<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
-----------------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE THIRTEEN AND TWENTY-SIX WEEK PERIODS
--------------------------------------------
ENDED NOVEMBER 27, 1996
-----------------------
Commission File Number 0-2849
AMERICAN RECREATION CENTERS, INC.
Incorporated in California Federal Employer No. 94-1441151
11171 Sun Center Drive, Suite 120, Rancho Cordova, CA 95670
Mail Address: P.O. Box 580, Rancho Cordova, CA 95741
-------------------------------------------------------
Telephone: Area Code (916) 852-8005
------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Capital Stock Outstanding as of November 27, 1996 - 4,606,199 shares
Page 1 of 12
Exhibit Index on Page 2
<PAGE>
AMERICAN RECREATION CENTERS, INC.
INDEX TO FORM 10-Q
FOR THE THIRTEEN AND TWENTY-SIX WEEK PERIODS
ENDED NOVEMBER 27, 1996
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (all of which are unaudited)
Condensed Consolidated Balance Sheet 3
Consolidated Statement of Income and Retained Earnings 4
Condensed Consolidated Statement of Cash Flows 5
Notes To Condensed Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
The following exhibits of the Company are included or
incorporated herein. (Note: The exhibit number corresponds
to the specific number within Item 601 of Regulation S-K)
Exhibit
Number
------
27.1 Financial Data Schedule
10.5 American Recreation Centers, Inc.
1996 Director Plan
SIGNATURES 12
2
<PAGE>
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
November 27, May 29,
1996 1996
(Unaudited) (Audited)
------------- ---------
<S> <C> <C>
ASSETS
------
Current assets:
Cash and equivalents $ 3,553 $ 3,489
Other current assets 3,192 3,266
------- --------
Total current assets 6,745 6,755
------- --------
Property, equipment and leaseholds, at cost
Land and buildings 41,636 41,965
Machinery and equipment 38,517 37,777
Leaseholds and leasehold improvements 8,913 8,532
------- --------
89,066 88,274
Less - accumulated depreciation and amortization (30,194) (28,572)
------- --------
58,872 59,702
------- --------
Property held for sale 2,558 2,557
Notes receivable 1,860 1,741
Other assets 1,350 1,376
------- --------
$71,385 $ 72,131
======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 6,576 $ 6,134
Short-term borrowings 300 -
Current maturities of long-term debt 1,764 1,796
------- --------
Total current liabilities 8,640 7,930
------- --------
Long-term debt and capital leases 25,460 26,194
------- --------
Income taxes deferred to future years 7,209 7,209
------- --------
Minority interests 1,849 2,060
------- --------
Shareholders' equity
Common stock:
Authorized - 21,484,375 shares
Issued and outstanding -
4,606,199 and 5,047,619 shares 9,584 9,845
Preferred stock:
Authorized - 5,000,000 shares
Issued and outstanding - none - -
Retained earnings 18,643 18,893
------- --------
Total shareholders' equity 28,227 28,738
------- --------
Commitments and contingencies
$71,385 $ 72,131
======= ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
(in thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
-------------------- ----------------------
Nov. 27, Nov. 29, Nov. 27, Nov. 29,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenue:
Bowling and entertainment
activities $ 8,333 $ 7,872 $14,670 $13,983
Beverage and food 3,445 3,312 5,847 5,671
Other 258 291 526 646
------- ------- ------- -------
12,036 11,475 21,043 20,300
------- ------- ------- -------
Operating, general and
administrative expenses:
Salaries, wages and employee
benefits 4,696 4,526 8,950 8,553
Operating costs 3,495 3,326 6,875 6,589
Cost of beverage and food sales 1,129 1,020 1,945 1,748
Selling, general and administrative 591 560 1,067 987
Depreciation and amortization 971 903 1,907 1,815
------- ------- ------- -------
10,882 10,335 20,744 19,692
------- ------- ------- -------
Operating income 1,154 1,140 299 608
Interest expense (649) (626) (1,295) (1,375)
Interest and other income 76 193 173 319
Gain on sale of stock option - - 800 -
------- ------- ------- -------
Income (Loss) from continuing
operations before provision for
income taxes and minority interests 581 707 (23) (448)
Provision for income taxes (205) (243) (2) 179
Minority interests (68) (81) 14 (2)
------- ------- ------- -------
Income (Loss) from continuing
operations 308 383 (11) (271)
Discontinued operations:
Gain on sale of investment in The
Right Start, Inc., net of
applicable income
taxes of $320 and $1,568 - - 360 2,251
Income from operations of The
Right Start, Inc., net of
applicable income
taxes of $49 - - - 54
------- ------- ------- -------
Net income 308 383 349 2,034
Retained earnings, beginning of
period 18,893 16,898
Cash dividends ($.065 and $.0625) (599) (630)
------- -------
Retained earnings, end of period $18,643 $18,302
======= =======
Earnings (Loss) per share:
Continuing operations $ 0.07 $ 0.08 $ 0.00 ($0.05)
Discontinued operations 0.00 0.00 0.08 0.46
------- ------- ------- -------
$ 0.07 $ 0.08 $ 0.08 $0.41
======= ======= ======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Twenty-six Weeks Ended
---------------------------------
November 27, November 29,
1996 1995
----------- ------------
<S> <C> <C>
Cash Flows from (used in) Operating Activities:
Net income $ 349 $ 2,034
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,907 1,813
Income from discontinued operations (360) (2,305)
Gain on sale of stock option (800) -
Results attributed to minority interests (14) 2
Decrease in other current assets 74 76
Increase (Decrease) in accounts payable
and accrued expenses 802 (2,742)
------ -------
Net cash from (used in) operations 1,958 (1,122)
------ -------
Cash Flows from (used in) Investing Activities:
Proceeds from sale of subsidiary's stock - 11,811
Proceeds from sale of stock option 800 -
Expenditures for property, equipment and leaseholds (1,023) (3,829)
Other (345) (2)
------ -------
Net cash from (used in) investing activities (568) 7,980
------ -------
Cash Flows from (used in) Financing Activities:
Short-term borrowings 300 (415)
Issuance of long-term debt - 2,200
Repayment of long-term debt (766) (4,856)
Dividends to shareholders (599) (630)
Issuance (Retirement) of common stock (261) (64)
------ -------
Net cash used in financing activities (1,326) (3,765)
------ -------
Net increase in cash and equivalents 64 3,093
Cash and equivalents at beginning of year 3,489 4,508
------ -------
Cash and equivalents at end of year $3,553 $ 7,601
====== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - Description of Business and Significant Accounting Policies:
- --------------------------------------------------------------------
American Recreation Centers, Inc. and its subsidiaries (the Company) operate
bowling centers in California, Texas, Wisconsin, Oklahoma, Kentucky and
Missouri.
There have been no changes in the Company's significant accounting policies as
set forth in the Company's 1996 annual report. These unaudited financial
statements as of November 27, 1996 and for the three and six month periods ended
November 27, 1996 and November 29, 1995 have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
"Discontinued Operations" include the operations and gain on sale of the
Company's majority interest in The Right Start, Inc. (Right Start), a catalog
company and retailer of infants' and children's products. See Note 6.
NOTE 2 - Long-term Debt:
- -----------------------
Long-term debt is comprised of the following (in thousands):
<TABLE>
<CAPTION>
November 27, May 29,
1996 1996
------------ -------
<S> <C> <C>
Long-term notes:
Secured notes payable in monthly
installments with a weighted
average interest rate of 8.94%
at November 27, 1996 $26,488 $27,095
Other 736 895
------- -------
27,224 27,990
Less-amounts due within one year 1,764 1,796
------- -------
$25,460 $26,194
======= =======
</TABLE>
NOTE 3 - Operations:
- -----------------------------------
The results of operations for this thirteen week period is not necessarily
indicative of the results to be expected for the entire year. Bowling is highly
seasonal with revenues during the first quarter normally not exceeding 19% to
22% of those for a full year. Second quarter revenue typically represents
between 25% to 27% of revenue for the full year.
6
<PAGE>
NOTE 4 - Earnings Per Share of Common Stock:
- -------------------------------------------
Earnings per share is computed on the weighted average number of shares of
common stock and common stock equivalents outstanding during each period.
Common stock equivalents include the Company's stock options. The weighted
average number of common shares and common stock equivalents outstanding were
4,606,199 and 5,059,557 for the thirteen week periods ended November 27, 1996
and November 29, 1995; and 4,616,681 and 5,057,241 for the twenty-six week
periods then ended.
NOTE 5 - Gain on Sale of Stock Option:
- -------------------------------------
During the first quarter of fiscal 1997 the Company sold its option to
repurchase up to 400,000 shares of Right Start common stock for $800,000 cash,
resulting in an after-tax gain of $480,000, equal to $.10 per share.
NOTE 6 - Gain on Sale of The Right Start, Inc.:
- ----------------------------------------------
On August 4, 1995, the Company sold its 62.5 percent ownership in Right Start
for $11,811,000 in cash and recorded a $2,251,000 after-tax gain, equal to $.45
per share, in the first quarter of fiscal 1996. In connection with the
transaction, the Company had agreed to reimburse Right Start up to $680,000
should it be unable to sustain ordinary loss treatment for its deferred loss tax
carry-forward and it have sufficient taxable income in or before its fiscal year
2000. During the first quarter of fiscal 1997 the Company received a favorable
ruling from the IRS allowing ARC to reverse the reserve established for the
agreement at the time of the sale. This resulted in a $360,000 increase in the
gain on sale which has been reported in discontinued operations.
NOTE 7 - Subsequent Event:
- -------------------------
On December 20, 1996 the Company's 85% owned joint venture, Triangle Bowl
Associates (TBA), completed the acquisition of two bowling centers, comprising
56 lanes, in the Dallas, Texas area. The purchase price for the businesses,
equipment, liquor licenses and suppliers for both centers and the land and
building for one of the centers totaled $1.62 million. TBA entered into a long-
term lease for the land and building of the second center. $1.325 million of the
purchase price was financed under a long-term bank loan.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introductory Note
- -----------------
This Quarterly Report on Form 10-Q contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934 and the Company intends that such
forward-looking statements be subject to the safe harbors created thereby.
These forward-looking statements include ( i ) the success of the Company's
operations, particularly its new Fun Fest and family entertainment center (FEC)
concepts, (ii) anticipated competition, (iii) potential future revenue and
income, (iv) potential future decreases in costs, and (v) the need for, and
availability of, additional financing.
The forward-looking statements included herein are based on current expectations
that involve a number of risks and uncertainties. Such factors include, among
others, the following: general economic and business conditions; advertising,
marketing and sales efforts; success of the Company's efforts to restage certain
bowling centers as family entertainment centers; acceptance of new programs and
entertainment offerings; business abilities and judgement of personnel;
availability of qualified management personnel; changes in, or the failure to
comply with, government regulations; weather conditions; operating cost
containment efforts; continued availability of lines of credit; availability of
qualified construction personnel; ability to remodel, refurbish and restage
Company facilities in a cost effective and timely manner; uncertainties
surrounding consolidation of the industry; the historically cyclical nature of
the bowling industry; and other factors referenced in this Form 10-Q.
Although the Company believes that the assumptions underlying the forward-
looking statements are reasonable, any of the assumptions could prove inaccurate
and therefore, there can be no assurance that the results contemplated in the
forward-looking statements will be realized. In addition, the business and
operations of the Company are subject to substantial risks, as discussed above,
which increase the uncertainty inherent in such forward-looking statements. In
light of the significant uncertainties inherent in the forward-looking
information included herein, the inclusion of such information should not be
regarded as a representation by the Company or any other person that the
objectives or plans of the Company will be achieved.
The following is managements' discussion and analysis of certain significant
factors which have affected the earnings and financial position of the Company
during the period included in the accompanying financial statements. This
discussion compares the thirteen and twenty-six week periods ended November 27,
1996 with the thirteen and twenty-six week period ended November 29, 1995. This
discussion should be read in conjunction with the financial statements and notes
thereto.
8
<PAGE>
Results of Continuing Operations
- --------------------------------
Second quarter
Revenue for the second quarter of fiscal 1997 increased nearly 5% to $12.0
million from $11.5 million while income from continuing operations declined to
$308,000, or $.07 per share from $383,000, or $.08 per share.
The overall increase in revenue for the quarter was attributable to acquisitions
and new revenue attractions. The Company's new Bowl Aire Center in Wisconsin,
the new Fun Fest family entertainment center in Texas and other "FEC-type"
attractions installed at existing locations produced a total of over $1.0
million in revenue and contributed $122,000 in incremental operating income.
Revenue for comparable centers and comparable bowling operations declined
$442,000, or 4%. $80,000 of the decline was attributable to the Company's
Arlington, Texas center where 24 bowling lanes have been removed and
construction is underway to convert it to a Fun Fest FEC. The balance of the
decrease was due to a decline in bowler traffic which contributed to a 4% drop
in the volume of games bowled which led to a similar decrease in bowling lineage
revenue. Ancillary revenue sources such as beverage and food declined 3% and
2%, respectively from the decrease in bowler traffic. .
Operating income for the second quarter of fiscal 1997 increased slightly to
$1.154 million from $1.140 million. This was due to the incremental operating
income generated by new locations and new revenue attractions as discussed
above. These increases were partially offset by a decline in operating income
from comparable centers due to the drop in revenue at these centers. However,
the impact of the decline in revenue on operating income was partially mitigated
by a reduction in operating costs for comparable center operations.
Second quarter interest expense increased to $649,000 from $626,000 due
primarily to additional debt incurred to finance the Bowl Aire acquisition and
construction of the first Fun Fest. These increases were partially offset by
reductions in interest expense due to $2.6 million in debt that was retired
during last year's fourth quarter in connection with the sale of a commercial
real estate project. Interest and other income declined to $76,000 from
$193,000 because last year's numbers reflect the short-term investment of some
of the proceeds from the sale of the Company's majority interest in The Right
Start, Inc. (see Discontinued Operations below).
9
<PAGE>
Six months year-to-date
Revenue for the six months ended November 27, 1996 rose almost 4% to $21.0
million from $20.3 million. The net loss from continuing operations for the
same period improved to ($11,000), or $.00 per share from ($271,000), or ($.05)
per share. However, during this year's six month period an option to repurchase
400,000 shares of Right Start's common stock was sold for $800,000 in cash,
resulting in an after-tax gain of $480,000, or $.10 per share. The option had
been retained after last year's first quarter sale of Right Start and contained
exercise prices ranging from $3.60 to $6.00 over a seven year period. The
option was sold when Right Start's common stock was trading at $6 3/8.
As was the case with the results for the second quarter, the overall increase in
revenue was attributable to acquisitions and new revenue attractions. These new
revenue sources contributed over $2.0 million in new revenue and nearly $250,000
in incremental operating income. Revenue for comparable centers was off almost
6% for the period due to the decline in bowler traffic. Ancillary revenue
sources were down correspondingly. Beverage sales were down 4% and food sales
were down slightly less than 4%.
Operating income for the six month period declined from $608,000 last year to
$299,000 this year. Incremental operating income from new revenue sources was
not sufficient to offset the decline in comparable center, comparable operations
revenue. However, some of the comparable center revenue decline was offset by
cost reductions.
Interest expense was reduced from $1.375 million last year to $1.295 million
this year for the period. Increases in interest expense due to additional debt
incurred to finance the Bowl Aire acquisition and Fun Fest construction were
offset by the reduction in interest associated with the repayment of certain
debt upon the sale of a commercial real estate project as discussed above and
last year's prepayment at the beginning of the second quarter of approximately
$2.5 million in debt using a portion of the proceeds from the sale of Right
Start. Some of the Right Start proceeds were invested on a short-term basis
during last year's six month period which contributed to a decline in interest
income from $319,000 last year to $173,000 this year.
Results of Discontinued Operations
- ----------------------------------
During the first quarter of fiscal 1996, the Company sold its 62.5% ownership in
Right Start for $11.811 million in cash and recorded a $2.251 million after-tax
gain, equal to $.45 per share. In connection with the transaction, the Company
had agreed to reimburse Right Start up to $680,000 should it be unable to
sustain ordinary loss treatment for its deferred loss tax carry-forward and it
have sufficient taxable income in or before its fiscal 2000. During the first
quarter of fiscal 1997, the Company received a favorable ruling from the IRS
allowing it to reverse the reserve established for the reimbursement agreement
at the time of the sale. This resulted in a $360,000, or $.08 per share,
increase in the gain on sale which has been reported in discontinued operations.
10
<PAGE>
Liquidity and Capital Resources
- -------------------------------
At November 27, 1996, the Company had $10.168 million available under an unused
bank commitment. Advances can be used to acquire, construct or refurbish
bowling centers or to acquire other compatible recreation businesses and would
bear interest at the prime rate plus .75%.
The Company also maintains various line-of-credit arrangements to augment
seasonal shortfalls in working capital. At November 27, 1996 and November 29,
1995, there were no advances outstanding under the Company's $2 million line-of-
credit. Advances under this line would bear interest at the prime rate plus
.5%. There was $300,000 outstanding at November 27, 1996 under a $1 million
line-of-credit which is designated for use by one of the Company's wholly-owned
subsidiaries. This line bears interest at the prime rate plus 1%.
The Company's Board of Directors approved a stock repurchase plan in October
1995 that authorized repurchase of up to 20% of the Company's outstanding stock.
Through November 27, 1996, the Company had repurchased 499,530 shares,
representing nearly 10% of its common stock outstanding when the plan was
approved. The total cost of the reacquired shares was $3.337 million. The
repurchased shares were retired by the Company and not held as treasury shares.
The plan expired December 31, 1996.
The Company has paid quarterly cash dividends for over 28 consecutive years.
The second quarter dividend of $.065 per share represents a 4% increase over
last year when the quarterly dividend was $.0625 per share.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
AMERICAN RECREATION CENTERS, INC.
Date January 10, 1997 /s/Robert A. Crist
------------------ -----------------------------------------
Robert A. Crist, President
Date January 10, 1997 /s/Karen B. Wagner
------------------ -----------------------------------------
Karen B. Wagner, Vice President/Treasurer
12
<PAGE>
AMERICAN RECREATION CENTERS, INC.
1996 DIRECTOR PLAN
Exhibit 10.5
This 1996 DIRECTOR PLAN (the "Plan") is hereby established by American
Recreation Centers, Inc. (the "Company") and adopted by its Board of Directors
as of the 19th day of November, 1996 (the "Effective Date").
ARTICLE 1.
PURPOSES OF THE PLAN
1.1 PURPOSES. The purposes of the Plan are (a) to enhance the
Company's ability to attract and retain the services of qualified directors
(including only non-employee directors) upon whose judgment, initiative and
efforts the successful conduct and development of the Company's business largely
depends, and (b) to provide additional incentives to such persons to devote
their utmost effort and skill to the advancement and betterment of the Company,
by providing them an opportunity to participate in the ownership of the Company
and thereby have an interest in the success and increased value of the Company.
ARTICLE 2.
DEFINITIONS
For purposes of this Plan, the following terms shall have the meanings
indicated:
2.1 ADMINISTRATOR. "Administrator" means the Board.
2.2 AFFILIATED COMPANY. "Affiliated Company" means any "parent
corporation" or "subsidiary corporation" of the Company, whether now existing or
hereafter created or acquired, as those terms are defined in Sections 424(e) and
424(f) of the Code, respectively.
2.3 BOARD. "Board" means the Board of Directors of the Company.
2.4 CODE. "Code" means the Internal Revenue Code of 1986, as amended from
time to
2.5 COMMON STOCK. "Common Stock" means the Common Stock, without par
value, of the Company, subject to adjustment pursuant to Section 4.2 hereof.
2.6 DISABILITY. "Disability" means permanent and total disability as
defined in Section 22(e)(3) of the Code. The Administrator's determination of a
Disability or the absence thereof shall be conclusive and binding on all
interested parties.
Page 1 of 12
<PAGE>
2.7 EFFECTIVE DATE. "Effective Date" means the date on which the Plan is
adopted by the Board, as set forth on the first page hereof.
2.8 EXERCISE PRICE. "Exercise Price" means the purchase price per share of
Common Stock payable upon exercise of an Option.
2.9 FAIR MARKET VALUE. "Fair Market Value" on any given date means the
value of one share of Common Stock, determined as follows:
(a) If the Common Stock is then listed or admitted to trading on a
Nasdaq market system or a stock exchange which reports closing sale prices, the
Fair Market Value shall be the closing sale price on the date of valuation on
such Nasdaq market system or principal stock exchange on which the Common Stock
is then listed or admitted to trading, or, if no closing sale price is quoted on
such day, then the Fair Market Value shall be the closing sale price of the
Common Stock on such Nasdaq market system or such exchange on the next preceding
day on which a closing sale price is quoted.
(b) If the Common Stock is not then listed or admitted to trading on
a Nasdaq market system or a stock exchange which reports closing sale prices,
the Fair Market Value shall be the average of the closing bid and asked prices
of the Common Stock in the over-the-counter market on the date of valuation.
(c) If neither (a) nor (b) is applicable as of the date of valuation,
then the Fair Market Value shall be determined by the Administrator in good
faith using any reasonable method of evaluation, which determination shall be
conclusive and binding on all interested parties.
2.10 NASD DEALER. "NASD Dealer" means a broker-dealer that is a member of
the National Association of Securities Dealers, Inc.
2.11 NONQUALIFIED OPTION. "Nonqualified Option" means any Option that is
not an Incentive Option. To the extent that any Option designated as an
Incentive Option fails in whole or in part to qualify as an Incentive Option,
including, without limitation, for failure to meet the limitations applicable to
a 10% Shareholder or because it exceeds the annual limit provided for in Section
5.6 below, it shall to that extent constitute a Nonqualified Option.
2.12 NONQUALIFLED OPTION AGREEMENT. "Nonqualified Option Agreement" means
an Option Agreement with respect to a Nonqualified Option.
2.13 OPTION. "Option" means any option to purchase Common Stock granted
pursuant
2.14 OPTION AGREEMENT. "Option Agreement" means the written agreement
entered into between the Company and the Optionee with respect to an Option
granted under the Plan.
2.15 OPTIONEE. "Optionee" means a Participant who holds an Option.
2.16 PARTICIPANT. "Participant" means an individual or entity who holds an
Option under the plan.
Page 2 of 12
<PAGE>
2.17 10% SHAREHOLDER. "10% Shareholder means a person who, as of a relevant
date, owns or is deemed to own (by reason of the attribution rules applicable
under Section 424(d) of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of an Affiliated
company.
ARTICLE 3.
ELIGIBILITY
3.1 NONQUALIFIED OPTIONS. Members of the Board (but only if not employed
by the Company or an Affiliated Company), are eligible to receive Nonqualified
Options under the Plan.
ARTICLE 4.
PLAN SHARES
4.1 SHARES SUBJECT TO THE PLAN. A total of 100,000 shares of Common Stock
may be issued under the Plan, subject to adjustment as to the number and kind of
shares pursuant to Section 4.2 hereof. For purposes of this limitation, in the
event that (a) all or any portion of any Option granted or offered under the
Plan can no longer under any circumstances be exercised, or (b) any shares of
Common Stock are reacquired by the Company pursuant to a Nonqualified Option
Agreement, the shares of Common Stock allocable to the unexercised portion of
such Option, or the shares so reacquired, shall again be available for grant or
issuance under the Plan.
4.2 CHANGES IN CAPITAL STRUCTURE. In the event that the outstanding shares
of Common Stock are hereafter increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of the
Company by reason of a recapitalization, stock split, combination of shares,
reclassification, stock dividend, or other change in the capital structure of
the Company, then appropriate adjustments shall be made by the Administrator to
the aggregate number and kind of shares subject to this Plan, and the number and
kind of shares and the price per share subject to outstanding Option Agreements
in order to preserve, as nearly as practical, but not to increase, the benefits
to Participants.
ARTICLE 5.
OPTIONS
5.1 OPTION AGREEMENT. Each Option granted pursuant to this Plan
shall be evidenced by an Option Agreement which shall specify the number of
shares subject thereto, the Exercise Price per share. As soon as is practical
following the grant of an Option, an Option Agreement shall be duly executed and
delivered by or on behalf of the Company to the Optionee to whom such Option was
granted. Each Option Agreement shall be in such form and contain such additional
terms and conditions, not inconsistent with the provisions of this Plan, as the
Administrator shall, from time to time, deem desirable, including, without
limitation, the imposition of any rights of first refusal
Page 3 of 12
<PAGE>
and resale obligations upon any shares of Common Stock acquired pursuant to an
Option Agreement. Each Option Agreement may be different from each other Option
Agreement.
5.2 EXERCISE PRICE. The Exercise Price per share of Common Stock covered
by each Option shall be determined by the Administrator, subject to the
following: the Exercise Price of a Nonqualified Option shall not be less than
100% of Fair Market Value on the date the Nonqualified Option is granted.
5.3 PAYMENT OF EXERCISE PRICE. Payment of the Exercise Price shall be made
upon exercise of an Option and may be made, in the discretion of the
Administrator, subject to any legal restrictions, by: (a) cash; (b) check;
(c) the surrender of shares of Common Stock owned by the Optionee that have been
held by the Optionee for at least six (6) months, which surrendered shares shall
be valued at Fair Market Value as of the date of such exercise; (d) the
Optionee's promissory note in a form and on terms acceptable to the
Administrator; (e) the cancellation of indebtedness of the Company to the
Optionee; (f) the waiver of compensation due or accrued to the Optionee for
services rendered; (g) upon a Change of Control, as defined in Section 10,
Optionee may deliver these options to the Company and receive from the Company
the difference between the price of the Company's Common Stock in the Change of
Control transaction and the purchase price hereof; (h) provided that a public
market for the Common Stock exists, a "same day sale" commitment from the
Optionee and an NASD Dealer whereby the Optionee irrevocably elects to exercise
the Option and to sell a portion of the shares so purchased to pay for the
Exercise Price and whereby the NASD Dealer irrevocably commits upon receipt of
such shares to forward the Exercise Price directly to the Company; (I) provided
that a public market for the Common Stock exists, a "margin" commitment from the
Optionee and an NASD Dealer whereby the Optionee irrevocably elects to exercise
the Option and to pledge the shares so purchased to the NASD Dealer in a margin
account as security for a loan from the NASD Dealer in the amount of the
Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of
such shares to forward the Exercise Price directly to the Company; or (j) any
combination of the foregoing methods of payment or any other consideration or
method of payment as shall be permitted by applicable corporate law.
5.4 TERM AND TERMINATION OF OPTIONS. The term and termination of each
Option shall be as fixed by the Administrator, but no Option may be exercisable
more than ten (10) years after the date it is granted.
5.5 VESTING AND EXERCISE OF OPTIONS. Each Option shall vest and be
exercisable in one or more installments at such time or times and subject to
such conditions, including without limitation the achievement of specified
performance goals or objectives, as shall be determined by the Administrator.
5.6 NONTRANSFERABILITY OF OPTIONS. No Option shall be assignable or
transferable except by will or the laws of descent and distribution, and during
the life of the Optionee shall be exercisable only by such Optionee; provided,
however, that, in the discretion of the Administrator, any Option may be
assigned or transferred in any manner which an "incentive stock option" is
permitted to be assigned or transferred under the Code.
5.7 RIGHTS AS SHAREHOLDER. An Optionee or permitted transferee of an
Option shall have no rights or privileges as a shareholder with respect to any
shares covered by an Option until such
Page 4 of 12
<PAGE>
Option has been duly exercised and certificates representing shares purchased
upon such exercise have been issued to such person.
ARTICLE 6.
ADMINISTRATION OF THE PLAN
6.1 ADMINISTRATOR. Authority to control and manage the operation and
administration of the Plan shall be vested in the Board, which may delegate such
responsibilities in whole or in part to a committee consisting of two (2) or
more members of the Board (the "Committee"). Members of the Committee may be
appointed from time to time by, and shall serve at the pleasure of, the Board.
As used herein, the term "Administrator" means the Board or, with respect to any
matter as to which responsibility has been delegated to the Committee, the term
Administrator shall mean the Committee.
6.2 POWERS OF THE ADMINISTRATOR. In addition to any other powers or
authority conferred upon the Administrator elsewhere in the Plan or by law, the
Administrator shall have full power and authority: (a) to determine the persons
to whom, and the time or times at which, Nonqualified Options shall be granted
shall be offered, the number of shares to be represented by each Option and the
consideration to be received by the Company upon the exercise thereof; (b) to
interpret the Plan; (c) to create, amend or rescind rules and regulations
relating to the Plan; (d) to determine the terms, conditions and restrictions
contained in, and the form of, Option Agreements; (e) to determine the identity
or capacity of any persons who may be entitled to exercise a Participant's
rights under any Option; (f) to correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any Option Agreement; (g) to
accelerate the vesting of any Option; (h) to extend the exercise date of any
Option; (I) to provide for rights of first refusal and/or repurchase rights; (j)
to amend outstanding Option Agreements to provide for, among other things, any
change or modification which the Administrator could have provided for upon the
grant of an Option or in furtherance of the powers provided for herein; and (k)
to make all other determinations necessary or advisable for the administration
of the Plan, but only to the extent not contrary to the express provisions of
the Plan. Any action, decision, interpretation or determination made in good
faith by the Administrator in the exercise of its authority conferred upon it
under the Plan shall be final and binding on the Company and all Participants.
6.3 LIMITATION ON LIABILITY. No employee of the Company or member of the
Board or Committee shall be subject to any liability with respect to duties
under the Plan unless the person acts fraudulently or in bad faith. To the
extent permitted by law, the Company shall indemnify each member of the Board or
Committee, and any employee of the Company with duties under the Plan, who was
or is a party, or is threatened to be made a party, to any threatened, pending
or completed proceeding, whether civil, criminal, administrative or
investigative, by reason of such person's conduct in the performance of duties
under the Plan.
Page 5 of 12
<PAGE>
ARTICLE 7.
MERGERS AND OTHER REORGANIZATIONS
7.1 MERGERS AND OTHER REORGANIZATIONS. In the event that the Company at
any time proposes to enter into any transaction approved by the Board to sell
substantially all of its assets or merge or consolidate with any other entity as
a result of which either the Company is not the surviving corporation or the
Company is the surviving corporation and the ownership of the voting power of
the Company's capital stock changes by more than 50% as a result of such
transaction, or in the event of a "Recommended Share Purchase Offer" (as deemed
below) (a "Change in Control"), all unexercised Options, if not already
exercisable, shall concurrent with and conditioned upon the effective date of
the proposed transaction, be accelerated and the Participant shall have the
right to exercise such Options in respect to any or all of the shares pursuant
thereto at such time. In addition, in the event of a Change in Control. the Plan
and all unexercised Options shall terminate upon the effective date of such
transaction, unless provision is made in writing in connection with such
transaction for the continuance of the Plan and for the assumption of
outstanding Options, or the substitution for such Options of new options of
comparable value covering shares of a successor corporation, with appropriate
adjustments as to the number and kind of shares and prices, in which event the
Plan and such Options, or the new options substituted therefor, shall continue
in the manner and under the terms so provided. If such provision is not made in
such transaction, then the Administrator shall cause written notice of the
proposed transaction to be given to all Participants not less than fifteen (15)
days prior to the anticipated effective date of the proposed transaction. For
purposes of this Section 7.1, a "Recommended Share of Purchase Offer" shall be a
transaction in which an offer is made to purchase outstanding securities of the
Company constituting more than 50% of the voting power of the Company's capital
stock, which offer is recommended to the Company's security holders by the
Company's Board.
ARTICLE 8.
AMENDMENT AND TERMINATION OF THE PLAN
8.1 AMENDMENTS. The Board may from time to time alter, amend, suspend or
terminate the Plan in such respects as the Board may deem advisable. No such
alteration, amendment, suspension or termination shall be made which shall
substantially affect or impair the rights of any Participant under an
outstanding Option Agreement without such Participant's consent. Upon any such
alteration or amendment, any outstanding Option granted hereunder may, if the
Administrator so determines and if permitted by applicable law, be subject to
the more favorable tax treatment afforded to an Optionee pursuant to such terms
and conditions.
8.2 PLAN TERMINATION. Unless the Plan shall theretofore have been
terminated, the Plan shall terminate on the tenth (10th) anniversary of the
Effective Date and no Options may be granted under the Plan thereafter, but
Option Agreements then outstanding shall continue in effect in accordance with
their respective terms.
Page 6 of 12
<PAGE>
ARTICLE 9.
TAX WITHHOLDING
9.1 WITHHOLDING. The Company shall have the power to withhold, or require
a Participant to remit to the Company, an amount sufficient to satisfy any
applicable Federal, state, and local tax withholding requirements with respect
to any Options exercised under the Plan. To the extent permissible under
applicable tax, securities and other laws, the Administrator may, in its sole
discretion and upon such terms and conditions as it may deem appropriate, permit
a Participant to satisfy his or her obligation to pay any such tax, in whole or
in part, up to an amount determined on the basis of the highest marginal tax
rate applicable to such Participant, by (a) directing the Company to apply
shares of Common Stock to which the Participant is entitled as a result of the
exercise of an Option or (b) delivering to the Company shares of Common Stock
owned by the Participant. The shares of Common Stock so applied or delivered in
satisfaction of the Participant's tax withholding obligation shall be valued at
their Fair Market Value as of the date of measurement of the amount of income
subject to withholding.
ARTICLE 10.
MISCELLANEOUS
10.1 BENEFITS NOT ALIENABLE. Other than as provided above, benefits under
the Plan may not be assigned or alienated, whether voluntarily or involuntarily.
Any unauthorized attempt at assignment, transfer, pledge or other disposition
shall be without effect.
10.2 NO ENLARGEMENT OF EMPLOYEE RIGHTS. This Plan is strictly a voluntary
undertaking on the part of the Company and shall not be deemed to constitute a
contract between the Company and any Participant to be consideration for, or an
inducement to, or a condition of, the employment of any Participant. Nothing
contained in the Plan shall be deemed to give the right to any Participant to be
retained as an employee of the Company or any Affiliated Company or to interfere
with the right of the Company or any Affiliated Company to discharge any
Participant at any time.
10.3 APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of Common Stock pursuant to Option Agreements, except as otherwise provided
herein, will be used for general corporate purposes.
Page 7 of 12
<PAGE>
AMERICAN RECREATION CENTERS, INC.
NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Agreement") is entered into as of _______,
1996, by and between American Recreation Centers, Inc., a California corporation
(the "Company") and __________ (the "Optionee") pursuant to the Company's 1996
Director Plan (the "Plan").
1. GRANT OF OPTION. The Company hereby grants to Optionee an option (the
"Option") to purchase all or any portion of a total of ____ shares (the
"Shares") of the Common Stock of the Company at a purchase price of $____ per
share (the "Exercise Price"), subject to the terms and conditions set forth
herein and the provisions of the Plan. This Option constitutes a Nonqualified
stock option.
2. VESTING OF OPTION. The right to exercise this Option shall vest in
installments, and this Option shall be exercisable from time to time in whole or
in part as to any vested installment. The Optionee's right to exercise this
Option shall vest in ____ Shares immediately on the date hereof and, ____
additional shares, on each of the first four anniversaries of the date hereof.
No additional shares shall vest after the date of termination of Optionee's
"Continuous Service" (as defined in Section 3 below), but this Option shall
continue to be exercisable in accordance with section 3 hereof with respect to
that number of shares that have vested as of the date of termination of
Optionee's Continuous Service. Notwithstanding the foregoing, immediately prior
to the consummation of a Change in Control (as defined in Section 10 below), the
vesting of this Option shall accelerate and become fully exercisable.
3. TERM OF OPTION. Optionee's right to exercise this Option shall
terminate upon the first to occur of the following:
(a) the expiration of five (5) years from the date of this
Agreement;
(b) the expiration of three (3) months from the date of termination
of Optionee's Continuous Service if such termination occurs for any reason other
than permanent disability or death; provided, however, that if Optionee dies
during such three-month period the provisions of Section 3(d) below shall apply;
(c) the expiration of one (1) year from the date of termination of
Optionee's Continuous Service if such termination is due to permanent disability
of the Optionee (as defined in Section 22(e)(3) of the Code);
(d) the expiration of one (1) year from the date of termination of
Optionee's Continuous Service if such termination is due to Optionee's death or
if death occurs during either the three-month or one-month period following
termination of Optionee's Continuous Service pursuant to Section 3(b) or 3(C)
above, as the case may be; or
Page 8 of 12
<PAGE>
(e) a Change in Control of the Company if such options are
terminated pursuant to Section 10.
As used herein, the term "Continuous Service" means service as a member of
the Board of Directors of the Company.
4. EXERCISE OF OPTION. On or after the vesting of any portion of this
Option in accordance with Section 2 above, and until termination of this Option
in accordance with Section 3 above, the portion of this Option which has vested
may be exercised in whole or in part by the Optionee (or, after Optionee's
death, by the successor designated in Section 5 below) upon delivery of the
following to the Company at its principal executive offices:
(a) a written notice of exercise which identifies this Agreement and
states the number of Shares then being purchased (but no fractional Shares may
be purchased);
(b) the purchase price may be paid by: (a) cash; (b) check; (c) the
surrender of shares of Common Stock owned by the Optionee that have been held by
the Optionee for at least six (6) months, which surrendered shares shall be
valued at Fair Market Value as of the date of such exercise; (d) the Optionee's
promissory note in a form and on terms acceptable to the Administrator; (e) the
cancellation of indebtedness of the Company to the Optionee; (f) the waiver of
compensation due or accrued to the Optionee for services rendered; (g) upon a
Change of Control, as defined in Section 10, Optionee may deliver these options
to the Company and receive from the Company the difference between the price of
the Company's Common Stock in the Change of Control transaction and the purchase
price hereof; (h) provided that a public market for the Common Stock exists, a
"same day sale" commitment from the Optionee and NASD Dealer whereby the
Optionee irrevocably elects to exercise the Option and to sell a portion of the
shares so purchased to pay for the Exercise Price and whereby the NASD Dealer
irrevocably commits upon receipt of such shares to forward the Exercise Price
directly to the Company; (I) provided that a public market for the Common Stock
exists, a "margin" commitment from the Optionee and an NASD Dealer whereby the
Optionee irrevocably elects to exercise the Option and to pledge the shares so
purchased to the NASD Dealer in a margin account as security for a loan from the
NASD Dealer in the amount of the Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such shares to forward the Exercise Price
directly to the Company; or (j) any combination of the foregoing methods of
payment or any other consideration or method of payment as shall be permitted by
applicable corporate law; and
(c) a check or cash in the amount reasonably requested by the
Company to satisfy the Company's withholding obligations under federal, state or
other applicable tax laws with respect to the taxable income, if any, recognized
by the Optionee in connection with the exercise of this Option (unless the
Company and Optionee shall have made other arrangements for deductions or
withholding from Optionee's wages, bonus or other compensation payable to
Optionee, or by the withholding of Shares issuable upon exercise of this Option
or the delivery of Shares owned by the Optionee in accordance with Section 9 of
the Plan, provided such arrangements satisfy the requirements of applicable tax
laws).
5. DEATH OF OPTIONEE: No Assignment. The rights of the Optionee under
this Agreement may not be assigned or transferred except by will or by the laws
of descent and distribution, and may be exercised during the lifetime of the
Optionee only by such Optionee. Any
Page 9 of 12
<PAGE>
attempt to sell, pledge, assign, hypothecate, transfer or dispose of this Option
in contravention of this Agreement or the Plan shall be void and shall have no
effect. If the Optionee's Continuous Service terminates as a result of
Optionee's death, and provided Optionee's rights hereunder shall have vested
pursuant to Section 2 hereof, Optionee's legal representative, Optionee's
legatee, or the person who acquired the right to exercise this Option by reason
of the death of the Optionee (individually, a "Successor") shall succeed to the
Optionee's rights and obligations under this Agreement. After the death of the
Optionee, only a Successor may exercise this Option.
6. REPRESENTATIONS AND WARRANTIES OF OPTIONEE.
(a) Optionee represents and warrants that this Option is being
acquired by Optionee for Optionee's personal account, for investment purposes
only, and not with a view to the distribution, resale or other disposition
thereof.
(b) Optionee acknowledges that the Company may issue Shares upon the
exercise of the Option without registering such Shares under the Securities Act
of 1933, as amended (the "Act"), on the basis of certain exemptions from such
registration requirement. Accordingly, Optionee agrees that Optionee's exercise
of the Option may be expressly conditioned upon Optionee's delivery to the
Company of an investment certificate including such representations and
undertakings as the Company may reasonably require in order to assure the
availability of such exemptions, including a representation that Optionee is
acquiring the Shares for investment and not with a present intention of selling
or otherwise disposing thereof and an agreement by Optionee that the
certificates evidencing the Shares may bear a legend indicating such non-
registration under the Act and the resulting restrictions on transfer. Optionee
acknowledges that, because Shares received upon exercise of an Option may be
unregistered, Optionee may be required to hold the Shares indefinitely unless
they are subsequently registered for resale under the Act or an exemption from
such registration is available.
7. RESTRICTIVE LEGENDS. Optionee hereby acknowledges that federal
securities laws and the securities laws of the state in which Optionee resides
may require the placement of certain restrictive legends upon the Shares issued
upon exercise of this Option, and Optionee hereby consents to the placing of any
such legends upon certificates evidencing the Shares as the Company, or its
counsel, may deem necessary or advisable.
8. LIMITATION OF COMPANY'S LIABILITY FOR NONISSUANCE. The Company agrees
to use its reasonable best efforts to obtain from any applicable regulatory
agency such authority or approval as may be required in order to issue and sell
the Shares to the Optionee pursuant to this Option. Inability of the Company to
obtain, from any such regulatory agency, authority or approval deemed by the
Company's counsel to be necessary for the lawful issuance and sale of the Shares
hereunder and under the Plan shall relieve the Company of any liability in
respect of the nonissuance or sale of such Shares as to which such requisite
authority or approval shall not have been obtained.
9. ADJUSTMENTS UPON CHANGES IN CAPITAL STRUCTURE. In the event that the
outstanding Shares of Common Stock of the Company are hereafter increased or
decreased or changed into or exchanged for a different number or kind of shares
or other securities of the Company by reason of a recapitalization, stock split,
combination of shares, reclassification, stock dividend or other change in the
capital structure of the Company, then appropriate adjustment shall be made by
the Administrator to the number of Shares subject to the unexercised portion of
this Option and to the
Page 10 of 12
<PAGE>
Exercise Price per share, in order to preserve, as nearly as practical, but not
to increase, the benefits of the Optionee under this Option in accordance with
the provisions of Section 4.2 of the Plan.
10. MERGERS AND OTHER REORGANIZATIONS. In the event that the Company at
any time proposes to enter into any transaction approved by the Board to sell
substantially all of its assets or merge or consolidate with any other entity as
a result of which either the Company is not the surviving corporation or the
Company is the surviving corporation and the ownership of the voting power of
the Company's capital stock changes by more than 50% as a result of such
transaction, or in the event of a "Recommended Share Purchase Offer" (as defined
below) (a "Change in Control"), this Option, if not already exercisable, shall
concurrent with and conditioned upon the effective date of the proposed
transaction, be accelerated according to Section 2 hereof and the Optionee shall
have the right to exercise the Option in respect to any or all of the vested
Shares at such time. In addition, in the event of a Change in Control, this
Option shall terminate upon the effective date of such transaction unless
provision is made in writing in connection with such transaction for the
continuance or assumption of this Option or the substitution for this Option of
a new option of comparable value covering shares of a successor corporation,
with appropriate adjustments as to the number and kind of shares and the
Exercise Price, in which event this Option or the new option substituted
therefor shall continue in the manner and under the terms so provided. If such
provision is not made in such transaction, then the Administrator shall cause
written notice of the proposed transaction to be given to Optionee not less than
fifteen (15) days prior to the anticipated effective date of the proposed
transaction. For purposes of this Section 10, a "Recommended Share Purchase
Offer" shall be a transaction in which an offer is made to purchase outstanding
securities of the Company constituting more than 50% of the voting power of the
Company's capital stock, which offer is recommended to the Company's security
holders by the Company's Board.
11. NO EMPLOYMENT CONTRACT CREATED. Neither the granting of this Option
nor the exercise hereof shall be construed as granting to the Optionee any right
with respect to continuance of employment by the Company or any of its
subsidiaries. The right of the Company or any of its subsidiaries to terminate
at will the Optionee's employment at any time (whether by dismissal, discharge
or otherwise), with or without cause, is specifically reserved, subject to any
other written employment agreement to which the Company and Optionee may be a
party.
12. RIGHTS AS SHAREHOLDER. The Optionee (or transferee of this option by
will or by the laws of descent and distribution) shall have no rights as a
shareholder with respect to any Shares covered by this Option until the date of
the issuance of a stock certificate or certificates to him or her for such
Shares, notwithstanding the exercise of this Option.
13. INTERPRETATION. This Option is granted pursuant to the terms of the
Plan, and shall in all respects be interpreted in accordance therewith. The
Administrator shall interpret and construe this Option and the Plan, and any
action, decision, interpretation or determination made in good faith by the
Administrator shall be final and binding on the Company and the Optionee. As
used in this Agreement, the term "Administrator" shall refer to the committee of
the Board of Directors of the Company appointed to administer the Plan, and if
no such committee has been appointed, the term Administrator shall mean the
Board of Directors.
14. NOTICES. Any notice, demand or request required or permitted to be
given under this Agreement shall be in writing and shall be deemed given when
delivered personally or three (3) days after being deposited in the United
States mail, as certified or registered mail, with postage prepaid,
Page 11 of 12
<PAGE>
and addressed, if to the Company, at its principal place of business, Attention:
the Chief Financial Officer, and if to the Optionee, at Optionee's most recent
address as shown in the employment or stock records of the Company.
15. ANNUAL AND OTHER PERIODIC REPORTS. During the term of this Agreement,
the Company will furnish to the Optionee copies of all annual and other periodic
financial and informational reports that the Company distributes generally to
its shareholders.
16. GOVERNING LAW. The validity, construction, interpretation, and effect
of this Option shall be governed by and determined in accordance with the laws
of the State of California.
17. SEVERABILITY. Should any provision or portion of this Agreement be
held to be unenforceable or invalid for any reason, the remaining provisions and
portions of this Agreement shall be unaffected by such holding.
18. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall be deemed one instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
"AMERICAN RECREATION CENTERS, INC." "OPTIONEE"
Page 12 of 12
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<PAGE>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-28-1997
<PERIOD-START> MAY-30-1996
<PERIOD-END> NOV-27-1996
<CASH> 3,553
<SECURITIES> 0
<RECEIVABLES> 765
<ALLOWANCES> 50
<INVENTORY> 653
<CURRENT-ASSETS> 6,745
<PP&E> 89,066
<DEPRECIATION> 30,194
<TOTAL-ASSETS> 71,385
<CURRENT-LIABILITIES> 8,641
<BONDS> 27,224
0
0
<COMMON> 9,584
<OTHER-SE> 18,642
<TOTAL-LIABILITY-AND-EQUITY> 71,385
<SALES> 21,043
<TOTAL-REVENUES> 22,016
<CGS> 1,945
<TOTAL-COSTS> 20,744
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 1,295
<INCOME-PRETAX> (9)
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