<PAGE>
FORM 10-K
(Mark One)
X Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the fiscal year
ended December 30, 1994.
- Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 for the transition
period from _____ to _____.
Commission File Number 0-15782
SHOWBIZ PIZZA TIME, INC.
(Exact name of registrant as specified in its charter)
Kansas 48-0905805
(State or jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4441 West Airport Freeway
P.O. Box 152077
Irving, Texas 75015
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 258-8507
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, par value $.10 each
(Title of Class)
Class A Preferred Stock, par value $60.00 each
(Title of Class)
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
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 by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
At March 17, 1995, an aggregate of 12,275,177 shares of the
registrant's Common Stock, par value of $.10 each (being the
registrant's only class of common stock), were outstanding, and
the aggregate market value thereof (based upon the last reported
sale price on March 17, 1995) held by non-affiliates of the
registrant was $ 91,521,632.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement, to be
filed pursuant to Section 14(a) of the Act in connection with the
registrant's 1995 annual meeting of shareholders, have been
incorporated by reference in Part III of this report.
<PAGE>
P A R T I
Item 1. Business
General
ShowBiz Pizza Time, Inc. (the "Company"), was incorporated in the
State of Kansas in 1980 and is engaged in the family
restaurant/entertainment center business. The Company considers
this to be its sole industry segment.
The Company operated, as of March 17, 1995, 227 Chuck E. Cheese's
Pizza ("Chuck E. Cheese's") restaurants (including six
restaurants managed by the Company for others). In addition, as of
March 17, 1995, franchisees of the Company operated 101 Chuck E.
Cheese's restaurants. Effective May 5, 1994, BHC Acquisition
Corporation ("BAC"), a wholly owned subsidiary of the Company, sold
its Monterey's Tex-Mex Cafe restaurants.
Chuck E. Cheese's Restaurants
Business Development
Chuck E. Cheese's restaurants offer a variety of pizza, a salad
bar, and selected sandwiches and desserts and feature musical and
comic entertainment by life-size, computer-controlled robotic
characters, family oriented games, rides and arcade-style
activities. The restaurants are intended to appeal to families
with children between the ages of 2 and 12. The Company opened its
first restaurant in March 1980.
The Company and its franchisees operate in a total of 44 states
and the Company has concentrated its ownership and operation of
Chuck E. Cheese's restaurants within a 28-state area. See "Item 2.
Properties."
The following table sets forth certain information with respect
to the Chuck E. Cheese's restaurants owned by the Company (excludes
restaurants managed by the Company for others and franchised
restaurants):
<TABLE>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Average annual revenues
per restaurant (1) $1,206,000 $1,259,000 $1,354,000
Number of restaurants open
at end of period 220 209 176
Percent of total restaurant revenues:
Food and beverage sales 71.0% 71.6% 71.9%
Game sales 25.8% 25.3% 25.3%
Merchandise sales 3.2% 3.1% 2.8%
_______
</TABLE>
(1) In computing these averages, only restaurants which were open
for a period greater than one year at the beginning of each
respective year were included (159, 139 and 129 restaurants in
1994, 1993, and 1992, respectively). Fiscal year 1992
consisted of 53 weeks while each of fiscal years 1994 and 1993
consisted of 52 weeks.
<PAGE> 2
Revenues from Chuck E. Cheese's restaurants owned by the Company
increased by 3.4% during 1994 over 1993, due to new restaurant
openings during both years.
The revenues from Chuck E. Cheese's restaurants are seasonal in
nature. The restaurants tend to generate more revenues during the
first and third fiscal quarters as compared to the second and
fourth fiscal quarters.
Each Chuck E. Cheese's restaurant generally employs a general
manager, one or two managers, an electronic specialist who is
responsible for repair and maintenance of the robotic characters
and games, and 45 to 75 food preparation and service employees,
most of whom work only part-time.
To maintain a unique and exciting environment in the restaurants,
the Company believes it is essential to reinvest capital through
the evolution of its games, rides and entertainment packages and
continuing enhancement of the facilities. The Company initiated a
remodel program in 1986 under which all Company operated
restaurants were remodeled by the end of 1992. In 1994, the
Company initiated a "repositioning" program to evolve and expand
its efforts to significantly enhance its Chuck E. Cheese's
restaurants. The Company completed 22 restaurants under this
program in 1994 and currently intends to reposition approximately
140 additional restaurants by the end of 1996.
The Company opened 12 and 33 new Chuck E. Cheese's restaurants
in 1994 and 1993, respectively. The Company plans to open two to
three new Chuck E. Cheese's restaurants during 1995. The reduction
of expected new store openings in 1995 and 1994 compared to 1993,
is intended to create an appropriate commitment of capital and
human resources between existing restaurants and new development.
In the event certain site characteristics considered essential
for the success of a restaurant deteriorate, the Company will
consider relocating the restaurant to a more desirable site. The
Company relocated two restaurants in 1993.
The Company believes its ownership of trademarks to the names and
character likenesses featured in the robotic animation stage show
(and other in-store entertainment) in its restaurants to be an
important competitive advantage.
Restaurant Design and Entertainment
Chuck E. Cheese's restaurants are typically located in shopping
centers or in free-standing buildings and are generally 7,500 to
14,000 square feet in area. Depending primarily on the demographic
characteristics of a specific site, the building design of new
restaurants developed by the Company range from 8,000 to 10,000
square feet in area.
The dining area of each Chuck E. Cheese's restaurant features a
variety of comic and musical entertainment by computer-controlled
robotic characters, together with various animated props, located
on various stage type settings. The dining area typically provides
table and chair seating for 250 to 375 customers.
Each Chuck E. Cheese's restaurant typically contains a separate
family-oriented playroom area offering approximately 40 coin- and
token-operated attractions, including arcade-style games, kiddie
rides, video games, skill oriented games and other similar
entertainment. Certain games dispense tickets that can be redeemed
by the guests for prizes. Also included in the playroom area is a
ball-crawl or other free attraction for young children. The
playroom area normally occupies approximately 40% of the
restaurant's public area and contributes significantly to its
revenues. A limited number of free tokens are furnished with food
orders. Additional tokens may be purchased.
<PAGE> 3
Food and Beverage Products
Each Chuck E. Cheese's restaurant offers varieties of pizza, a
salad bar and selected sandwiches and desserts. Standard beverages
are also served, along with beer and wine where permitted by local
laws. The Company believes that the quality of its food compares
favorably with that of its competitors.
The majority of food, beverages and other supplies used in the
Company-operated restaurants is currently distributed under a
system-wide agreement with a major food distributor. The Company
believes that this distribution system creates certain cost and
operational efficiencies for the Company.
Marketing
The primary customer base for the Company's restaurants consists
of families having children between 2 and 12 years old. The
Company runs advertising campaigns which target families with young
children and features the family entertainment experiences
available at Chuck E. Cheese's restaurants, and is primarily aimed
at increasing the frequency of return visits. The primary
advertising medium continues to be television, due to its broad
access to family audiences and its ability to communicate the Chuck
E. Cheese's experience. The television advertising campaigns are
supplemented by select radio campaigns, promotional offers in
newspapers and direct mail advertisements.
Franchising
The Company began franchising its restaurants in October 1981 and
the first franchised restaurant opened in June 1982. At March 17,
1995, 101 Chuck E. Cheese's restaurants were operated by a total of
58 different franchisees, as compared to 109 of such restaurants at
March 18, 1994. The Company sold four franchises in 1994.
The Company opened a franchise restaurant in Chile during the
third quarter of 1994. Opportunities for further international
franchise development are being reviewed by the Company.
The Chuck E. Cheese's standard franchise agreements grant to the
franchisee the right to develop and operate a restaurant and use
the associated trademarks within the standards and guidelines
established by the Company. The franchise agreement presently
offered by the Company has an initial term of 15 years and includes
a 15-year renewal option. The earliest expiration dates of
outstanding Chuck E. Cheese's franchises are in 1997.
The franchise agreements governing existing franchised Chuck E.
Cheese's restaurants currently require each franchisee to pay: (i)
to the Company, in addition to an initial franchise fee of $50,000,
a continuing monthly royalty fee equal to 3.8% of gross sales;
(ii) to the Advertising Fund [an independent fund established and
managed by an association of the Company and its franchisees to pay
costs of system-wide advertising (the "Association")] an amount
equal to 0.9% of gross sales; and (iii) to the Entertainment Fund
(an independent fund established and managed by such Association to
further develop and improve entertainment attractions) an amount
equal to 0.4% of gross sales. The Chuck E. Cheese's franchise
agreements also require franchisees to expend at least 3% of gross
sales for local advertising. Under the Chuck E. Cheese's franchise
agreements, the Company is required, with respect to Company-
operated restaurants, to spend for local advertising and to
contribute to the Advertising Fund and the Entertainment Fund at
the same rates as franchisees.
<PAGE> 4
Competition
The restaurant and entertainment industries are highly
competitive, with a number of major national and regional chains
being engaged in the pizza restaurant or entertainment business.
Although there are few other restaurant chains presently utilizing
the concept of combining robotic characters and restaurant
operations, there are several competitors presently combining
family entertainment and restaurant operations. The Company
believes that it will continue to encounter competition in the
future. Major national and regional chains, some of which have
capital resources as great or greater than the Company, are
expanding into the family restaurant and entertainment markets.
The Company believes that the principal competitive factors
affecting Chuck E. Cheese's restaurants are the relative quality
of food and service, quality and variety of offered entertainment,
and location and attractiveness of the restaurants as compared to
its competitors in the restaurant or entertainment industries.
Monterey's Tex-Mex Cafe Restaurants
The Company, through its wholly owned subsidiary BAC, operated
27 Monterey's Tex-Mex Cafe restaurants. Effective May 5, 1994, the
Company sold its Monterey's Tex-Mex Cafe restaurants for an
aggregate purchase price consisting of approximately $6.7 million
in cash, $4.7 million in subordinated promissory notes and the
retention of a 12 1/2% equity interest in the acquiring company.
Trademarks
The Company owns various trademarks, including "Chuck E. Cheese"
and "ShowBiz Pizza" that are used in connection with the
restaurants and have been registered with the United States Patent
and Trademark Office. The duration of such trademarks is
unlimited, subject to continued use. The Company believes that it
holds the necessary rights for protection of the marks essential to
the conduct of their present restaurant operations.
Government Regulation
The development and operation of Chuck E. Cheese's restaurants
are subject to various federal, state and local laws and
regulations, including but not limited to those that impose
restrictions, levy a fee or tax, or require a permit or license on
the service of alcoholic beverages and the operation of games and
rides. The Company is subject to the Fair Labor Standards Act, the
Americans With Disabilities Act, and family leave mandates. A
significant portion of the Company's restaurant personnel are paid
at rates related to the minimum wage established by federal and
state law. Increases in such minimum wage result in higher labor
costs to the Company, which may be partially offset by price
increases and operational efficiencies.
If certain mandated health care legislation is passed, it could
negatively impact the business community by increasing costs. The
Company would attempt to minimize the impact of increased costs by
operational efficiency improvements and increased menu prices as
permitted within the competitive market.
Working Capital Practices
The Company attempts to maintain only sufficient inventory of
supplies in the restaurants which it operates to satisfy current
operational needs. The Company's accounts receivable consist
primarily of credit card receivables, franchise royalties,
management fees and advances to managed properties.
Employees
The number of persons employed by the Company varies seasonally,
with the greatest number being employed during the summer months.
On March 17, 1995, the Company had approximately 13,500 employees,
including 13,325 in the operation of Chuck E. Cheese's restaurants
and 175 employed by the Company in the Company's executive offices.
None of the Company's employees is a member of any union or
collective bargaining group. The Company considers its employee
relations to be good.
<PAGE> 5
Item 2. Properties
The following table sets forth certain information regarding the
Chuck E. Cheese's restaurants operated by the Company (excluding
six restaurants managed by the Company for others) as of March 17,
1995.
Chuck E.
State Cheese's
----- -------
Alabama 5
Arkansas 2
California 47
Colorado 4
Connecticut 5
Florida 15
Georgia 7
Illinois 14
Indiana 7
Kansas 1
Kentucky 1
Louisiana 4
Maryland 10
Massachusetts 10
Michigan 11
Missouri 7
Nevada 1
Nebraska 2
New Hampshire 2
New Jersey 9
New York 5
North Carolina 2
Ohio 11
Pennsylvania 7
Tennessee 2
Texas 24
Virginia 3
Wisconsin 3
---
221
===
<PAGE> 6
Of the 227 Chuck E. Cheese's restaurants operated by the Company
as of March 17, 1995, 212 were leased by the Company and 15 were owned
by the Company. The leases of these restaurants will expire at various
times from 1995 to 2009, as described in the table below.
Year of Number of Range of Renewal
Expiration Restaurants Options (Years)
---------- --------- ----------------
1995 10 None to 10
1996 14 None to 20
1997 27 None to 20
1998 23 None to 20
1999 and thereafter 138 None to 20
The leases of Chuck E. Cheese's restaurants contain terms which
vary from lease to lease, although a typical lease provides for a
primary term of 10 years, with two additional five-year options to
renew, and provides for annual minimum rent payments of
approximately $6.00 to $22.00 per square foot, subject to periodic
adjustment. Most of the restaurant leases require the Company to
pay the cost of repairs, insurance and real estate taxes and, in
most instances, provide for additional rent equal to the amount by
which a percentage (typically 6%) of gross revenues exceeds the
minimum rent.
Item 3. Legal Proceedings.
In December 1991, the Company, The Hallwood Group Incorporated,
("Hallwood"), Integra-A Hotel and Restaurant Company ("Integra"),
and their individual directors were named defendants in two
separate but related lawsuits brought in the 14th and 134th
District Courts of Dallas County, Texas. In April 1993, the
Company and its two directors who are also employees of the
Company, were dismissed as defendants in the lawsuit brought in the
134th District Court by an Integra common stockholder. Integra
owned approximately 90% of the outstanding Common Stock of the
Company prior to Integra's distribution of such Common Stock in
December 1988 (the "1988 Distribution") to its shareholders of
record. The plaintiffs in the remaining lawsuit constitute certain
holders of warrants, options and preferred stock of Integra who
seek to serve as representatives of proposed classes of other
holders of such securities. The plaintiffs allege that the Company
has (i) violated Texas statutes related to securities fraud and the
fraudulent transfer of assets, (ii) committed common law fraud, and
(iii) breached fiduciary and other duties to the plaintiffs. As
amended, this suit seeks recision of the 1988 distribution actual
damages in excess of $184 million, and punitive damages in excess
of $500 million. To date, no class has been certified as against
the Company. The case is set for trial on May 1, 1995. The
Company believes that the claims made against it in this suit are
without merit and intends to vigorously defend this lawsuit.
However, the Company is actively pursuing negotiations for
settlement of the lawsuit.
In May 1994, Hermitage Hotel, Ltd., L. P., filed a lawsuit
against the Company, Hallwood and certain directors of the Company
in the 101st District Court of Dallas County, Texas. The lawsuit
seeks recovery on behalf of plaintiff under theories of successor
liability, tortious interference with contract, fraud, negligent
representation and breach of contract. The plaintiff is seeking
approximately $10.2 million in actual damages, $30 million in
exemplary damages, attorneys' fees and court costs. The Company
believes that the claims made against it in this suit are without
merit and intends to vigorously defend this lawsuit. However, the
Company is actively pursuing negotiations for settlement of the
lawsuit.
In June 1993, the Company was named as a nominal defendant in a
shareholders' derivative action in the 68th Judicial District Court
in Dallas County, Texas in which three of the Company's executive
officers, four of the Company's outside directors and Hallwood were
named defendants. The plaintiffs in this lawsuit have alleged the
individual defendants (i) breached their fiduciary duties to
stockholders, (ii) committed constructive fraud and (iii) unjustly
enriched themselves as a result of alleged violations of federal
securities laws and illegal insider trading between July 13, 1992
and June 11, 1993. The Company does not believe that this action
will result in any significant damages to the Company.
<PAGE> 7
In July 1993, the Company was named a defendant in a lawsuit
brought in the Circuit Court for Davidson County, Nashville,
Tennessee by Third National Bank in Nashville, as Trustee pursuant
to a municipal bond issuance of $6.4 million made in 1980, for
which Integra executed a guaranty. The plaintiff has alleged that
Integra's guaranty of the municipal bond issuance was binding on
successors of Integra and that the Company is the legal successor
to Integra. The plaintiff is seeking to recover a judgement
against the Company in the full amount of its claim against
Integra, which is unspecified, as well as attorneys' fees and
costs. In April 1994, the court dismissed the plaintiff's
complaint for failure to state a claim upon which relief can be
granted. Plaintiff has appealed the dismissal to the 6th Circuit
Court of Appeals. The Company believes the allegations made in
this suit to be without merit and will offer a vigorous defense in
this lawsuit.
In January 1994, the Company was named a defendant in a lawsuit
brought in the Supreme Court of the State of New York, County of
Queens, by Big Six Towers, Inc., in its purported capacity as a
landlord to the Company with regard to a restaurant/entertainment
center location in Queens County, New York which the Company had
contracted to lease from the plaintiff. The plaintiff has alleged
that the Company has breached the lease and is seeking total
damages in excess of $4.0 million against the Company. The Company
believes it validly terminated the lease in question pursuant to an
agreement with the plaintiff and believes the allegations made in
this suit to be without merit and therefore intends to vigorously
defend this lawsuit.
Certain other pending legal proceedings exist against the Company
which the Company believes are not material in amount or have
arisen in the ordinary course of its business.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during
the fourth quarter of 1994.
<PAGE> 8
P A R T I I
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
As of March 17, 1995, there were an aggregate of 12,275,177
shares of the Company's Common Stock outstanding and approximately
5,489 stockholders of record.
The Company's Common Stock is listed on the National Market
System of the National Association of Securities Dealers Automated
Quotation ("NASDAQ") system under the symbol "SHBZ". The following
table sets forth the highest and lowest prices per share of the
Common Stock during each quarterly period within the two most
recent years, as reported on the National Market System of NASDAQ:
High Low
-------- -------
1994 - 1st quarter $15 1/4 $ 11 3/4
---- - 2nd quarter 14 9 1/4
- 3rd quarter 11 1/4 7 1/4
- 4th quarter 9 1/8 7 1/4
1993 - 1st quarter 35 1/2 25 1/2
---- - 2nd quarter 34 1/2 16
- 3rd quarter 17 1/2 12 1/4
- 4th quarter 15 12 1/2
The Company may not pay any dividends to holders of its Common
Stock (except in shares of Common Stock) unless an amount equal to
all dividends then accrued on its Class A Preferred Stock par value
$60.00 per share ("the Preferred Stock") has been paid or set aside
to be paid. A dividend to holders of record of Preferred Stock as
of December 28, 1994 in the amount of $1.20 per share will be paid
on March 28, 1995. The Company also may not pay any dividend or make
any other distribution on its Common Stock (except in shares of Common
Stock or rights to acquire capital stock of the Company) so long as any
amount is outstanding under the terms of its revolving loan agreement.
The Company has not paid any dividends on its Common Stock,
has no present intention of paying cash dividends thereon in the
future and is currently restricted from paying cash dividends
under the terms of its current revolving loan agreement. The
Company plans to retain any earnings to finance anticipated capital
expenditures and reduce its long-term debt. Future dividend policy
with respect to the Common Stock will be determined by the Board of
Directors of the Company, taking into consideration factors such as
future earnings, capital requirements, potential loan agreement
restrictions and the financial condition of the Company.
<PAGE> 9
Item 6. Selected Financial Data.
<TABLE>
1994 1993 1992 1991 1990
----- ----- ----- ----- -----
(Thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Operating results (1):
Revenues . . . . $267,827 $271,998 $253,124 $208,118 $181,558
Costs and expenses. . 263,541 253,300 226,686 187,295 164,305
-------- --------- --------- --------- ---------
Operating income . . 4,286 18,698 26,438 20,823 17,253
Other income(expenses) (1,173) (451) (1,188) (1,890) (3,354)
-------- --------- --------- -------- ---------
Income before
income taxes . . 3,113 18,247 25,250 18,933 13,899
Income taxes:
Current expense . . . 869 1,751 1,161 1,050 678
Deferred expense. . . 1,568 4,605 8,586 6,285 4,769
------- -------- -------- -------- --------
2,437 6,356 9,747 7,335 5,447
------- -------- -------- -------- --------
Net income. . . . $ 676 $ 11,891 $ 15,503 $ 11,598 $ 8,452
======== ========= ========= ======== =========
Per Share (2):
Primary:
Net income . . $ .03 $ .86 $ 1.11 $ .82 $ .61
Weighted average shares
outstanding. . 12,127 13,455 13,662 13,700 13,254
Fully diluted:
Net income . . $ .03 $ .86 $ 1.11 $ .82 $ .61
Weighted average shares
outstanding . .12,127 13,464 13,713 13,728 13,367
Cash flow data:
Cash provided by
operations . . . $ 30,819 $ 44,905 $ 44,246 $ 36,097 $ 29,884
Purchases of property
and equipment. . 29,421 44,600 33,903 25,088 21,471
Balance sheet data:
Total assets. . . $ 188,308 $193,649 $173,217 $158,563 $146,435
Long-term obligations (including
current portion and redeemable
preferred stock) 33,223 29,816 17,743 21,360 26,929
Shareholders'
equity...... 125,515 136,647 132,167 115,500 99,973
Number of restaurants at year end:
Chuck E. Cheese's:
Company operated . 226 215 182 159 144
Franchise. . . . . 106 110 113 113 123
------- ------- ------- ------- -------
332 325 295 272 267
Monterey's Tex-Mex
Cafe's. . . . . . 27 28 27 27
------- ------- ------- ------- -------
332 352 323 299 294
======= ======= ======= ======= =======
</TABLE>
----------------------
(1) Fiscal year 1992 was 53 weeks in length while fiscal years 1994,
1993, 1991, and 1990 were 52 weeks in length.
(2) No cash dividends on common stock were paid in any of the years
presented.
<PAGE> 10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results Of Operations.
Results of Operations
1994 Compared to 1993
Revenues declined 1.5% to $267.8 million in 1994 from $272.0 million
in 1993 due to the sale of the Company's Monterey's Tex-Mex Cafe
restaurants effective May 5, 1994. Revenue generated by the Company's
Chuck E. Cheese's restaurants increased by 3.4% to $261.6 million in
1994 from $253.0 million in 1993 due to the net addition of 11 Company
restaurants in 1994 and 33 Company restaurants in 1993. Sales from the
Company's Chuck E. Cheese's restaurants which were open during all of
1994 and 1993 ("comparable store sales") declined 5.8% between the
years. Revenues from the Company's Monterey's Tex-Mex Cafe restaurants
declined to $6.2 million in 1994 from $19.0 million in 1993 due to the
sale of the Monterey's restaurants mentioned above.
Operating income decreased to $4.3 million in 1994 from $18.7 million
in 1993. Included in operating income for 1994 is a gain of $5.5
million related to the sale of the Company's Monterey's Tex-Mex Cafe
restaurants and a $2.3 million loss associated with the impairment in
fair value of certain Chuck E. Cheese's restaurants. Operating income
in 1994 was also reduced by approximately $900,000 due to a write-off
of all unamortized preopening expenses resulting from a change in the
estimated future benefit of such expenses. The decline in operating
income is primarily due to the decline in comparable store sales and
operating margins in the Company's Chuck E. Cheese's restaurants. A
material portion of operating costs are fixed resulting in an erosion
of operating margins at lower sales levels.
A summary of the results of operations of the Company as a percentage
of revenues for the last three fiscal years is shown below.
<TABLE>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Revenues . . . . . . . . . . 100.0% 100.0% 100.0%
-------- -------- --------
Costs and expenses:
Cost of sales. . . . . . . 51.4% 50.5% 49.5%
Selling, general and administrative 17.7% 15.5% 15.7%
Depreciation and amortization. . . 9.7% 8.5% 7.6%
(Gain) loss on property transactions. (1.0%) 0.2% 0.3%
Other operating expenses . . . . . 20.6% 18.4% 16.5%
-------- -------- --------
98.4% 93.1% 89.6%
-------- -------- --------
Operating income . . . . . . . . 1.6% 6.9% 10.4%
======== ======== ========
</TABLE>
Revenues
Revenues from the Company's Chuck E. Cheese's restaurants increased
by 3.4% to $261.6 million in 1994 from $253.0 million in 1993 due to
sales from new restaurants opened throughout 1994 and 1993. Comparable
store sales of Chuck E. Cheese's restaurants which were open during all
of both 1994 and 1993 declined by 5.8% between the years. Average
annual sales per restaurant decreased to approximately $1,206,000 in
1994. Menu prices were comparable between the two years.
Management believes that several factors may have contributed to the
comparable store sales decline, including increased competition and to
a lesser extent, a decrease in the number of restaurants remodeled
since 1992 and the impact of newly opened restaurants on comparable
store sales of existing restaurants in certain markets. Some of the
factors impacting comparable store sales are believed to be negatively
impacting sales volumes of newer restaurants opened since 1990. During
1994, the average sales volume of the 70 new Chuck E. Cheese's
restaurants opened in 1991 through 1993 was 3.0% lower than the average
sales volume of existing restaurants during the same period.
<PAGE> 11
Revenues from franchise fees and royalties decreased by 5.6% from
1993 to 1994 primarily due to a 6.4% decline in comparable franchise
store sales for restaurants open all of 1994 and 1993, and a decline
in the number of restaurants operated each year. During 1994, two new
franchise restaurants opened and six franchise restaurants closed.
Revenues from Monterey's Tex-Mex Cafe restaurants were $6.2 million
in 1994 compared to $19.0 million in 1993 due to the sale of the
Company's Monterey's Tex-Mex Cafe restaurants effective May 5, 1994.
Costs and Expenses
Costs and expenses as a percentage of revenues increased to 98.4% in
1994 from 93.1% in 1993.
Cost of sales increased as a percentage of revenues to 51.4% in 1994
from 50.5% in 1993. Cost of food, beverage, prize and merchandise
items for Chuck E. Cheese's restaurants as a percentage of restaurant
sales increased to 18.2% in 1994 from 18.0% in 1993 primarily due to
increases in cheese costs and in costs relating to the enhancement of
certain prize and merchandise items. Labor expenses for Chuck E.
Cheese's restaurants as a percentage of restaurant sales increased to
30.0% in 1994 from 29.0% in 1993 primarily due to the decline in
comparable store sales and enhancements in services provided to guests,
including child security.
Selling, general and administrative expenses as a percentage of
revenues increased to 17.7% in 1994 from 15.5% in 1993 due primarily
to increased advertising expense as a percentage of revenues.
Corporate overhead costs were impacted by an increase of approximately
$1.2 million primarily during the first three quarters of 1994 as a
result of increasing the number of operational regional and district
managers. Overhead costs were also impacted in 1994 by an allowance
for potential legal settlements.
Depreciation and amortization expense as a percentage of revenues
increased to 9.7% in 1994 from 8.5% in 1993 primarily due to a write-
off of all unamortized preopening expenses of approximately $900,000
resulting from a change in the estimated future benefit of such
expenses, the higher depreciation and amortization expense of new
restaurants relative to older restaurants and the decline in comparable
store sales.
The Company had a net gain on property transactions of $2.6 million
in 1994 compared to a loss on property transactions of $675,000 in
1993. The Company recognized a gain of $5.5 million from the sale of
its Monterey's Tex-Mex Cafe restaurants effective May 5, 1994. The
gain was partially offset by a loss of approximately $2.3 million in
1994. The loss was a result of the Company's decision to close one
Chuck E. Cheese's restaurant and the impairment in fair value of the
fixed assets of ten Chuck E. Cheese's restaurants due to the Company's
decision not to renew the leases as a result of the deterioration of
site characteristics or the inability to renew the leases at acceptable
rental terms. The Company will consider possible relocation of some
of the restaurants. The Company provided for an additional loss on
property transactions of approximately $597,000 in 1994 compared to
$675,000 in 1993 due to the replacement of certain assets in
conjunction with the enhancement of facilities and entertainment
packages of restaurants.
Other operating expenses increased as a percentage of revenues to
20.6% in 1994 from 18.4% in 1993 primarily due to increased rent,
utility and property tax expenses as a percentage of revenues and the
decline in comparable store sales.
Operating Income
As a result of the changes in revenues and expenses discussed above,
operating income declined to $4.3 million in 1994 from $18.7 million
in 1993. Included in operating income are the operations of Monterey's
Tex-Mex Cafe restaurants through May 5, 1994. Operating income in 1994
for Monterey's Tex-Mex Cafe restaurants was $6.0 million, including a
gain on property transactions of $5.5 million, compared to operating
income of $652,000 in 1993.
<PAGE> 12
Net Income
Interest expense increased to $1.9 million in 1994 from $797,000 in
1993 due primarily to an increase in long-term debt of $18.5 million
since the third quarter of 1993 primarily to fund the Company's
repurchase of its common stock and an increase in interest rates. In
the fourth quarter of 1994, the Company established an allowance of
approximately $1.1 million related to deferred tax credit carryforwards
which are estimated to expire in 1997. Income tax expense was increased
by approximately $1.1 million as a result of this allowance. In the
third quarter of 1993, income tax expense was reduced approximately
$971,000 primarily due to a non-recurring tax gain resulting from the
increased valuation of the Company's deferred tax asset due to an
increase in federal corporate income tax rates enacted in 1993. The
Company's net income decreased to $676,000 in 1994 from $11.9 million
in 1993 due to the changes in revenues and expenses as discussed above.
The Company's primary and fully diluted earnings per share decreased
to $.03 per share in 1994 from $.86 per share in 1993.
1993 Compared to 1992
Revenues increased 7.5% to $272.0 million in 1993 from $253.1 million
in 1992. Revenue generated by the Company's Chuck E. Cheese's
restaurants increased by 8.1% to $253.0 million in 1993 from $234.0
million in 1992 due to the net addition of 33 Company restaurants in
1993 and 23 Company restaurants in 1992. Sales from the Company's
Chuck E. Cheese's restaurants which were open during all of 1993 and
1992 declined 5.3% between the years. Revenues from the Company's
Monterey's Tex-Mex Cafe restaurants declined slightly to $19.0 million
in 1993 from $19.1 million in 1992 primarily due to a decline in comparable
store sales of .6% between the years. Fiscal years 1993 and 1992 consisted
of 52 and 53 weeks, respectively.
Operating income decreased to $18.7 million in 1993 from $26.4
million in 1992 due primarily to declines in comparable store sales and
operating margins in both restaurant concepts. A material portion of
operating costs are fixed resulting in an erosion of operating margins
at lower sales levels.
Chuck E. Cheese's Restaurants
Revenues
Revenues from the Company's Chuck E. Cheese's restaurants increased
by 8.1% to $253.0 million in 1993 from $234.0 million in 1992 due to
sales from new restaurants opened throughout 1993 and 1992. Comparable
store sales of Chuck E. Cheese's restaurants which were open during all
of both 1993 and 1992 declined by 5.3% between the years. Average
annual sales per restaurant decreased to approximately $1,259,000 in
1993. Menu prices were increased approximately 1.1% between the two
years.
Management believes that several factors may have contributed to the
comparable store sales decline, including generally severe winter
weather and a March snowstorm which caused the brief closing of
numerous restaurants, ineffective advertising and the decrease in
number and apparent effectiveness of restaurants remodeled during 1992
and 1993. Other factors that management believes contributed to the
decline in comparable store sales include increased competition and the
impact of newly opened restaurants on comparable store sales of
existing restaurants in certain markets. Some of the factors impacting
comparable store sales are believed to be negatively impacting sales
volumes of newer restaurants opened since 1988. New restaurants opened
from 1988 through 1992 averaged approximately $1,341,000 in sales
during 1993, which is slightly in excess of the sales volume of the
average Company restaurant. This compares to the prior year in which
new restaurants had sales volumes significantly higher than the average
Company restaurant.
Revenues from franchise fees and royalties decreased by 11.1% from
1992 to 1993 primarily due to 52 weeks of revenue in 1993 compared to
53 weeks of revenue in 1992, a 1.0% decline in comparable franchise
store sales for restaurants open all of 1993 and 1992, and a decline
in the number of franchise restaurants operated each year. During
1993, the Company purchased two franchise restaurants, one new
franchise restaurant opened and two franchise restaurants closed.
<PAGE> 13
Costs and Expenses
Costs and expenses as a percentage of revenues increased to 92.9% in
1993 from 89.1% in 1992.
Cost of sales increased as a percentage of revenues to 49.7% in 1993
from 48.5% in 1992. Cost of food, beverage, prize and merchandise
items as a percentage of restaurant sales remained constant at 18.0%
in both 1993 and 1992. Labor expenses as a percentage of restaurant
sales increased slightly to 29.0% in 1993 from 28.0% in 1992 primarily
due to the decline in comparable store sales.
Selling, general and administrative expenses as a percentage of
revenues declined to 15.6% in 1993 from 15.9% in 1992 due primarily to
a decrease in management bonus expense and other corporate overhead
expenses as a percentage of revenues which was partially offset by an
increase in advertising expense as a percentage of revenues.
Depreciation and amortization expense as a percentage of revenues
increased to 8.5% in 1993 from 7.6% in 1992 primarily due to the
higher depreciation and amortization expense of new restaurants
relative to older restaurants and the decline in comparable store
sales.
Other operating expenses increased as a percentage of revenues to
18.9% in 1993 from 16.9% in 1992 primarily due to increased rent,
utility and insurance expenses as a percentage of revenues and the
decline in comparable store sales.
The Company provided for a loss on property transactions of $585,000
in 1993 compared to $654,000 in 1992 primarily due to closing three
restaurants in 1993 and to the replacement of certain assets in
conjunction with the remodeling of restaurants.
Operating Income
As a result of the changes in revenues and expenses discussed above,
operating income decreased to $18.0 million in 1993 from $25.4 million
in 1992.
Monterey's Tex-Mex Cafe Restaurants
Revenues
Revenues decreased to $19.0 million in 1993 from $19.1 million in
1992 due primarily to a .6% decline in comparable store sales between
the two years. One restaurant was opened in the third quarter of 1992
and was subsequently sold in the fourth quarter of 1993. Menu prices
were increased approximately 2.0% between the periods.
Costs and Expenses
Costs and expenses increased as a percentage of revenues to 96.6% in
1993 from 94.5% in 1992.
Cost of sales declined slightly to 61.3% in 1993 from 61.8% in 1992.
The cost of food and beverage items as a percentage of restaurant sales
decreased slightly to 27.4% in 1993 compared to 27.7% in 1992 due
primarily to lower food prices on certain items resulting from a change
in food distributors in the third quarter of 1992 and the increase in
menu prices implemented in the second quarter of 1993. These factors
were slightly offset by a change in product ingredients which was
implemented in the third quarter of 1992. Labor expenses as a
percentage of restaurant sales increased slightly to 31.7% in 1993 from
31.6% in 1992 primarily as a result of the decline in comparable store
sales.
Selling, general and administrative expenses as a percentage of
revenues increased to 14.1% in 1993 from 13.6% in 1992 primarily due
to an increase in advertising expense and in corporate overhead
expenses including an increase in research and development costs.
Other operating expenses increased as a percentage of revenues to
12.5% in 1993 from 11.3% in 1992 primarily due to an increase in rent
and utility expenses as a percentage of revenues and the decline in
comparable store sales.
The Company provided for a loss on property transactions of $90,000
from the sale of one restaurant in the fourth quarter of 1993.
<PAGE> 14
Operating Income
Operating income declined to $652,000 in 1993 from $1,049,000 in 1992
as a result of the changes in revenues and expenses discussed above.
Consolidated Income
Interest expense declined to $797,000 in 1993 from $1.5 million in
1992 due primarily to reductions in long-term debt of $1.8 million in
the first three quarters of 1993 and $4.6 million in 1992 and reduced
interest rates between the years. Income taxes were decreased
approximately $971,000 in the third quarter of 1993 due to a non-
recurring tax gain resulting from the increased valuation of the
Company's deferred tax asset due to an increase in federal corporate
income tax rates enacted in 1993. The Company's net income decreased
to $11.9 million in 1993 from $15.5 million in 1992 due to the changes
in revenues and expenses as discussed above. The Company's primary
and fully diluted earnings per share decreased to $.86 per share in
1993 from $1.11 per share in 1992.
Inflation
The Company's costs of operations, including but not limited to,
labor, supplies, utilities, financing and rental costs, are
significantly affected by inflationary factors. The Company pays most
of its part-time employees rates that are related to federal and state
mandated minimum wage requirements. Increases in any such costs would
result in higher costs to the Company, which the Company expects would
be partially offset by menu price increases and increased efficiencies
in operations.
Financial Condition, Liquidity and Capital Resources
Cash provided by operations declined to $30.8 million in 1994 from
$44.9 million in 1993. The Company's primary requirements for cash
relate to planned capital expenditures and debt service. During 1994,
the Company made approximately $29.4 million in capital expenditures
primarily related to the opening of 12 new Chuck E. Cheese's
restaurants and the enhancement of facilities and entertainment
packages at 27 restaurants, including 22 restaurants completed under
the "repositioning" program described below.
The Company previously announced that it planned to repurchase shares
of the Company's common stock at an aggregate purchase price of up to
$30 million. As of December 30, 1994, the Company had repurchased
shares of its common stock in the open market for an aggregate purchase
price of approximately $24.9 million. The Company has purchased
treasury shares up to the limit permitted under its revolving loan
agreement and intends to use its future cash flow for the enhancement
of existing facility and entertainment packages and new store
development. The ability of the Company to satisfy its capital
expenditure and debt service requirements depends on the availability
of sufficient funds for such purpose. The Company expects that it will
satisfy such requirements from cash provided by operations and funds
available under its revolving loan agreement or from refinancing.
In 1994, the Company's revolving loan agreement was amended to
provide a credit facility of up to $30.8 million due on January 31,
1996. Beginning July 1, 1995, available borrowings under the credit
line reduce each month to $18.3 million by January 1, 1996. Available
borrowings are reduced by outstanding letters of credit which totaled
$1.5 million at December 30, 1994. The Company is required to comply
with certain financial ratio tests during the term of the revolving
loan agreement. The Company is currently considering refinancing
alternatives and believes it will complete such refinancing prior to
the maturity of its current credit facility. If the Company is unable
to complete such refinancing, it would impair the Company's ability to
fully execute its capital expenditure enhancement plans.
<PAGE> 15
The Company believes that the success of its facility and enhancement
program in addition to new restaurant development will continue to be
significant factors in its ability to generate increased revenues over
the foreseeable future. The Company continues to evolve and expand its
efforts to significantly enhance its Chuck E. Cheese's locations. This
"repositioning" program is being carried out on a market by market
basis and involves: an improved exterior identity, a facility upgrade,
an expanded free ball-crawl with tubes and tunnels suspended from or
reaching to the ceiling, and an enhancement of the variety and number
of games and rides offered to its guests. The Company has completed
22 restaurants under this program in 1994. Although the Company has
had limited time to evaluate the results of these 22 repositioned
restaurants, average sales of these restaurants for the periods
following their repositioning have increased over 12% compared to the
same periods of the previous year. Sales in these restaurants during
the three months immediately prior to their repositioning averaged 6%
less than the sales during the comparable three month periods of the
prior year resulting in an improvement in sales trends of approximately
18%. Based on the early sales results of these repositioned
restaurants, the Company currently intends to reposition approximately
140 additional Chuck E. Cheese's restaurants by the end of 1996. The
Company anticipates that the repositioning of the remaining restaurants
will cost on the average approximately $300,000 per restaurant. However,
this amount can vary significantly at a particular restaurant depending
on several factors, including the restaurant's square footage, date of
most recent remodel and the existing assets of the restaurant. The
Company plans to open two to three new Chuck E. Cheese's restaurants
in 1995. In the event certain site characteristics considered
essential for the success of a restaurant deteriorate, the Company will
consider closing the restaurant or relocating the restaurant to a more
desirable site.
The Company is implementing several strategies designed to strengthen
the sales vitality of its existing restaurant base in what management
believes is a competitive market. The Company appointed a new
advertising agency during the fourth quarter of 1993; the Company has
accelerated its commitment of capital to existing stores; and the
Company is limiting its 1995 new restaurant development to ensure that
the sales vitality of the Company's existing restaurant base and new
restaurant growth are both given appropriate priority. The Company
believes that certain operating costs will increase as a result of
implementing these strategies designed to strengthen existing
restaurant sales. If the declines in comparable store sales of the
Company's Chuck E. Cheese's restaurants experienced in 1994 and 1993
continue to be experienced over a longer term, an adverse impact on the
Company's operating margins and results of operations could continue.
The Company is involved in a number of lawsuits. The Company
presently believes that it will continue to incur expense to defend
against and resolve such litigation, and anticipates that it will
satisfy such expense with cash flow from operations.
The Company believes it will realize substantial benefit from
utilization of approximately $74 million in net operating loss
carryforwards to reduce federal income tax liability. Such net
operating loss carryforwards expire from years 1999 through 2002.
Although the use of such carryforwards could, under certain
circumstances, be limited, the Company is presently unaware of the
occurrence of any event which would result in the imposition of such
limitation. The Company has adopted an amendment to its Restated
Articles of Incorporation which is intended to prevent changes in
ownership of its common stock that would cause such limitation. In
addition, the Company has investment tax credit, job tax credit and
alternative minimum tax credit carryforwards of approximately $7
million. The investment tax credit and the job tax credit
carryforwards expire in years 1997 through 2002. Tax credit
carryforwards can be utilized by the Company only after all net
operating loss carryforwards have been realized. At December 30, 1994,
the deferred tax asset was reduced approximately $1.1 million due to
an allowance for the estimated expiration of tax credit carryforwards
in 1997. If the Company's results of operations continue to decline
or fail to timely achieve levels necessary to utilize the net operating
loss carryforwards, the investment tax credit and job credit
carryforwards and net operating loss carryforwards could expire prior
to utilization, resulting in a charge against income.
<PAGE> 16
Item 8. Financial Statements and Supplementary Data
SHOWBIZ PIZZA TIME, INC.
YEARS ENDED DECEMBER 30, 1994, DECEMBER 31, 1993
AND JANUARY 1, 1993
CONTENTS
Page
------
Independent auditors' report. . . . . . . . . . . . . . . . . . . . 18
Consolidated financial statements:
Consolidated balance sheets . . . . . . . . . . . . . . . . . . 19
Consolidated statements of earnings . . . . . . . . . . . . . . 20
Consolidated statements of shareholders' equity . . . . . . . . 21
Consolidated statements of cash flows . . . . . . . . . . . . . 22
Notes to consolidated financial statements. . . . . . . . . . . 23
<PAGE> 17
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
ShowBiz Pizza Time, Inc.
Irving, Texas
We have audited the accompanying consolidated balance sheets of
ShowBiz Pizza Time, Inc. and subsidiary as of December 30, 1994
and December 31, 1993 and the related consolidated statements of
earnings, shareholders' equity, and cash flows for each of the
three years (52 or 53 weeks) in the period ended December 30,
1994. 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, such consolidated financial statements present
fairly, in all material respects, the financial position of
ShowBiz Pizza Time, Inc. and subsidiary as of December 30, 1994
and December 31, 1993 and the results of their operations and
their cash flows for each of the three years in the period ended
December 30, 1994, in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the consolidated financial statements,
the Company changed its method of accounting for preopening costs
in 1994.
DELOITTE & TOUCHE LLP
Dallas, Texas
March 3, 1995
<PAGE> 18
SHOWBIZ PIZZA TIME, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 30, 1994 AND DECEMBER 31, 1993
(Thousands, except share data)
ASSETS
<TABLE> December 30, December 31,
1994 1993
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . $ 2,381 $ 4,511
Accounts receivable, including receivables
from related parties of $416 and $309,
respectively . . . . . . . . . . . . 3,361 3,694
Current portion of notes receivable, including
receivables from related parties of $300
and $368, respectively . . . . . . . . . 529 521
Inventories . . . . . . . . . . . . . . . . 3,107 2,909
Prepaid expenses. . . . . . . . . . . . . . 2,900 2,771
Current portion of deferred tax asset. . . 3,583 6,013
--------- ---------
Total current assets. . . . . . . . . . 15,861 20,419
--------- ---------
Investments in related parties. . . . . . 699 237
--------- ---------
Property and equipment. . . . . . . . . . . 130,190 133,007
--------- ---------
Deferred tax asset. . . . . . . . . . . . . 29,414 29,479
--------- ---------
Other assets:
Notes receivable, less current portion,
including receivables from related
parties of $1,708 a and $1,676,
respectively . . . . . . . . . . . . . . . . 6,705 2,886
Deferred charges, less amortization . . . . . 2,083 4,357
Other . . . . . . . . . . . . . . . . . . . . 3,356 3,264
--------- --------
12,144 10,507
--------- --------
$ 188,308 $ 193,649
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt . . . . $ 10,060 $ 51
Accounts payable and accrued liabilities 26,545 24,762
--------- ---------
Total current liabilities. . . . . . . . 36,605 24,813
--------- ---------
Long-term debt, less current portion. . . . 19,947 26,846
--------- ---------
Deferred credits. . . . . . . . . . . . . . 3,025 2,424
--------- ---------
Other liabilities . . . . . . . . . . . . . 1,314 1,120
--------- ---------
Commitments and contingencies
Redeemable preferred stock, $60 par value,
redeemable for $2,974 in 2005. . . . . . 1,902 1,799
--------- ---------
Shareholders' equity:
Common stock, $.10 par value; authorized
30,000,000 shares; 14,337,235 and
14,282,520 shares issued, respectively . . 1,434 1,428
Capital in excess of par value. . . . . . . 156,532 157,226
Retaining earnings . . . . . . . . . . . . 5,012 4,677
Deferred compensation . . . . . . . . . . . (7,200) (9,934)
Less treasury shares of 2,072,784 and
1,045,984, respectively, at cost . . . . . (30,263) (16,750)
--------- ---------
125,515 136,647
--------- ---------
$ 188,308 $ 193,649
========= =========
</TABLE> See notes to consolidated financial statements.
<PAGE> 19
SHOWBIZ PIZZA TIME, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 30, 1994,
DECEMBER 31, 1993 AND JANUARY 1, 1993
(Thousands, except per share data)
<TABLE>
1994 1993 1992
---------- -------- --------
<S> <C> <C> <C>
Food and beverage revenues . . . . . . $189,257 $197,090 $183,798
Games and merchandise revenues . . . . 74,331 70,242 64,033
Franchise fees and royalties . . . . . 4,078 4,321 4,863
Joint venture income . . . . . . . . . 161 345 430
------- -------- --------
267,827 271,998 253,124
-------- -------- --------
Costs and expenses:
Cost of sales . . . . . . . . . . . 137,729 137,343 125,279
Selling, general and administrative
expenses, including related party
expenses of $125 in each year . . . . 47,263 42,129 39,733
Depreciation and amortization . . . . 26,032 23,058 19,249
(Gain) loss on property transactions. (2,597) 675 654
Other operating expenses. . . . . . . 55,114 50,095 41,771
-------- -------- --------
263,541 253,300 226,686
-------- -------- --------
Operating income . . . . . . . . . . . 4,286 18,698 26,438
-------- -------- --------
Other income (expenses):
Interest income, including related party
income of $209, $177, and $219,
respectively. . . . . . . . . . . 688 346 320
Interest expense, including related
party expense of $99 and $376,
in 1993 and 1992, respectively. . . (1,861) (797) (1,508)
-------- -------- --------
(1,173) (451) (1,188)
-------- -------- --------
Income before income taxes . . . . . . 3,113 18,247 25,250
Income taxes:
Current expense. . . . . . . . . . . 869 1,751 1,161
Deferred expense . . . . . . . . . . 1,568 4,605 8,586
-------- -------- --------
2,437 6,356 9,747
-------- -------- --------
Net income . . . . . . . . . . . . . $ 676 $ 11,891 $ 15,503
======== ======== ========
Earnings per common and common
equivalent share:
Primary:
Net income . . . . . . . . . . . . $ .03 $ .86 $ 1.11
======== ======== ========
Weighted average shares outstanding. 12,127 13,455 13,662
======== ======== ========
Fully diluted:
Net income . . . . . . . . . . . . $ .03 $ .86 $ 1.11
======== ========= ========
Weighted average shares outstanding. 12,127 13,464 13,713
======== ========= ========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 20
SHOWBIZ PIZZA TIME, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 30, 1994,
DECEMBER 31, 1993 AND JANUARY 1, 1993
(Thousands, except per share data)
<TABLE>
Common Treasury
Stock Capital in Retained Deferred Stock
----------------- Excess of Earnings Compen- ---------------
Shares Par Value Par Value (Deficit) sation Shares Cost
-------- --------- ----------- --------- ------------ ------ ------
<S><C> <C> <C> <C> <C> <C> <C>
Balances, Dec. 27, 1991. . .
12,538 $ 1,254 $136,358 $(22,034) 28 $ (78)
Net income . . . . . . . .
15,503
Redeemable preferred stock accretion .. (103)
Redeemable preferred stock
dividends, $4.80 per share. . . . . (238)
Stock options exercised. . . . . . .
353 35 1,324
Warrants exercised . . . . . . . . . .
74 8 124
Stock grant plan . . . . . . . . . . . . .
2 1,040 $ (999)
Tax benefit from exercise of stock
options and stock grants . . . . . . . .
4,436
Treasury stock acquired. . . . . . . . . . . 184 (4,733)
Amortization of deferred compensation . . . 333
Stock split costs. . . . . . . . . . . . . .
(17)
Cancellation of fractional shares. . . . . .
(2) (46)
------- ------ --------- ------- ------- ------ -------
Balances, Jan. 1, 1993 . . . . . . . . . . . .
12,965 1,297 143,219 (6,872) (666) 212 (4,811)
Net income . . . . . . . . . . . . . 11,891
Redeemable preferred stock
accretion. . . . . . . . . . . . . (104)
Redeemable preferred stock
dividends, $4.80 per share . . . . (238)
Stock options exercised. . . . . . .
48 5 573
Warrants exercised . . . . . . . . .
855 85 1,435
Stock grant plan . . . . . . . . . .
414 41 12,000 (12,000)
Tax expense from exercise of stock
options and stock grants . . . . . .
(37)
Treasury stock acquired. . . . . . . . 834 (11,939)
Amortization of deferred compensation. 2,732
Stock issued under 401(k) plan . . .
1 36
----- ------ --------- ------- --------- ------ --------
Balances, Dec. 31, 1993. . . . . . . .
14,283 1,428 157,226 4,677 (9,934) 1,046 (16,750)
Net income . . . . . . . . . . . . . . 676
Redeemable preferred stock accretion . (103)
Redeemable preferred stock
dividends, $4.80 per share. . . . . (238)
Stock options exercised. . . . . . . .
54 6 234
Tax expense from exercise of stock options
and stock grants . . . (928)
Treasury stock acquired. . . . . . . . . 1,027 (13,513)
Amortization of deferred
compensation . . . . . . . . . . . . . 2,734
------- -------- -------- --------- -------- -------- --------
Balances, Dec. 30, 1994. . . . . . . . . .
14,337 $ 1,434 $156,532 $ 5,012 $ (7,200) 2,073 (30,263)
======= ======= ======== ======= ======== ====== =========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 21
SHOWBIZ PIZZA TIME, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 30, 1994,
DECEMBER 31, 1993 AND JANUARY 1, 1993
(Thousands)
<TABLE>
1994 1993 1992
-------- --------- ---------
<S <C> <C> <C>
Operating activities:
Net income . . . . . . . . $ 676 $11,891 $15,503
Adjustments to reconcile net income to
cash provided by operations:
Depreciation and amortization . . . 26,032 23,058 19,249
Deferred income taxes. . . . . . . 1,568 4,605 8,586
(Gain) loss on property transactions. (2,597) 675 654
Compensation expense under
stock grant plan. . . . . . . . . 2,734 2,756 418
Other . . . . . . . . . . . . . . . 619 399 756
Net change in receivables,
inventories, prepaids, payables
and accrued liabilities . . . . . 1,787 1,521 (920)
-------- ------- -------
Cash provided by operations. . . 30,819 44,905 44,246
------- ------- -------
Investing activities:
Purchases of property and equipment. . (29,421) (44,600) (33,903)
Proceeds from disposition of
property and equipment. . . . . . . 6,725 250
Payments received on notes receivable. . 2,992 978 1,041
Additions to notes receivable. . . . . (2,169) (724) (928)
Change in deferred charges,
investments and other assets. . . . . (703) (1,813) (2,082)
------- ------- -------
Cash used in investing activities. . (22,576) (45,909) (35,872)
------- ------- -------
Financing activities:
Proceeds from line of credit. . . . . . 8,535 24,050 16,650
Payments on line of credit . . . . . . . (5,235) (10,550) (8,650)
Reduction of debt and capital lease
obligations, including payments to
related parties of $1,658 and $6,447
in 1993 and 1992, respectively. . . . . (47) (1,692) (12,231)
Redeemable preferred stock dividends. . . (238) (238) (238)
Acquisition of treasury stock. . . . . (13,513) (11,939) (4,733)
Exercise of stock options and warrants,
including exercise by a related party
of $1,488 and $130 in 1993 and 1992,
respectively . . . . . . . . . . . . 240 2,098 1,491
Other. . . . . . . . . . . . . . . . . (115) 324 80
------- ------- -------
Cash used in financing activities (10,373) 2,053 (7,631)
------- ------- -------
Increase in cash and cash equivalents. . (2,130) 1,049 743
Cash and cash equivalents,
beginning of year . . . . . . . . . . 4,511 3,462 2,719
------- ------- -------
Cash and cash equivalents, end of year .$ 2,381 $ 4,511 $ 3,462
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
<PAGE> 22
SHOWBIZ PIZZA TIME, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 30, 1994,
DECEMBER 31, 1993 AND JANUARY 1, 1993
1. Summary of significant accounting policies:
Operations:
ShowBiz Pizza Time, Inc. (the "Company") operates and
franchises family restaurant entertainment centers as Chuck E.
Cheese's restaurants, and through BHC Acquisition Corporation
("BAC"), its wholly owned subsidiary, also operated Monterey's
Tex-Mex Cafe restaurants. The Monterey's Tex-Mex Cafe
restaurants were sold effective May 5, 1994.
Fiscal year:
The Company's fiscal year is 52 or 53 weeks and ends on the
Friday nearest December 31. References to 1994, 1993 and 1992 are
for the fiscal years ended December 30, 1994, December 31, 1993
and January 1, 1993, respectively. Fiscal year 1992 was 53 weeks
in length, while 1994 and 1993 were each 52 weeks in length.
Basis of consolidation:
The consolidated financial statements include the accounts of
the Company and BAC. All significant intercompany accounts and
transactions have been eliminated.
Cash and cash equivalents:
Cash and cash equivalents of the Company are composed of demand
deposits with banks and short-term cash investments with remaining
maturities of less than three months from the date of purchase by
the Company.
Inventories:
Inventories of food, paper products and supplies are stated at
the lower of cost or market on a first-in, first-out basis.
Property and equipment, depreciation and amortization:
Property and equipment are stated at cost. Depreciation and
amortization are provided by charges to operations over the
estimated useful lives of the assets, or the lease term if less,
by the straight-line method.
Deferred charges and related amortization:
Loan costs are deferred and amortized over the term of the
respective agreements. Franchise rights are amortized over the
remaining life of the franchise agreements. In the fourth quarter
of 1994, the Company revised its estimate of the future benefit
for preopening expenses. As a result, the Company expensed all
unamortized preopening expenses of approximately $900,000. The
Company will now expense all preopening expenses as incurred.
Previously, preopening expenses were amortized over a two year
period. Other deferred charges are amortized over various periods
of up to five years. All amortization is provided by the
straight-line method.
Franchise fees and royalties:
The Company recognizes initial franchise fees upon fulfillment
of all significant obligations to the franchisee. Royalties from
franchisees are accrued as earned.
<PAGE> 23
SHOWBIZ PIZZA TIME, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 30, 1994,
DECEMBER 31, 1993 AND JANUARY 1, 1993
2. Significant transactions:
Effective May 5, 1994, the Company sold its Monterey's Tex-Mex
Cafe restaurants for an aggregate purchase price consisting of
approximately $6.7 million in cash, $4.7 million in subordinated
promissory notes and the retention of a 12 1/2% equity interest in
the acquiring company. Due to the Company's substantial equity
interest, the acquiring company is a related party subsequent to
the transaction. Revenues from the Company's Monterey's Tex-Mex
Cafe restaurants were $6.2 million in 1994. Operating income was
$6.0 million in 1994. Operating income includes a gain of $5.5
million from the sale.
The Company provided for a loss of approximately $2.3 million
in 1994 as a result of the Company's decision to close one Chuck
E. Cheese's restaurant and the impairment in fair value of the
fixed assets of ten Chuck E. Cheese's restaurants. The impairment
in fair value of the ten restaurants is due to the Company's
decision not to renew the leases as a result of the deterioration
of site characteristics or the inability to renew the leases at
acceptable rental terms.
3. Accounts receivable:
<TABLE>
1994 1993
------ ------
(thousands)
<S> <C> <C>
Trade. . . . . . . . . . . . . . . . . $ 382 $ 309
Other. . . . . . . . . . . . . . . . . 3,454 3,651
------- -------
3,836 3,960
Less allowance for doubtful collection . (475) (266)
------- -------
$ 3,361 $ 3,694
======= =======
</TABLE>
4. Notes receivable:
The Company's notes receivable at December 30, 1994 and
December 31, 1993 arose principally as a result of the sale of
restaurants, advances to franchisees, joint ventures and managed
properties and lines of credit established with the International
Association of ShowBiz Pizza Time Restaurants, Inc., a related
party (Note 19). The notes have various terms, but most are
payable in monthly installments of principal and interest through
2000, with interest rates ranging from 8.5% to 13.5%.
Substantially all notes are collateralized by the related property
and equipment. Balances of notes receivable are net of an
allowance for doubtful collection of $139,000 at December 30,
1994. There was no allowance at December 31, 1993.
5. Property and equipment:
<TABLE>
Estimated
Lives 1994 1993
----------- --------- ---------
(in years) (thousands)
<S> <C> <C> <C>
Land and improvements. . . . . . 0 - 10 $ 4,650 $ 5,538
Leasehold improvements . . . . . 4 - 15 107,928 109,445
Buildings and improvements . . . . 4 - 25 8,789 9,061
Furniture, fixtures and equipment. 2 - 10 87,756 80,562
Property leased under capital
leases (Note 8). . . . . . . . . 10 - 15 1,328 1,486
--------- ---------
210,451 206,092
Less accumulated depreciation and
amortization. . . . . . . . . . (81,805) (77,142)
--------- ----------
128,646 128,950
Construction in progress . . . . . . 1,544 4,057
--------- ---------
$ 130,190 $ 133,007
========= =========
</TABLE>
<PAGE> 24
SHOWBIZ PIZZA TIME, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 30, 1994,
DECEMBER 31, 1993 AND JANUARY 1, 1993
6. Deferred charges:
<TABLE>
1994 1993
-------- --------
(thousands)
<S> <C> <C>
Franchise rights . . . . . . . . . . . . $ 5,000 $ 5,000
Loan costs . . . . . . . . . . . . . . . 434 370
Preopening expenses (Note 1) . . . . . . 4,088
Consulting contracts . . . . . . . . . . 643
Other. . . . . . . . . . . . . . . . . . 557 563
-------- --------
5,991 10,664
Less accumulated amortization. . . . . . . (3,908) (6,307)
-------- -------
$ 2,083 $ 4,357
======== ========
</TABLE>
7. Accounts payable and accrued liabilities:
<TABLE>
1994 1993
-------- --------
(thousands)
<S> <C> <C>
Accounts payable. . . . . . . . . . . . . $ 10,819 $ 10,683
Salaries and wages. . . . . . . . . . . . 3,990 3,367
Insurance . . . . . . . . . . . . . . . . 7,670 6,291
Taxes, other than income . . . . . . . . . 2,528 2,941
Other. . . . . . . . . . . . . . . . . . . 1,538 1,480
-------- --------
$ 26,545 $ 24,762
======== ========
</TABLE>
8. Leases:
The Company leases certain restaurants and related property and
equipment under operating and capital leases. All leases require
the Company to pay property taxes, insurance and maintenance of
the leased assets. The leases generally have initial terms of
seven to 30 years with various renewal options.
Following is a summary of property leased under capital leases:
<TABLE>
1994 1993
------- -------
(thousands)
<S> <C> <C>
Buildings and improvements. . . . . . . . . . . $ 1,328 $ 1,486
Less accumulated depreciation . . . . . . . . . (771) (735)
-------- --------
$ 557 $ 751
======== ========
</TABLE>
<PAGE> 25
SHOWBIZ PIZZA TIME, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 30, 1994,
DECEMBER 31, 1993 AND JANUARY 1, 1993
8. Leases (continued):
Scheduled annual maturities of the obligations for capital and
operating leases as of December 30, 1994, are:
<TABLE>
Years Capital Operating
--------- ---------- ---------
(thousands)
<S> <C> <C>
1995 . . . . . . $ 275 $ 26,157
1996 . . . . . . 292 25,194
1997 . . . . . . 292 22,869
1998 . . . . . . 256 19,701
1999 . . . . . . 184 17,467
2000-2009 (aggregate payments) . . . . . . 1,238 53,259
------- --------
Minimum future lease payments. . . . . . . . 2,537 $164,647
========
Less amounts representing interest . . . . . (1,330)
--------
Present value of future minimum lease payments . 1,207
Less current portion . . . . . . . . . . . . . (60)
--------
$ 1,147
========
</TABLE>
Certain of the Company's real estate leases, both capital and
operating, require payment of contingent rent in the event defined
revenues exceed specified levels.
The Company's rent expense is comprised of the following:
<TABLE>
1994 1993 1992
------ ------ ------
(thousands)
<S> <C> <C> <C>
Minimum . . . . . . . . . . . . . . $28,003 $25,305 $20,485
Contingent. . . . . . . . . . . . . 216 185 525
------- ------- -------
$28,219 $25,490 $21,010
======= ======= =======
</TABLE>
<PAGE> 26
SHOWBIZ PIZZA TIME, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 30, 1994
DECEMBER 31, 1993 AND JANUARY 1, 1993
9. Long-term debt:
<TABLE>
1994 1993
--------- ---------
(thousands)
<S> <C> <C>
Revolving bank loan, due January 1996 . . . $ 28,800 $ 25,500
Obligations under capital leases (Note 8) . 1,207 1,397
-------- --------
30,007 26,897
Less current portion. . . . . . . . . . . (10,060) (51)
-------- --------
$19,947 $26,846
======== ========
</TABLE>
The Company's revolving loan agreement was amended to provide
the Company with a credit line of up to $30.8 million due on
January 31, 1996. Beginning July 1, 1995, available borrowings
under the credit line reduce each month to $18.3 million by
January 1, 1996. Available borrowings are further reduced by
outstanding letters of credit which totaled $1.5 million at
December 30, 1994. Interest is provided at a rate equal to prime,
8.5% at December 30, 1994, plus 1%, increasing to 2.75% by
January 1996. A 1/5% annual commitment fee is payable on any
unused credit line.
Under the terms of the revolving loan agreement, the Company is
prohibited from paying dividends on its common stock and must
achieve certain profitability levels.
The Company has a substantial portion of its assets pledged as
collateral for the bank loan, including $7,234,000 in notes
receivable and property and equipment with a net book value of
$70,862,000.
10. Commitments and contingencies:
The Company has guaranteed certain obligations related to
restaurant building and equipment leases. The underlying assets
are collateral for the leases and the makers or assignees of all
of the obligations are required to perform thereunder before the
Company is required to fulfill its guarantee. In the event of
default by the maker or assignee, the Company, in almost all
cases, may make payment under the guarantees in accordance with
the original payment schedule and has the right to locate
potential buyers or subtenants for the assets. As of December 30,
1994, such guarantees aggregated approximately $ 1,126,000.
11. Litigation:
The Company has been named a defendant in litigation brought by
plaintiffs as individuals and as representatives of a purported
class who are holders of securities issued by Integra - A Hotel
and Restaurant Company ("Integra") which has sought protection
from creditors under Chapter 11 of the Federal Bankruptcy Code.
This suit has alleged that the Company, Integra and The Hallwood
Group, Incorporated ("Hallwood") violated state securities laws,
committed common law fraud and breached fiduciary duties to the
plaintiffs in connection with the Integra securities acquired by
the plaintiffs from 1986 through 1988 and that the 1988 Integra
distribution of 90% of the common stock of the Company to holders
of Integra common stock constituted a fraudulent transfer under
Texas law. The plaintiffs have sought actual damages in an amount
equal to the alleged loss of value of their Integra securities,
recission of the Company's 1988 spin-off and punitive damages.
<PAGE> 27
SHOWBIZ PIZZA TIME, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 30, 1994,
DECEMBER 31, 1993 AND JANUARY 1, 1993
11. Litigation (continued):
The Company has been named a defendant in litigation brought by
the trustee of a municipal bond issuance made in 1980 upon which
Integra executed a guaranty. The plaintiff in this suit has
alleged that Integra's guaranty of the municipal bond issuance was
binding on successors of Integra and that the Company is a legal
successor to Integra. The plaintiff in this action seeks to
recover judgement in the full amount of its claim against Integra.
The Company is a nominal defendant in a shareholders'
derivative action in which three of the Company's executive
officers, four of the Company's outside directors and Hallwood
were named defendants. The plaintiffs in this lawsuit have
alleged the individual defendants breached fiduciary duties to
shareholders and unjustly enriched themselves as a result of
alleged violations of federal securities laws. The plaintiffs in
this action have sought unspecified damages.
The Company has been named a defendant in litigation brought by
a partnership alleging that the Company tortiously interfered with
a contract between the partnership and Integra and that the
Company has successor liability on the contract. The plaintiff in
this action has sought damages.
The Company has also been named a defendant in a suit alleging
that the Company breached a restaurant lease, which the Company
contends it has rightfully terminated.
The Company presently believes that the ultimate resolution of
these lawsuits will not have a material adverse impact on the
Company. Certain other suits are pending against the Company
which involve claims for damages which are not material and which
have arisen in the ordinary course of business.
12. Redeemable preferred stock:
As of December 30, 1994, the Company had 49,570 shares of its
redeemable preferred stock authorized and outstanding. The stock
pays dividends at $4.80 per year, subject to a minimum cash flow
test. As of December 30, 1994, one quarterly dividend, totaling
$59,484 or $1.20 per share, was accrued but not yet paid. The
redeemable preferred stock has been recorded at the net present
value and is being accreted on the straight-line basis. The
Company's restated articles of incorporation provide for the
redemption of such shares at $60 per share in 2005. During the
continuation of any event of default by the Company, the preferred
shareholders shall be able to elect a majority of the directors of
the Company.
<PAGE> 28
SHOWBIZ PIZZA TIME, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 30, 1994,
DECEMBER 31, 1993 AND JANUARY 1, 1993
13. Earnings per common share:
Earnings per common and common equivalent share were computed
based on the weighted average number of common and common
equivalent shares outstanding during the period. Net income
available per common share has been adjusted for the items
indicated.
Earnings per common and common equivalent share were computed
as follows (thousands, except per share data):
<TABLE>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Net income . . . . . . . . . . . . . . . $ 676 $ 11,891 $ 15,503
Accretion of redeemable preferred stock. (103) (104) (103)
Redeemable preferred stock dividends . . (238) (238) (238)
------- -------- --------
Adjusted income applicable to common shares. $ 335 $ 11,549 $ 15,162
======= ========= =========
Primary:
Weighted average common shares outstanding. 12,078 12,816 12,666
Common stock equivalents:
Stock purchase warrants. . . . . . . . . . 426 839
Other. . . . . . . . . . . . . . . . . . . 49 213 157
--------- -------- --------
Weighted average shares outstanding . . . 12,127 13,455 13,662
========= ======== ========
Earnings per common and common
equivalent share. . . . . . . . . . . $ .03 $ .86 $ 1.11
======== ======== ========
Fully Diluted:
Weighted average common
shares outstanding . . . . . . . . 12,078 12,816 12,666
Common stock equivalents:
Stock purchase warrants . . . . . . 426 852
Other . . . . . . . . . . . . . . . 49 222 195
-------- -------- --------
Weighted average shares outstanding. . 12,127 13,464 13,713
======== ======== ========
Earnings per common and common
equivalent share . . . . . . . . . . $ .03 $ .86 $ 1.11
======== ======== ========
</TABLE>
14. Franchise fees and royalties:
At December 30, 1994, 106 Chuck E. Cheese's restaurants were
operated by a total of 58 different franchisees. The standard
franchise agreements grant to the franchisee the right to develop
and operate a restaurant and use the associated trade names,
trademarks, and service marks within the standards and guidelines
established by the Company.
Initial franchise fees included in revenues were $315,000,
$82,500 and $197,000 in 1994, 1993 and 1992, respectively.
15. Cost of sales:
<TABLE> 1994 1993 1992
------- ------- -------
(thousands)
<S> <C> <C> <C>
Food, beverage and related supplies. . . . $ 46,328 $ 48,435 $ 45,881
Games and merchandise. . . . . . . . . . . 12,369 11,375 10,202
Labor. . . . . . . . . . . . . . . . . . . 79,032 77,533 69,196
------- ------- -------
$137,729 $137,343 $125,279
======= ======= =======
</TABLE>
<PAGE> 29
SHOWBIZ PIZZA TIME, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 30, 1994,
DECEMBER 31, 1993 AND JANUARY 1, 1993
16. Income taxes:
The significant components of income tax expense are as
follows:
<TABLE>
1994 1993 1992
------- ------- -------
(thousands)
<S> <C> <C> <C>
Current expense. . . . . . . . . . . . $ 869 $ 1,751 $ 1,161
Deferred expense:
Utilization of operating loss
carryforwards . . . . . . . . . . . 2,204 6,078 4,441
Tax (benefits) expense from exercise of
stock options and stock grants . . . . (928) (37) 4,436
Increase in valuation of deferred tax asset (971)
Allowance for tax credit carryforwards
expiring in 1997. . . . . . . . . . . 1,104
Tax credits. . . . . . . . . . . . . . (237) (465) (291)
Other. . . . . . . . . . . . . . . . . (575)
-------- -------- --------
$ 2,437 $ 6,356 $ 9,747
======== ======== ========
</TABLE>
The Company's deferred tax asset of approximately $33.0 million
at December 30, 1994 is primarly due to a $26.4 million tax effect
of $74.0 million unused net operating loss carryforwards
("NOL's"), $7.1 million in tax credit carryforwards and tax
effected net taxable deductions of $575,000. In 1994, the Company
recorded a valuation allowance of $1.1 million for deferred tax
credit carryforwards which are estimated to expire in 1997.
In August 1993, new federal tax legislation was enacted that
increased the Company's federal tax rate to 35% effective January
1, 1993. As a result, the Company's deferred tax asset and net
income were increased by approximately $971,000 and deferred tax
expense decreased in the same amount.
As of December 30, 1994, the Company has NOL's of approximately
$74.0 million for federal income tax purposes. While the Company
believes that it is likely that it will realize these
carryforwards, there can be no assurance that they will be
available to such extent and be fully realized. In addition, as
of December 30, 1994, the Company has investment tax credit and
jobs tax credit carryforwards totaling $5,258,000 and $495,000,
respectively, and alternative minimum tax credits of $1,369,000.
A schedule of expiring NOL's and tax credits by fiscal year are
as follows:
<TABLE>
Amount
---------------------------
Years NOL's Tax Credits
---------- ---------- ------------
(thousands)
<S> <C> <C>
1997 . . . . . . . . . . . . . . . . . $ 1,104
1998 . . . . . . . . . . . . . . . . . 4,007
1999 . . . . . . . . . . . . . . . . . $39,000 395
2000 . . . . . . . . . . . . . . . . . 20,000 149
2001 . . . . . . . . . . . . . . . . . 14,000 19
2002 - 2008. . . . . . . . . . . . . . 1,000 79
-------- --------
$74,000 $ 5,753
</TABLE>
The Company's alternative minimum tax credits have no
expiration date.
<PAGE> 30
SHOWBIZ PIZZA TIME, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 30, 1994,
DECEMBER 31, 1993 AND JANUARY 1, 1993
16. Income taxes (continued):
Current tax laws and regulations relating to substantial
changes in control may limit the utilization of net operating loss
and tax credit carryforwards in any one year. As of December 30,
1994, no limitation of such carryforwards has occurred.
A reconciliation of the statutory rate to taxes provided is as
follows:
<TABLE> 1994 1993 1992
------- ------- ------
(thousands)
<S> <C> <C> <C>
Statutory rate . . . . . . . . . . . . . 34.0% 35.0% 34.0%
State income taxes . . . . . . . . . . . 14.8% 5.1% 4.6%
Increase in valuation of deferred tax asset (5.3%)
Allowance for tax credit carryforwards . . 35.5%
Other. . . . . . . . . . . . . . . . . . . (6.0%)
------- ------- --------
Income taxes provided. . . . . . . . . . . 78.3% 34.8% 38.6%
======= ======= =======
</TABLE>
17. Fair value of financial instruments:
The Company has certain financial instruments consisting
primarily of cash, cash equivalents, notes receivable, notes
payable and redeemable preferred stock. The carrying amount of
cash and cash equivalents approximates fair value because of the
short maturity of those instruments. The carrying amount of the
Company's notes receivable, notes payable and redeemable preferred
stock approximates fair value based on the interest rates charged
on instruments with similar terms and risks. The estimated fair
value of the Company's redeemable preferred stock is $3.0 million.
The carrying values of all other financial instruments approximate
the fair values.
18. Supplemental cash flow information:
<TABLE>
1994 1993 1992
------- ------- -------
(thousands)
Cash paid during the year for:
<S> <C> <C> <C>
Interest . . . . . . . . . . . . . . $ 1,781 $ 912 $1,416
Income taxes . . . . . . . . . . . . 1,389 1,769 935
Supplemental schedule of noncash investing and
financing activities:
Other assets cancelled in connection
with the acquisition of
property and equipment . . . . . . . . 24
Liabilities assumed or incurred in
connection with the acquisition
of property and equipment. . . . . . . 674
Notes received in connection with the
disposition of property and equipment . . 4,650
Investment received in connection with the
disposition of property and equipment . . 438
</TABLE>
<PAGE> 31
SHOWBIZ PIZZA TIME, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 30, 1994,
DECEMBER 31, 1993 AND JANUARY 1, 1993
19. Related party transactions:
Hallwood is the beneficial owner of approximately 14.5% of the
outstanding common stock of the Company. The directors of Hallwood serve
as a majority of the directors of the Company and Integra.
In December 1993, the Company fully repaid approximately $1.7
million in a term loan payable to a third party assigned by
Integra. In February 1992, the Company prepaid $1,583,000 in a
term loan payable to Hallwood which had been assigned to them by
Integra. In November 1992, the Company redeemed $4,768,300 in
floating rate subordinated bonds held by Hallwood.
The Company made annual payments to Hallwood of $125,000 for
consulting services in 1994, 1993, and 1992. In addition, the
Company made interest payments to Hallwood of $261,000 in 1992.
In consideration for rent reductions resulting from Hallwood's
negotiation of the Company's home office lease agreement in
December 1990, the Company assigned to Hallwood its sublease
interest in the home office building subleased to Integra with a
fair value of approximately $120,000 per year.
The Company paid $99,000 and $115,000 in interest to Integra
for 1993 and 1992, respectively.
In 1993 and 1992, Hallwood and its affiliate exercised warrants
to purchase 835,873 and 73,263 shares of common stock,
respectively. The exercise price of the warrants was $1.78 per
share.
During 1993 and 1992, the Company advanced $30,000 and
$437,000, respectively, to joint ventures in which the Company has
a 50% interest or less. Principal and interest are payable in
monthly installments, with interest at various rates from prime to
12%. The Company also has miscellaneous accounts receivable from
the joint ventures of approximately $393,000 and $279,000 at
December 30, 1994 and December 31, 1993, respectively.
In September 1990, the Company entered into an agreement to
grant the International Association of ShowBiz Pizza Time
Restaurants, Inc. (the "Association") a $2.0 million line of
credit, at prime, which allowed the Association to accelerate the
conversion of all robotic characters into Chuck E. Cheese's
characters and to begin improvements to existing Chuck E. Cheese's
characters. In December 1993, the Company granted the Association
a $1.0 million line of credit, at prime, for advertising
production. In November 1994, available borrowings under the
lines of credit were reduced to a total of $2.4 million at an
annual interest rate of prime plus 1/2%. The Association was
established to develop and improve entertainment attractions and
produce system wide advertising. Two officers of the Association
are also officers of the Company. At December 30, 1994,
$1,372,000 was outstanding under these lines of credit. The
Company also had a miscellaneous account receivable from the
Association of $22,000 and $30,000 at December 30, 1994 and December
31, 1993, respectively.
20. Employee benefit plans:
The Company has employee benefit plans that include: a)
executive bonus compensation plans based on the performance of the
Company; b) a non-statutory stock option plan and c) a stock grant
plan.
<PAGE> 32
SHOWBIZ PIZZA TIME, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECMBBER 30, 1994,
DECEMBER 31, 1993 AND JANUARY 1, 1993
20. Employee benefit plans (continued):
The number of shares of the Company's common stock which may be
issued under the stock option plan is 1,348,025 shares. All
shares must be granted before December 31, 1998. The exercise
price for options granted under the plan may not be less than the
fair market value of the Company's common stock at date of grant.
Options may not be exercised until the employee has been
continuously employed at least one year after the date of grant.
Options which expire or terminate may be regranted under the plan.
<TABLE>
1994 1993 1992
--------- ---------- ----------
<S> <C> <C> <C>
Options outstanding,
beginning of year. . . . 372,662 276,297 445,388
Granted . . . . . . . . 341,500 158,800 162,030
Exercised . . . . . . . (51,714) (47,885) (321,369)
Terminated. . . . . . . (155,813) (14,550) (9,752)
--------- --------- ---------
Options outstanding, end of year
($2.45-$33.50 per share) . . 506,635 372,662 276,297
========= ========= =========
Options:
Exercisable. . . . . . . . 175,317 261,490 114,267
Available for grant. . . . 171,871 357,558 251,808
</TABLE>
The options granted in 1994 are at exercise prices ranging from
$8.13 to $13.75 per share. In January and March 1995, the Stock
Option Committee of the Board of Directors granted 191,540
additional options at an exercise price of $8.50 per share,
subject to the surrender of certain options granted in 1994.
The number of shares of the Company's common stock which may be
awarded to senior executives of the Company under the Stock Grant
Plan is 1,145,758 shares. An aggregate of 414,508 shares were
awarded pursuant to the plan in 1993. None were awarded in 1994
and 1992. Compensation expense recognized by the Company pursuant
to this plan was $2,734,000, $2,756,000 and $418,000, in 1994,
1993, and 1992, respectively. All shares are subject to forfeiture
upon termination of the participant's employment by the Company
over vesting periods ranging from 2 years to 6 years. The shares
are nontransferable during the vesting periods.
As a result of shares awarded to the Company's Chairman of the
Board and Chief Executive Officer, the Company recognized deferred
compensation of $12.0 million in 1993. The deferred compensation
is amortized over the compensated periods of service through 1997.
In January 1992, the Board of Directors accelerated the vesting
provisions of 350,955 shares of common stock granted in 1989 to
the Company's Chairman of the Board and Chief Executive Officer.
Concurrently, 112,053 shares were surrendered to the Company to
satisfy federal income tax withholding obligations. Shares were
held in an irrevocable trust to secure his continuing obligations
to the Company under his employment and consulting agreements.
The Company has adopted the ShowBiz 401(k) Retirement and
Savings Plan, to which it may at its discretion make an annual
contribution out of its current or accumulated earnings of up to
the lesser of 50% of employee contributions or $750 per employee.
Contributions by the Company may be made in the form of its common
stock or in cash. In 1993, the Company made a contribution of
approximately $36,000 in common stock for the 1992 plan year. No
contributions were made for the 1993 plan year and it is
anticipated that approximately $30,000 will be made for 1994.
<PAGE> 33
SHOWBIZ PIZZA TIME, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
YEARS ENDED DECEMBER 30, 1994,
DECEMBER 31, 1993 AND JANUARY 1, 1993
21. Quarterly results of operations (unaudited):
The following summarizes the unaudited quarterly results of
operations for the years ended December 30, 1994 and December 31,
1993 (thousands, except per share data).
<TABLE>
Fiscal year ended December 30, 1994
-----------------------------------------------------
April 1 July 1 Sept. 30 Dec. 30
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues . . . . . . . $ 76,370 $ 64,019 $ 68,285 $ 59,153
Gross operating profit . . 38,377 30,858 33,789 27,074
Operating income (loss). . 5,744 2,529 1,982 (5,969)
Net income (loss). . . . . 3,425 1,248 1,024 (5,021)
Per Share:
Primary and fully diluted:
Net income (loss) . . . $ .27 $ .10 $ .08 $ (.42)
</TABLE>
<TABLE>
Fiscal year ended December 31, 1993
---------------------------------------------------
April 2 July 2 Oct. 1 Dec. 31
------- ------- ------- --------
<C> <C> <C> <C>
Revenues . . . . . . . . . $ 73,381 $ 64,669 $ 71,636 $ 62,312
Gross operating profit . . 38,235 31,542 35,985 28,893
Operating income (loss). . 10,854 2,962 5,366 (484)
Net income (loss). . . . . 6,583 1,799 3,895 (386)
Per Share:
Primary and fully diluted:
Net income (loss) . . $ .48 $ .13 $ .28 $ (.04)
</TABLE>
In the second quarter of 1994, the Company recognized a gain of
$5.5 million from the sale of its Monterey's Tex-Mex Cafe
restaurants. This was partially offset by a $2.0 million loss
associated with the impairment in fair value of certain Chuck E.
Cheese's restaurants.
The fourth quarter of 1994 includes a $1.1 million increase in
income tax expense due to a reduction in deferred tax credit
carryforwards which are estimated to expire in 1997, a write-off
of approximately $900,000 for preopening expenses due to a change
in the estimated future benefit of such expenses and a reserve of
approximately $400,000 for the impairment in fair value of certain
Chuck E. Cheese's restaurants.
<PAGE> 34
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
ShowBiz Pizza Time, Inc.
Irving, Texas
We have audited the consolidated financial statements of ShowBiz
Pizza Time, Inc. and subsidiary as of December 30, 1994 and December
31, 1993, and for each of the three years (52 or 53 weeks) in the
period ended December 30, 1994 and have issued our report thereon
dated March 3, 1995; such report which discloses a change in the
method of accounting for preopening expenses in 1994, is included
elsewhere in this Form 10-K. Our audits also included the
consolidated financial statement schedule of ShowBiz Pizza Time,
Inc. and subsidiary, listed in Item 14. This consolidated financial
statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on
our audits. In our opinion, such consolidated financial statement
schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Dallas, Texas
March 3, 1995
<PAGE> 35
SCHEDULE II
SHOWBIZ PIZZA TIME, INC. AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
------------------------------------------------------------------------------
Additions
charged
Balance at to costs Balance at
beginning of and end of
Description of period expenses Deductions period
===============================================================================
(Thousands)
Allowance for doubtful accounts:
Years ended:
Dec. 30, 1994 . $ 266 $ 209 $ 475
======== ======= =======
Dec. 31, 1993 . . $ 150 $ 116 $ 266
======== ======= =======
Jan. 1, 1993. . . $ 234 $ 84 (A) $ 150
======== ========== =======
Accumulated amortization -- deferred charges:
Years ended:
Dec. 30, 1994 . . $ 6,307 $ 2,854 $ 5,252 (B) $ 3,909
======== ======== ============ ========
Dec. 31, 1993 . . $ 7,789 $ 2,110 $ 3,592 (B) $ 6,307
======== ======== ============ ========
Jan. 1, 1993. . . $ 6,424 $ 1,784 $ 419 (B) $ 7,789
======== ======== ============ ========
Reserve for uncollectible notes receivable:
Years ended:
Dec. 30, 1994 . . $ 139 $ 139
======= =======
Dec. 31, 1993 . . $ 320 $ 320(C)
======= ===========
Jan. 1, 1993 . . $ 320 $ 320
======= =======
________________
(A) Settlement of previously reserved accounts.
(B) Write-off of deferred charges.
(C) Adjustment to notes receivable reserve.
<PAGE> 36
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
P A R T I I I
Item 10. Directors and Executive Officers of the Registrant.
The information required by this Item regarding the directors
and executive officers of the Company shall be included in the
Company's definitive Proxy Statement to be filed pursuant to
Regulation 14A in connection with the Company's 1995 annual meeting
of stockholders and is incorporated herein by reference thereto.
Item 11. Executive Compensation.
The information required by this Item regarding the directors
and executive officers of the Company shall be included in the
Company's definitive Proxy Statement to be filed pursuant to
Regulation 14A in connection with the Company's 1995 annual meeting
of stockholders and is incorporated herein by reference thereto.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The information required by this Item shall be included in the
Company's definitive Proxy Statement to be filed pursuant to
Regulation 14A in connection with Company's 1995 annual meeting of
stockholders and is incorporated herein by reference thereto.
Item 13. Certain Relationships and Related Transactions.
The information required by this Item shall be included in the
Company's definitive Proxy Statement to be filed pursuant to
Regulation 14A in connection with the Company's 1995 annual meeting
of stockholders and is incorporated herein by reference thereto.
<PAGE> 37
P A R T I V
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a) The following documents are filed as a part of this
report:
(1) Financial Statements and Supplementary Data:
Independent auditors' report.
ShowBiz Pizza Time, Inc. and Subsidiary consolidated
financial statements:
Consolidated balance sheets as of December 30, 1994 and
December 31, 1993.
Consolidated statements of earnings for the years
ended December 30, 1994, December 31, 1993, and
December 27, 1991.
Consolidated statements of shareholders' equity for the
years ended December 30, 1994, December 31, 1993, and
January 1, 1993.
Consolidated statements of cash flows for the years
ended December 30, 1994, December 31, 1993, and January
1, 1993.
Notes to consolidated financial statements.
(2) Financial Statement Schedules:
ShowBiz Pizza Time, Inc. and Subsidiary
II ---
Valuation and qualifying accounts and reserves.
<PAGE> 38
(3) Exhibits:
Number Description
------- ------------
3(a)--- Restated Articles of Incorporation of
the Company, as amended to date
(Filed as Exhibit 3(a) to the
Company's Annual Report on Form 10-K
for the year ended January 1, 1993 and
incorporated herein by reference).
3(b)--- Bylaws of the Company, as amended to
date (filed as Exhibit 3 to the
Company's Quarterly Report on Form 10-
Q for the quarter ended September 30,
1994 and incorporated herein by
reference).
4(a)--- Specimen form of certificate
representing $.10 par value Common
Stock (filed as Exhibit 4(a) to the
Company's Annual Report on Form 10-K
for the year ended December 28, 1990
and incorporated herein by reference).
4(b)--- Specimen form of certificate
representing $60 par value Class A
Preferred Stock (filed as Exhibit 4(b)
to the Company's Annual Report on Form
10-K for the year ended December 28,
1990 and incorporated herein by
reference).
4(c)--- Fourth Amended and Restated Revolving
Credit Note in the stated amount of
$50,000,000 dated December 15, 1993
from the Company to The First National
Bank of Boston (filed as Exhibit
4(c) to the Company's Annual Report on
Form 10-K for the year ended December
31, 1993 and incorporated herein by
reference).
10(a)(1)---
Amended and Restated Employment
Agreement dated April 14, 1993 between
the Company and Richard M. Frank
(filed as Exhibit 10(a)(8) to the
Company's Quarterly Report on Form 10-
Q for the quarter ended April 2, 1993
and incorporated herein by reference).
10(a)(2)---
Consulting Agreement dated January 5,
1989 between the Company and Richard
M. Frank (filed as Exhibit 10(a)(5) to
the Company's Annual Report on Form
10-K for the year ended December 27,
1991 and incorporated herein by
reference).
10(a)(3)---
Amendment to Consulting Agreement
dated January 29, 1992, amending the
Consulting Agreement dated January 5,
1989 between the Company and Richard
M. Frank (filed as Exhibit 10(a)(6) to
the Company's Annual Report on Form
10-K for the year ended December 27,
1991 and incorporated herein by
reference).
10(a)(4)---
Stock Grant Trust Agreement dated
January 29, 1992 among the Company,
Richard M. Frank, Ronald F. Saupe and
Kevin J. Shepherd (filed as Exhibit
10(a)(7) to the Company's Annual
Report on Form 10-K for the year ended
December 27, 1991 and incorporated
herein by reference).
10(b)---
Employment Agreement dated January 4,
1994 between the Company and Michael
H. Magusiak. (filed as Exhibit 10(b)
to the Company's Annual Report on Form
10-K for the year ended December 31,
1993 and incorporated herein by
reference).
<PAGE> 39
10(c)(1)---
Non-Statutory Stock Option Plan of the
Company, as amended to date (filed
as Exhibit 10(a)(1) to Company's
Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994 and
incorporated herein by reference).
10(c)(2)---
Specimen form of Contract under the
Non-Statutory Stock Option Plan of the
Company, as amended to date (filed as
Exhibit 10(a)(2) to the Company's
Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994 and
incorporated herein by reference).
10(d)(1)---
Stock Grant Plan of the Company, as
amended to date (filed as Exhibit
10(d)(1) to the Company's Annual
Report on Form 10-K for the year ended
December 31, 1993 and incorporated
herein by reference).
10(d)(2)---
Specimen form of Certificate of
Participation to certain participants
under the Stock Grant Plan of the
Company (filed as Exhibit 10(e)(3) to
Company's Annual Report on Form 10-K
for the year ended December 29, 1989
and incorporated herein by reference).
10(e)(1)---
Specimen current form of the Company's
Franchise Agreement (filed as Exhibit
10(d)(1) to the Company's Annual
Report on Form 10-K for the year ended
December 27, 1991 and herein by
reference).
10(e)(2)---
Specimen current form of the Company's
Development Agreement (filed as
Exhibit 10(d)(2) to the Company's
Annual Report on Form 10-K for the
year ended December 27, 1991 and
herein by reference).
10(f)(1)---
Second Amended and Restated Revolving
Credit Agreement dated as of November
19, 1992 between The First National
Bank of Boston and the Company (filed
as Exhibit 10(e)(1) to the Company's
Annual Report on Form 10-K for the
year ended January 1, 1993 and
incorporated herein by reference).
10(f)(2)---
First Amendment to Second Amended and
Restated Revolving Credit Agreement
dated as of December 15, 1993 between
The First National Bank of Boston, the
Company and BHC Acquisition Corporation
("BAC") (filed as Exhibit 10(f)(2) to
the Company's Annual Report on Form 10-K
for the year ended December 31, 1993 and
incorporated herein for all purposes).
10(f)(3)---
Second Amendment to Second Amended and
Restated Revolving Credit Agreement
dated as of July 1, 1994 between the
Company, BAC and The First National Bank
of Boston, (filed as Exhibit 10(a) to the
Company's Quarterly Report on Form 10-Q
for the quarter ended July 1, 1994
and incorporated herein by reference).
10(f)(4)---
Third Amendment Agreement dated as of
December 29, 1994 between the Company,
BAC and The First National Bank of Boston.
10(f)(5)---
Letter agreement dated as of July 1,
1994 between the Company, BAC and the
First National Bank of Boston (filed as
Exhibit 10(b)(1) to the Company's
quarterly report on Form 10-Q and
incorporated herein by reference).
<PAGE> 40
10(f)(6)---
Second Amended and Restated ShowBiz
Security Agreement dated as of
November 19, 1992 between the Company
and The First National Bank of Boston
(filed as Exhibit 10(e)(2) to the
Company's Annual Report on Form 10-K
for the year ended January 1, 1993 and
incorporated herein by reference).
10(f)(7)---
Second Amended and Restated Monterey
Security Agreement dated as of
November 19, 1992 between BAC and The
First National Bank of Boston (filed
as Exhibit 10(e)(3) to the Company's
Annual Report on Form 10-K for the
year ended January 1, 1993 and
incorporated herein by reference).
10(f)(8)---
Second Amended and Restated Guaranty
Agreement dated November 19, 1992
between BAC and The First National
Bank of Boston (filed as Exhibit
10(e)(4) to the Company's Annual
Report on Form 10-K for the year ended
January 1, 1993 and incorporated
herein by reference).
10(f)(9)---
Second Amended and Restated Stock
Pledge Agreement dated as of November
19, 1992 between the Company and The
First National Bank of Boston (filed
as Exhibit 10(e)(5) to the Company's
Annual Report on Form 10-K for the
year ended January 1, 1993 and
incorporated herein by reference).
10(g)---
Financial and Management Consulting
Services Agreement between the Company
and The Hallwood Group Incorporated
(filed as Exhibit 10(i) to the
Company's Annual Report on Form 10-K
for the year ended December 30, 1988
and incorporated herein by reference).
10(h)---
Stock Purchase and Registration
Agreement dated as of May 5, 1992
among the Company, The Hallwood Group
Incorporated and certain shareholders
of the Company (filed as Exhibit 28 to
the Company's Registration Statement
on Form S-3 (No. 33-48307) and
incorporated herein by reference).
10(i)(1)---
Entertainment Operating Fund Line of Credit
dated as of November 17, 1994 between the
Company and the International
Association of ShowBiz Pizza Time
Restaurants, Inc. (the "Association").
10(i)(2)---
Entertainment Operating Fund
Promissory Note dated as of November
17, 1994 in the original principal
amount of $750,000 executed by the
Association payable to the order of
the Company.
10(i)(3)---
National Advertising Production Line
of Credit dated as of November 17,
1994 between the Company and the
Association.
<PAGE> 41
10(i)(4)---
National Advertising Production
Promissory Note dated as of November
17, 1994 in the original principal
amount of $750,000 executed by the
Association payable to the order of
the Company.
10(i)(5)---
Concept Unification Fund Line of
Credit dated as of November 17, 1994
between the Company and the
Association.
10(i)(6)---
Concept Unification Fund Promissory
Note dated as of November 17, 1994 in
the original principal amount of
$500,000 executed by the Association
payable to the order of the Company.
10(i)(7)---
National Media Fund Line of Credit
as of November 17, 1994 between the
Company and the Association.
10(i)(8)---
National Media Fund Promissory Note
dated as of November 17, 1994 in the
original principal amount of $400,000
executed by the Association payable to
the order of the Company.
18--- Letter of Deloitte & Touche LLP.
21--- List of subsidiaries.
23--- Independent Auditors' Consent.
27--- Financial Data Schedule.
----------------
(b) Reports on Form 8-K:
No reports on Form 8-K were filed in the
fourth quarter of 1994.
(c) Exhibits pursuant to Item 601 of
Regulation S-K:
Pursuant to Item 601(b)(4) of Regulation
S-K, there have been excluded from the
exhibits filed pursuant to this report
instruments defining the rights of
holders of long-term debt of the Company
where the total amount of the securities
authorized under each such instrument
does not exceed 10% of the total assets
of the Company. The Company hereby
agrees to furnish a copy of any such
instruments to the Commission upon
request.
(d) Financial Statements excluded from the
annual report to shareholders by Rule
14a-3(b):
No financial statements are excluded from
the annual report to the Company's
shareholders by Rule 14a-3(b).
<PAGE> 42
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: March 29, 1995 SHOWBIZ PIZZA TIME, INC.
By: Richard M. Frank
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Signature Title Date
---------- ------ -----
Richard M. Frank
Chairman of the Board, March 29, 1995
Chief Executive Officer,
and Director (Principal
Executive Officer)
Michael H. Magusiak
President and Director
Larry G. Page March 29, 1995
Executive Vice President,
Treasurer, (Principal Financial
Officer and Principal Accounting
Officer)
Charles A. Crocco, Jr.
Director March 29, 1995
Anthony J. Gumbiner
Director March 29, 1995
Robert L. Lynch
Director March 29, 1995
J. Thomas Talbot
Director March 29, 1995
Brian M. Troup
Director March 29, 1995
Louis P. Neeb
Director March 29, 1995
Cynthia I. Pharr
Director March 29, 1995
<PAGE> 43
EXHIBIT INDEX
Exhibit No. Description
------------ -----------
Page No.
------------
10(f)(4)--- Third Amendment Agreement between
the Company, BAC and The First
National Bank of Boston. 45
10(i)(1)--- Entertainment Fund Line of Credit
dated November 17, 1994 between the
Company and the International
Association of ShowBiz Pizza Time
Restaurants, Inc. (the "Association"). 54
10(i)(2)--- Entertainment Operating Fund Promissory
Note dated November 17, 1994 between
the Company and the Association. 58
10(i)(3)--- National Advertising Production Line
of Credit dated November 17, 1994
between the Company and the Association. 63
10(i)(4)--- National Advertising Production Promissory
Note dated November 17, 1994 between the
Company the Association. 67
10(i)(5)--- Concept Unification Fund Line of Credit
dated November 17, 1994 between the Company
and the Association. 72
10(i)(6)--- Concept Unification Fund Promissory Note
dated November 17, 1994 between the Company
and the Association. 76
10(i)(7)--- National Media Fund Line of Credit dated
November 17, 1994 between the Company and
the Association. 81
10(i)(8)--- National Media Fund Promissory Note dated
November 17, 1994 between the Company and
the Association. 85
18 --- Letter of Deloitte & Touche LLP 90
21 --- List of Subsidiaries 91
23--- Independent Auditor's Consent 92
<PAGE> 44
EXHIBIT - 10(f)(4)
THIRD AMENDMENT AGREEMENT
The THIRD AMENDMENT AGREEMENT (this "Amendment"), dated as of
December 29, 1994, among SHOWBIZ PIZZA TIME, INC., a Kansas
corporation (the "Borrower"), BHC ACQUISITION CORPORATION, a Texas
corporation ("Monterey"), and THE FIRST NATIONAL BANK OF BOSTON
(the "Bank") amends the Second Amended and Restated Revolving
Credit Agreement dated as of November 19, 1992 between the Borrower
and the Bank (as heretofore amended by a First Amendment to Second
Amended and Restated Revolving Credit Agreement dated as of
December 15, 1993 and a Second Amendment to Second Amended and
Restated Revolving Credit Agreement dated as of July 1, 1994, the
"Credit Agreement"). Capitalized terms used but not defined herein
shall have the meanings set forth in the Credit Agreement.
WHEREAS, the Borrower and the Bank have heretofore entered into
the Credit Agreement; and
WHEREAS, Monterey and the Bank entered into a certain Second
Amended and Restated Guaranty Agreement, dated as of November 19,
1992, pursuant to which Monterey guaranteed the Obligations of the
Borrower under the Credit Agreement and the other Loan Documents;
and
WHEREAS, the Borrower has requested that certain terms and
provisions of the Credit Agreement be amended as specified herein;
and
WHEREAS, the Bank, subject to the terms and provisions hereof, is
willing to amend the Credit Agreement as specified herein;
NOW THEREFORE, the parties hereto hereby agree as follows:
Section 1. -
----------
Amendment to Credit Agreement. Subject to the satisfaction of
the conditions precedent and the other terms and conditions set
forth in Section 4 hereof, the Credit Agreement is hereby amended
as follows:
Section 1.1. -
------------
Amendment to Section 1.1 of the Credit Agreement. Section 1.1 of
the Credit Agreement is hereby amended by:
(a) deleting in their entirety the definitions of "Eurocurrency
Reserve Rate", "Eurodollar Business Day", "Eurodollar Lending
Office", "Eurodollar Rate", "Eurodollar Rate Loans" and "Type"
contained in such Section 1.1;
<PAGE> 45
(b) deleting the definition of "Applicable Margin" in its
entirety and substituting in lieu thereof the following new
definition:
"Applicable Margin. During all or any part of any period within
any Interest Period with respect to a Loan (regardless of when such
Loan is made), the Applicable Margin in effect with respect to such
Loan on any date shall be the percentage per annum set forth
opposite the period containing such date in the table below:
Period Applicable Margin
------ -----------------
Until June 30, 1995 1.00%
July 1, 1995 - July 31, 1995 1.25%
August 1, 1995 - August 31, 1995 1.50%
September 1, 1995 - September 30, 1995 1.75%
October 1, 1995 - October 31, 1995 2.00%
November 1, 1995 - November 30, 1995 2.25%
December 1, 1995 - December 31, 1995 2.50%
January 1, 1996 - and thereafter 2.75%
(c) amending the definition of "Commitment" contained in such
Section 1.1 by deleting the dollar amount "$32,000,000" contained
therein and substituting in lieu thereof the dollar amount
"$30,800,000";
(d) deleting the definition of "Interest Payment Date" in its
entirety and substituting in lieu thereof the following new
definition:
"Interest Payment Date. As to any Loan, the last day of the
calendar quarter which includes the Drawdown Date thereof."; and
(e) deleting the definition of "Interest Period" in its entirety
and substituting in lieu thereof the following new definition:
"Interest Period. -- With respect to each Loan, (a) initially,
the period commencing on the Drawdown Date of such Loan and ending
on the last day of the calendar quarter; and (b) thereafter, each
period commencing on the last day of the next preceding Interest
Period applicable to such Loan and ending on the last day of the
period set forth above; provided that if any Interest Period with
respect to a Loan would end on a day that is not a Business Day,
that Interest Period shall end on the next succeeding Business
Day."
<PAGE> 46
Section 1.2 Amendment to Section 2.3 of the Credit Agreement.
----------------------------------------------------------------
Paragraph (b) of Section 2.3 of the Credit Agreement is hereby
deleted in its entirety and the following new paragraph (b) is
substituted in lieu thereof:
"(b) To the extent not already reduced or terminated pursuant to
Section 2.3(a), the Commitment shall automatically be reduced to
the amount set forth below as of the date set forth opposite such
amount below:
Date Commitment
--- ----------
07/01/95 $29,800,000
08/01/95 $28,300,000
09/01/95 $26,300,000
10/01/95 $24,300,000
11/01/95 $22,300,000
12/01/95 $20,300,000
01/01/96 $18,300,000
Upon each such reduction, the Borrower shall pay to the Bank the
full amount of any commitment fee then accrued on the amount of
such reduction. No such reduction of the Commitment may be
reinstated."
Section 1.3 - Amendment to Section 2.5 of the Credit Agreement.
---------------------------------------------------------------
Section 2.5 of the Credit Agreement is hereby deleted in its
entirety, and the following new Section 2.5 is hereby substituted
in lieu thereof:
"Section 2.5. - Interest on Loans.
------------------------------------
Except as provided in Section 2.6, each Loan shall bear interest
for the period commencing with the Drawdown Date thereof and ending
on the last day of the Interest Period with respect thereto at the
rate per annum which is the lesser of (i) the Base Rate plus the
Applicable Margin and (ii) the maximum rate permitted by applicable
law (after taking into account, without limitation, all payments
and benefits that, pursuant to applicable law, are deemed to be
interest or are deemed to reduce the principal balance of the
Note)."
Section 1.4. - Amendment to Section 2.6 of the Credit
------------------------------------------------------
Agreement.
-----------
Section 2.6 of the Credit Agreement is hereby amended by deleting
the text "four percent (4%) above the Base Rate" and substituting in
lieu thereof the text "four percent (4%) above the rate of interest
otherwise applicable to such Loans pursuant to Section 2.5".
Section 1.5. - Amendment to Section 2.7 of the Credit
-------------------------------------------------------
Agreement.
-----------
Section 2.6 of the Credit Agreement is hereby amended by deleting
the first two sentences thereof in their entirety and substituting
in lieu thereof the following text:
<PAGE> 47
"The Borrower shall give to the Bank written notice in the form
of Exhibit B hereto (or telephonic notice confirmed in writing in
the form of Exhibit B hereto, if requested by the Bank) of each
request for a Loan hereunder (a "Loan Request") no later than 1:00
p.m., Boston time, on the proposed Drawdown Date of any Loan. Each
such note shall specify (i) the principal amount of the Loan
requested, (ii) the proposed Drawdown Date of such Loan and (iii)
the Interest Period for such Loan."
Section 1.6. - Amendment to Section 2.8 of the Credit Agreement.
-----------------------------------------------------------------
Section 2.8 of the Credit Agreement is hereby deleted in its
entirety, and the following text is hereby substituted in lieu
thereof:
"Section 2.8. - Restructuring Fee.
-----------------------------------
The Borrower shall pay to the Bank, in immediately available
funds, a restructuring fee in the amount of $308,000 with one-half
of such restructuring fee ($154,000) payable upon the closing of
the Third Amendment Agreement dated as of December 29, 1994 among
the Borrower, Monterey and the Bank and the remaining one-half of
such restructuring fee ($154,000) (The "Remaining Restructuring
Fee") payable on July 1, 1995; provided however, that in the event
that, on or before June 30, 1995, the Borrower shall have paid the
Obligations in full in cash and the Commitment shall have been
reduced to zero, the Borrower shall not be obligated to pay to the
Bank the Remaining Restructuring Fee. The Borrower hereby
authorizes the Bank to debit, without notice, any of the Borrower's
accounts with the Bank in payment of all or any part of such
restructuring fee upon the same becoming due and payable."
Section 1.7. - Amendment to Section 2.9 of the Credit Agreement.
-----------------------------------------------------------------
Section 2.9 of the Credit Agreement is hereby deleted in its
entirety, and the following new Section 2.9 is hereby substituted
in lieu thereof:
"Section 2.9. - Intentionally Deleted."
Section 1.8.Amendment to Section 3.3 of the Credit Agreement.
-------------------------------------------------------------
Section 3.3 of the Credit Agreement is hereby deleted, and the
following new Section 3.3 is hereby substituted in lieu thereof:
"Section 3.3.Optional Repayments of Loans.
------------------------------------------
The Borrower shall have the right, at its election, to repay the
outstanding amounts of the Loans, as a whole or in part, at any
time without penalty or premium. The Borrower shall give the Bank,
no later than 1:00 p.m., Boston time, on the date of any proposed
prepayment pursuant to this Section 3.3 of Loans, written notice
specifying the proposed date of prepayment of the Loans and the
principal amount to be prepaid. Each partial prepayment of the
Loans shall be in an integral multiple of $100,000 and shall be
accompanied by the payment of accrued interest on the principal
prepaid to the date of prepayment."
<PAGE> 48
Section 1.9. - Amendment to Section 5.2 of the Credit Agreement.
----------------------------------------------------------------
Section 5.2 of the Credit Agreement is hereby amended by deleting
the text "Except as otherwise provided in the definition of the
term "Interest Period" with respect to Eurodollar Rate Loans,
whenever" in the second sentence thereof and substituting in lieu
thereof the word "Whenever".
Section 1.10. - Amendment to Section 5.3 of the Credit Agreement.
-----------------------------------------------------------------
Section 5.3 of the Credit Agreement is hereby deleted in its
entirety, and the following text is hereby substituted in lieu
thereof:
"Section 5.3. Intentionally Omitted."
Section 1.11. - Amendment to Section 5.4 of the Credit Agreement.
-----------------------------------------------------------------
Section 5.4 of the Credit Agreement is hereby deleted in its
entirety, and the following text is hereby substituted in lieu
thereof:
"Section 5.4. - Intentionally Omitted."
Section 1.12. - Amendment to Section 5.7 of the Credit Agreement.
-----------------------------------------------------------------
Section 5.7 of the Credit Agreement is hereby deleted in its
entirety, and the following text is hereby substituted in lieu
thereof:
"Section 5.7. - Intentionally Omitted."
Section 1.13. - Amendment to Section 6 of the Credit Agreement.
----------------------------------------------------------------
Section 6 of the Credit Agreement is hereby amended by deleting
paragraph (c) thereof in its entirety and substituting in lieu
thereof the following new paragraph (c):
"(c) If a Default of Event of Default shall have occurred and be
continuing, and at any time following June 30, 1995, the Borrower
and Monterey shall, upon the request of the Bank, take all such
actions and execute all such documents, agreements, instruments
and financing statements, each in form and substance satisfactory
to the Bank, to grant, or confirm the grant to the Bank of, a
first priority, perfected security interest in and lien upon (i)
all Collateral described in Section 6(a) and (b) hereof, and (ii)
any or all fee and leasehold properties of the borrower and Monterey
not described in Section (6 (a) or (b) hereof including without
limitation, such filings with the United States Patent and Trademark
Office, such mortgages or deeds of trust, amendments of mortgages or
of deeds of trust, title policies, surveys, site assessments, legal
opinions and title searches or updates as the Bank may request."
<PAGE> 49
Section 1.14. - Amendment to Section 9.4 of the Credit Agreement.
-----------------------------------------------------------------
Paragraph (c) of Section 9.4 of the Credit Agreement is hereby
deleted in its entirety, and the following new paragraph (c) is
hereby substituted in lieu thereof:
"(c) from and after July 1, 1994, the Borrower shall be
permitted to repurchase, in an aggregate amount not to exceed
500,000 shares, solely those shares of its own issued and
outstanding common stock which employees or directors of the
Borrower transfer to the Borrower as payment for withholding or
payment obligations of such employees or directors arising from
the exercise of stock options under the Borrower's stock option
or stock grant plans."
Section 1.15. - Amendment to Section 9.7 of the Credit Agreement.
-----------------------------------------------------------------
Section 9.7 of the credit Agreement is hereby deleted in its
entirety, and the following new Section 9.7 is substituted in lieu
thereof:
"Section 9.7. - Liabilities to Tangible Net Worth Ratio.
---------------------------------------------------------
The Borrower will not cause or permit the ratio of
Consolidated Total Liabilities to Consolidated Tangible Net
Worth to exceed 0.70 to 1 at any time."
Section 1.16. - Amendment to Section 9.8 of the Credit Agreement.
-----------------------------------------------------------------
Section 9.8 of the Credit Agreement is hereby amended by deleting
the text "1.0 to 1" at the end thereof and substituting in lieu
thereof the text "1.3 to 1".
Section 1.17.- Amendment to Section 9.10 of the Credit Agreement.
-----------------------------------------------------------------
Section 9.10 of the Credit Agreement is hereby amended by
deleting the dollar figure "$130,000,000" set forth therein and
substituting in lieu thereof the dollar figure "$123,000,000".
Section 1.18.- Amendment to Section 9.15 of the Credit Agreement.
-----------------------------------------------------------------
Section 9.15 of the Credit Agreement is hereby deleted in its
entirety, and the following new Section 9.15 is substituted in lieu
thereof:
"Section 9.15.- Earnings Before Interest, Taxes,
--------------------------------------------------
Depreciation and Amortization.
-----------------------------
The Borrower will not cause or permit Earnings Before
Interest, Taxes, Depreciation and Amortization for the fiscal
quarter of the Borrower ending December 30, 1994 to be less
than $2,000,000 and for any other fiscal quarter of the
Borrower ending after December 30, 1994 to be less than
$5,100,000."
Section 1.19. - Addition of New Section 9.16 of the Credit
------------------------------------------------------------
Agreement.
----------
The Credit Agreement is hereby further amended by adding,
immediately Section 9.15 and immediately before Section 10, a new
Section 9.16 with the following text:
"Section 9.16. - Earnings Before Interest, Taxes, Depreciation
----------------------------------------------------------------
and Amortization to Consolidated Interest Expense.
--------------------------------------------------
The Borrower will not cause or permit the ratio of Earnings
Before Interest, Taxes, Depreciation and Amortization to
Consolidated Interest Expense for any fiscal quarter of the
Borrower ending after December 30, 1994 to be less than 6.0 to 1."
<PAGE> 50
Section 2. - Confirmation of Security Documents.
------------------------------------------------
The Security Documents are hereby ratified and confirmed as
follows:
Section 2.1. - ShowBiz Security Agreement.
------------------------------------------
The Borrower hereby ratifies and confirms the ShowBiz Security
Agreement and the security interests created thereby and
acknowledges and agrees that the Obligations under the Credit
Agreement, as amended hereby, continue to be secured by such
agreement.
Section 2.2. - ShowBiz Stock Pledge Agreement.
----------------------------------------------
The Borrower hereby ratifies and confirms the ShowBiz Stock
Pledge Agreement and the pledges and security interests created
thereby and acknowledges and agrees that the Obligations under the
Credit Agreement, as amended hereby, continue to be secured by such
agreement.
Section 2.3. - ShowBiz Mortgages.
---------------------------------
The Borrower hereby ratifies and confirms the ShowBiz Mortgages
and the mortgages and security interests created thereby and
acknowledges and agrees that the Obligations under the Credit
Agreement, as amended hereby, continue to be secured by the ShowBiz
Mortgages.
Section 2.4. - Monterey Security Agreement.
-------------------------------------------
Monterey hereby ratifies and confirms the Monterey Security
Agreement, as modified by the consent letter dated as of May 4,
1994 from the Bank to the Borrower and Monterey, and the security
interests created thereby and acknowledges and agrees that the
Guaranty Obligations (as defined in the Monterey Security
Agreement), including without limitation the obligation of Monterey
to guaranty the Obligations under the Credit Agreement as amended
hereby, continue to be secured by such agreement.
Section 2.5. - Guaranty.
------------------------
Monterey hereby ratifies and confirms the Guaranty and
acknowledges and agrees that the Obligations under the Credit
Agreement, as amended hereby, continue to be guaranteed by such
agreement.
Section 3. - Representations and Warranties.
---------------------------------------------
Each of the Borrower and Monterey hereby represents and warrants
to the Bank as follows:
(a) Representations and Warranties in Credit Agreement and
Other Loan Documents; No Default. The representations and
warranties of the Borrower and Monterey contained in the
Credit Agreement and the other Loan Documents were true and
correct in all material respects when made and continue to
be true and correct in all material respects on the
Effective Date (as hereinafter defined), except, in each
case to the extent of changes resulting from transactions
contemplated or permitted by the Loan Documents and the
Amendment and changes occurring in the ordinary course of
business which singly or in the aggregate are not
materially adverse, and to the extent that such
representations and warranties relate expressly to an
earlier date. No Default or Event of Default has occurred
and is continuing as of the Effective Date.
<PAGE> 51
(b) Authority, No Conflicts, Enforceability of Obligations,
Etc. Each of the Borrower and Monterey hereby confirms that
the representations and warranties of the Borrower and
Monterey contained in Sections 7.1 and 7.2 of the Credit
Agreement are true and correct on and as of the date hereof
as if made on the date hereof, treating this Amendment, the
Credit Agreement as amended hereby, and the other Loan
Documents, as amended hereby, as "Loan Documents" for the
purposes of making said representations and warranties.
Section 4. - Conditions to Effectiveness.
-----------------------------------------
Except as provided in the last sentence of this Section 4, this
Amendment shall be effective as of the date first written above
(the "Effective Date"), upon the delivery to the Bank of (a)
facsimile counterparts of this Amendment (to be followed
immediately by original counterparts) signed by each of the
Borrower, Monterey, and the Bank, in form and substance
satisfactory to the Bank, (b) the amount of $154,000, in
immediately available funds, representing one-half of the
restructuring fee referenced in Section 1.6 of this Amendment and
in Section 2.8 of the Credit Agreement, as amended hereby, with the
Bank hereby being authorized to debit, without notice, any of the
Borrower's accounts with the Bank in payment of all or any portion
of such fee, and (c) a certificate, duly certified by the President
or Treasurer of the Borrower and Monterey and in form and substance
satisfactory to the Bank, as to the lack of the existence or
continuance of any Default or Event of Default as of the date
thereof. Notwithstanding the foregoing, the amendments set forth
in Section 1.1(a), (b), (d), and (e), Section 1.3, Section 1.5, the
deletion of existing Section 2.8 of the Credit Agreement set forth
in Section 1.6, Section 1.8, Section 1.9, Section 1.10, Section
1.11 and Section 1.12 shall be effective as of March 22, 1995.
Section 5.- No Other Amendments; Etc.
-------------------------------------
Except as otherwise expressly provided by this Amendment, all of
the terms, conditions and provisions of the Credit Agreement and
the other Loan Documents are hereby ratified and confirmed in all
respects and shall remain in full force and effect. Each of the
Borrower and Monterey confirms and agrees that the Obligations of
the Borrower to the Bank under the Loan Documents, as amended and
supplemented hereby, are secured by, guaranteed under, and entitled
to the benefits, of the Security Documents. The Borrower, Monterey
and the Bank hereby acknowledge and agree that all references to
the Credit Agreement and the Obligations thereunder contained in
any of the Loan Documents shall be references to the Credit
Agreement and the Obligations, as affected hereby and as the same
may be amended, modified, supplemented, or restated from time to
time. The Security Documents and the perfected first priority
security interests of the Bank thereunder shall continue in full
force and effect, and the collateral security and guaranties
provided for in the Security Documents shall not be impaired by
this Amendment. This Amendment may be executed in any number of
counterparts, but all such counterparts shall together constitute
but one instrument. In making proof of this Amendment it shall not
be necessary to produce or account for more than one counterpart
signed by each party hereto by and against which enforcement hereof
is sought.
<PAGE> 52
Section 6. - No Implied Amendment, Etc.
----------------------------------------
Except as expressly provided herein, nothing contained herein
shall constitute an amendment or waiver of, impair or otherwise
affect any Obligations, any other obligations of the Borrower or
Monterey or any right of the Bank consequent thereon. The
amendments provided herein are limited strictly to their terms.
The Bank shall have no obligation to issue any further amendment
with respect to the subject matter hereof or any other matter.
Section 7. - Governing Law.
----------------------------
This Amendment shall be construed according to and governed by
the internal laws of The Commonwealth of Massachusetts without
reference to principles of conflicts of law.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed by their respective officers thereunto duly
authorized.
SHOWBIZ PIZZA TIME, INC.
By:__________________________________
Title:_______________________________
THE FIRST NATIONAL BANK OF BOSTON
By:__________________________________
Title:_______________________________
BHC ACQUISITION CORPORATION
d/b/a Monterey
By:__________________________________
Title:_______________________________
<PAGE> 53
EXHIBIT - 10(i)(1)
ENTERTAINMENT OPERATING FUND LINE OF CREDIT
By this Agreement, dated as of November 17, 1994, SHOWBIZ PIZZA
TIME, INC. ("Lender") and INTERNATIONAL ASSOCIATION OF SHOWBIZ
PIZZA TIME RESTAURANTS, INC., ("Borrower") hereby agree as follows:
1. Revolving Commitment. Subject to the terms and conditions in
this Agreement, Lender agrees to loan to Borrower from time to time
amounts not to exceed Seven Hundred and Fifty Thousand Dollars
($750,000.00) in the aggregate outstanding at any one time. No new
advance shall be made under this Agreement after December 31, 1996.
Subject to the foregoing limitations, Borrower may borrow, repay,
prepay and reborrow amounts under this Agreement.
2. Note. Borrower's obligation to repay amounts borrowed under
this Agreement is further evidenced by an Entertainment Operating
Fund Promissory Note (the "Note") dated the same date as this
Agreement. Payment of principal and interest, and accrual of
interest, on amounts borrowed under this Agreement shall be as
provided in the Note.
3. Use of Proceeds. Borrower shall use amounts borrowed under
this Agreement only to purchase goods and services for the
production of showtapes and other entertainment-related items
(collectively, the "Project"). Upon Lender's reasonable request,
Borrower shall provide copies of invoices and other documents which
evidence Borrower's compliance with this Section 3.
4. Records and Reports. Upon Lender's reasonable request,
Borrower shall provide reports and copies of invoices, canceled
checks and other business records pertaining to the Project, this
Agreement or the Note.
5. Condition to Loans. The obligation of Lender to make loans
under this Agreement is subject to the satisfaction of each of the
following conditions:
(a) No default under this Agreement, and no event which would
constitute a default but for the giving of notice or the passage
of time thereafter, shall have occurred and be continuing on the
date of such loan;
(b) The representations and warranties of Borrower set forth in
this Agreement shall be true as of the date of such loan;
<PAGE> 54
(c) Lender shall have received any documents or information
previously requested from Borrower pursuant to this Agreement;
and
(d) No material adverse change, in Lender's sole determination,
has occurred in the businesses of the ShowBiz Pizza Time
restaurants or in the financial condition of Borrower.
6. Representation and Warranties: Borrower represents and
warrants that: (a) Borrower is a corporation duly incorporated,
validly existing and in good standing under the laws of the State
of Texas; (b) the execution, delivery and performance of this
Agreement and the Note have been duly authorized by all necessary
corporation action; and (c) this Agreement and the Note constitute
the valid and binding obligations of Borrower enforceable in
accordance with their terms.
7. Default. Borrower shall be in default under this Agreement
if one or more of the following events shall have occurred and be
continuing:
(a) The failure by Borrower to make any payment of principal or
interest on the Note within ten (10) days after the same becomes
due and payable;
(b) The failure by Borrower to perform any of its obligations,
except the payment of principal and interest, arising under the
Note, this Agreement or any other agreement between Borrower and
Lender within five (5) days after written notice of such failure;
or
(c) The filing by or against the Borrower of a voluntary or
involuntary proceeding seeking liquidation, reorganization or
other relief with respect to Borrower or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official for Borrower or
any substantial part of its property and, in the case of any
involuntary proceeding not consented to by Borrower, such
proceeding is not dismissed within sixty (60) days.
8. Remedies. If Borrower is in default under this Agreement:
(a) the outstanding principal and accrued interest under the Note
shall mature and become automatically due and payable, without
notice or demand; (b) Lender may terminate its commitment to make
loans under this Agreement; and (c) Lender may exercise any other
remedies permitted by law or equity.
<PAGE> 55
9. Notices. Any notice under this Agreement shall be effective
upon actual receipt or upon delivery to the United States Postal
Service, with first class postage, addressed as follows (or to such
other address subsequently provided by the party hereto):
To Lender:
ShowBiz Pizza Time, Inc.
4441 West Airport Freeway
Irving, Texas 75015
Attention: General Counsel
To Borrower:
International Association of ShowBiz
Pizza Time Restaurants, Inc.
4441 West Airport Freeway
Irving, Texas 75015
Attention: Mike Hilton
10. Miscellaneous.
(a) No failure or delay by Lender in exercising any right, power
or privilege under this Agreement or the Note shall operate as a
waiver thereof, nor shall any single or partial exercise thereof
preclude any further exercise thereof or the exercise of any
other right, power or privilege.
(b) The captions used in this Agreement are for convenience only
and shall not be deemed to amplify, modify or limit the
provisions hereof.
(c) Words of any gender used in the Agreement shall be construed
to include any other gender, and words in the singular shall
include the plural and vice versa, unless the context otherwise
requires.
(d) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns.
(e) This Agreement, together with the Note, contains the entire
agreement of the parties hereto with respect to the subject
matter hereof and can be altered, amended or modified only by
written instrument executed by both parties.
<PAGE> 56
(f) This Agreement may be executed in multiple copies, each of
which shall be deemed an original, and all of such copies shall
together constitute one and the same instrument.
(g) Time is of the essence in the performance of each
obligation, covenant and condition under this Agreement.
(h) This Agreement shall be governed by the laws of the State of
Texas.
IN WITNESS HEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the date
first appearing above.
SHOWBIZ PIZZA TIME, INC.
By: Richard M. Frank
Chairman and Chief Executive Officer
INTERNATIONAL ASSOCIATION OF SHOWBIZ
PIZZA TIME RESTAURANTS, INC.
By: Michael A. Hilton
President
<PAGE> 57
EXHIBIT - 10(i)(2)
ENTERTAINMENT OPERATING FUND
PROMISSORY NOTE
Dated as of
$750,000.00 Irving, Texas November 17,1994
FOR VALUE RECEIVED, the undersigned INTERNATIONAL ASSOCIATION OF
SHOWBIZ PIZZA TIME RESTAURANTS, INC. ("Borrower"), a Texas
corporation, promises to pay to SHOWBIZ PIZZA TIME, INC.
("Lender"), a Kansas corporation, (hereinafter collectively
referred to as "Parties"), the principal sum of SEVEN HUNDRED AND
FIFTY THOUSAND AND NO/100 DOLLARS ($750,000.00), or so much thereof
as may from time to time be advanced, together with interest
accrued on the unpaid principal balance hereof as set forth below.
1. Interest Rate. The unpaid principal amount hereof from time
to time outstanding from the date hereof until maturity shall bear
interest at a fluctuating rate per annum equal to the Prime Rate
plus 0.5% (as herein defined), changing automatically, without
notice to the Borrower, effective as of the effective date of any
change in the Prime Rate. Interest shall be calculated at the end
of each of Lender's monthly accounting periods (which will not
correspond with calendar months due to Lender's 52 week fiscal
year) based on the average between the principal amounts
outstanding and unpaid at the beginning of the monthly accounting
period and at the end of such period, but shall be charged and
collected based on the actual number of days elapsed. The term
"Prime Rate" as used herein means the higher of (a) the annual rate
of interest announced from time to time by the First National Bank
of Boston at its head office in Boston, Massachusetts as its "base
rate" and (b) the overnight federal funds effective rate as
published by the Board of Governors of the Federal Reserve System
as in effect from time to time plus one half of one percent (1/2%).
2. Payment of Principal and Interest. Each payment by Borrower
to Lender on this Note shall be applied first to fees and/or costs,
if any, pursuant to Section 8 hereof and then applied to any
accrued interest, and then any remaining portion of the payment
after such applications shall be applied to reduction of
outstanding principal balance of this Note.
<PAGE> 58
3. Revolving Note. This Note is a "revolving line of credit"
note. Principal advances may be made, from time to time, up to the
principal amount of this Note, and principal payments may, from
time to time, be made by Borrower to reduce the principal balance
owing pursuant to this Note. This Note may be prepaid in whole or
in part at any time without penalty or premium. In no event shall
any principal advance be made after December 31, 1996, and all
amounts outstanding will be due and payable at that time.
4. Line of Credit Agreement. This Note is issued pursuant to,
is entitled to the benefit of, and is subject to the provisions of
the Entertainment Operating Fund Line of Credit Agreement (the
"Agreement") between Borrower and Lender dated the same date as
this Note.
5. Events of Default. The outstanding principal and accrued
interest hereon shall mature and become automatically due and
payable, without notice or demand, upon the occurrence and during
the continuance without cure of any of the following events of
default:
(a) The failure by Borrower to make a payment of any
principal or interest on the Note within ten (10) days after
the same becomes due and payable;
(b) The failure by Borrower to perform any of its
obligations, except the payment of principal and interest,
arising under this Note, the Agreement or any other agreement
between Borrower and Lender within five (5) days after receipt
of written notice of such failure; or
(c) The filing by or against the Borrower of a voluntary or
involuntary proceeding seeking liquidation, reorganization or
other relief with respect to Borrower or its debts under any
bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official for Borrower
or any substantial part of its property and, in the case of
any involuntary proceeding not consented to by Borrower, such
proceeding is not dismissed within sixty (60) days of its
filing.
6. Remedies. If Borrower is in default under this Note: (a) the
outstanding principal and accrued interest under the Note shall
mature and become automatically due and payable, without notice or
demand; (b) Lender may terminate its commitment to advance monies
under this Note; and (c) Lender may exercise any other remedies
available to it at law or in equity.
<PAGE> 59
7. Waiver. Borrower, sureties, endorsers, guarantors and any
other party now or hereafter liable for the payment of this Note in
whole or in part, hereby severally (a) waive presentment for
payment, notice of nonpayment, protest, notice of protest, notice
of intent to accelerate, notice of acceleration and all other
notices, filing of suit and diligence in collecting this Note or
enforcing any other security with respect to same, (b) agree to any
substitution, subordination, exchange or release of any such
security or the release of any parties primarily or secondarily
liable hereon, (c) agree that the Lender shall not be required
first to institute suit or exhaust its remedies hereon against the
Borrower, or other any party liable or to become liable hereon or
to enforce its rights against any or all of them or any security
with respect to same, and (d) consent to any extension or
postponement of time of payment of this Note and to any other
indulgence with respect hereto without notice hereof to any of
them.
8. Attorneys' Fees. If this Note is not paid at maturity and
is placed in the hands of an attorney for collection, or if it is
collected through a bankruptcy or any other court after maturity,
then the Lender shall be entitled to reasonable attorneys' fees and
court costs for collection.
9. Limitation of Agreements. All agreements between the
Borrower and the Lender, whether now existing or hereafter arising
and whether written or oral, are hereby expressly limited so that
in no contingency or event, whether by reason of demand or
otherwise, shall the amount paid, or agreed to be paid to the
Lender for the use, forbearance, or detention of the money to be
loaned under this Note or otherwise or for the payment or
performance of any covenant or obligation contained herein or in
any other document evidencing security or pertaining to the loan
evidenced hereby, exceed the maximum amount permissible under
applicable law, as now existing or as hereafter amended. If from
any circumstances whatsoever fulfillment of any provision hereof or
in any of such other documents at the time performance of such
provision shall be due, shall involve transcending the limit of
validity prescribed by law, then ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity, and if
from any such circumstances the Lender shall ever receive interest
(or anything which might be deemed interest under applicable law)
which would exceed the highest rate of interest allowed by
applicable law, such amount which would be excessive interest shall
be applied to the reduction of the principal due hereunder and not
<PAGE> 60
to the payment of interest, or if such excessive interest exceeds
the unpaid balance of principal of this Note, such excess shall be
refunded to the Borrower. All sums paid or agreed to be paid to
the Lender for the use, forbearance or detention of the
indebtedness of the Borrower to the Lender shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of such indebtedness until payment
in full so that the actual rate of interest on account of such
indebtedness is uniform, or does not exceed the maximum rate
permitted by applicable law as now existing or hereafter amended,
throughout the term thereof. The terms and provisions of this
paragraph shall control and supersede every other provision of all
agreements between the Lender and the Borrower.
10. Records. Borrower hereby appoints Lender as the authorized
agent of Borrower with full authority to record on the Grid
attached hereto as Exhibit A, and incorporated herein by reference
for all purposes, the dates of each transaction, amounts of all
principal advances, as well as principal and interest payments,
made under this Note, and balance due on the Note. This Grid (and
all notations made thereto) shall be conclusive evidence of the
actual amounts of principal and accrued interest advanced and/or
outstanding under this Note.
11. Miscellaneous.
(a) No failure or delay by Lender in exercising any
right, power or privilege under this Note or the
Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise thereof preclude any
further exercise thereof or the exercise of any other
right, power or privilege.
(b) The captions used in this Note are for convenience
only and shall not be deemed to amplify, modify or limit
any provision hereof.
(c) Words of any gender used in this Note shall be
construed to include any other gender, and words in the
singular shall include the plural and vice versa, unless
the context otherwise requires.
(d) This Note shall be binding upon and inure to the
benefit of the Parties hereto and their respective heirs,
legal representatives, successors and assigns.
<PAGE> 61
(e) This Note, together with the Agreement, contains the
entire agreement between the Parties hereto with respect
to the subject matter hereof and can be altered, amended
or modified only by a written instrument executed by both
Parties.
(f) This Note may be executed in multiple copies, each
of which shall be deemed an original, and all of such
copies shall together constitute one and the same
instrument.
(g) Time is of the essence in the performance of each
obligation, covenant and condition under this Note.
(h) This Note shall be governed by the laws of the State
of Texas.
(i) This Note is performable in Dallas County, Texas.
SHOWBIZ PIZZA TIME, INC. (Lender)
By: Michael H. Magusiak
President
INTERNATIONAL ASSOCIATION OF SHOWBIZ
PIZZA TIME RESTAURANTS, INC. (Borrower)
By: Michael A. Hilton
President
<PAGE> 62
EXHIBIT - 10(i)(3)
NATIONAL ADVERTISING PRODUCTION LINE OF CREDIT
By this Agreement, dated as of November 17, 1994, SHOWBIZ PIZZA
TIME, INC. ("Lender") and INTERNATIONAL ASSOCIATION OF SHOWBIZ
PIZZA TIME RESTAURANTS, INC., ("Borrower") hereby agree as follows:
1. Revolving Commitment. Subject to the terms and conditions
in this Agreement, Lender agrees to loan to Borrower from time to
time amounts not to exceed Seven Hundred and Fifty Thousand Dollars
($750,000.00) in the aggregate outstanding at any one time. No new
advance shall be made under this Agreement after December 31, 1995.
Subject to the foregoing limitations, Borrower may borrow, repay,
prepay and reborrow amounts under this Agreement.
2. Note. Borrower's obligation to repay amounts borrowed under
this Agreement is further evidenced by an National Advertising
Production Promissory Note (the "Note") dated the same date as this
Agreement. Payment of principal and interest, and accrual of
interest, on amounts borrowed under this Agreement shall be as
provided in the Note.
3. Use of Proceeds. Borrower shall use amounts borrowed under
this Agreement only to pay the costs associated with the production
of advertisements for the benefit of Lender ("Production Costs").
Upon Lender's reasonable request, Borrower shall provide copies of
invoices and other documents which evidence Borrower's compliance
with this Section 3.
4. Records and Reports. Upon Lender's reasonable request,
Borrower shall provide reports and copies of invoices, canceled
checks and other business records pertaining to the Project, this
Agreement or the Note.
5. Condition to Loans. The obligation of Lender to make loans
under this Agreement is subject to the satisfaction of each of the
following conditions:
(a) No default under this Agreement, and no event which would
constitute a default but for the giving of notice or the
passage of time thereafter, shall have occurred and be
continuing on the date of such loan;
(b) The representations and warranties of Borrower set forth
in this Agreement shall be true as of the date of such loan;
<PAGE> 63
(c) Lender shall have received any documents or information
previously requested from Borrower pursuant to this Agreement;
and
(d) No material adverse change, in Lender's sole
determination, has occurred in the businesses of the ShowBiz
Pizza Time restaurants or in the financial condition of
Borrower.
6. Representation and Warranties: Borrower represents and
warrants that: (a) Borrower is a corporation duly incorporated,
validly existing and in good standing under the laws of the State
of Texas; (b) the execution, delivery and performance of this
Agreement and the Note have been duly authorized by all necessary
corporation action; and (c) this Agreement and the Note constitute
the valid and binding obligations of Borrower enforceable in
accordance with their terms.
7. Default. Borrower shall be in default under this Agreement
if one or more of the following events shall have occurred and be
continuing:
(a) The failure by Borrower to make any payment of principal or
interest on the Note within ten (10) days after the same becomes
due and payable;
(b) The failure by Borrower to perform any of its obligations,
except the payment of principal and interest, arising under the
Note, this Agreement or any other agreement between Borrower and
Lender within five (5) days after written notice of such failure;
or
(c) The filing by or against the Borrower of a voluntary or
involuntary proceeding seeking liquidation, reorganization or
other relief with respect to Borrower or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official for Borrower or
any substantial part of its property and, in the case of any
involuntary proceeding not consented to by Borrower, such
proceeding is not dismissed within sixty (60) days.
8. Remedies. If Borrower is in default under this Agreement:
(a) the outstanding principal and accrued interest under the Note
shall mature and become automatically due and payable, without
notice or demand; (b) Lender may terminate its commitment to make
loans under this Agreement; and (c) Lender may exercise any other
remedies permitted by law or equity.
<PAGE> 64
9. Notices. Any notice under this Agreement shall be effective
upon actual receipt or upon delivery to the United States Postal
Service, with first class postage, addressed as follows (or to such
other address subsequently provided by the party hereto):
To Lender:
ShowBiz Pizza Time, Inc.
4441 West Airport Freeway
Irving, Texas 75015
Attention: General Counsel
To Borrower:
International Association of ShowBiz
Pizza Time Restaurants, Inc.
4441 West Airport Freeway
Irving, Texas 75015
Attention: Mike Hilton
10. Miscellaneous.
(a) No failure or delay by Lender in exercising any right, power
or privilege under this Agreement or the Note shall operate as
a waiver thereof, nor shall any single or partial exercise
thereof preclude any further exercise thereof or the exercise of
any other right, power or privilege.
(b) The captions used in this Agreement are for convenience only
and shall not be deemed to amplify, modify or limit the
provisions hereof.
(c) Words of any gender used in the Agreement shall be construed
to include any other gender, and words in the singular shall
include the plural and vice versa, unless the context otherwise
requires.
(d) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns.
(e) This Agreement, together with the Note, contains the entire
agreement of the parties hereto with respect to the subject
matter hereof and can be altered, amended or modified only by
written instrument executed by both parties.
<PAGE> 65
(f) This Agreement may be executed in multiple copies, each of
which shall be deemed an original, and all of such copies shall
together constitute one and the same instrument.
(g) Time is of the essence in the performance of each
obligation, covenant and condition under this Agreement.
(h) This Agreement shall be governed by the laws of the State
of Texas.
11. Prior Agreements. This Agreement amends, supersedes, and
replaces all previous agreements related to National Advertising
Production.
IN WITNESS HEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the date
first appearing above.
SHOWBIZ PIZZA TIME, INC.
By: Michael H. Magusiak
President
INTERNATIONAL ASSOCIATION OF SHOWBIZ
PIZZA TIME RESTAURANTS, INC.
By: Michael A. Hilton
President
<PAGE> 66
EXHIBIT - 10(i)(4)
NATIONAL ADVERTISING PRODUCTION
PROMISSORY NOTE
Dated as of
$750,000.00 Irving, Texas November 17, 1994
FOR VALUE RECEIVED, the undersigned INTERNATIONAL ASSOCIATION
OF SHOWBIZ PIZZA TIME RESTAURANTS, INC. ("Borrower"), a Texas
corporation, promises to pay to SHOWBIZ PIZZA TIME, INC.
("Lender"), a Kansas corporation, (hereinafter collectively
referred to as "Parties"), the principal sum of SEVEN HUNDRED AND
FIFTY THOUSAND AND NO/100 DOLLARS ($750,000.00), or so much thereof
as may from time to time be advanced, together with interest
accrued on the unpaid principal balance hereof as set forth below.
1. Interest Rate. The unpaid principal amount hereof from time
to time outstanding from the date hereof until maturity shall bear
interest at a fluctuating rate per annum equal to the Prime Rate
plus 0.5% (as herein defined), changing automatically, without
notice to the Borrower, effective as of the effective date of any
change in the Prime Rate. Interest shall be calculated at the end
of each of Lender's monthly accounting periods (which will not
correspond with calendar months due to Lender's 52 week fiscal
year) based on the average between the principal amounts
outstanding and unpaid at the beginning of the monthly accounting
period and at the end of such period, but shall be charged and
collected based on the actual number of days elapsed. The term
"Prime Rate" as used herein means the higher of (a) the annual rate
of interest announced from time to time by the First National Bank
of Boston at its head office in Boston, Massachusetts as its "base
rate" and (b) the overnight federal funds effective rate as
published by the Board of Governors of the Federal Reserve System
as in effect from time to time plus one half of one percent (1/2%).
2. Payment of Principal and Interest. Each payment by Borrower
to Lender on this Note shall be applied first to fees and/or costs,
if any, pursuant to Section 8 hereof and then applied to any
accrued interest, and then any remaining portion of the payment
after such applications shall be applied to reduction of
outstanding principal balance of this Note.
<PAGE> 67
3. Revolving Note. This Note is a "revolving line of credit"
note. Principal advances may be made, from time to time, up to the
principal amount of this Note, and principal payments may, from
time to time, be made by Borrower to reduce the principal balance
owing pursuant to this Note. This Note may be prepaid in whole or
in part at any time without penalty or premium. In no event shall
any principal advance be made after December 31, 1995, and all
amounts outstanding will be due and payable at that time.
4. Line of Credit Agreement. This Note is issued pursuant to,
is entitled to the benefit of, and is subject to the provisions of
the National Advertising Production Line of Credit Agreement (the
"Agreement") between Borrower and Lender dated the same date as
this Note.
5. Events of Default. The outstanding principal and accrued
interest hereon shall mature and become automatically due and
payable, without notice or demand, upon the occurrence and during
the continuance without cure of any of the following events of
default:
(a) The failure by Borrower to make a payment of any principal
or interest on the Note within ten (10) days after the same
becomes due and payable;
(b) The failure by Borrower to perform any of its obligations,
except the payment of principal and interest, arising under
this Note, the Agreement or any other agreement between
Borrower and Lender within five (5) days after receipt of
written notice of such failure; or
(c) The filing by or against the Borrower of a voluntary or
involuntary proceeding seeking liquidation, reorganization or
other relief with respect to Borrower or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official for Borrower or
any substantial part of its property and, in the case of any
involuntary proceeding not consented to by Borrower, such
proceeding is not dismissed within sixty (60) days of its
filing.
6. Remedies. If Borrower is in default under this Note: (a)
the outstanding principal and accrued interest under the Note shall
mature and become automatically due and payable, without notice or
demand; (b) Lender may terminate its commitment to advance monies
under this Note; and (c) Lender may exercise any other remedies
available to it at law or in equity.
<PAGE> 68
7. Waiver. Borrower, sureties, endorsers, guarantors and any
other party now or hereafter liable for the payment of this Note in
whole or in part, hereby severally (a) waive presentment for
payment, notice of nonpayment, protest, notice of protest, notice
of intent to accelerate, notice of acceleration and all other
notices, filing of suit and diligence in collecting this Note or
enforcing any other security with respect to same, (b) agree to any
substitution, subordination, exchange or release of any such
security or the release of any parties primarily or secondarily
liable hereon, (c) agree that the Lender shall not be required
first to institute suit or exhaust its remedies hereon against the
Borrower, or other any party liable or to become liable hereon or
to enforce its rights against any or all of them or any security
with respect to same, and (d) consent to any extension or
postponement of time of payment of this Note and to any other
indulgence with respect hereto without notice hereof to any of
them.
8. Attorneys' Fees. If this Note is not paid at maturity and is
placed in the hands of an attorney for collection, or if it is
collected through a bankruptcy or any other court after maturity,
then the Lender shall be entitled to reasonable attorneys' fees and
court costs for collection.
9. Limitation of Agreements. All agreements between the
Borrower and the Lender, whether now existing or hereafter arising
and whether written or oral, are hereby expressly limited so that
in no contingency or event, whether by reason of demand or
otherwise, shall the amount paid, or agreed to be paid to the
Lender for the use, forbearance, or detention of the money to be
loaned under this Note or otherwise or for the payment or
performance of any covenant or obligation contained herein or in
any other document evidencing security or pertaining to the loan
evidenced hereby, exceed the maximum amount permissible under
applicable law, as now existing or as hereafter amended. If from
<PAGE> 69
any circumstances whatsoever fulfillment of any provision hereof or
in any of such other documents at the time performance of such
provision shall be due, shall involve transcending the limit of
validity prescribed by law, then ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity, and if
from any such circumstances the Lender shall ever receive interest
(or anything which might be deemed interest under applicable law)
which would exceed the highest rate of interest allowed by
applicable law, such amount which would be excessive interest shall
be applied to the reduction of the principal due hereunder and not
to the payment of interest, or if such excessive interest exceeds
the unpaid balance of principal of this Note, such excess shall be
refunded to the Borrower. All sums paid or agreed to be paid to
the Lender for the use, forbearance or detention of the
indebtedness of the Borrower to the Lender shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of such indebtedness until payment
in full so that the actual rate of interest on account of such
indebtedness is uniform, or does not exceed the maximum rate
permitted by applicable law as now existing or hereafter amended,
throughout the term thereof. The terms and provisions of this
paragraph shall control and supersede every other provision of all
agreements between the Lender and the Borrower.
10. Records. Borrower hereby appoints Lender as the authorized
agent of Borrower with full authority to record on the Grid
attached hereto as Exhibit A, and incorporated herein by reference
for all purposes, the dates of each transaction, amounts of all
principal advances, as well as principal and interest payments,
made under this Note, and balance due on the Note. This Grid (and
all notations made thereto) shall be conclusive evidence of the
actual amounts of principal and accrued interest advanced and/or
outstanding under this Note.
11. Miscellaneous.
(a) No failure or delay by Lender in exercising any right,
power or privilege under this Note or the Agreement shall
operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any further exercise thereof or the
exercise of any other right, power or privilege.
(b) The captions used in this Note are for convenience only
and shall not be deemed to amplify, modify or limit any
provision hereof.
(c) Words of any gender used in this Note shall be construed
to include any other gender, and words in the singular shall
include the plural and vice versa, unless the context otherwise
requires.
(d) This Note shall be binding upon and inure to the benefit
of the Parties hereto and their respective heirs, legal
representatives, successors and assigns.
<PAGE> 70
(e) This Note, together with the Agreement, contains the
entire agreement between the Parties hereto with respect to the
subject matter hereof and can be altered, amended or modified
only by a written instrument executed by both Parties.
(f) This Note may be executed in multiple copies, each of
which shall be deemed an original, and all of such copies shall
together constitute one and the same instrument.
(g) Time is of the essence in the performance of each
obligation, covenant and condition under this Note.
(h) This Note shall be governed by the laws of the State of
Texas.
(i) This Note is performable in Dallas County, Texas.
SHOWBIZ PIZZA TIME, INC. (Lender)
By: Michael H. Magusiak
President
INTERNATIONAL ASSOCIATION OF SHOWBIZ
PIZZA TIME RESTAURANTS, INC. (Borrower)
By: Michael A. Hilton
President
<PAGE> 71
EXHIBIT - 10(i)(5)
CONCEPT UNIFICATION FUND LINE OF CREDIT
By this Agreement, dated as of November 17, 1994, SHOWBIZ PIZZA
TIME, INC. ("Lender") and INTERNATIONAL ASSOCIATION OF SHOWBIZ
PIZZA TIME RESTAURANTS, INC., ("Borrower") hereby agree as follows:
1. Revolving Commitment. Subject to the terms and conditions in
this Agreement, Lender agrees to loan to Borrower from time to time
amounts not to exceed Five Hundred Thousand Dollars ($500,000.00)
in the aggregate outstanding at any one time. No new advance shall
be made under this Agreement after December 31, 1995. Subject to
the foregoing limitations, Borrower may borrow, repay, prepay and
reborrow amounts under this Agreement.
2. Note. Borrower's obligation to repay amounts borrowed under
this Agreement is further evidenced by an Concept Unification Fund
Promissory Note (the "Note") dated the same date as this Agreement.
Payment of principal and interest, and accrual of interest, on
amounts borrowed under this Agreement shall be as provided in the
Note.
3. Use of Proceeds. Borrower shall use amounts borrowed under
this Agreement only to purchase goods and services for the
following special projects of the borrower: conversion of the
"Rock-Afire Explosion" animated stage shows to "Munch's Make
Believe Band" and installation of "Cyberstar" and "Phase II" in
Chuck E. Cheese shows (collectively, the "Project"). Upon Lender's
reasonable request, Borrower shall provide copies of invoices and
other documents which evidence Borrower's compliance with this
Section 3.
4. Records and Reports. Upon Lender's reasonable request,
Borrower shall provide reports and copies of invoices, canceled
checks and other business records pertaining to the Project, this
Agreement or the Note.
5. Condition to Loans. The obligation of Lender to make loans
under this Agreement is subject to the satisfaction of each of the
following conditions:
(a) No default under this Agreement, and no event which would
constitute a default but for the giving of notice or the passage
of time thereafter, shall have occurred and be continuing on the
date of such loan;
<PAGE> 72
(b) The representations and warranties of Borrower set forth in
this Agreement shall be true as of the date of such loan;
(c) Lender shall have received any documents or information
previously requested from Borrower pursuant to this Agreement;
and
(d) No material adverse change, in Lender's sole determination,
has occurred in the businesses of the ShowBiz Pizza Time
restaurants or in the financial condition of Borrower.
6. Representation and Warranties: Borrower represents and
warrants that: (a) Borrower is a corporation duly incorporated,
validly existing and in good standing under the laws of the State
of Texas; (b) the execution, delivery and performance of this
Agreement and the Note have been duly authorized by all necessary
corporation action; and (c) this Agreement and the Note constitute
the valid and binding obligations of Borrower enforceable in
accordance with their terms.
7. Default. Borrower shall be in default under this Agreement
if one or more of the following events shall have occurred and be
continuing:
(a) The failure by Borrower to make any payment of principal or
interest on the Note within ten (10) days after the same becomes
due and payable;
(b) The failure by Borrower to perform any of its obligations,
except the payment of principal and interest, arising under the
Note, this Agreement or any other agreement between Borrower and
Lender within five (5) days after written notice of such failure;
or
(c) The filing by or against the Borrower of a voluntary or
involuntary proceeding seeking liquidation, reorganization or
other relief with respect to Borrower or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official for Borrower or
any substantial part of its property and, in the case of any
involuntary proceeding not consented to by Borrower, such
proceeding is not dismissed within sixty (60) days.
8. Remedies. If Borrower is in default under this Agreement:
(a) the outstanding principal and accrued interest under the Note
shall mature and become automatically due and payable, without
notice or demand; (b) Lender may terminate its commitment to make
loans under this Agreement; and (c) Lender may exercise any other
remedies permitted by law or equity.
<PAGE> 73
9. Notices. Any notice under this Agreement shall be effective
upon actual receipt or upon delivery to the United States Postal
Service, with first class postage, addressed as follows (or to such
other address subsequently provided by the party hereto):
To Lender:
ShowBiz Pizza Time, Inc.
4441 West Airport Freeway
Irving, Texas 75015
Attention: General Counsel
To Borrower:
International Association of ShowBiz
Pizza Time Restaurants, Inc.
4441 West Airport Freeway
Irving, Texas 75015
Attention: Mike Hilton
10. Miscellaneous.
(a) No failure or delay by Lender in exercising any right,
power or privilege under this Agreement or the Note shall
operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any further exercise thereof or the
exercise of any other right, power or privilege.
(b) The captions used in this Agreement are for convenience
only and shall not be deemed to amplify, modify or limit the
provisions hereof.
(c) Words of any gender used in the Agreement shall be
construed to include any other gender, and words in the
singular shall include the plural and vice versa, unless the
context otherwise requires.
(d) This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs,
legal representatives, successors and assigns.
(e) This Agreement, together with the Note, contains the
entire agreement of the parties hereto with respect to the
subject matter hereof and can be altered, amended or modified
only by written instrument executed by both parties.
<PAGE> 74
(f) This Agreement may be executed in multiple copies, each
of which shall be deemed an original, and all of such copies
shall together constitute one and the same instrument.
(g) Time is of the essence in the performance of each
obligation, covenant and condition under this Agreement.
(h) This Agreement shall be governed by the laws of the State
of Texas.
11. Prior Agreements. This Agreement amends, supersedes, and
replaces all previous agreements related to Concept Unification.
IN WITNESS HEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the date
first appearing above.
SHOWBIZ PIZZA TIME, INC.
By: Michael H. Magusiak
President
INTERNATIONAL ASSOCIATION OF SHOWBIZ
PIZZA TIME RESTAURANTS, INC.
By: Michael A. Hilton
President
<PAGE> 75
EXHIBIT - 10(i)(6)
CONCEPT UNIFICATION FUND
PROMISSORY NOTE
Dated as of
$500,000.00 Irving, Texas November 17, 1994
FOR VALUE RECEIVED, the undersigned INTERNATIONAL ASSOCIATION
OF SHOWBIZ PIZZA TIME RESTAURANTS, INC. ("Borrower"), a Texas
corporation, promises to pay to SHOWBIZ PIZZA TIME, INC.
("Lender"), a Kansas corporation, (hereinafter collectively
referred to as "Parties"), the principal sum of FIVE HUNDRED
THOUSAND AND NO/100 DOLLARS ($500,000.00), or so much thereof as
may from time to time be advanced, together with interest accrued
on the unpaid principal balance hereof as set forth below.
1. Interest Rate. The unpaid principal amount hereof from time
to time outstanding from the date hereof until maturity shall bear
interest at a fluctuating rate per annum equal to the Prime Rate
plus 0.5% (as herein defined), changing automatically, without
notice to the Borrower, effective as of the effective date of any
change in the Prime Rate. Interest shall be calculated at the end
of each of Lender's monthly accounting periods (which will not
correspond with calendar months due to Lender's 52 week fiscal
year) based on the average between the principal amounts
outstanding and unpaid at the beginning of the monthly accounting
period and at the end of such period, but shall be charged and
collected based on the actual number of days elapsed. The term
"Prime Rate" as used herein means the higher of (a) the annual rate
of interest announced from time to time by the First National Bank
of Boston at its head office in Boston, Massachusetts as its "base
rate" and (b) the overnight federal funds effective rate as
published by the Board of Governors of the Federal Reserve System
as in effect from time to time plus one half of one percent (1/2%).
2. Payment of Principal and Interest. Each payment by Borrower
to Lender on this Note shall be applied first to fees and/or costs,
if any, pursuant to Section 8 hereof and then applied to any
accrued interest, and then any remaining portion of the payment
after such applications shall be applied to reduction of
outstanding principal balance of this Note.
3. Revolving Note. This Note is a "revolving line of credit"
note. Principal advances may be made, from time to time, up to the
principal amount of this Note, and principal payments may, from
time to time, be made by Borrower to reduce the principal balance
owing pursuant to this Note. This Note may be prepaid in whole or
in part at any time without penalty or premium. In no event shall
any principal advance be made after December 31, 1995, and all
amounts outstanding will be due and payable at that time.
<PAGE> 76
4. Line of Credit Agreement. This Note is issued pursuant to,
is entitled to the benefit of, and is subject to the provisions of
the Concept Unification Fund Line of Credit Agreement (the
"Agreement") between Borrower and Lender dated the same date as
this Note.
5. Events of Default. The outstanding principal and accrued
interest hereon shall mature and become automatically due and
payable, without notice or demand, upon the occurrence and during
the continuance without cure of any of the following events of
default:
(a) The failure by Borrower to make a payment of any
principal or interest on the Note within ten (10) days after
the same becomes due and payable;
(b) The failure by Borrower to perform any of its
obligations, except the payment of principal and interest,
arising under this Note, the Agreement or any other agreement
between Borrower and Lender within five (5) days after receipt
of written notice of such failure; or
(c) The filing by or against the Borrower of a voluntary or
involuntary proceeding seeking liquidation, reorganization or
other relief with respect to Borrower or its debts under any
bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official for Borrower
or any substantial part of its property and, in the case of
any involuntary proceeding not consented to by Borrower, such
proceeding is not dismissed within sixty (60) days of its
filing.
6. Remedies. If Borrower is in default under this Note: (a) the
outstanding principal and accrued interest under the Note shall
mature and become automatically due and payable, without notice or
demand; (b) Lender may terminate its commitment to advance monies
under this Note; and (c) Lender may exercise any other remedies
available to it at law or in equity.
<PAGE> 77
7. Waiver. Borrower, sureties, endorsers, guarantors and any
other party now or hereafter liable for the payment of this Note in
whole or in part, hereby severally (a) waive presentment for
payment, notice of nonpayment, protest, notice of protest, notice
of intent to accelerate, notice of acceleration and all other
notices, filing of suit and diligence in collecting this Note or
enforcing any other security with respect to same, (b) agree to any
substitution, subordination, exchange or release of any such
security or the release of any parties primarily or secondarily
liable hereon, (c) agree that the Lender shall not be required
first to institute suit or exhaust its remedies hereon against the
Borrower, or other any party liable or to become liable hereon or
to enforce its rights against any or all of them or any security
with respect to same, and (d) consent to any extension or
postponement of time of payment of this Note and to any other
indulgence with respect hereto without notice hereof to any of
them.
8. Attorneys' Fees. If this Note is not paid at maturity and
is placed in the hands of an attorney for collection, or if it is
collected through a bankruptcy or any other court after maturity,
then the Lender shall be entitled to reasonable attorneys' fees and
court costs for collection.
9. Limitation of Agreements. All agreements between the
Borrower and the Lender, whether now existing or hereafter arising
and whether written or oral, are hereby expressly limited so that
in no contingency or event, whether by reason of demand or
otherwise, shall the amount paid, or agreed to be paid to the
Lender for the use, forbearance, or detention of the money to be
loaned under this Note or otherwise or for the payment or
performance of any covenant or obligation contained herein or in
any other document evidencing security or pertaining to the loan
evidenced hereby, exceed the maximum amount permissible under
applicable law, as now existing or as hereafter amended. If from
any circumstances whatsoever fulfillment of any provision hereof or
in any of such other documents at the time performance of such
provision shall be due, shall involve transcending the limit of
validity prescribed by law, then ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity, and if
from any such circumstances the Lender shall ever receive interest
(or anything which might be deemed interest under applicable law)
which would exceed the highest rate of interest allowed by
applicable law, such amount which would be excessive interest shall
be applied to the reduction of the principal due hereunder and not
to the payment of interest, or if such excessive interest exceeds
the unpaid balance of principal of this Note, such excess shall be
<PAGE> 78
refunded to the Borrower. All sums paid or agreed to be paid to
the Lender for the use, forbearance or detention of the
indebtedness of the Borrower to the Lender shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of such indebtedness until payment
in full so that the actual rate of interest on account of such
indebtedness is uniform, or does not exceed the maximum rate
permitted by applicable law as now existing or hereafter amended,
throughout the term thereof. The terms and provisions of this
paragraph shall control and supersede every other provision of all
agreements between the Lender and the Borrower.
10. Records. Borrower hereby appoints Lender as the authorized
agent of Borrower with full authority to record on the Grid
attached hereto as Exhibit A, and incorporated herein by reference
for all purposes, the dates of each transaction, amounts of all
principal advances, as well as principal and interest payments,
made under this Note, and balance due on the Note. This Grid (and
all notations made thereto) shall be conclusive evidence of the
actual amounts of principal and accrued interest advanced and/or
outstanding under this Note.
11. Miscellaneous.
(a) No failure or delay by Lender in exercising any right,
power or privilege under this Note or the Agreement shall
operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any further exercise thereof or the
exercise of any other right, power or privilege.
(b) The captions used in this Note are for convenience only
and shall not be deemed to amplify, modify or limit any
provision hereof.
(c) Words of any gender used in this Note shall be construed
to include any other gender, and words in the singular shall
include the plural and vice versa, unless the context
otherwise requires.
(d) This Note shall be binding upon and inure to the benefit
of the Parties hereto and their respective heirs, legal
representatives, successors and assigns.
(e) This Note, together with the Agreement, contains the
entire agreement between the Parties hereto with respect to
the subject matter hereof and can be altered, amended or
modified only by a written instrument executed by both
Parties.
<PAGE> 79
(f) This Note may be executed in multiple copies, each
of which shall be deemed an original, and all of such
copies shall together constitute one and the same
instrument.
(g) Time is of the essence in the performance of each
obligation, covenant and condition under this Note.
(h) This Note shall be governed by the laws of the State
of Texas.
(i) This Note is performable in Dallas County, Texas.
SHOWBIZ PIZZA TIME, INC. (Lender)
By: Michael H. Magusiak
President
INTERNATIONAL ASSOCIATION OF SHOWBIZ
PIZZA TIME RESTAURANTS, INC. (Borrower)
By: Michael A. Hilton
President
<PAGE> 80
EXHIBIT - 10(i)(7)
NATIONAL MEDIA FUND LINE OF CREDIT
By this Agreement, dated as of November 17, 1994, SHOWBIZ PIZZA
TIME, INC. ("Lender") and INTERNATIONAL ASSOCIATION OF SHOWBIZ
PIZZA TIME RESTAURANTS, INC., ("Borrower") hereby agree as follows:
1. Revolving Commitment. Subject to the terms and conditions
in this Agreement, Lender agrees to loan to Borrower from time to
time amounts not to exceed Four Hundred Thousand Dollars
($400,000.00) in the aggregate outstanding at any one time. No new
advance shall be made under this Agreement after December 31, 1995.
Subject to the foregoing limitations, Borrower may borrow, repay,
prepay and reborrow amounts under this Agreement.
2. Note. Borrower's obligation to repay amounts borrowed under
this Agreement is further evidenced by an National Media Fund
Promissory Note (the "Note") dated the same date as this Agreement.
Payment of principal and interest, and accrual of interest, on
amounts borrowed under this Agreement shall be as provided in the
Note.
3. Use of Proceeds. Borrower shall use amounts borrowed under
this Agreement only to purchase goods and services related to
network media buys (collectively, the "Project"). Upon Lender's
reasonable request, Borrower shall provide copies of invoices and
other documents which evidence Borrower's compliance with this
Section 3.
4. Records and Reports. Upon Lender's reasonable request,
Borrower shall provide reports and copies of invoices, canceled
checks and other business records pertaining to the Project, this
Agreement or the Note.
5. Condition to Loans. The obligation of Lender to make loans
under this Agreement is subject to the satisfaction of each of the
following conditions:
(a) No default under this Agreement, and no event which would
constitute a default but for the giving of notice or the passage
of time thereafter, shall have occurred and be continuing on the
date of such loan;
(b) The representations and warranties of Borrower set forth in
this Agreement shall be true as of the date of such loan;
<PAGE> 81
(c) Lender shall have received any documents or information
previously requested from Borrower pursuant to this Agreement;
and
(d) No material adverse change, in Lender's sole determination,
has occurred in the businesses of the ShowBiz Pizza Time
restaurants or in the financial condition of Borrower.
6. Representation and Warranties: Borrower represents and
warrants that: (a) Borrower is a corporation duly incorporated,
validly existing and in good standing under the laws of the State
of Texas; (b) the execution, delivery and performance of this
Agreement and the Note have been duly authorized by all necessary
corporation action; and (c) this Agreement and the Note constitute
the valid and binding obligations of Borrower enforceable in
accordance with their terms.
7. Default. Borrower shall be in default under this Agreement
if one or more of the following events shall have occurred and be
continuing:
(a) The failure by Borrower to make any payment of principal or
interest on the Note within ten (10) days after the same becomes
due and payable;
(b) The failure by Borrower to perform any of its obligations,
except the payment of principal and interest, arising under the
Note, this Agreement or any other agreement between Borrower and
Lender within five (5) days after written notice of such failure;
or
(c) The filing by or against the Borrower of a voluntary or
involuntary proceeding seeking liquidation, reorganization or
other relief with respect to Borrower or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official for Borrower or
any substantial part of its property and, in the case of any
involuntary proceeding not consented to by Borrower, such
proceeding is not dismissed within sixty (60) days.
8. Remedies. If Borrower is in default under this Agreement:
(a) the outstanding principal and accrued interest under the Note
shall mature and become automatically due and payable, without
notice or demand; (b) Lender may terminate its commitment to make
loans under this Agreement; and (c) Lender may exercise any other
remedies permitted by law or equity.
<PAGE> 82
9. Notices. Any notice under this Agreement shall be effective
upon actual receipt or upon delivery to the United States Postal
Service, with first class postage, addressed as follows (or to such
other address subsequently provided by the party hereto):
To Lender:
ShowBiz Pizza Time, Inc.
4441 West Airport Freeway
Irving, Texas 75015
Attention: General Counsel
To Borrower:
International Association of ShowBiz
Pizza Time Restaurants, Inc.
4441 West Airport Freeway
Irving, Texas 75015
Attention: Mike Hilton
10. Miscellaneous.
(a) No failure or delay by Lender in exercising any right, power
or privilege under this Agreement or the Note shall operate as
a waiver thereof, nor shall any single or partial exercise
thereof preclude any further exercise thereof or the exercise of
any other right, power or privilege.
(b) The captions used in this Agreement are for convenience only
and shall not be deemed to amplify, modify or limit the
provisions hereof.
(c) Words of any gender used in the Agreement shall be construed
to include any other gender, and words in the singular shall
include the plural and vice versa, unless the context otherwise
requires.
(d) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns.
(e) This Agreement, together with the Note, contains the entire
agreement of the parties hereto with respect to the subject
matter hereof and can be altered, amended or modified only by
written instrument executed by both parties.
<PAGE> 83
(f) This Agreement may be executed in multiple copies, each of
which shall be deemed an original, and all of such copies shall
together constitute one and the same instrument.
(g) Time is of the essence in the performance of each
obligation, covenant and condition under this Agreement.
(h) This Agreement shall be governed by the laws of the State
of Texas.
11. Prior Agreements. This Agreement amends, supersedes, and
replaces all previous agreements related to national media
production.
IN WITNESS HEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the date
first appearing above.
SHOWBIZ PIZZA TIME, INC.
By: Michael H. Magusiak
President
INTERNATIONAL ASSOCIATION OF SHOWBIZ
PIZZA TIME RESTAURANTS, INC.
By: Michael A. Hilton
President
<PAGE> 84
EXHIBIT - (10)(i)(8)
NATIONAL MEDIA FUND
PROMISSORY NOTE
Dated as of
$400,000.00 Irving, Texas November 17, 1994
FOR VALUE RECEIVED, the undersigned INTERNATIONAL ASSOCIATION
OF SHOWBIZ PIZZA TIME RESTAURANTS, INC. ("Borrower"), a Texas
corporation, promises to pay to SHOWBIZ PIZZA TIME, INC.
("Lender"), a Kansas corporation, (hereinafter collectively
referred to as "Parties"), the principal sum of FOUR HUNDRED
THOUSAND AND NO/100 DOLLARS ($400,000.00), or so much thereof as
may from time to time be advanced, together with interest accrued
on the unpaid principal balance hereof as set forth below.
1. Interest Rate. The unpaid principal amount hereof from time
to time outstanding from the date hereof until maturity shall bear
interest at a fluctuating rate per annum equal to the Prime Rate
plus 0.5% (as herein defined), changing automatically, without
notice to the Borrower, effective as of the effective date of any
change in the Prime Rate. Interest shall be calculated at the end
of each of Lender's monthly accounting periods (which will not
correspond with calendar months due to Lender's 52 week fiscal
year) based on the average between the principal amounts
outstanding and unpaid at the beginning of the monthly accounting
period and at the end of such period, but shall be charged and
collected based on the actual number of days elapsed. The term
"Prime Rate" as used herein means the higher of (a) the annual rate
of interest announced from time to time by the First National Bank
of Boston at its head office in Boston, Massachusetts as its "base
rate" and (b) the overnight federal funds effective rate as
published by the Board of Governors of the Federal Reserve System
as in effect from time to time plus one half of one percent (1/2%).
2. Payment of Principal and Interest. Each payment by Borrower
to Lender on this Note shall be applied first to fees and/or costs,
if any, pursuant to Section 8 hereof and then applied to any
accrued interest, and then any remaining portion of the payment
after such applications shall be applied to reduction of
outstanding principal balance of this Note.
<PAGE> 85
3. Revolving Note. This Note is a "revolving line of credit"
note. Principal advances may be made, from time to time, up to the
principal amount of this Note, and principal payments may, from
time to time, be made by Borrower to reduce the principal balance
owing pursuant to this Note. This Note may be prepaid in whole or
in part at any time without penalty or premium. In no event shall
any principal advance be made after December 31, 1995, and all
amounts outstanding will be due and payable at that time.
4. Line of Credit Agreement. This Note is issued pursuant to,
is entitled to the benefit of, and is subject to the provisions of
the National Media Fund Line of Credit Agreement (the "Agreement")
between Borrower and Lender dated the same date as this Note.
5. Events of Default. The outstanding principal and accrued
interest hereon shall mature and become automatically due and
payable, without notice or demand, upon the occurrence and during
the continuance without cure of any of the following events of
default:
(a) The failure by Borrower to make a payment of any
principal or interest on the Note within ten (10) days after
the same becomes due and payable;
(b) The failure by Borrower to perform any of its
obligations, except the payment of principal and interest,
arising under this Note, the Agreement or any other agreement
between Borrower and Lender within five (5) days after receipt
of written notice of such failure; or
(c) The filing by or against the Borrower of a voluntary or
involuntary proceeding seeking liquidation, reorganization or
other relief with respect to Borrower or its debts under any
bankruptcy, insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official for Borrower
or any substantial part of its property and, in the case of
any involuntary proceeding not consented to by Borrower, such
proceeding is not dismissed within sixty (60) days of its
filing.
6. Remedies. If Borrower is in default under this Note: (a) the
outstanding principal and accrued interest under the Note shall
mature and become automatically due and payable, without notice or
demand; (b) Lender may terminate its commitment to advance monies
under this Note; and (c) Lender may exercise any other remedies
available to it at law or in equity.
<PAGE> 86
7. Waiver. Borrower, sureties, endorsers, guarantors and any
other party now or hereafter liable for the payment of this Note in
whole or in part, hereby severally (a) waive presentment for
payment, notice of nonpayment, protest, notice of protest, notice
of intent to accelerate, notice of acceleration and all other
notices, filing of suit and diligence in collecting this Note or
enforcing any other security with respect to same, (b) agree to any
substitution, subordination, exchange or release of any such
security or the release of any parties primarily or secondarily
liable hereon, (c) agree that the Lender shall not be required
first to institute suit or exhaust its remedies hereon against the
Borrower, or other any party liable or to become liable hereon or
to enforce its rights against any or all of them or any security
with respect to same, and (d) consent to any extension or
postponement of time of payment of this Note and to any other
indulgence with respect hereto without notice hereof to any of
them.
8. Attorneys' Fees. If this Note is not paid at maturity and
is placed in the hands of an attorney for collection, or if it is
collected through a bankruptcy or any other court after maturity,
then the Lender shall be entitled to reasonable attorneys' fees and
court costs for collection.
9. Limitation of Agreements. All agreements between the
Borrower and the Lender, whether now existing or hereafter arising
and whether written or oral, are hereby expressly limited so that
in no contingency or event, whether by reason of demand or
otherwise, shall the amount paid, or agreed to be paid to the
Lender for the use, forbearance, or detention of the money to be
loaned under this Note or otherwise or for the payment or
performance of any covenant or obligation contained herein or in
any other document evidencing security or pertaining to the loan
evidenced hereby, exceed the maximum amount permissible under
applicable law, as now existing or as hereafter amended. If from
any circumstances whatsoever fulfillment of any provision hereof or
in any of such other documents at the time performance of such
provision shall be due, shall involve transcending the limit of
validity prescribed by law, then ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity, and if
from any such circumstances the Lender shall ever receive interest
(or anything which might be deemed interest under applicable law)
which would exceed the highest rate of interest allowed by
applicable law, such amount which would be excessive interest shall
<PAGE> 87
be applied to the reduction of the principal due hereunder and not
to the payment of interest, or if such excessive interest exceeds
the unpaid balance of principal of this Note, such excess shall be
refunded to the Borrower. All sums paid or agreed to be paid to
the Lender for the use, forbearance or detention of the
indebtedness of the Borrower to the Lender shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of such indebtedness until payment
in full so that the actual rate of interest on account of such
indebtedness is uniform, or does not exceed the maximum rate
permitted by applicable law as now existing or hereafter amended,
throughout the term thereof. The terms and provisions of this
paragraph shall control and supersede every other provision of all
agreements between the Lender and the Borrower.
10. Records. Borrower hereby appoints Lender as the authorized
agent of Borrower with full authority to record on the Grid
attached hereto as Exhibit A, and incorporated herein by reference
for all purposes, the dates of each transaction, amounts of all
principal advances, as well as principal and interest payments,
made under this Note, and balance due on the Note. This Grid (and
all notations made thereto) shall be conclusive evidence of the
actual amounts of principal and accrued interest advanced and/or
outstanding under this Note.
11. Miscellaneous.
(a) No failure or delay by Lender in exercising any right,
power or privilege under this Note or the Agreement shall
operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any further exercise thereof or the
exercise of any other right, power or privilege.
(b) The captions used in this Note are for convenience only
and shall not be deemed to amplify, modify or limit any
provision hereof.
(c) Words of any gender used in this Note shall be construed
to include any other gender, and words in the singular shall
include the plural and vice versa, unless the context
otherwise requires.
(d) This Note shall be binding upon and inure to the benefit
of the Parties hereto and their respective heirs, legal
representatives, successors and assigns.
<PAGE> 88
(e) This Note, together with the Agreement, contains the
entire agreement between the Parties hereto with respect to
the subject matter hereof and can be altered, amended or
modified only by a written instrument executed by both
Parties.
(f) This Note may be executed in multiple copies, each of
which shall be deemed an original, and all of such copies
shall together constitute one and the same instrument.
(g) Time is of the essence in the performance of each
obligation, covenant and condition under this Note.
(h) This Note shall be governed by the laws of the State of
Texas.
(i) This Note is performable in Dallas County, Texas.
SHOWBIZ PIZZA TIME, INC. (Lender)
By: Michael H. Magusiak
President
INTERNATIONAL ASSOCIATION OF SHOWBIZ
PIZZA TIME RESTAURANTS, INC. (Borrower)
By: Michael A. Hilton
President
<PAGE> 89
EXHIBIT 18
March 17, 1995
Board of Directors and Shareholders
ShowBiz Pizza Time, Inc.
Irving, Texas
We have audited the consolidated financial statements of ShowBiz Pizza Time,
Inc. and subsidiary as of December 30, 1994 and December 30, 1993, and for
each of the three years (52 or 53 weeks) in the period ended December 30, 1994,
included in your Annual Report on Form 10-K to the Securities and Exchange
Commission and have issued our report thereon dated March 3, 1995. Note 1 to
such financial statements contains a description of your decision during the
year ended December 30, 1994 to expense restaurant preopening costs as incurred.
In our judgment, such change is to an alternative accounting principle that
is to an alternative accounting principle that is preferable under the
circumstances.
Yours truly,
Deloitte & Touche LLP
<PAGE> 90
EXHIBIT 21
SUBSIDIARIES
SHOWBIZ PIZZA TIME, INC.
NAME OF SUBSIDIARY
(AND NAMES IN WHICH STATE OF
SUBSIDIARY DOES BUSINESS) ORGANIZATION
------------------------- --------------
BHC Acquisition Corporation Texas
<PAGE> 91
EXHIBIT 23
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
Showbiz Pizza Time, Inc.
Irving, Texas
We consent to the incorporation by reference in Registration Statement
No. 33-24490 on Form S-1, as amended, and Registration Statement Nos.
33-24490 and 33-48307 on Form S-3 and Registration Statments Nos. 33-29495,
33-36075, 33-39650, 33-67838 and 33-67840 on Form S-8 of ShowBiz Pizza Time,
Inc. of our reports dated March 3, 1995, appearing in this Annual Report
on Form 10-K of ShowBiz Pizza Time, Inc. for the year ended December 30, 1994.
DELOITTE & TOUCHE LLP
Dallas, Texas
March 3, 1995
</PAGE> 92
