Impairment and park
closing costs........ 8,314 750,000 1,647,750 -- --
Unrealized gain on
available-for-sale
marketable
securities........... -- -- -- -- 9,615
Changes in current
assets and
liabilities:
Inventories........... 14,165 (68,395) (116,676) (2,285) (33,388)
Prepaid expenses and
other assets......... 78,472 (14,034) (206,549) 24,649 (250,181)
Accounts payables and
accrued expenses..... 359,657 1,053,932 824,179 (522,208) (429,611)
Accrued park closing
costs................ (678,771) (262,192) (352,351) (42,988) (1,767)
Other long-term
liabilities.......... (24,888) (6,168) 332,840 6,625 345,764
----------- ----------- ----------- ----------- ----------
Net cash provided by
(used in) operating
activities......... (2,180,089) (1,096,943) (1,298,103) (572,837) 205,997
CASH FLOWS FROM
INVESTING ACTIVITIES:
Capital expenditures... (1,076,029) (3,540,474) (5,182,379) (503,608) (2,342,149)
Payments for business
acquisition........... -- -- (80,000) (80,000) --
Amounts advanced to
landlords............. -- (1,237,000) (3,889,280) -- (1,145,000)
Amounts received from
landlords............. -- 1,050,000 2,911,201 -- 1,103,564
----------- ----------- ----------- ----------- ----------
Net cash used in
investing
activities......... (1,076,029) (3,727,474) (6,240,458) (583,608) (2,383,585)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from
convertible debenture. -- 3,325,000 -- -- --
Proceeds from preferred
stock................. -- 9,250,905 2,661,599 191,849 --
Proceeds from issuance
of warrants........... -- 307,255 30,250 -- --
Preferred stock
issuance costs........ -- (212,290) (77,873) -- --
Proceeds (payments)
from note payable to
investor.............. -- 2,004,345 (2,004,345) (2,004,345) --
Proceeds from
borrowings............ 391,252 400,000 650,000 -- --
Payments on borrowings. (405,024) (622,589) (1,111,051) (147,427) (500,920)
Repurchase of preferred
stock................. (100,000) -- -- -- (50,000)
----------- ----------- ----------- ----------- ----------
Net cash (used in)
provided by
financing
activities......... (113,772) 14,452,626 148,580 (1,959,923) (550,920)
----------- ----------- ----------- ----------- ----------
Change in cash and cash
equivalents........... (3,369,890) 9,628,209 (7,389,981) (3,116,368) (2,728,508)
Cash and cash
equivalents, beginning
of year............... 7,774,442 4,404,552 14,032,761 14,032,761 6,642,780
----------- ----------- ----------- ----------- ----------
Cash and cash
equivalents, end of
year.................. $ 4,404,552 $14,032,761 $ 6,642,780 $10,916,393 $3,914,272
=========== =========== =========== =========== ==========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
JEEPERS! INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 29, 1998 AND FOR THE QUARTERS ENDED MARCH 30, 1997
AND MARCH 29, 1998 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Business
The accompanying consolidated financial statements include the accounts of
Jeepers! Inc. and its wholly-owned subsidiaries ("Jeepers!" or the "Company").
Significant intercompany balances and transactions have been eliminated in
consolidation.
Jeepers! operates indoor animated theme parks (the "Parks") serving families
with children up to the age of 12. The first Park commenced operations in 1988
under the trade name Jungle Jim's Playland ("Jungle Jim's"). The Company's
Parks provide a broad variety of entertainment activities including amusement
rides, play areas and skill games. The Company also offers a range of birthday
party packages for children that combine food and special entertainment
activities. The Parks, which consist of approximately 25,000 square feet, also
incorporate a high level of thematic design including creative imagery, vivid
graphics and engaging proprietary mascot characters. All Jeepers! Parks offer
a full menu of items that appeal to both young children and their parents. The
majority of Parks also serve Pizza Hut pizza pursuant to the terms and
conditions of a master license agreement. As of December 28, 1997, the Company
had fourteen Parks in operation throughout the United States.
Fiscal Year
The Company has adopted a fiscal year of 52- or 53-week periods that end on
the Sunday closest to December 31. For purposes of these notes to consolidated
financial statements, the fiscal years ended December 31, 1995, December 29,
1996 and December 28, 1997 are referred to as 1995, 1996 and 1997,
respectively. Each fiscal year presented contains 52 weeks.
Unaudited Interim Information
In the opinion of management, the consolidated financial statements for the
unaudited periods presented include all adjustments necessary for a fair
presentation in accordance with generally accepted accounting principles,
consisting solely of normal recurring accruals and adjustments. The results of
operations and cash flows for the quarters ended March 30, 1997 and March 29,
1998 are not necessarily indicative of results which would be expected for a
full fiscal year.
Revenue Recognition
The Company derives its revenues from amusement rides, skill games, food and
beverage and birthday parties. Revenues from Park admissions and rides are
recognized at the time of sale. Revenues from birthday parties are recognized
when services are provided.
Significant Estimates
In the process of preparing its consolidated financial statements, the
Company estimates the appropriate carrying value of certain assets and
liabilities which are not readily apparent from other sources. The primary
estimates underlying the Company's consolidated financial statements include
the useful lives and recoverability of its assets such as property and
intangibles, accruals for insurance and other matters. Management bases its
estimates on certain assumptions, which they believe are reasonable in the
circumstances, and while actual results could differ from those estimates,
management does not believe that any change in those assumptions in the near
term would have a material effect on the Company's consolidated financial
position or the results of operation.
Cash Flow Information
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid, short-term investments with original maturities
of three months or less when purchased to be cash equivalents.
F-7
<PAGE>
JEEPERS! INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Cash payments for interest aggregated approximately $228,000, $190,000 and
$187,000 in 1995, 1996 and 1997, respectively.
The Company paid no income taxes in 1995, 1996 and 1997.
The Company recorded accretion of redeemable convertible preferred stock in
the amount of $2,031,831 in 1995 and 1996 and $3,508,775 in 1997.
Capital lease obligations of approximately $359,000 were incurred when the
Company entered into leases for new Park games and office equipment in 1997.
There were no capital lease obligations incurred by the Company in 1995 or
1996.
Significant other non-cash investing and financing transactions are as
follows:
1995
. The Company repurchased and retired 30,211 shares of Series B preferred
stock for $100,000 and the cancellation of a $100,000 note receivable.
1996
. The Company converted $3,500,000 of 11% convertible notes into 3,181,814
shares of Series F preferred stock (see Note 5).
1997
. The Company issued 15,000 shares of Jeepers! common stock and 150,000
shares of Series F preferred stock in exchange for all outstanding shares
of Family Fun Entertainment Limited ("FFEL") (see Note 2).
. The Company executed approximately $1,350,000 of notes payable for new
Park games (see Note 4).
. The accounts payable balance at December 28, 1997 includes approximately
$1,450,000 of invoices relating to capital expenditures.
Concentration of Credit Risk
The Company invests its cash and cash equivalents with institutions that
have a strong credit rating. The Company has developed guidelines relative to
investment risk and liquidity.
Amounts Due From Landlords
The amounts due from landlords at December 29, 1996, December 28, 1997 and
March 29, 1998 relate to payments made by the Company for capital improvements
which were made on behalf of the landlords.
Inventories
Inventories, which consist of food, beverages, merchandise and supplies, are
stated at lower of cost (first-in, first-out method) or market. Inventories
also include the initial cost of smallwares with replacements charged to
expense when purchased.
Equipment and Leasehold Improvements
Equipment and leasehold improvements are stated at cost. Additions, renewals
and betterments that extend the life of an asset are capitalized. Expenditures
for maintenance and repairs are charged to expense. Depreciation is recorded
using the straight-line method over the estimated useful lives of the assets.
Leasehold improvements and assets capitalized pursuant to capital lease
obligations are amortized over the shorter of the lease term or the estimated
useful life. Useful lives are as follows:
<TABLE>
<S> <C>
Rides and games............................................ 10 to 15 years
Other equipment............................................ 7 to 10 years
Leasehold improvements..................................... 15 to 25 years
</TABLE>
F-8
<PAGE>
JEEPERS! INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Depreciation expense amounted to $513,127, $859,025, $1,024,121, $251,915
and $407,348 in 1995, 1996, 1997 and for the quarters ended March 30, 1997 and
March 29, 1998, respectively.
Advertising Costs
Advertising costs are expensed as incurred. Advertising expenses amounted to
approximately $472,000, $417,000, $519,000, $127,000 and $256,000, in 1995,
1996, 1997 and for the quarters ended March 30, 1997 and March 29, 1998,
respectively.
Pre-opening Costs
The Company expenses pre-opening costs as they are incurred.
Deferred Rent
Deferred rent relates to leases which contain rent escalation clauses and/or
free rent incentives. The Company records the total rent payable during the
lease term on a straight line basis over the term of the lease.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes." Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities, and are measured using the enacted tax rates and laws that will
be in effect when the differences are expected to reverse.
Net Loss Per Share
In 1997, the Company adopted the provisions of SFAS No. 128, "Earnings per
Share." SFAS No. 128 replaced the previously reported primary and fully
diluted earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effects of options, warrants and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted earnings per
share.
Basic and diluted historical net loss per share (see Note 11) was computed
by dividing net loss plus accretion of redeemable convertible preferred stock
(see Note 6) by the weighted average number of common shares outstanding.
Common stock equivalents were antidilutive and therefore were not included in
the computation of weighted average shares used in computing diluted loss per
share for 1995, 1996, and 1997 and for the quarters ended March 30, 1997 and
March 29, 1998, respectively.
Accounting for Stock-Based Compensation
The Company adopted the disclosure provisions of SFAS No. 123, "Accounting
for Stock-Based Compensation." However, as permitted by SFAS No. 123, the
Company continues to account for its stock-based plans under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
(see Note 8).
Accounting Pronouncements Not Yet Adopted
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information." SFAS
No. 131 establishes standards for the way that public companies report
information about operating segments in financial statements. SFAS No. 131
supersedes SFAS No. 14, "Financial Reporting for Segments of a Business
Enterprise," but retains the requirements to report information about major
customers. SFAS No. 131 is effective for the Company in fiscal 1998. The
Company does not believe that the adoption of SFAS No. 131 will have a
material effect on disclosures in the Company's financial statements.
F-9
<PAGE>
JEEPERS! INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. ACQUISITIONS
On March 5, 1997, the Company executed a series of agreements to purchase
certain franchise rights and operations of a franchisee of the Company in
Illinois. The interests acquired included: (1) the limited partnership
interest (39%) in FFEL for $168,000, including $80,000 in cash and an $88,000
note payable (including accrued interest of $8,000) due on March 4, 1998, (2)
Illinois franchise rights for 150,000 shares of Series F preferred stock (see
Note 6) and (3) the option to purchase the entire general partnership interest
(61%) for 15,000 shares of common stock, valued at $150,000, upon exercise.
On December 28, 1997, the Company exercised its option to acquire the
general partnership interest in FFEL. The Company has accounted for this
acquisition using the purchase method of accounting. The consolidated
financial statements include the results of operations, adjusted for the
majority owners' share of earnings, which were not material, for the period
prior to December 28, 1997, of FFEL from the date of initial acquisition
(March 5, 1997). The purchase price of approximately $650,000, including the
assumption of a $100,000 loan, has been allocated principally to rides, games
and other equipment based on their estimated fair market values at the date of
acquisition, as determined by an independent valuation obtained by the
Company.
The following unaudited pro forma results of operations assume that the
purchase transaction described above occurred at the beginning of 1995, 1996
and 1997. In addition to combining historical results of operations, the
unaudited pro forma amounts shown include adjustments for the estimated effect
of depreciation, amortization and interest expense associated with such
transaction. The unaudited pro forma information below does not purport to be
indicative of the results of operations that would have actually been achieved
if the transaction described above had actually been consummated as of the
beginning of 1995, 1996 and 1997. In addition, the unaudited pro forma
information below does not purport to be indicative of the results of
operations which may be achieved in the future.
<TABLE>
<CAPTION>
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenues.......................... $ 8,915,735 $11,480,612 $16,658,483
Net loss.......................... (2,526,328) (3,523,935) (4,583,437)
Pro forma net loss per share of $ (27.54) $ (33.57) $ (48.90)
common stock..................... =========== =========== ===========
</TABLE>
3. IMPAIRMENT AND PARK CLOSING COSTS
In 1996, the Company adopted the provisions of SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of."
SFAS No. 121 requires the Company to evaluate the carrying value of long-lived
assets including equipment and leaseholds whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. Under
SFAS No. 121, an assessment is made to determine if the sum of the expected
future undiscounted cash flows from the use of the assets and eventual
disposition is less than the carrying value. If the sum of the expected
undiscounted cash flows is less than the carrying value, an impairment loss is
recognized by measuring the excess of carrying value over fair value
(generally estimated by projected future discounted cash flows from the
applicable operation or independent appraisal).
During 1996, the Company developed two scaled-down versions of the Jeepers!
prototype ("Jeepers Jr!s") which are operated by the Company within Toys "R"
Us Kids World ("Kids World") superstores pursuant to a license agreement. In
1997, the Wall Street Journal reported that Toys "R" Us would not open
additional Kids World superstores. Further, due to the uncertainty of future
cash flows associated with both Jeepers Jr!s, the Company recorded an
impairment charge of approximately $1,280,000. The provision includes charges
for impairments to the carrying value of all Jeepers Jr! assets including
rides, games and leasehold improvements.
F-10
<PAGE>
JEEPERS! INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In 1996, the Company recorded an impairment charge of approximately $600,000
relating to certain leasehold improvements, rides and games at one Jungle
Jim's Playland. In 1997, the Company accrued approximately $368,000 of exit
costs, primarily for lease settlements, relating to the closing of the same
Jungle Jim's Playland. Revenues associated with this Jungle Jim's Playland
amounted to approximately $1,365,000, $1,142,000 and $939,000 in 1995, 1996
and 1997, respectively.
In 1996, the Company also accrued $150,000 of additional exit costs,
primarily for lease settlements, relating to the closing of one of the earlier
generation Jungle Jim's Playland that closed in 1995. In June 1997, the
Company settled its final obligations relating to the same Jungle Jim's
Playland. Contractual lease costs of $262,000 were charged during 1996 against
the reserve that was established in 1995.
During 1995, the Company incurred $428,000 and $72,000 of impairment and
closing costs, respectively, relating to the closing of two Jungle Jim's
Playlands. Revenues associated with these two Jungle Jim's Playlands amounted
to approximately $1,193,000 in 1995.
4. LONG-TERM DEBT
The components of long-term debt are as follows:
<TABLE>
<CAPTION>
MARCH 29,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Borrowings under master line-of-
credit........................... $ 928,679 $ 487,880 $ 337,972
Notes payable to Toys "R" Us...... 397,500 377,500 372,500
Notes payable to investor/limited
partners......................... 2,004,345 80,000 --
Loan from financial institution... -- 105,770 88,853
Notes payable to lenders.......... 92,400 959,881 756,113
Notes payable to landlord......... -- 624,899 599,284
Capital leases (see Note 7)....... -- 290,439 270,727
----------- ----------- -----------
3,422,924 2,926,369 2,425,449
Less current portion.............. (2,590,005) (1,568,384) (1,665,708)
----------- ----------- -----------
$ 832,919 $ 1,357,985 $ 759,741
=========== =========== ===========
</TABLE>
The Company has various debt agreements (the "Agreements") pursuant to the
terms and conditions of a master line-of-credit with a financing company. The
Agreements require monthly payments of principal and interest, ranging from
$2,413 to $12,060, with interest charges on the various notes ranging between
10.5% and 13% per annum. Borrowings under the master line-of-credit and
related Agreements are for the purchase of rides, games and equipment at Park
locations. The Agreements are collateralized by the rides, games and
equipment.
During 1996, the Company executed two notes with Toys "R" Us which require
equal monthly payments of principal and interest of $933. At December 28,
1997, the unpaid balance on these notes aggregated $377,500, with an effective
interest rate of 10.7%. The notes are collateralized by the assets at each
location.
The note payable of $2,004,345 relates to a 1996 loan from an investor that
was made in anticipation of proceeds to be received from the issuance of
Series F preferred stock. The loan was repaid in January 1997.
On March 5, 1997, in connection with the acquisition of FFEL (see Note 2),
the Company executed unsecured promissory notes with various limited partners
in the aggregate principal amount of $80,000. Each note bears interest at the
rate of 10% per annum and matures on March 4, 1998. The Company also assumed a
$400,000 loan obtained from a financial institution. The loan requires the
Company to pay monthly principal
F-11
<PAGE>
JEEPERS! INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
and interest payments of approximately $6,770. The loan bears interest at the
rate of 11.25% per annum and matures in May 1999. The loan is collateralized
by the assets of the Park.
In October 1997, the Company executed a $650,000 note payable to a landlord
relating to the construction of one Jeepers! Park. The note, which bears
interest at the rate of 10.45% per annum, requires monthly principal and
interest payments of $13,955. The Company is required to make accelerated
principal prepayments based on certain Park operating profit levels as defined
in the lease agreement. At December 28, 1997, the unpaid balance on this note
aggregated $624,899.
The Company has also entered into various notes payable with certain lenders
for the purchase of Park rides and games. These notes require the Company to
make weekly principal and interest payments ranging between $2,000 to $3,000
over a term of 18 to 30 months. These notes bear interest at the rate of 12%
to 13% per annum and are collateralized by the rides and games.
Maturities of long-term debt, including capital lease obligations, at
December 28, 1997 are as follows:
<TABLE>
<S> <C>
1998.......................................................... $1,568,384
1999.......................................................... 896,335
2000.......................................................... 123,597
2001.......................................................... 30,579
2002.......................................................... 30,579
Thereafter.................................................... 276,895
----------
Total..................................................... $2,926,369
==========
</TABLE>
5. CONVERTIBLE DEBENTURES
In November 1996, the Company issued $3,500,000 of 11% convertible notes at
a discount of $175,000, due November 1, 2002. All of the Company's convertible
notes were converted into 3,181,814 shares of Series F preferred stock as of
December 29, 1996 at a conversion rate of $1.10 per share. The total principal
amount converted was credited to preferred stock.
6. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND WARRANTS
Redeemable Convertible Preferred Stock
Redeemable convertible preferred stock is recorded upon issuance at fair
value, net of issuance costs, and is periodically accreted to redemption value
principally as the result of accrued and unpaid preferred stock dividends.
Each share of preferred stock is convertible, at the option of the holder,
at any time, into a number of common shares determined by dividing the
redemption price by a conversion price per share. Each holder of preferred
shares who converts his preferred shares to common shares, in lieu of
accepting cash for accrued and unpaid dividends, may request that the Company
pay such dividends in shares of common stock. The number of shares of common
stock to be issued upon such election is determined by dividing accrued and
unpaid dividends by a conversion price per share. The conversion price for
each share of preferred stock is $10.00 per share for Series A, B and D, and
$11.00 per share for Series C and F, and is subject to adjustment, including
stock splits, combinations, stock dividends, recapitalization,
reclassification or reorganization. The conversion price for accrued and
unpaid dividends is $11.00 for all series. Each holder of preferred shares has
the right to vote at the rate of the largest number of full shares of common
stock into which all shares of preferred stock could be converted.
F-12
<PAGE>
JEEPERS! INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On April 29, 2004, the holders of the preferred shares have the option to
require that the Company redeem all or a portion of their outstanding shares
at the redemption price. Commencing April 29, 2005, the Company shall have the
right to redeem all or any portion of the preferred shares outstanding. The
redemption price is $7.07 per share for Series A and D, $6.62 per share for
Series B, and $1.10 for Series C and F, plus accrued and unpaid dividends.
Dividends are cumulative at $0.6363 per share for Series A and D, $0.5956
per share for Series B and $0.0990 per share for Series C and F. At December
29, 1996, December 28, 1997 and March 29, 1998, there were cumulative
dividends in arrears of approximately $5,280,000, $8,606,000 and $9,453,000,
respectively. In the event of liquidation, the Series A, B, C, D and F
preferred shareholders are to be paid out of assets available to shareholders
at $7.07, $6.62, $1.10, $7.07 and $1.10 per share, respectively, plus all
accrued but unpaid dividends, before any payment is made to common
shareholders.
Warrants
The Company has issued warrants to purchase 135,000 shares of common stock
at a strike price of $7.30 per share. The warrants expire in 2001.
In addition, the Company has issued warrants to purchase 7,500 and 5,000
shares of common stock at a strike price of $13.20 and $20.00 per share,
respectively. These warrants expire in 2002.
7. COMMITMENT AND CONTINGENCIES
Leases
The Company leases all of its Park locations and corporate offices under
long-term noncancelable lease agreements. Most of the lease agreements contain
renewal options and require the Company to pay real estate taxes. Certain
agreements provide for contingent rental payments based on revenues, and
certain agreements are collateralized by the rides, games and equipment at the
respective Park location.
Future minimum lease payments pursuant to leases with noncancelable lease
terms in excess of one year at December 28, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING OPERATING CAPITAL
----------- ----------- --------
<S> <C> <C>
1998............................................... $ 1,980,586 $115,956
1999............................................... 1,994,115 116,792
2000............................................... 2,007,916 110,072
2001............................................... 2,021,993 12,166
2002............................................... 2,086,175 11,152
Thereafter......................................... 17,203,117 --
----------- --------
Total future minimum lease payments.................. $27,293,902 $366,138
===========
Less amount representing interest.................... 75,699
--------
Present value of future minimum lease payments....... $290,439
========
</TABLE>
Rent expense totaled $1,263,339, $1,286,240 and $2,150,092 for 1995, 1996
and 1997, respectively.
Included in equipment and leasehold improvements at December 28, 1997 and
March 29, 1998 is $359,000 of equipment held pursuant to capital lease
arrangements. The Company had no capital leases in 1996 and 1995. The related
accumulated amortization was approximately $14,200 and $23,800 at December 28,
1997 and March 29, 1998, respectively.
F-13
<PAGE>
JEEPERS! INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Litigation
The Company is engaged in various legal actions arising in the ordinary
course of business against which, in the judgment of management based upon
consultation with legal counsel, the Company has adequate legal defenses or
insurance coverage. The Company also believes that the ultimate outcome of
such actions would not have a material adverse effect on the Company's
consolidated financial position, results of operations or cash flows.
8. STOCK OPTION PLANS
The Company has five stock option plans: the 1991 Stock Option Plan (the
"1991 Plan"), the 1991 Management Stock Option Plan (the "1991 Management
Plan"), the 1993 Stock Option Plan (the "1993 Plan"), the 1994 Stock Option
Plan (the "1994 Plan") and the 1995 Stock Option Plan (the "1995 Plan")
(collectively, the "Plans"). Pursuant to the Plans, the Company may grant to
management and key employees incentive and nonqualified options to purchase up
to 427,792 shares of common stock. The options are exercisable over a period
determined by the Company's Board of Directors, but not longer than ten years
after the date granted. The vesting schedule for the options granted is
determined by the Board of Directors. The exercise price of these options may
not be less than the fair market value at the date of the grant. In February
1997, the exercise price of all options previously granted under the 1995 Plan
was reduced from $11.00 to $8.00 per share in order to reflect the reduction
in value of the Company's common stock resulting from the effect of the
accumulated redeemable convertible preferred stock dividends (see Note 6).
The following table summarizes the Company's stock option activity for the
periods presented:
<TABLE>
<CAPTION>
1995 1996 1997
------------------ ----------------- -----------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
-------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period.............. 246,901 $10.19 48,864 $9.12 64,035 $ 8.35
Granted................. 25,700 8.00 42,875 8.00 62,950 10.73
Canceled................ (223,737) 10.18 (27,704) 9.16 (4,850) 8.00
-------- ------ ------- ----- ------- ------
Outstanding at end of
period................. 48,864 $ 9.12 64,035 $8.35 122,135 $ 9.59
======== ====== ======= ===== ======= ======
Options exercisable at
end of period.......... 2,000 $10.70 5,140 $8.00 16,360 $ 8.87
======== ====== ======= ===== ======= ======
</TABLE>
The weighted average remaining contractual life of the Plans' options
outstanding at December 28, 1997 was nine years. Options available for future
grants under the Plans were 238,929, 253,757, and 305,657 at December 31,
1995, December 29, 1996 and December 28, 1997, respectively.
In addition, during 1995, the Company granted non-qualified options to the
Chairman, President and Chief Executive Officer to purchase 200,000 shares at
$11.00 per share, 100,000 shares at $16.50 per share and 100,000 shares at
$22.00 per share. These options have a contractual life of eight years and
vest in equal quarterly installments over four years. In connection with the
February 1997 option repricing discussed above, the exercise price of the
options was reduced to $8.00, $12.00 and $16.00 per share, respectively.
Furthermore, effective April 1997, the exercise price of the options was
reduced to $5.50 per share which, in the view of the Company, was not less
than the fair market value of the common stock of the Company. There has been
no other activity relating to this agreement during 1997.
Pro forma information regarding net loss and pro forma net loss per share is
required by SFAS No. 123, which also requires that the information be
determined as if the Company had accounted for its employee stock options
granted subsequent to December 31, 1994 under the fair value method prescribed
by SFAS No. 123. The fair value for options granted was estimated at the date
of grant using the Black-Scholes option valuation model. The following
weighted average assumptions were used for 1995, 1996, and 1997: risk-free
interest rates of 6.0%-6.5%; no dividend yield; a .001 volatility factor; and
an expected life of the options of 8.4 years.
F-14
<PAGE>
JEEPERS! INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics different
from those of traded options, and because the changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
option is amortized to expense over the option's vesting period. Because SFAS
No. 123 requires compensation expense to be recognized over the vesting
period, the impact on pro forma net loss, as reported below, may not be
representative of the pro forma compensation expense in future years. Pro
forma net loss and net loss per common share for 1995, 1996 and 1997 were not
materially different from reported amounts.
9. EMPLOYEE BENEFIT PLANS
The Company sponsors a 401(k) retirement plan that is considered a defined
contribution discretionary plan and covers all employees meeting certain
requirements. The amount an individual employee may contribute to the plan
ranges between 1% and 15% of their compensation. The Company made no
contributions during 1995, 1996 and 1997. The Company has not yet made a
fiscal 1998 discretionary contribution.
Effective October 10, 1997, the Company implemented a nonqualified executive
deferred compensation plan providing retirement benefits to certain Company
executives. Eligible participants may elect to defer a percentage, or a
specific dollar amount, of their salary or bonus (as defined in the plan) each
year. Such amounts are credited to the participant's individual account. At
December 28, 1997 and March 29, 1998, $125,000 has been accrued by the Company
representing deferred compensation of a certain executive.
10. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial purposes
and the amounts used for income tax purposes. Significant components of the
Company's deferred tax assets and liabilities at December 29, 1996 and
December 28, 1997 are as follows:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
DEFERRED TAX ASSETS:
Net operating loss carryforward................ $4,551,000 $5,546,000
Asset impairment charge........................ 204,000 656,000
Accrual for park closing costs................. 120,000 127,000
Other.......................................... 341,000 511,000
---------- ----------
Total deferred tax assets.................... 5,216,000 6,840,000
DEFERRED TAX LIABILITIES:
Depreciation................................... (662,000) (756,000)
Other.......................................... (11,000) --
---------- ----------
Total deferred tax liabilities............... (673,000) (756,000)
---------- ----------
Net deferred tax assets...................... 4,543,000 6,084,000
---------- ----------
Total valuation allowance.................... (4,543,000) (6,084,000)
---------- ----------
$ -- $ --
========== ==========
</TABLE>
F-15
<PAGE>
JEEPERS! INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Due to the uncertainties which exist as to the future utilization of the net
operating loss carryforwards under the criteria set forth under SFAS No. 109,
it is management's opinion that a valuation allowance for net deferred tax
assets should be established at December 29, 1996 and December 28, 1997. The
Company has net operating loss carryforwards for federal income tax purposes
of approximately $16 million which, if not used, will begin to expire in years
2006 and thereafter. The Company's ability to utilize loss carryforwards is
subject to limitations as defined in Internal Revenue Code Section 382.
11. EARNINGS (LOSS) PER SHARE
The following table sets forth the computation of basic, diluted, and
unaudited pro forma net income (loss) per share:
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------ PRO FORMA
PROFORMA MARCH 30 MARCH 29, MARCH 29,
1995 1996 1997 1997 1997 1998 1998
----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Numerator:
Net income (loss)...... $(2,617,588) $(3,591,736) $(4,599,905) $(4,599,905) $ (299,975) $ 146,321 $ 146,321
Accretion of redeemable
convertible preferred
stock................. (2,031,831) (2,031,831) (3,508,775) -- (877,194) (877,194) --
----------- ----------- ----------- ----------- ----------- --------- ---------
$(4,649,419) $(5,623,567) $(8,108,680) $(4,599,905) $(1,177,169) $(730,873) $146,321
=========== =========== =========== =========== =========== ========= =========
Denominator:
Denominator for basic
and diluted net loss
per share--weighted
average shares........ 165,500 165,500 165,500 165,500 165,500 180,500 180,500
Redeemable convertible
preferred stock....... -- -- -- 4,293,197 -- -- 4,365,202
----------- ----------- ----------- ----------- ----------- --------- ---------
165,500 165,500 165,500 4,458,697 165,500 180,500 4,545,702
=========== =========== =========== =========== =========== ========= =========
Basic net income (loss)
per share.............. $ (28.09) $ (33.98) $ (49.00) $ (7.11) $ (4.05)
=========== =========== =========== =========== =========
Diluted net income
(loss) per share....... $ (28.09) $ (33.98) $ (49.00) $ (7.11) $ (4.05)
=========== =========== =========== =========== =========
Unaudited pro forma net
income (loss) per
share.................. $ (1.03) $ 0.03
=========== =========
</TABLE>
Unaudited pro forma net income (loss) per share was computed by dividing net
income (loss) by the unaudited weighted average number of shares of common
stock outstanding plus the conversion of all outstanding preferred stock,
including accrued and unpaid preferred stock dividends at December 28, 1997
and March 29, 1998, into 4,293,197 and 4,365,202 shares of common stock,
respectively, which will occur upon consummation of the Company's initial
public offering (see Note 13).
F-16
<PAGE>
JEEPERS! INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. YEAR 2000 ISSUE (UNAUDITED)
The Company has reviewed its computer programs and systems to ensure that
the programs and systems will function properly and be Year 2000 compliant.
The Company presently believes that the Year 2000 issue will not pose any
significant operational problems for the Company's computer systems. However,
the Year 2000 issue may impact other entities with which the Company transacts
business, and the Company cannot predict the effect of the Year 2000 issue on
such entities and, in turn, the impact of any such effect on the Company.
13. SUBSEQUENT EVENTS
In March 1998, the Board of Directors of the Company authorized management
to file a registration statement with the Securities and Exchange Commission
in order to permit the Company to sell shares of its common stock to the
public. If the offering is consummated under terms presently anticipated, all
of the preferred stock issued and outstanding will automatically convert into
approximately 4,420,825 shares of common stock including accrued preferred
stock dividends of approximately 915,000 shares through June 5, 1998.
Immediately following such conversions, all currently outstanding shares of
preferred stock will be canceled, retired and eliminated from the Company's
authorized shares of capital stock and the number of authorized shares of
preferred stock will be decreased to approximately 5,000,000 shares.
In March 1998, the Company obtained a $5.0 million term loan (the "loan
facility") for purposes of financing new rides and equipment. Borrowings under
the loan facility bear interest at a coupon rate of 10.0% per annum. Terms of
the loan facility also require principal and interest payments over 48 months
with additional payments at the end of the loan facility period (resulting in
an effective interest rate of approximately 15.25%). The Company has no
borrowings outstanding under this loan facility.
A reverse stock split was approved by the Company's Board of Directors on
April 6, 1998, whereby one share of common stock is outstanding after the
split for each 10 shares of common stock outstanding prior to the split. All
share and per share amounts related to common stock presented in the
accompanying consolidated financial statements have been restated to reflect
the reverse stock split.
F-17
<PAGE>
NO DEALER, SALES REPRESENTATIVE OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHO-
RIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES
OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITA-
TION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITA-
TION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF
OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE OF THIS PROSPECTUS.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 6
Use of Proceeds........................................................... 12
Dividend Policy........................................................... 12
Capitalization............................................................ 13
Dilution.................................................................. 14
Selected Consolidated Financial Data...................................... 15
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 16
Business.................................................................. 22
Management................................................................ 31
Certain Relationships and Related Transactions............................ 37
Principal Stockholders.................................................... 38
Shares Eligible for Future Sale........................................... 39
Description of Capital Stock.............................................. 40
Underwriting.............................................................. 43
Legal Matters............................................................. 44
Experts................................................................... 44
Available Information..................................................... 45
Index to Consolidated Financial Statements................................ F-1
</TABLE>
---------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THE PROSPECTUS), ALL DEAL-
ERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, REGISTERED SE-
CURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UN-
SOLD ALLOTMENTS OR SUBSCRIPTIONS.
Shares
[LOGO OF JEEPERS]
Common Stock
---------------------
PROSPECTUS
---------------------
Piper Jaffray inc.
Cowen & Company
Gerard Klauer Mattison & Co., Inc.
, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the Registrant's estimated expenses in
connection with the issuance of the securities being registered, other than
underwriting discounts and commissions.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee............ $10,178
NASD Filing Fee................................................ 3,950
Printing and Engraving Expenses................................ *
Counsel Fees and Expenses...................................... *
Accountants' Fees and Expenses................................. *
Transfer Agent and Registrar Fees and Expenses................. *
Nasdaq National Market Listing Fee............................. 66,875
Miscellaneous.................................................. *
--------
Total...................................................... $ *
========
</TABLE>
- --------
*To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL"), the law of
the state in which the Registrant is incorporated, empowers a corporation
within certain limitations to indemnify a director, officer, employee or agent
of the corporation and certain other persons serving at the request of the
corporation in related capacities against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonable
incurred by him in connection with any action, suit or proceeding to which he
is or was threatened to be a party by reason of the fact that he is or was a
director, officer, employee or agent of the corporation or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, as
long as he acted in good faith and in a manner which he reasonably believed to
be in, or not opposed to, the best interests of the corporation. With respect
to any criminal proceeding, he must have had no reasonable cause to believe
his conduct was unlawful. No such indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the corporation unless and only to the extent that the Court of
Chancery of the State of Delaware or the Court in which such action or suit
was brought shall determine upon application that despite the adjudication of
liability but in view of all of the circumstances of the case such person is
fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery of the State of Delaware or such other court shall deem proper.
Pursuant to the Registrant's Certificate of Incorporation and Bylaws, the
Registrant is obligated to indemnify, to the fullest extent permitted by
applicable law, any person who was, is or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether
civil, criminal administrative or investigative, by reason of the fact that he
is or was a director or officer of the corporation, or is or was serving at
the request of the corporation as a director, officer, agent, employee or
other similar functionary of another entity, against all expenses (including
attorney's fees), liability, loss, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding. The Registrant's Bylaws provide that such
indemnification shall be made if such person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Registrant and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. If the proceeding was
initiated by such person, the Certificate of Incorporation requires that such
proceeding be authorized by the Board as a condition to the right to
indemnification. The Registrant also is obligated to pay the expenses of such
indemnified persons in advance of the final disposition of such action, suit
or proceeding upon certain conditions.
II-1
<PAGE>
As permitted by Section 102 of the DGCL, the Certificate of Incorporation
provides that a director of the Registrant shall not be liable to the
Registrant or its stockholders for monetary damages for breach of fiduciary
duty as a director other than (i) for any breach of the director's duty of
loyalty to the Registrant or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the DGCL and (iv) for any transaction from
which the director derived an improper personal benefit.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On November 1, 1996, the Company issued to CCI, J.P. Morgan, Sixty Wall
Street SBIC Fund L.P., Dickstein & Co., L.P., Dickstein International Limited,
Dickstein Focus Fund L.P. and Shad Run-JJ Nominee Corporation convertible
notes due November 1, 2002 (the "Notes") in an aggregate principal amount of
$3,500,000 and warrants to purchase 70,000 shares of Common Stock, for an
aggregate purchase price of $3,500,000. The Notes were converted into
1,359,683 shares of Series F Preferred Stock and warrants to purchase 6,242
shares of Common Stock (other than the Notes held by CCI, which were redeemed
by the Company) in connection with the issuance of the Series F Preferred
Stock on December 26, 1996. The warrants are exercisable into shares of Common
Stock of the Company at a price of $7.33 per share, subject to adjustment.
Such sale was exempt from registration pursuant to Section 4(2) of the
Securities Act.
Pursuant to a purchase agreement dated December 26, 1996 (the "December 1996
Agreement"), the Company issued on such date to certain of the investors
referred to above, as well as to certain affiliates of Centre Partners II LLC
and Generation Capital Partners L.P. and to certain additional investors,
10,526,673 shares of Series F Preferred Stock and warrants to purchase 48,325
shares of Common Stock for an aggregate purchase price of $11,579,341.
Pursuant to the December 1996 Agreement, on March 31, 1997 the Company issued
to Braemar Capital Partners I, L.P. and to certain other investors party to
such agreement 2,272,727 shares of Series F Preferred Stock and warrants to
purchase 10,433 shares of Common Stock, for an aggregate purchase price of
$2,499,999. The warrants are exercisable at a price of $7.33 per share,
subject to adjustment. Such sales were exempt from registration pursuant to
Section 4(2) of the Securities Act.
During 1997, the Company issued warrants to purchase an aggregate of 17,500
shares of Common Stock to certain landlords in connection with leases entered
into by the Company with respect to certain Park locations. The warrants are
exercisable at prices of $13.20 to $20.00 per share, subject to adjustment.
Such sale was exempt from registration pursuant to Section 4(2) of the
Securities Act.
On March 5, 1997, the Company issued to Swento & Company ("Swento"), a
former franchisee in Des Plaines, Illinois, 150,000 shares of Series F
Preferred Stock in consideration for the granting of the franchise rights for
the Company's first-generation Park located in Des Plaines, Illinois. Such
sale was exempt from registration pursuant to Section 4(2) of the Securities
Act.
On December 28, 1997, the Company issued to Swento 15,000 shares of Common
Stock in consideration for the general partnership interest in the owner of
the Company's Chicago-area franchise. Such sale was exempt from registration
pursuant to Section 4(2) of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this Registration Statement:
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S> <C>
1.1 Form of Underwriting Agreement.*
3.1 Restated Certificate of Incorporation of the Registrant,
as amended.*
3.2 Bylaws of the Registrant.
4.1 Form of Common Stock certificate.*
5.1 Opinion of Weil, Gotshal & Manges LLP.*
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S> <C>
10.1 Registrant's 1995 Stock Option Plan.
10.2 Registrants 1998 Stock Option Plan.*
10.3 Fourth Amended and Restated Stockholders' Agreement.*
10.4 Employment Agreement between the Registrant and Nabil N.
El-Hage, as amended.*
10.5 Option Agreement between the Registrant and Nabil N. El-
Hage, as amended.
10.6 Master License Agreement between Registrant and Pizza Hut,
Inc. dated September 20, 1993.*
21 Subsidiaries of Registrant.
23.1 Consent of Ernst & Young LLP.
24 Power of Attorney (included in the signature pages to Reg-
istration Statement).**
27 Financial Data Schedule.
</TABLE>
- --------
*To be filed by amendment.
**Previously filed.
(b) FINANCIAL STATEMENT SCHEDULES
Not applicable.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant under the DGCL or pursuant to the
Registrant's Certificate of Incorporation or Bylaws or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Waltham, Commonwealth of Massachusetts, on April 24, 1998.
Jeepers! Inc.
(Registrant)
/s/ Nabil N. El-Hage
By __________________________________
Nabil N. El-Hage
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Nabil N. El-Hage Chairman, President and April 24, 1998
____________________________________ Chief Executive Officer
Nabil N. El-Hage (Principal Executive
Officer)
* Chief Financial Officer April 24, 1998
____________________________________ (Principal Financial
Kenneth J. Sanginario Officer and Principal
Accounting Officer)
* Director April 24, 1998
___________________________________
Paul F. Balser
* Director April 24, 1998
____________________________________
Mark E. Jennings
* Director April 24, 1998
____________________________________
Mark L. Kaufman
* Director April 24, 1998
____________________________________
Bruce G. Pollack
* Director April 24, 1998
____________________________________
Jonathan H. Kagan
</TABLE>
/s/ Nabil N. El-Hage
*By ____________________________
Nabil N. El-Hage
Attorney-in Fact
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S> <C>
1.1 Form of Underwriting Agreement.*
3.1 Restated Certificate of Incorporation of the Registrant,
as amended.*
3.2 Bylaws of the Registrant.
4.1 Form of Common Stock certificate.*
5.1 Opinion of Weil, Gotshal & Manges LLP.*
10.1 Registrant's 1995 Stock Option Plan.
10.2 Registrant's 1998 Stock Option Plan.*
10.3 Fourth Amended and Restated Stockholders' Agreement.*
10.4 Employment Agreement between the Registrant and Nabil N.
El-Hage, as amended.*
10.5 Option Agreement between the Registrant and Nabil N. El-
Hage, as amended.
10.6 Master License Agreement between Registrant and Pizza
Hut, Inc. dated September 20, 1993.*
21 Subsidiaries of Registrant.
23.1 Consent of Ernst & Young LLP.
24 Power of Attorney (included in the signature pages to
Registration Statement).**
27 Financial Data Schedule.
</TABLE>
- --------
*To be filed by amendment.
**Previously filed.
<PAGE>
EXHIBIT 3.2
JUNGLE JIM'S PLAYLANDS, INC.
A Delaware Corporation
BYLAWS
* * * * * * *
ARTICLE I
OFFICES
-------
Section 1.01. Principal Office. The principal office of the corporation
shall be in the City of Wilmington, Delaware.
Section 1.02. Registered Office. The registered office of the corporation
shall be in the City of Wilmington, Delaware.
Section 1.03. Other Offices. The corporation also may have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
Section 2.01. Place of Annual Meetings. All annual meetings of the
stockholders shall be held in the City of San Antonio, Texas, or any other place
either within or without the State of Texas as the Directors may designate.
Special meetings of the stockholders may be held at such time and place within
or without the State of Delaware as shall be stated in the notice of the
meeting, or in a duly executed waiver of notice thereof.
Section 2.02. Date of Annual Meeting. Annual meetings of stockholders
shall be held each year on the second Tuesday in April of each year, if not a
legal holiday and if a legal holiday, then on the next secular day following, at
11:00 A.M., at which they shall elect by a plurality vote a Board of Directors
and transact such other business as may properly be brought before the meeting.
Section 2.03. Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the President and shall be called
by the President or Secretary at the request, in writing, of a majority of the
Board of Directors, or at the request, in writing, of stockholders owning at
least one-tenth (1/10th) in amount of the entire capital stock of the
corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting, and such meeting shall be
confined to such purposes.
<PAGE>
Section 2.04. Notice. Notices of meetings shall be in writing and signed
by the President or Vice President, or the Secretary, or an Assistant Secretary,
or by such other person or persons as the Directors may designate. Such notice
shall state the purpose or purposes for which the meeting is called and the
place, date and hour which may be within or without the State of Delaware, where
it is to be held. A copy of such notice shall be either delivered personally or
shall be mailed, postage prepaid, to each stockholder of record entitled to vote
at such meeting not less than ten (10) nor more than sixty (60) days before such
meeting. If mailed, it shall be directed to a stockholder at his address as it
appears upon the records of the corporation and upon such mailing of any such
notice, the service thereof shall be complete, and the time of the notice shall
begin to run from the date upon which such notice is deposited in the United
States mail for transmission to such stockholder. Personal delivery of any such
notice to any officer of a corporation or association, or to any member of a
partnership shall constitute delivery of such notice to such corporation,
association or partnership. In the event of the transfer of stock after delivery
or mailing of the notice of, and prior to the holding of the meeting, it shall
not be necessary to deliver or mail notice of the meeting to the transferee.
Section 2.05. Business. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 2.06. List of Stockholders. The officer or agent having charge of
the stock transfer books for shares of the corporation shall make, at least ten
(10) days before each meeting of stockholders, a complete list of the
stockholders entitled to vote at such meeting, or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each, which list, for a period of ten (10) days prior to such meeting,
shall be kept on file either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held and shall be subject
to inspection by any stockholder at any time during usual business hours. Such
list shall also be produced and kept open at the time and place of the meeting
and shall be subject to the inspection of any stockholder during the whole time
of the meeting. The original stock transfer books shall be prima facie evidence
as to who are the stockholders entitled to examine such list or transfer books
or to vote at any meeting of stockholders.
Section 2.07. Quorum. The holders of a majority of the shares of stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business, except as otherwise provided by
statute
2
<PAGE>
or by the Certificate of Incorporation. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, then those
stockholders representing a majority of the shares entitled to vote thereat,
present in person or represented by proxy, shall have the power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 2.08. Power of Stockholders. When a quorum is present or
represented at any meeting, the vote of the holders of a majority of the shares
of stock having voting power present in person or represented by proxy shall
decide any question brought before such meeting, unless the question is one upon
which, by express provision of the statutes or of the Certificate of
Incorporation or of these Bylaws, a different vote is required, in which case
such express provision shall govern and control the decision of the question.
The stockholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
Section 2.09. Voting of Stock. Except as hereinafter provided, each
outstanding share, regardless of class, shall be entitled to one vote on each
matter submitted to a vote at a meeting of stockholders, except to the extent
that the voting rights of the shares of any class or classes are limited or
denied by the Certificate of Incorporation. At all elections of Directors, each
holder of shares of stock possessing voting power shall be entitled to vote in
person or by proxy for the number of shares of stock held by him, for as many
persons as there are Directors to be elected. No cumulative voting for Directors
shall be permitted. At all corporate meetings, the manner of voting shall be by
ballot, by voice vote, or by a showing of hands, at the discretion of the
Chairman of the meeting; provided, however, all elections of Directors shall be
by written ballot.
Section 2.10. Proxies. At any meeting of the stockholders, any stockholder
may be represented and vote by a proxy or proxies appointed by an instrument in
writing. In the event that any such written instrument shall designate two or
more persons to act as proxies, a majority of such persons present at the
meeting shall have and may exercise all of the powers conferred by such written
instrument upon all of the persons so designated, unless the instrument shall
otherwise provide. No such proxy shall be valid after the expiration of three
(3) years from the date of its execution unless the person executing it
specifies therein the length of time for which it is to continue in force.
Subject to the above, any proxy duly executed is not revoked and continues in
full force and effect until an instrument revoking it or a duly
3
<PAGE>
executed proxy bearing a later date is filed with the Secretary of the
corporation.
Section 2.11. Action Consent. Any action required or permitted to be taken
at a meeting of the stockholders by any statutory provisions or the Certificate
of Incorporation, may be taken without a meeting, without prior notice, and
without a vote, if a consent or consents in writing, setting forth the action so
taken, shall be signed by the holder or holders of shares of stock having not
less than the minimum number of votes that would be necessary to take such
action at a meeting at which the holders of all shares of stock entitled to vote
on the action were present and voted. Every written consent shall bear the date
of signature of each stockholder who signs the consent. No written consent shall
be effective to take the action that is the subject of the consent unless,
within sixty (60) days after the date of the earliest dated consent delivered to
the corporation in the manner required herein, a consent or consents signed by
the holder or holders of shares of stock having not less than the minimum number
of votes that would be necessary to take the action that is the subject of the
consent are delivered to the corporation by delivery to its registered office,
its principal place of business, or an officer or agent of the corporation
having custody of the books in which proceedings of meetings of stockholders are
recorded. Delivery shall be by hand or certified or registered mail, return
receipt requested if delivered to the corporation's registered office. Delivery
to the corporation's principal place of business shall be addressed to the
president or principal executive officer of the corporation. A telegram, telex,
cablegram, or similar transmission by a stockholder, or a photographic,
photostatic facsimile, or similar reproduction of a writing signed by a
stockholder, shall be regarded as signed by the stockholder for purposes of this
section. If any action by stockholders is taken by written consent, any articles
or documents filed with the Secretary of State as a result of the taking of the
action shall state, in lieu of any statement required by the General Corporation
Law of the State of Delaware concerning any vote of stockholders, that written
consent has been given in accordance with the provisions of Section 228 of said
statute has been given. Any such written consent, or a signed copy thereof,
shall be placed in the minute book of the corporation. Prompt notice of the
taking of any action by stockholders without a meeting by less than unanimous
written consent, shall be given to those stockholders who did not consent in
writing to the action.
ARTICLE III
DIRECTORS
---------
Section 3.01. Stockholders and Voting Agreement. The corporation and its
stockholders are subject to a Stockholders and Voting Agreement dated as of
March 14, 1991 (the "Stockholders Agreement"). Notwithstanding the provisions of
this Article III
4
<PAGE>
of the Bylaws, for such period of time that the corporation is a party to, or
bound by the conditions of, the Stockholders Agreement, the terms of Article 2
of the Stockholders Agreement shall control in selecting nominees for election
to the Board of Directors, voting for directors and related issues addressed in
Article 2 of the Stockholders Agreement. This Article III of the Bylaws shall
control to the extent not inconsistent with Article 2 of the Stockholders
Agreement.
Section 3.02. Number and Terms. The Board of Directors shall consist of
three (3) or more members, as fixed from time to time by the Board of Directors
or by the stockholders. The Directors shall be elected at the annual meeting of
the stockholders, and except as provided in Section 3.03 of this Article each
Director elected shall hold office until his successor is elected and qualified.
Any directorship to be filled by reason of an increase in the number of
Directors shall be filled by a majority of the remaining directors though less
than a quorum, or by election at an annual meeting or at a special meeting of
stockholders called for that purpose. Directors need not be stockholders or
residents of the State of Delaware. Any Director shall be subject to removal
with or without cause at any time by the stockholders.
Section 3.03. Vacancies. Vacancies may be filled by a majority of the
remaining Directors though less than a quorum or by election at an annual or
optional meeting of stockholders called for that purpose. When one or more
Directors shall give notice of his or their resignation to the Board of
Directors, effective at a future date, the Board of Directors shall have the
power to fill the vacancy or vacancies to take effect when such resignation or
resignations shall become effective, each Director so appointed to hold office
during the remainder of the term of office of the resigning Director or
Directors. If the remaining Directors have not filled such vacancy, it may be
filled by the stockholders.
Section 3.04. Authority of Directors. The business and affairs of the
corporation shall be managed by its Board of Directors which may exercise all
such powers of the corporation and do all such lawful acts and things as are not
by statute or by the Certificate of Incorporation or by these Bylaws directed or
required to be exercised or done by the stockholders.
Section 3.05. Directors' Meetings. The Board of Directors of the
corporation may hold meetings, both regular and special, either within or
without the State of Delaware.
MEETINGS OF THE BOARD OF DIRECTORS
----------------------------------
Section 3.06. Annual Meetings. The first meeting of each newly elected
Board of Directors shall be held at the place of and immediately following the
annual meeting of Stockholders, unless otherwise fixed by the vote of the
stockholders at the annual
5
<PAGE>
meeting, and no notice of such meeting shall be necessary to the newly elected
Directors in order legally to constitute the meeting; provided, however, that a
quorum shall be present. In the event such meeting is not held at the time and
place above provided for, the meeting may be held at such time and place as
shall be specified in a notice given as hereinafter provided for special
meetings of the Board of Directors, or as shall be specified in a written waiver
signed by all of the Directors.
Section 3.07. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by the Board of Directors.
Section 3.08. Special Meetings. Special meetings of the Board of Directors
may be called by the President, and shall be called by the President or
Secretary on the written request of two (2) Directors. Written notice of the
time and place of special meetings of the Board of Directors shall be given to
each Director at least three (3) days prior to the date of the meeting.
Section 3.09. Quorum. At all meetings of the Board of Directors, a
majority of the number of Directors fixed by these Bylaws shall constitute a
quorum for the transaction of business. The act of the majority of the Directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors, except as otherwise specifically provided by statute or by
the Certificate of Incorporation or by these Bylaws. If a quorum is not present
at a meeting of the Board of Directors, the Directors present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum is present.
Section 3.10. Unanimous Consent. Whenever the vote of the Directors at a
meeting thereof or at the meeting of any committee is required or permitted to
be taken in connection with any corporate action by any provisions of the
statutes or of the Certificate of Incorporation, the meeting and vote of the
Directors may be dispensed with, if all the members of the Board of Directors,
the executive committee, or any other committee, as the case may be, who have
been entitled to vote upon the action if such meeting were held, shall consent
in writing to such corporate action being taken. Such consent shall have the
same force and effect as a unanimous vote at a regularly called meeting, and may
be stated as such in any document or instrument filed with the Secretary of
State. Any such signed consent, or a signed copy thereof, shall be placed in the
minute book of the corporation.
Section 3.11. Telephone Meetings. Subject to the provisions required or
permitted by statute or by these Bylaws for notice, the Directors or the members
of any committee, may participate in and hold a meeting by means of conference
telephone or similar
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communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in such a meeting shall
constitute presence in person at such meeting, except where a Director
participates in the meeting for the express purpose of objecting to the
transaction of any business on the grounds that the meeting is not lawfully
called or convened. A written record of any such meeting shall thereafter be
prepared and placed in the minute book of the corporation.
COMMITTEES
----------
Section 3.12. Creation. The Board of Directors may, by resolution adopted
by a majority of the whole Board, designate an executive committee and one or
more other committees, each to consist of one (1) or more Directors of the
corporation. The Board of Directors may also designate one or more directors as
alternate members of the committee, who may replace any absent or disqualified
member at any meeting of the committee.
Section 3.13. Authority. Any committee, to the extent provided in such
resolution, shall have and may exercise all of the authority of the Board of
Directors in the management of the business and affairs of the corporation,
except where action of the full Board of Directors is required by statute or by
the Certificate of Incorporation.
Section 3.14. Minutes. Any committee shall keep regular minutes of their
proceedings and report the same to the Board of Directors when required. The
minutes of the proceedings of any committee shall be placed in the minute book
of the corporation.
Section 3.15. Removal of Members. Any member of a committee may be removed
by the Board of Directors by the affirmative vote of a majority of the whole
Board of Directors, whenever, in its judgment, the best interests of the
corporation will be served thereby.
COMPENSATION OF DIRECTORS
-------------------------
Section 3.16. By resolution of the Board of Directors, the Directors may
be paid their expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as Director. No such payment shall
preclude any Director from serving the corporation in any other capacity and
receiving compensation therefor. Members of any committee may be allowed like
compensation for attending committee meetings.
ADVISORY DIRECTORS
------------------
Section 3.17. By resolution of the Board of Directors, the corporation may
designate any number of advisory directors.
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Advisory directors shall serve in that capacity for a term as determined by the
Board of Directors. Although the presence of advisory directors at meetings of
the Board of Directors shall not be counted towards a quorum and advisory
directors shall not be entitled to vote on any action or resolution brought
before the Board of Directors, in all other respects advisory directors shall be
entitled to prior notice of meetings of the Board of Directors, to attend
meetings of the Board of Directors, to receive and review documents and
materials, and to participate at meetings of the Board of Directors as if
actually members of the Board of Directors. Advisory directors shall be paid
their expenses, if any, of attendance at each meeting of the Board of Directors;
however, advisory directors that are paid employees or consultants of the
corporation or any of its subsidiaries are not entitled to additional
compensation for serving as advisory directors.
ARTICLE IV
NOTICES
-------
Section 4.01. Delivery. Notices to Directors and stockholders shall be in
writing and delivered personally or mailed to the Directors or stockholders at
their addresses appearing on the books of the corporation. Notice by mail shall
be deemed to be given at the time when the same shall be deposited in the United
States mail unless otherwise provided in the Certificate of Incorporation or in
the Stockholders Agreement. Notice to Directors may also be given by telegram
and shall be deemed to be given at the time when the same shall be delivered to
the telegraph office for transmission.
Section 4.02. Waiver. Whenever any notice is required to be given to a
stockholder or Director under the provisions of the statutes, the Certificate of
Incorporation or by these Bylaws, a waiver thereof in writing, signed by the
person or persons entitled to give such notice, whether before or after the time
stated therein, shall be deemed equivalent thereto to the giving of such notice.
Attendance of a Director at a Directors' meeting shall constitute a waiver of
notice of such meeting, except where a Director attends for the express purpose
of objecting to the transaction of any business on the grounds that the meeting
is not lawfully called or convened.
ARTICLE V
OFFICERS
--------
Section 5.01. Selection of Officers. The officers of the corporation shall
be chosen by the Board of Directors. Such officers may include a Chairman of the
Board, a President, a Vice President, a Secretary and a Treasurer. Any person
may hold two
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(2) or more offices. No officer or agent need be a stockholder, a Director, or a
resident of the State of Delaware.
Section 5.02. Necessary Officers. The Board of Directors, at its first
meeting after each annual meeting of stockholders, may choose a Chairman from
among the Directors and shall choose a President and a Secretary neither of whom
need be a member of the Board of Directors.
Section 5.03. Additional Officers. The Board of Directors may appoint Vice
Presidents, a Treasurer, and Assistant Secretaries and Assistant Treasurers and
such other officers and agents as it shall deem necessary, who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.
Section 5.04. Salaries. The salaries of all officers and agents of the
corporation shall be fixed by the Board of Direc- tors.
Section 5.05. Term of Office. The officers of the corporation shall hold
office until their successors are chosen and shall qualify. Any officer elected
or appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors whenever, in its
judgment, the best interests of the corporation will be served thereby. Any
vacancy occurring in any office of the corporation by death, resignation,
removal or otherwise shall be filled by the Board of Directors.
Section 5.06. Authority. Officers and agents shall have such authority and
perform such duties in the management of the corporation as are provided in
these Bylaws or as may be determined by resolution of the Board of Directors not
inconsistent with these Bylaws.
THE CHAIRMAN OF THE BOARD
-------------------------
Section 5.07. The Chairman of the Board shall preside at meetings of the
Board of Directors and of the stockholders unless he shall be absent and he
shall have power to call special meetings of the stockholders and the Directors
for any purpose or purposes. He is authorized to make and sign contracts and
agreements in the name and on behalf of the corporation. The Chairman of the
Board shall be primarily responsible for implementing the broad policies
implemented by the stockholders and the Board of Directors.
THE PRESIDENT
-------------
Section 5.08. The President shall be the chief executive officer of the
corporation. He may preside at meetings of the Board of Directors and of the
stockholders unless he shall be
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absent, and he shall have power to call special meetings of the stockholders and
the Directors for any purpose or purposes, appoint and discharge, subject to the
approval or review by the Board of Directors, employees and agents of the
corporation and fix their compensation, and shall make and sign contracts and
agreements in the name of and on behalf of the corporation. The President shall
put into operation such business policies of the corporation as shall be decided
upon by the Board of Directors. In carrying out the business policies of the
Board of Directors, the President shall have the general management and control
of the business and affairs of the corporation and shall be the managing
executive officer of the corporation, and the President, in carrying out such
business policies, is given the necessary authority to discharge such
responsibility. The President shall see that the books, reports, statements and
certificates required by the statutes under which the corporation is organized
or any other laws applicable thereto, are properly kept, made and filed
according to law. The President shall, in general, have supervisory power over
the other officers, the committees and the business activities of the
corporation, subject to the approval or review of the Board of Directors; and he
shall generally do and perform all acts incident to the office of President or
which are authorized or required by law.
THE VICE PRESIDENT
------------------
Section 5.09. The Vice Presidents in the order of their seniority, unless
otherwise determined by the Board of Directors, shall, in the absence or
disability of the President, perform the duties and exercise the power of the
President. They shall also generally assist the President and exercise such
other powers and perform such other duties as are delegated to them by the
President and as the Board of Directors shall prescribe.
THE SECRETARY
-------------
Section 5.10. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
such meetings in a book to be kept for that purpose, and the Secretary shall
perform like duties for the standing committees when required. The Secretary
shall give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors, and the Secretary shall perform such
other duties as may be prescribed by the Board of Directors or President, under
whose supervision the Secretary shall be. The Secretary shall keep in safe
custody the seal of the corporation, if any, and, when authorized by the Board
of Directors, affix the same to any instrument requiring it; when the seal is so
affixed, it shall be attested by the signature of the Secretary or by the
signature of an assistant secretary.
10
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Section 5.11. Assistant Secretaries. The Assistant Secretaries, in the
order of their seniority, unless otherwise determined by the Board of Directors,
shall, in the absence or disability of the Secretary, perform the duties and
have the authority and exercise the powers of the Secretary. They shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe or as the President may from time to time delegate.
THE TREASURER
-------------
Section 5.12. Custody of Funds. The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation, and, in
addition, the Treasurer shall deposit all moneys and other valuable effects in
the name and to the credit of the corporation in such depositories as may be
designated by the Board of Directors.
Section 5.13. Disbursal. The Treasurer shall disburse the funds of the
corporation as may be ordered by the Board of Directors, taking proper vouchers
for such disbursements, and the Treasurer shall render to the President and the
Board of Directors, at the regular meeting of the Board, or when the Board of
Directors so requires, an account of all transactions of the Treasurer and of
the financial condition of the corporation.
Section 5.14. Surety Bond. If required by the Board of Directors, the
Treasurer shall give the corporation a bond in such sum and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of this office and for the restoration to the
corporation, in case of the death, resignation, retirement or removal from
office of the Treasurer, of all books, papers, vouchers, money and other
property of whatever kind in the possession or under the control of the
Treasurer and belonging to the corporation.
Section 5.15. Additional Duties. The Treasurer shall perform such other
duties and have such other authority and powers as the Board of Directors may
from time to time prescribe or as the President may from time to time delegate.
ARTICLE VI
OFFICERS' AND DIRECTORS' SERVICES, CONFLICTING
INTERESTS AND INDEMNIFICATION
-----------------------------
Section 6.01. Services. No Director and, unless otherwise determined by
the Board of Directors, no officer of the corporation, shall be required to
devote his time or any particular portion of his time or render services or any
particular services exclusively to the corporation. Subject to each and every
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Director's and officer's duty of loyalty and fiduciary duties to the
Corporation, each and every Director and, unless otherwise determined by the
Board of Directors, each and every officer of the corporation shall be entirely
free to engage, participate and invest in any and all such businesses,
enterprises and activities, either similar or dissimilar to the business,
enterprise and activities of the corporation, without breach of duty to the
corporation or to its stockholders and without accountability or liability to
the corporation or to its stockholders in any event or under any circumstances
or conditions.
Subject to each and every Director's and officer's duty of loyalty and
fiduciary duties to the Corporation, each and every Director and, unless
otherwise determined by the Board of Directors, each and every officer of the
corporation shall, respectively, be entirely free to act for, serve and
represent any other corporation or corporations, entity or entities, and any
person or persons, in any capacity or capacities, and be or become a Director or
officer, or both, of any other corporation or corporations, entity or entities,
irrespective of whether or not the business, purposes, enterprises and
activities, or any of them, thereof be similar or dissimilar to the business,
purposes, enterprises and activities, or any of them, of the corporation,
without breach of duty to the corporation or to its stockholders and without
accountability or liability of any character or description to the corporation
or to its stockholders in any event or under any circumstances or conditions.
Section 6.02. Directors' and Officers' Interests in Contracts. No contract
or other transaction between the corporation and one or more of its Directors or
officers, or between the corporation and any firm or partnership of which one or
more of its Directors or officers are members or employees or in which they are
otherwise interested, or between the corporation and any other corporation or
association or other entity in which one or more of the Directors or officers of
the corporation are stockholders, members, Directors, officers or employees or
in which they are otherwise interested, shall be void or voidable by reason of
or as a result of such connection with or holding an office or offices as a
Director or officer of the corporation or such interest in or in connection with
such other firm, partnership, corporation, association or other entity,
notwithstanding the presence of such Director or Directors, officer or officers,
at the meeting of the Board of Directors of the corporation which acts upon or
in reference to any such contract or other transaction, and notwithstanding his
or their participation in such action, if (a) the material facts of such
relationship or interest shall be disclosed or known to the Board of Directors
and the Board of Directors in good faith shall authorize, approve or ratify such
contract or other transaction by a vote of a majority of the disinterested
Directors present, even though the disinterested Directors be less than a
quorum; or (b) the material facts of such relationship or
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<PAGE>
interest shall be disclosed or known to the stockholders and the stockholders in
good faith, either by written consent or by vote of holders of record of a
majority of all the outstanding shares of stock entitled to vote, shall
authorize, approve or ratify such contract or other transaction; or (c) the
contract or transaction is fair as to the corporation as of the time it is
authorized, approved or ratified by the Board of Directors, a committee or its
stockholders; nor shall any Director or officer be responsible to, or liable to
account to the corporation for any profits realized by or from or through any
such contract or other transaction of the corporation so authorized, ratified or
approved, by reason of such interest or his being or having been a Director or
officer, or both, of the corporation. Nothing herein contained shall create
responsibility or liability in or in connection with any such event or events or
prevent the authorization, ratification or approval of such contracts or other
transactions in any other manner permitted by law or by statute. This section
shall not be construed to invalidate any contract or other transaction which
would otherwise be valid under the common or statutory law applicable thereto.
Section 6.03. Non-Liability of Directors and Officers in Certain Cases. No
Director or officer or member of any committee shall be liable for his acts as
such if he is excused from liability under any present or future provision or
provisions of the General Corporation Laws of Delaware; and, in addition, to the
fullest extent now or hereafter permitted by the General Corporation Laws of
Delaware, each officer or Director or member of any committee shall, in the
discharge of any duty imposed or power conferred upon him by the corporation, be
fully protected if, in the exercise of ordinary care, he acted in good faith and
in reliance upon the written opinion of an attorney for the corporation, the
books of account or reports made to the corporation by any of its officials or
by an independent certified public accountant or by any appraiser selected with
reasonable care by the Board of Directors or by such committee, or in reliance
upon other records of the corporation.
Section 6.04. Indemnification of Directors and Officers. The corporation
shall, to the fullest extent to which it is empowered to do so by the General
Corporation Law of the State of Delaware or any other applicable laws as may
from time to time be in effect, indemnify any person who was, is or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he is or was a director or officer of the corporation,
or is or was serving at the request of the corporation as a director, officer,
partner, venturer, proprietary, trustee, employee, agent or similar functionary
of another foreign or domestic corporation, partnership, joint venture, trust,
or other enterprise, against all expenses (including attorneys fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection
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<PAGE>
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The corPoration's
obligations under this Section include, but are not limited to, the convening of
any meeting, and the consideration of any matter thereby, required by statute in
order to determine the eligibility of an officer or director for
indemnification. Expenses incurred in defending a civil or criminal action, suit
or proceeding shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of (i) a written
affirmation by the person of his good faith belief that he has met the standard
of conduct necessary for indemnification under the General Corporation Laws of
Delaware, and (ii) an undertaking by or on behalf of the director, officer,
employee or agent who may be entitled to such indemnification, to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation. The corporation's obligation to indemnify and to
prepay expenses under this Section 6.04 shall arise, and all rights granted to
directors, officers, employees or agents hereunder shall vest, at the time of
the occurrence of the transaction or event to which such action, suit or
proceeding relates, or at the time that the action or conduct to which such
action, suit or proceeding relates was first taken or engaged in (or omitted to
be taken or engaged in), regardless of when such action, suit or proceeding is
first threatened, commenced or completed. Notwithstanding any other provision of
these Bylaws or the Articles or Certificate of Incorporation of the corporation,
no action taken by the corporation, either by amendment of the Bylaws or the
Certificate of Incorporation of the corporation or otherwise, shall diminish or
adversely affect any rights to indemnification or prepayment of expenses granted
under this Section 6.04 which shall have become vested as aforesaid prior to the
date that such amendment or other corporate action is taken. Further, if any
provision of this Section 6.04 shall be held to be invalid or unenforceable, the
validity and enforceability of the remaining provisions shall not in any way be
affected or impaired.
Section 6.05. Insurance. The Board of Directors shall have, in its
discretion, the power to purchase and maintain insurance on behalf of any person
who is or was a Director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a Director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Laws of Delaware, the Certificate of
Incorporation or these Bylaws.
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ARTICLE VII
CERTIFICATES OF STOCK
---------------------
Section 7.01. Requirements. Every stockholder shall be entitled to have a
certificate signed by the President or a Vice President and the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation, certifying the number of shares owned by him in the corporation. If
the corporation shall be authorized to issue more than one class of stock or
more than one series of any class, the designations, preferences and relative,
participating, option or other special rights of the various classes of stock or
series thereof and the qualifications, limitations or restrictions of such
rights, shall be set forth in full or summarized on the face or back of the
certificate which the corporation shall issue to represent such stock, and, if
the corporation shall be authorized to issue only shares of special stock, such
certificate shall set forth in full or summarize the rights of the holders of
such shares of stock.
Section 7.02. Facsimiles. Whenever any certificate is countersigned or
otherwise authenticated by a transfer agent or transfer clerk, or registered by
a registrar, then a facsimile of the signatures of the officers or agents of the
corporation may be printed or lithographed upon such certificate in lieu of the
actual signatures. In case any officer or officers who shall have signed, or
whose facsimile signature shall have been used on, any such certificate or
certificates shall cease to be such officer or officers of the corporation,
whether because of death, resignation or otherwise, before such certificate or
certificates shall have been delivered by the corporation, such certificate or
certificates may nevertheless be adopted by the corporation and be issued and
delivered as though the person or persons whose signature appears on such
certificate or certificates, or whose facsimile signature or signatures shall
have been used thereon, had not ceased to be the officer or officers of the
corporation.
LOST CERTIFICATE(S)
-------------------
Section 7.03. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate(s) to be lost or destroyed. When authorizing such issue of a new
certificate(s), the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate(s), or his legal representative, to advertise the same in such
manner as it shall require and/or give the corporation a bond in such sum as it
may direct as indemnity against any claim that may be made against the
corporation with
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respect to the certificate(s) alleged to have been lost or destroyed.
TRANSFER OF STOCK
-----------------
Section 7.04. Shares of stock shall be transferable only on the books of
the corporation by the holder thereof in person or by his duly authorized
attorney. Upon surrender to the corporation of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, cancelling the old certificate and
recording the transaction upon its books. A record shall be made of each
transfer.
CLOSING OF TRANSFER BOOKS
-------------------------
Section 7.05. Except as otherwise provided in the Certificate of
Incorporation or in the Stockholders Agreement, for the purpose of determining
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or stockholders entitled to receive payment of any
dividend, or in order to make a determination of stockholders for any other
proper purpose, the Board of Directors may provide that the stock transfer books
be closed for a period not to exceed sixty (60) nor be less than ten (10) days.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this Section, such determination shall
apply to any adjournment thereof; provided, however, that the Board of Directors
may fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
-----------------------
Section 7.06. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of the
State of Delaware, the Certificate of Incorporation or these Bylaws.
ARTICLE VIII
GENERAL PROVISIONS
------------------
DIVIDENDS
---------
Section 8.01. Declaration. Dividends upon the capital stock of the
corporation, subject to the provisions of the Certificate
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of Incorporation, if any, may be declared by the Board of Directors at any
regular or special meeting, pursuant to law. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation.
Section 8.02. Reserves. Before payment of any dividend, there may be set
aside out of any funds of the corporation available therefor, such sum or sums
as the Board of Directors, from time to time, in their absolute discretion,
think proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the Board of Directors shall think conducive to the
interest of the corporation, and the Board of Directors may modify or abolish
any such reserves in the manner in which it was created.
CHECKS
------
Section 8.03. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
FISCAL YEAR
-----------
Section 8.04. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
ARTICLE IX
RESTRICTIONS ON TRANSFER OF CORPORATE SECURITIES
------------------------------------------------
Section 9.01. Any security of the corporation which is issued to any
person without registration under the Securities Act of 1933, as amended, or the
securities or Blue Sky laws of any state, shall not be transferable or the
subject of a sale or pledge until the corporation shall have been furnished with
an opinion of counsel for such stockholder satisfactory to counsel for the
corporation that such sale, transfer or pledge does not involve a violation of
the Securities Act of 1933, as amended, or the securities or Blue Sky laws of
any state having jurisdiction. The certificate representing the security shall
bear substantially the following legend:
"The shares evidenced and represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or the securities
or Blue Sky laws of any state. Transfer or sale of the shares evidenced
and represented by this certificate shall not be made without the prior
written approval of the Company and its counsel."
Section 9.02. A security of the corporation that is issued to any person
pursuant to an agreement, which in any way restricts the transfer of such
security, including but not limited to the Stockholders Agreement, shall be
restricted as to such transfer by noting conspicuously on the certificate
representing the security, a legend which shall indicate such restriction
against transferability and the appropriate officers of the corporation shall
cause to be placed on such security a stop-transfer order subject to the terms
and conditions of such agreement.
ARTICLE X
AMENDMENTS
----------
Section 10.01. Except as otherwise prohibited by the terms of the
Stockholders Agreement, these Bylaws may be altered, amended or repealed at any
regular or special meeting of the Board of Directors.
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EXHIBIT 10.1
JUNGLE JIM'S PLAYLANDS, INC.
1995 EMPLOYEE STOCK OPTION PLAN
I. PURPOSES
JUNGLE JIM'S PLAYLANDS, INC. (the "Company") desires to afford certain of
its key employees, and the key employees of any subsidiary corporation or parent
corporation of the Company now existing or hereafter formed or acquired, who are
responsible for the continued growth of the Company an opportunity to acquire a
proprietary interest in the Company, and thus to create in such key employees an
increased interest in and a greater concern for the welfare of the Company and
its subsidiaries.
The Company, by means of this 1995 Employee Stock Option Plan (the
"Plan"), seeks to retain the services of persons now holding key positions and
to secure the services of persons capable of filling such positions.
The stock options ("Options") offered pursuant to the Plan are a matter of
separate inducement and are not in lieu of any salary or other compensation for
the services of any key employee.
The Options granted under the Plan are intended to be either incentive
stock options ("Incentive Options") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or options that do not
meet the requirements for Incentive Options ("Non-Qualified Options"), but the
Company makes no warranty as to the qualification of any Option as an Incentive
Option.
II. AMOUNT OF STOCK SUBJECT TO THE PLAN
The total number of shares of common stock of the Company which may be
purchased or acquired pursuant to the exercise of Options granted under the Plan
shall not exceed, in the aggregate, 900,000 shares of the authorized common
stock, $.01 par value per share, of the Company (the "Shares"), such number
subject to adjustment as provided in Article XI hereof.
Shares acquired under the Plan may be either authorized but unissued
Shares or Shares of issued stock held in the Company's treasury, or both, at the
discretion of the Company. If and to the extent that Options granted under the
Plan expire or terminate without having been exercised, the
<PAGE>
Shares covered by such expired or terminated Options may again be subject to an
Option under the Plan.
Except as provided in Article XVIII and subject to Article III, the
Company may, from time to time during the period beginning on June 13, 1995
(the "Effective Date") and ending on June 12, 2000 (the "Termination Date"),
grant to certain key employees of the Company, or of any subsidiary corporation
or parent corporation of the Company now existing or hereafter formed or
acquired, Incentive Options or Non-Qualified Options or both under the terms
hereinafter set forth.
As used in the Plan, the term "subsidiary corporation" and "parent
corporation" shall mean, respectively, a corporation coming within the
definition of such terms contained in Sections 424(f) and 424(e) of the Code.
III. ADMINISTRATION
The board of directors of the Company (the "Board of Directors") shall
designate from among its members an option committee, which may be the
Compensation Committee of the Board of Directors (the "Committee"), to
administer the Plan. The Committee shall consist of no fewer than two members of
the Board of Directors, each of whom shall be a "disinterested person" within
the meaning of Rule 16b-3 (or any successor rule or regulation) promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). A
majority of the members of the Committee shall constitute a quorum, and the act
of a majority of the members of the Committee shall be the act of the Committee.
Any member of the Committee may be removed at any time either with or without
cause by resolution adopted by the Board of Directors, and any vacancy on the
Committee at any time may be filled by resolution adopted by the Board of
Directors.
Subject to the express provisions of the Plan, the Committee shall have
authority, in its discretion, to determine the employees to whom Options shall
be granted, the time when such Options shall be granted, the number of Shares
which shall be subject to each Option, the purchase price or exercise price of
each Option, the period(s) during which such Options shall be exercisable
(whether in whole or in part) and the other terms and provisions thereof (which
need not be identical).
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Subject to the express provisions of the Plan, the Committee also shall
have authority to construe the Plan and the Options granted thereunder, to amend
the Plan and the Options granted thereunder, to prescribe, amend and rescind
rules and regulations relating to the Plan, to determine the terms and
provisions of the Options (which need not be identical) granted thereunder and
to make all other determinations necessary or advisable for administering the
Plan. The Committee also shall have the authority to require, in its discretion,
as a condition of the granting of any such Option, that the employee agree (i)
not to sell or otherwise dispose of Shares acquired pursuant to the exercise of
such Option for a period of six (6) months following the date of the acquisition
of such Option and (ii) to certain covenants concerning confidential information
relating to the Company and its subsidiaries and affiliates and the ownership
and protection of certain intellectual property developed during such employee's
period of employment. In no event will an employee who is subject to the
reporting requirements of Section 16(a) of the Exchange Act be entitled to sell
or otherwise dispose of any Shares acquired pursuant to exercise of any such
Options for a period of six (6) months from the date of the acquisition of such
Options, to the extent that such sale or disposition would be deemed a violation
of Section 16 of the Exchange Act.
The Committee may establish performance standards for determining the
periods during which Options shall be exercisable, including without limitation
standards based on the earnings of the Company and its subsidiaries for various
fiscal periods. The Committee shall define such performance criteria and, from
time to time, the Committee in its sole discretion and in administering the Plan
may make adjustments to such performance criteria for any fiscal period so that
extraordinary or unusual charges or credits, acquisitions, mergers,
consolidations, and other corporate transactions and other elements of or
factors influencing the calculations of earnings or any other performance
standard do not distort or affect the operation of the Plan in a manner
inconsistent with the achievement of its purpose.
The determination of the Committee on matters referred to in this Article
III shall be conclusive.
The Committee may employ such legal counsel, consultants and agents as it
may deem desirable for the administration of the Plan and may rely upon any
opinion or computa-
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tion received from any such legal counsel, consultant or agent. Expenses
incurred by the Committee in the engagement of such counsel, consultant or agent
shall be paid by the Company. No member or former member of the Committee shall
be liable for any action or determination made in good faith with respect to the
Plan or any award of Options granted hereunder.
IV. ELIGIBILITY
Options may be granted only to salaried key employees of the Company or of
any subsidiary corporation or parent corporation of the Company, except as
hereinafter provided, and shall not be granted to any officer or director who is
not also a salaried key employee or to any member of the Committee. Any person
who shall have retired from active employment by the Company or a subsidiary
corporation, although such person shall have entered into a consulting contract
with the Company or a subsidiary corporation, shall not be eligible to receive
any Options.
The Plan does not create a right in any employee to participate in the
Plan, nor does it create a right in any employee to have any Options granted to
him or her.
V. OPTION PRICE AND PAYMENT
The price for each Share purchasable under any Option granted hereunder
shall be such amount as the Committee shall, in its best judgment, determine to
be not less than one hundred percent (100%) of the fair market value per Share
at the date the Option is granted; provided, however, that in the case of an
Incentive Option granted to a person who, at the time such Option is granted,
owns shares of the Company or any subsidiary corporation or parent corporation
of the Company which possesses more than ten percent (10%) of the total combined
voting power of all classes of shares of the Company or of any subsidiary
corporation or parent corporation of the Company, the purchase price for each
share shall be such amount as the Committee in its best judgment shall determine
to be not less than one hundred ten percent (110%) of the fair market value per
Share at the date the Option is granted. In determining stock ownership of an
employee for any purposes under the Plan, the rules of Section 424(d) of the
Code shall be applied, and the Committee may rely on representations of fact
made to it by the employee and believed by it to be true.
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If the Shares are listed on a national securities exchange in the United
States on any date on which the fair market value per Share is to be determined,
the fair market value per Share shall be deemed to be the average of the high
and low quotations at which such Shares are sold on such national securities
exchange on the date such Option is granted. If the Shares are listed on a
national securities exchange in the United States on such date, but the Shares
are not traded on such date, or such national securities exchange is not open
for business on such date, the fair market value per Share shall be determined
as of the closest preceding date on which such exchange shall have been open for
business and the Shares shall have been traded. If the Shares are listed on more
than one national securities exchange in the United States on the date on which
the fair market value per Share is to be determined, the Committee shall
determine which national securities exchange shall be used for the purpose of
determining the fair market value per Share.
If a public market exists for the Shares on any date on which the fair
market value per Share is to be determined but the Shares are not listed on a
national securities exchange in the United States, the fair market value per
Share shall be deemed to be the mean between the closing bid and asked
quotations in the over-the-counter market for the Shares on such date. If there
are no bid and asked quotations for the Shares on such date, the fair market
value per Share shall be deemed to be the mean between the closing bid and asked
quotations in the over-the-counter market for the Shares on the closest date
preceding such date for which such quotations are available.
If no public market exists for the Shares on any date on which the fair
market value per Share is to be determined, the Committee shall, in its sole
discretion and best judgment, determine the fair market value of a Share.
For purposes of this Plan, the determination by the Committee of the fair
market value of a Share shall be conclusive.
Upon the exercise of an Option granted hereunder, the Company shall cause
the purchased Shares to be issued only when it shall have received the full
purchase price for the Shares in cash or by certified check; provided, however,
that in lieu of cash, the holder of an Option may, if and to the extent the
terms of such Option so provide and to the
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extent permitted by applicable law, exercise an Option in whole or in part, by
delivering to the Company shares of common stock of the Company (in proper form
for transfer and accompanied by all requisite stock transfer tax stamps or cash
in lieu thereof) owned by such holder having a fair market value equal to the
exercise price applicable to that portion of the Option being exercised by the
delivery of such Shares. The fair market value of the stock so delivered shall
be determined as of the date immediately preceding the date on which the Option
is exercised, or as may be required in order to comply with or to conform to the
requirements of any applicable laws or regulations.
VI. USE OF PROCEEDS
The cash proceeds of the sale of Shares pursuant to the Plan are to be
added to the general funds of the Company and used for its general corporate
purposes as the Board of Directors shall determine.
VII. TERM OF OPTIONS AND LIMITATIONS ON THE RIGHT OF
EXERCISE
Any Option shall be exercisable at such times, in such amounts and during
such period or periods as the Committee shall determine at the date of the grant
of such Option, including by providing in any grant of an Option that portions
of such Option shall become vested pursuant to a vesting schedule set forth in
such grant, provided, however, that an Incentive Option shall not be exercisable
after the expiration of ten (10) years from the date such Option is granted; and
provided further that, in the case of an Incentive Option granted to a person
who, at the time such Option is granted, owns stock of the Company or any
subsidiary corporation or parent corporation of the Company possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company or of any subsidiary corporation or parent corporation of the
Company, such Option shall not be exercisable after the expiration of five (5)
years from the date such Option is granted.
Except to the extent otherwise provided under the Code, to the extent that
the aggregate fair market value of stock for which Incentive Options are
exercisable for the first time by an employee during any calendar year (under
all stock option plans of the Company and of any parent corporation or
subsidiary corporation of the Company) exceeds one
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hundred thousand dollars ($100,000), such Options shall be treated as
Non-Qualified Options. For purposes of this limitation, (i) the fair market
value of stock is determined as of the time the Option is granted, and (ii) the
limitation will be applied by taking into account Options in the order in which
they were granted.
Subject to the provisions of Article XVII, the Committee shall have the
right to accelerate, in whole or in part, from time to time, conditionally or
unconditionally, rights to exercise any Option granted hereunder.
To the extent that an Option is not exercised within the period of
exercisability specified therein, it shall expire as to the then unexercised
part.
In no event shall an Option granted hereunder be exercised for a fraction
of a Share.
VIII. EXERCISE OF OPTIONS
Options granted under the Plan shall be exercised by the optionee as to
all or part of the Shares covered thereby by the giving of written notice of the
exercise thereof to the Corporate Secretary of the Company at the principal
business office of the Company, specifying the number of Shares to be purchased
and specifying a business day not more than fifteen (15) days from the date such
notice is given for the payment of the purchase price against delivery of the
Shares being purchased. Subject to the terms of Articles XIII, XIV, and XVI, the
Company shall cause certificates for the Shares so purchased to be delivered to
the optionee at the principal business office of the Company, against payment of
the full purchase price, on the date specified in the notice of exercise.
IX. NON-TRANSFERABILITY OF OPTIONS
No Option granted hereunder shall be transferable, whether by operation of
law or otherwise, other than by will or the laws of descent and distribution,
and any Option granted hereunder shall be exercisable during the lifetime of the
holder only by such holder. Except to the extent provided above, Options may not
be assigned, transferred, pledged, hypothecated or disposed of in any way
(whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar process.
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<PAGE>
X. TERMINATION OF EMPLOYMENT
Upon termination of employment of any employee with the Company and all
parent and subsidiary corporations, an Option previously granted to the
employee, unless otherwise specified by the Committee in the Option, shall, to
the extent not theretofore exercised, terminate and become null and void,
provided that:
(a) if the employee shall die while in the employ of such
corporation or during either the three (3) month or one (1) year period,
whichever is applicable, specified in clause (b) below and at a time when
such employee was entitled to exercise an Option as herein provided, the
legal representative of such employee, or such person who acquired such
Option by bequest or inheritance or by reason of the death of the
employee, shall have the right to exercise such Option so granted, to the
extent not theretofore exercised, in respect of any or all of such number
of Shares that such employee is entitled to purchase pursuant to such
Option at the time of such employee's death, at any time up to and
including one (1) year after the date of death; and
(b) if the employment of any employee to whom such Option shall have
been granted shall terminate by reason of the employee's retirement (at
such age or upon such conditions as shall be specified by the Board of
Directors), disability (as described in Section 22(e)(3) of the Code) or
dismissal by the employer other than for cause (as defined below), and
while such employee is entitled to exercise such Option as herein
provided, such employee shall have the right to exercise such Option so
granted, to the extent not theretofore exercised, in respect of any or all
of such number of Shares that such employee is entitled to purchase
pursuant to such Option at the time of such termination, at any time up to
and including (i) three (3) months after the date of such termination of
employment in the case of termination by reason of retirement or dismissal
other than for cause and (ii) one (1) year after the date of termination
of employment in the case of termination by reason of disability.
If an employee voluntarily terminates his or her employment, or is
discharged for cause, any Option granted
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<PAGE>
hereunder shall, unless otherwise specified by the Committee in the Option,
forthwith terminate with respect to any unexercised portion thereof.
If an Option granted hereunder shall be exercised by the legal
representative of a deceased or disabled employee or former employee, or by a
person who acquired an Option granted hereunder by bequest or inheritance or by
reason of death of any employee or former employee, written notice of such
exercise shall be accompanied by a certified copy of letters testamentary or
equivalent proof of the right of such legal representative or other person to
exercise such Option.
For all purposes of the Plan, the term "for cause" shall mean, (i) with
respect to an employee who is a party to a written employment agreement with the
Company, which agreement contains a definition of "for cause" or "cause" (or
words of like import) for purposes of termination of employment thereunder by
the Company, "for cause" or "cause" as defined in the most recent of such
agreements, or (ii) in all other cases, as determined by the Committee, in its
sole discretion, that one or more of the following has occurred: (A) any
intentional or willful failure by an employee to substantially perform his or
her employment duties which shall not have been corrected within thirty days
following written notice thereof, (B) any engaging by an employee in misconduct
which is significantly injurious to the Company or any of its subsidiaries or
affiliates, (C) any breach by an employee of any covenant contained in the
instrument pursuant to which an Option is granted to such an employee under the
Plan, or (D) an employee's conviction of or entry of a plea of nolo contendere
in respect of any felony, or of a misdemeanor which results in or is reasonably
expected to result in economic or reputational injury to the Company or any of
its subsidiaries or affiliates.
For the purposes of the Plan, an employment relationship shall be deemed
to exist between an individual and a corporation if, at the time of the
determination, the individual was an "employee" of such corporation for purposes
of Section 422(a) of the Code. If an individual is on military, sick leave or
other bona fide leave of absence, such individual shall be considered an
"employee" for purposes of the exercise of an Option and shall be entitled to
exercise such Option during such leave if the period of such leave does not
exceed 90 days, or, if longer, so long as the individual's right to reemployment
with the corporation
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granting the Option (or a related corporation) is guaranteed either by statute
or by contract. If the period of leave exceeds ninety (90) days, the employment
relationship shall be deemed to have terminated on the ninety-first (91st) day
of such leave, unless the individual's right to reemployment is guaranteed by
statute or contract.
A termination of employment shall not be deemed to occur by reason of (i)
the transfer of an employee from employment by the Company to employment by a
subsidiary corporation or a parent corporation of the Company or (ii) the
transfer of an employee from employment by a subsidiary corporation or a parent
corporation of the Company to employment by the Company or by another subsidiary
corporation or parent corporation of the Company.
In the event of the complete liquidation or dissolution of a subsidiary
corporation of the Company, or in the event that the Company ceases to own,
directly or indirectly, stock possessing 50% or more of the total combined
voting power of all classes of stock of such subsidiary corporation, any
unexercised Options theretofore granted to any person employed by such
subsidiary corporation will be deemed cancelled unless such person is employed
by the Company or by any parent corporation or another subsidiary corporation of
the Company after the occurrence of such event. In the event an Option is to be
cancelled pursuant to the provisions of the previous sentence, notice of such
cancellation will be given to the employee holding such Option and such holder
will have the right to exercise such Option in respect of such number of Shares
for which such Options were exercisable at the time such notice is given, during
the 30 day period following notice of such cancellation.
Notwithstanding anything to the contrary contained in this Article X, in
no event, however, shall any person be entitled to exercise any Option after the
expiration of the period of exercisability of such Option as specified therein.
XI. ADJUSTMENT OF SHARES; EFFECT OF CERTAIN
TRANSACTIONS
In the event of any change in the outstanding Shares through merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
reverse split, split-up, split-off, spin-off, combination of shares, exchange of
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shares, or other like change in capital structure of the Company, the Committee
shall make such adjustment to each outstanding Option that it, in its sole
discretion, deems appropriate. The term "Shares" after any such change shall
refer to the securities, cash and/or property then receivable upon exercise of
an Option. In addition, in the event of any such change, the Committee shall
make any further adjustment as may be appropriate to the maximum number of
Shares which may be acquired under the Plan pursuant to the exercise of Options
and the number of Shares and prices per Share subject to outstanding Options as
shall be equitable to prevent dilution or enlargement of rights under such
Options, and the determination of the Committee as to these matters shall be
conclusive. Notwithstanding the foregoing, (i) each such adjustment with respect
to an Incentive Option shall comply with the rules of Section 424(a) of the Code
and (ii) in no event shall any adjustment be made which would render any
Incentive Option granted hereunder to be other than an "incentive stock option"
for purposes of Section 422 of the Code.
For purposes of the Plan, a "change in control" of the Company occurs if:
(a) any "Person" (as such term is used in Sections 13(d) and 14(d)(2) of the
Exchange Act), other than any existing stockholders of the Company as of the
Effective Date or any of their respective affiliates or any combination thereof
(collectively, the "Existing Holders"), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of all of
the outstanding capital stock of the Company; or (b) the Board of Directors
shall approve a sale of all or substantially all of the assets of the Company
other than to an entity owned or controlled by Existing Holders; or (c) the
Board of Directors shall approve any merger or consolidation, the result of
which would be the occurrence of any event described in clause (a) or (b) above.
Upon the occurrence of a transaction described in the preceding
paragraph, each Option which was granted prior to the time of such transaction
shall immediately become exercisable. The Committee, in its sole discretion, may
determine that, upon the occurrence of any such transaction, each Option shall
terminate within a specified number of days after notice to the holder, and such
holder shall receive, with respect to each Share subject to such Option, an
amount equal to the excess of the fair market value of such Share immediately
prior to the occurrence of such transaction over the exercise price for such
Share under
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such Option; such amount to be payable in cash, in one or more kinds of property
(including the property, if any, payable in such transaction), or in a
combination thereof, as the Board of Directors or the Committee, as the case may
be, in its discretion shall determine. The provisions contained in the
immediately preceding sentence shall be inapplicable to an Option granted within
six (6) months before the occurrence of a transaction described above if the
holder of such Option is subject to the reporting requirements of Section 16(a)
of the Exchange Act and the implementation of such provisions or such resulting
exercise of the Option would be deemed a violation of Section 16 of the Exchange
Act; provided, however, that in such case the Company nevertheless shall be
entitled to cause such Option to terminate without any payment therefor.
XII. RIGHT TO TERMINATE EMPLOYMENT
The Plan shall not impose any obligation on the Company or on any
subsidiary corporation or parent corporation thereof to continue the employment
of any holder of Options and it shall not impose any obligation on the part of
any holder of Options to remain in the employ of the Company or of any
subsidiary corporation or parent corporation thereof.
XIII. PURCHASE FOR INVESTMENT; STOCKHOLDERS AGREEMENT
Except as hereinafter provided, the Committee may require an employee, as
a condition upon exercise of any Option granted hereunder, to execute and
deliver to the Company (a) stock powers with respect to Shares underlying a
particular Option and required to be held by a custodian, and (b) a written
statement, in form satisfactory to the Committee in which the employee
represents and warrants that Shares are being acquired for such employee's own
account for investment only and not with a view to the resale or distribution
thereof. The employee shall, at the request of the Committee, be required to
represent and warrant in writing that any subsequent resale or distribution of
Shares by the employee shall be made only pursuant to either (i) a Registration
Statement on an appropriate form under the Securities Act of 1933, as amended
(the "Securities Act"), which Registration Statement has become effective and is
current with regard to the Shares being sold, or (ii) a specific exemption from
the registration requirements of the Securities Act, but in claiming such
exemption the employee shall, prior to any offer of sale or sale of such Shares,
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obtain a prior favorable written opinion of counsel, in form and substance
satisfactory to counsel for the Company, as to the application of such exemption
thereto. The foregoing restriction shall not apply to (i) issuances by the
Company so long as the Shares being issued are registered under the Securities
Act and a prospectus in respect thereof is current or (ii) re-offerings of
Shares by affiliates of the Company (as defined in Rule 405 or any successor
rule or regulation promulgated under the Securities Act) if the Shares being
re-offered are registered under the Securities Act and a prospectus in respect
thereof is current.
The Committee may require an employee, as a condition upon any
exercise of any Option granted hereunder, to become party to, and to execute and
deliver a counterpart of, the Amended and Restated Stockholders and Voting
Agreement dated as of April 29, 1994 by and between the Company and the persons
listed in Schedule I thereto, and to become subject to all of the terms and
provisions thereof as a "Management Stockholder" within the meaning of Section
2.01(a)(ii) thereof.
XIV. ISSUE OF CERTIFICATES, LEGENDS, PAYMENT OF
EXPENSES
Upon any exercise of an Option which may be granted hereunder and payment
of the purchase price, a certificate or certificates for the Shares shall be
issued by the Company in the name of the person exercising the Option and shall
be delivered to or upon the order of such person.
The Company may endorse such legend or legends upon the certificates for
Shares issued pursuant to the Plan and, if a transfer agent has been engaged by
the Company, may issue such "stop transfer" instructions to its transfer agent
in respect of such Shares as, in its discretion, it determines to be necessary
or appropriate to (i) prevent a violation of, or to perfect an exemption from,
the registration requirements of the Securities Act, (ii) implement the
provisions of the Plan and any agreement between the Company and the optionee or
grantee with respect to such Shares, or (iii) permit the Company to determine
the occurrence of a disqualifying disposition, as described in Section 421(b) of
the Code, of Shares transferred upon exercise of an Incentive Option granted
under the Plan.
The Company shall pay all issue or transfer taxes with respect to the
issuance or transfer of Shares, as well as
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all fees and expenses necessarily incurred by the Company in connection with
such issuance or transfer. If the issuance or transfer of Shares requires the
filing of a Registration Statement under the Securities Act or an amendment of a
previously filed Registration Statement, the person to receive the Shares shall
bear all fees and expenses relating to such filing. However, if the Company is
filing a Registration Statement or amendment for its own corporate purposes (and
the Company so states), the person to receive the Shares shall bear only the
fees and expenses that are attributable solely to the inclusion of such Shares
in the Registration Statement or amendment.
All Shares issued as provided herein shall be fully paid and
non-assessable to the extent permitted by law.
XV. WITHHOLDING TAXES
The Company may require an employee exercising a NonQualified Option
granted hereunder, or disposing of Shares acquired pursuant to the exercise of
an Incentive Option in a disqualifying disposition (within the meaning of
Section 421(b) of the Code), to reimburse the corporation that employs such
employee for any taxes required by any government to be withheld or otherwise
deducted and paid by such corporation in respect of the issuance or disposition
of such Shares. In lieu thereof, the corporation that employs such employee
shall have the right to withhold the amount of such taxes from any other sums
due or to become due from such corporation to the employee upon such terms and
conditions as the Committee shall prescribe. The corporation that employs such
employee may, in its discretion, hold the stock certificate to which such
employee is entitled upon the exercise of an Option as security for the payment
of such withholding tax liability, until cash sufficient to pay that liability
has been accumulated.
XVI. LISTING OF SHARES AND RELATED MATTERS
The Committee may delay any award, issuance or delivery of Shares if it
determines that listing, registration or qualification of Shares or the consent
or approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the sale or purchase of Shares under the
Plan, until such listing, registration, qualification, consent or approval shall
have been effected or obtained, or otherwise provided for, free of any
conditions not acceptable to the Committee.
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XVII. AMENDMENT OF THE PLAN
The Board of Directors or the Committee, as the case may be, may, from
time to time, amend the Plan, provided that no amendment shall be made, without
the approval of the stockholders of the Company, that will (i) increase the
total number of Shares reserved for Options under the Plan (other than an
increase resulting from an adjustment provided for in Article XI), (ii) reduce
the exercise price of any Incentive Option granted hereunder below the price
required by Article V, (iii) modify the provisions of the Plan relating to
eligibility, or (iv) materially increase the benefits accruing to participants
under the Plan. The Board of Directors or the Committee, as the case may be,
shall be authorized to amend the Plan and the Options granted thereunder to
permit the Incentive Options granted thereunder to qualify as incentive stock
options within the meaning of Section 422 of the Code. The rights and
obligations under any Option granted before amendment of the Plan or any
unexercised portion of such Option shall not be adversely affected by amendment
of the Plan or such Option without the consent of the holder of such Option.
XVIII. TERMINATION OR SUSPENSION OF THE PLAN
The Board of Directors may at any time suspend or terminate the Plan. The
Plan, unless sooner terminated by action of the Board of Directors, shall
terminate at the close of business on the Termination Date. Options may not be
granted while the Plan is suspended or after it is terminated. Rights and
obligations under any Option granted while the Plan is in effect shall not be
altered or impaired by suspension or termination of the Plan, except upon the
consent of the person to whom the Option was granted. The power of the Committee
to construe and administer any Options granted prior to the termination or
suspension of the Plan under Article III nevertheless shall continue after such
termination or during such suspension.
XIX. GOVERNING LAW
The Plan and such Options as may be granted thereunder and all related
matters shall be governed by, and construed and enforced in accordance with, the
laws of the State of Delaware from time to time obtaining.
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XX. PARTIAL INVALIDITY
The invalidity or illegibility of any provision hereof shall not be deemed
to affect the validity of any other provision.
XXI. EFFECTIVE DATE
The Plan shall become effective at 9:00 a.m., New York City Time, on the
Effective Date.
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EXHIBIT 10.5
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OPTION AGREEMENT
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This OPTION AGREEMENT (the "Agreement") dated effective as of
February 1, 1995, provides for the granting of an option by Jungle Jim's
Playlands, Inc., a Delaware corporation (the "Corporation"), to Nabil N.
El-Hage, an employee of the Corporation (the "Optionee");
The Corporation and the Optionee have concurrently herewith entered
into an Executive Employment Agreement (the "Employment Agreement"), to which
this Agreement is attached as Exhibit A and incorporated by reference. In
connection with such Employment Agreement, the Board of Directors of the
Corporation has determined that the Optionee is to be granted an option to buy
shares of the Corporation's common stock, par value $.01 per share (the
"Shares"), on the terms and subject to the conditions hereinafter provided.
1. Number of Shares: Option Price. The Corporation hereby grants to
the Optionee an option (the "Option") to purchase Two Million (2,000,000) Shares
at a price of One Dollar Ten Cents ($1.10) per Share, One Million (1,000,000)
Shares at a price of One Dollar Sixty-Five Cents ($1.65) per Share and One
Million (1,000,000) Shares at a price of Two Dollars and Twenty Cents ($2.20)
per Share (collectively, the "Option Shares," and the various prices being
collectively referred to as the "Per Share Exercise Price") on the terms and
subject to the conditions set forth herein. The Optionee shall not have any of
the rights of a stockholder with respect to the Shares covered hereby unless and
until the valid exercise of this Option in accordance with the terms and
conditions contained herein. The Option shall be a nonqualified or nonstatutory
stock option within the meaning of the Internal Revenue Code of 1986, as
amended.
2. Period of Option and Conditions of Exercise.
(a) The term of this Option Agreement and the Option covered
hereby shall commence on the date hereof (the "Date of Grant") and terminate
upon the earlier of: (i) the expiration of eight (8) years from the Date of
Grant (the "Expiration Date"), and (ii) the time at which the Option is
completely terminated pursuant to Section 3 below.
<PAGE>
Upon the termination of the Option, all rights of the Optionee hereunder shall
cease.
(b) The Option shall become exercisable as to one-sixteenth of
the Option Shares on a pro rata basis three (3) months after the Date of Grant
and as to an additional one-sixteenth of the Option Shares on a pro rata basis
upon each of the next fifteen succeeding three-month anniversary dates of the
Date of Grant thereafter. Upon the (i) liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary or (ii) merger or
consolidation of the Corporation with or into another corporation resulting in
the stockholders of the Corporation immediately prior to such transaction owning
less than a majority of the outstanding voting stock of the surviving or
successor entity, or the sale of all or substantially all of the Corporation's
assets, the Option shall become exercisable in full.
(c) If, prior to the date upon which this Option has become
exercisable with respect to all of the Option Shares, the Corporation determines
to effect a transaction (including, without limitation, a merger, consolidation
or sale of all or substantially all of the Corpora- tion's assets in one
transaction) in which the previously outstanding Shares are changed into or
exchanged for common stock or other securities of another corporation or
interests in a noncorporate entity or other property (including cash) or any
combination of any of the foregoing (each, a "Transfer Event"), the Option shall
be exercisable, subject to the satisfaction of the conditions to exercisability
provided in Section 2(b) hereof, for the same property into which the number of
Shares for which the Option shall be exercisable would have been changed into or
exchanged for had such exercise occurred immediately prior to such Transfer
Event (and the provisions of Section 5 hereof, permitting payment of the
exercise price in shares or withholding of shares to pay the exercise price or
withholding obligations shall be modified to the extent practicable so as to be
applicable to the property into which such shares have been changed into or
exchanged for).
(d) The Option may be exercised only to purchase whole Shares,
and in no case may a fraction of a Share be purchased. The right of the Optionee
to purchase Option Shares may be exercised in whole at any time or in part from
time to time to the extent the Option has become exercisable in accordance with
Section 2(b) hereof and prior
2
<PAGE>
to the earlier of: (1) the Expiration Date, and (ii) as to any portion of the
Option, the time at which such portion is terminated pursuant to Section 3
below.
3. Termination Upon Termination of Employment.
(a) If the Optionee's employment with the Corporation or its
subsidiaries terminates for Cause (as defined in Section 7(c) of the Employment
Agreement), the Option shall immediately terminate.
(b) If the Optionee shall die while an employee of the
Corporation or a subsidiary, to the extent the Option is exercisable on the date
of such death, the Optionee's estate shall be permitted to exercise the Option
as to the portion then exercisable and the Option shall not terminate, until the
earlier of (i) one year after the Date of Death, and (ii) the Expiration Date.
(c) If the Optionee's employment with the Corporation or its
subsidiaries terminates by reason of Disability (as defined in section 7(b) of
the Employment Agreement), to the extent the Option is exercisable on the date
of such Disability, the Optionee shall be permitted to exercise the Option as to
the portion then exercisable and the Option shall not terminate, until the
earlier of: (i) one year following the date of Disability, and (ii) the
Expiration Date.
(d) If the Optionee's employment with the Corporation or its
subsidiaries shall terminate by reason of resignation by the Optionee (other
than for Good Cause, as defined in the Employment Agreement), to the extent the
Option is exercisable on the date of such resignation, the Optionee shall be
permitted to exercise the Option as to the portion then exercisable and the
Option shall not terminate, until the earlier of: (i) the thirtieth day
following the date of resignation, and (ii) the Expiration Date.
(e) If the Optionee's employment with the Corporation or its
subsidiaries shall otherwise terminate, to the extent the Option is exercisable
on the date of such termination, the Optionee shall be permitted to exercise the
Option as to the portion then exercisable and the Option shall not terminate,
until the earlier of: (i) the one hundred eightieth day following the date of
such termination, and (ii) the Expiration Date.
3
<PAGE>
4. Non-Transferability of Option; Death of Optionee. The Option and
this Option Agreement shall not be transferable otherwise than by will or by the
laws of descent and distribution, or to a trust of which Optionee is the
trustee, and of which the Optionee, his spouse and/or his lineal descendants are
the beneficiaries; and the Option may be exercised, during the lifetime of the
Optionee, only by the Optionee, and, in the event of the death of the Optionee,
only by the Optionee's estate or, either during the Optionee's lifetime or upon
his death, by the trustee if the Option has been transferred to a trust in
accordance with this Section. More particularly, but without limiting the
generality of the foregoing, the Option may not be assigned, transferred (except
as provided above), pledged or hypothecated in any way, shall not be assignable
by operation of law and shall not be subject to execution, attachment or similar
process. Any attempted assignment, transfer, pledge, hypothecation or other
disposition of the Option contrary to the provisions hereof shall be null and
void and without effect.
5. Exercise of Option. The Option shall be exercised in the
following manner: the Optionee or his or her estate shall deliver to the
Corporation written notice specifying the number of Option Shares which he or
she elects to purchase and a date, not more than ninety (90) day after the date
of such notice, upon which such Shares shall be purchased and payment therefor
shall be made. Upon delivery to the Corporation on such date of either (i) cash
or certified or bank cashier's check payable to the order of the Corporation, in
an amount equal to the product of the number of Option Shares specified in such
notice and the Per Share Exercise Price (such product being referred to as the
"Current Exercise Price") or (ii) shares of Common Stock registered in the name
of Employee (including by causing the Corporation to withhold shares of Common
Stock otherwise issuable pursuant to the exercise of the Option) which shares of
Common Stock have a Fair Market Value, as defined below, equal to the Current
Exercise Price of the Option Shares purchased, together with payment, by cash or
certified or bank cashier's check payable to the order of the Corporation or by
such other method as shall be acceptable to the Corporation, of such amount as
the Corporation deems necessary to satisfy its liability to withhold federal,
state or local income or other taxes incurred by reason of the exercise or the
transfer of Shares thereupon, the Option Shares so purchased shall thereupon be
promptly delivered to the Optionee or his estate. Provided, however,
4
<PAGE>
that if any securities or other law or regulation of any commission or agency of
competent jurisdiction shall require the Corporation or the exercising Optionee
to take any action with respect to the Shares acquired by the exercise of an
Option, then the date upon which the Corporation shall issue or cause to be
issued the certificate or certificates for the Shares shall be postponed until
full compliance has been made with all such requirements of law or regulation;
provided, that the Corporation and the Optionee shall each use its best efforts
to take all necessary action to comply with such requirements of law or
regulation. Notwithstanding the foregoing, the Optionee may elect to satisfy any
withholding obligations, in whole or in part, (i) by causing the Corporation to
withhold shares of Common Stock otherwise issuable pursuant to the exercise of
the Option or (ii) by delivering to the Corporation shares of Common Stock
already owned by the Optionee, in each case having a Fair Market Value equal to
the amount of such withholding obligations. The Fair Market Value of such shares
shall be determined as of the date that the amount of tax to be withheld is to
be determined. For purposes of this Agreement, the "Fair Market Value" per share
of the Corporation's Common Stock on any date shall be deemed to be the closing
price of the Common Stock on the principal national securities exchange on which
the Corporation's Common Stock is then listed or admitted to trading, if the
Common Stock is then listed or admitted to trading on any national securities
exchange. The closing price shall be the last reported sale price regular way,
or, in case no such sale takes place on such day, the average of the closing bid
and asked prices regular way, as reported by said exchange. If the Corporation's
Common Stock is not then so listed on a national securities exchange, the fair
market value per share of the Corporation's Common Stock on any date shall be
deemed to be the closing price (the last reported sale price regular way) in the
over-the-counter market as reported by the NASDAQ National Market System, if the
Common Stock closing price is then reported on the NASDAQ National Market
System, or, if the Corporation's Common Stock is not then reported by NASDAQ
National Market System, shall be deemed to be the mean between the
representative closing bid and asked prices of the Corporation's Common Stock in
the over-the-counter market as reported by the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"), or if the
Corporation's Common Stock is not then quoted by NASDAQ, as furnished by any
member of the National Association of Securities Dealers, Inc. selected from
time to time by the
5
<PAGE>
Corporation for that purpose. If no member of the National Association of
Securities Dealers, Inc. furnishes quotes with respect to the Corporation's
Common Stock, such fair market value shall be determined by resolution of the
Corporation's Board of Directors. Notwithstanding the foregoing provisions of
this Section, if the Corporation shall at any time determine it is impracticable
to apply the foregoing methods of determining Fair Market Value, the
Corporation's Board of Directors is empowered to adopt other reasonable methods
of determining Fair Market Value for such purpose.
6. Specific Restrictions Upon Option Shares. The Optionee hereby
agrees with the Corporation as follows:
(a) The Optionee shall acquire the Option Shares for
investment purposes only and not with a view to resale or other distribution
thereof to the public in violation of the Securities Act of 1933, as amended
(the "1933 Act"), and shall not dispose of any Option Shares in transactions
which, in the opinion of counsel to the Corporation, violate the 1933 Act, or
the rules and regulations thereunder, or any applicable state securities or
"blue sky" laws; and further
(b) If any Option Shares shall be registered under the 1933
Act, no public offering (otherwise than on a national securities exchange, as
defined in the Securities Exchange Act of 1934, as amended) of any Option Shares
shall be made by the Optionee (or any other persons) under such circumstances
that he or she (or such person) may be deemed an underwriter, as defined in the
1933 Act; and further
(c) The Optionee agrees that the Corporation shall have the
authority to endorse upon the certificate or certificates representing the
Option Shares such legends referring to the foregoing restrictions, any
restrictions resulting from the fact that the Optionee is a party to the
Stockholders' Agreement and any other applicable restrictions as it may deem
appropriate.
7. Adjustments. In the event of the declaration of any stock
dividend on the Common Stock or in the event of any reorganization, merger,
consolidation, acquisition, separation, recapitalization, stock split, reverse
stock split, combination or exchange of the Common Stock or like adjustments,
the number of Shares subject to any Option granted pursuant to this Plan, and/or
the Per Share Exercise
6
<PAGE>
Price, shall be adjusted by appropriate changes in this Agreement and in any
Options outstanding pursuant to this Agreement. In the event of the payment of
any dividend or other distribution of cash or property in respect of the Common
Stock after the Date of Grant and prior to exercise of the Option, the exercise
price per share of the Option shall be reduced by the amount of cash or the fair
market value (as determined in good faith by the Board of Directors) of any
other property per share so paid.
8. Stockholders Agreement. Optionee is a party to the Amended and
Restated Stockholders and Voting Agreement dated as of April 29, 1994 by and
between the Corporation and the persons listed on Schedule I thereto (the
"Stockholders Agreement"). Optionee shall be subject to all of the terms and
provisions of the Stockholders Agreement as a "Management Stockholder" within
the meaning of Section 2.01(a)(ii) thereof (but not as to any shares of capital
stock of the Corporation held by Optionee as of the date hereof) if (but only
if) Optionee shall be terminated for Cause under the Employment Agreement or
Optionee shall violate the provisions of the Nondisclosure/Noncompetition
Agreement dated as of the date hereof between Optionee and the Corporation.
Optionee shall in any event remain subject to all of the term and provisions of
the Stockholders Agreement applicable to the "Stockholders".
9. Notice. Any notice required or permitted under this Option
Agreement shall be deemed given when delivered personally, or when deposited in
a United States Post Office as registered mail, postage prepaid, addressed, as
appropriate, either to the Optionee at his or her address set forth below or
such other address as he or she may designate in writing to the Corporation, and
to the Corporation at 9000 Wurzbach, San Antonio, Texas 78240, Attention:
President, or such other address as the Corporation may designate in writing to
the Optionee.
10. Failure to Enforce Not a Waiver. The failure of the Corporation
to enforce at any time any provision of this Option Agreement shall in no way be
construed to be a waiver of such provision or of any other provision hereof.
7
<PAGE>
11. Governing Law. This Option Agreement shall be governed by and
construed according to the laws of the State of Delaware.
8
<PAGE>
IN WITNESS WHEREOF, the Corporation has executed this Option on the
day and year first above written.
JUNGLE JIM'S PLAYLANDS, INC.
By: /s/ Mark E. Jennings
---------------------------
The undersigned hereby accepts, and agrees to all terms and provisions of the
foregoing Option Agreement.
/s/ Nabil N. El-Hage
---------------------------
Signature
Printed Name and Address:
Nabil N. El-Hage
153 North Avenue
---------------------------
Weston, MA 02193
---------------------------
9
<PAGE>
AMENDMENT TO
OPTION AGREEMENT
AMENDMENT TO OPTION AGREEMENT (this "Amendment"), dated as of April
11, 1997, among Jeepers! Inc., a Delaware corporation (the "Company"), and Nabil
N. El-Hage ("Optionee").
RECITALS
A. The Company and Optionee previously entered into an Option Agreement,
dated as of February 1, 1995 (the "Existing Option Agreement"), under which the
Company has granted Optionee options to buy shares of the Company's Common
Stock.
B. The Company and Optionee wish to enter into this Amendment in order to
modify the Per Share Exercise Price of such options.
In consideration of the foregoing, the Company and Optionee agree as
follows:
SECTION 1
Amendment to Existing Option Agreement
--------------------------------------
Section 1 of the Existing Option Agreement is amended by (i) deleting the
reference in such Section to the amount "One Dollar Ten Cents ($1.10)" and
inserting in lieu thereof the amount "Fifty Five Cents ($0.55)", (ii) deleting
the reference in such Section to "One Dollar Sixty-Five Cents ($1.65)" and
inserting in lieu thereof the amount "Fifty-Five Cents ($0.55)", and (iii)
deleting the reference in such Section to "Two Dollars and Twenty Cents ($2.20)"
and inserting in lieu thereof the amount "Fifty Five Cents ($0.55)".
SECTION 2
Miscellaneous
-------------
(a) Effective Date. This Amendment shall be effective as of the date
hereof upon the execution and delivery hereof by the Company and Optionee.
Except as expressly amended herein, the Existing Option Agreement shall remain
in full force and effect in accordance with its terms.
<PAGE>
(b) Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of Delaware.
(c) Entire Agreement. This Amendment contains the entire agreement of the
parties hereto and supersedes any and all prior agreements, oral or written, and
negotiations between said parties, regarding the subject matter hereof.
IN WITNESS WHEREOF, this Amendment has been executed by a duly authorized
officer of the Company and Optionee.
/s/ Nabil N. El-Hage
--------------------------
Nabil N. El-Hage
COMPANY:
JEEPERS! INC.
By: /s/ Kenneth J. Sanginario
----------------------------
Name: K. Sanginario
Title: Chief Financial Officer
2
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
1. Jungle Jim's Playlands of Texas, Inc.
2. Jungle Jim's Playlands of Utah, Inc.
3. Jungle Jim's Playlands of Kansas, Inc.
4. Jungle Jim's Playlands of Arizona, Inc.
5. Jungle Jim's Playlands of Maryland, Inc.
6. Jungle Jim's Playlands Leasing, Inc.
7. Jungle Jim's Playlands Franchise Systems, Inc.
8. Childrens Amusement of San Antonio, Inc.
9. Jeepers! of New Jersey, Inc.
10. Jeepers! of Virginia, Inc.
11. Jeepers! of Olathe, Inc.
12. Jeepers! of Des Plaines, Inc.
13. Jeepers! of Norridge, Inc.
14. Jeepers! of Macomb, Inc.
15. Jeepers! of Wonderland, Inc.
16. Jeepers! of Crossgates Commons, Inc.
17. Jeepers! of Walden, Inc.
18. Jeepers! of Glen Burnie, Inc.
19. Jeepers! of Nyack, Inc.
20. Jeepers! of Kingston, Inc.
21. Jeepers! of Auburn Hills, Inc.
22. Jeepers! of Michigan, Inc.
23. Jeepers! of Illinois, Inc.
24. Jeepers! of Missouri, Inc.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" and to the use of our report dated
March 5, 1998 (except as to Note 13 as to which the date is April 6, 1998) in
Amendment No. 1 to the Registration Statement (Form S-1 No. 333-50297) and
related Prospectus of Jeepers! Inc. for the registration of shares of its
common stock.
Ernst & Young LLP
Boston, Massachusetts
April 24, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE BODY OF THE ACCOMPANYING FORM S-1
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1999
<PERIOD-START> DEC-29-1997
<PERIOD-END> MAR-29-1998
<CASH> 3,914,272
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 278,791
<CURRENT-ASSETS> 5,493,459
<PP&E> 23,322,248
<DEPRECIATION> (6,640,268)
<TOTAL-ASSETS> 22,739,447
<CURRENT-LIABILITIES> 5,540,525
<BONDS> 0
46,317,981
0
<COMMON> 1,805
<OTHER-SE> (31,083,919)
<TOTAL-LIABILITY-AND-EQUITY> 22,739,447
<SALES> 7,206,281
<TOTAL-REVENUES> 7,206,281
<CGS> 1,307,325
<TOTAL-COSTS> 5,487,787
<OTHER-EXPENSES> 1,576,537
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 65,984
<INCOME-PRETAX> 146,321
<INCOME-TAX> 0
<INCOME-CONTINUING> 141,957
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 146,321
<EPS-PRIMARY> (4.05)
<EPS-DILUTED> (4.05)
</TABLE>
