<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
SHOWBIZ PIZZA TIME INC
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
SHOWBIZ PIZZA TIME, INC.
4441 WEST AIRPORT FREEWAY
IRVING, TEXAS 75062
(214) 258-8507
May 4, 1995
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of
the Company to be held at 9:00 a.m. local time, Thursday, June 8, 1995, at the
Company's Chuck E. Cheese's restaurant located at 7935 Grapevine Highway, North
Richland Hills, Texas.
At the meeting you will be asked to re-elect three current directors,
authorize an increase in the number of shares available for issuance under the
Company's current stock option plan and adopt a new formula stock option plan
for non-employee directors of the Company.
The formal Notice of the Annual Meeting of Stockholders and Proxy Statement
accompanying this letter provide detailed information concerning matters to be
considered and acted upon at the meeting.
It is important that your shares be represented at the meeting, whether or
not you attend personally. I urge you to sign, date and return the enclosed
proxy at your earliest convenience.
Sincerely,
RICHARD M. FRANK
Chairman and Chief Executive Officer
<PAGE> 3
SHOWBIZ PIZZA TIME, INC.
4441 WEST AIRPORT FREEWAY
IRVING, TEXAS 75062
(214) 258-8507
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 8, 1995
To the Stockholders of
ShowBiz Pizza Time, Inc.:
Notice is hereby given that the annual meeting of stockholders of ShowBiz
Pizza Time, Inc., a Kansas corporation, will be held at the Company's Chuck E.
Cheese's restaurant located at 7935 Grapevine Highway, North Richland Hills,
Texas on June 8, 1995, at 9:00 a.m. local time, for the following purposes:
1. To re-elect three Class I directors to serve for a term of three
years each or until their respective successors are elected and qualified
or until their earlier resignation or removal;
2. To authorize an increase in the number of shares available for
issuance pursuant to the Company's 1988 Non-Statutory Stock Option Plan;
3. To adopt a Non-Employee Directors Stock Option Plan; and
4. To transact such other business as may properly come before the
meeting.
It is desirable that as large a proportion as possible of the stockholders'
interests be represented at the meeting. Whether or not you plan to be present
at the meeting, you are requested to sign and return the enclosed proxy in the
envelope provided so that your stock will be represented. The giving of such
proxy will not affect your right to vote in person, should you later decide to
attend the meeting. Please date and sign the enclosed proxy and return it
promptly in the enclosed envelope.
Only stockholders of record at the close of business on May 1, 1995 are
entitled to notice of, and to vote at, the meeting or any adjournment thereof.
By Order of the Board of Directors,
ALICE WINTERS
Assistant Secretary
Irving, Texas
May 4, 1995
<PAGE> 4
SHOWBIZ PIZZA TIME, INC.
4441 WEST AIRPORT FREEWAY
IRVING, TEXAS 75062
(214) 258-8507
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 8, 1995
This proxy statement is furnished to stockholders of ShowBiz Pizza Time,
Inc., a Kansas corporation (the "Company"), in connection with the solicitation
of proxies by the Board of Directors of the Company (the "Board of Directors")
for use at the annual meeting of stockholders (the "Annual Meeting") to be held
at 9:00 A.M. local time on June 8, 1995 at the Company's Chuck E. Cheese's
restaurant located at 7935 Grapevine Highway, North Richland Hills, Texas.
Proxies in the form enclosed will be voted at the Annual Meeting, if properly
executed, returned to the Company prior to the Annual Meeting and not revoked. A
proxy may be revoked at any time before it is voted either in person at the
Annual Meeting or by giving prior written notice to the Assistant Secretary of
the Company. This proxy statement was first sent or given to the Company's
stockholders on or about May 4, 1995.
OUTSTANDING CAPITAL STOCK
The record date for stockholders entitled to notice of, and to vote at, the
Annual Meeting is May 1, 1995. At the close of business on that date, the
Company had issued and outstanding and entitled to receive notice of and vote at
the Annual Meeting 12,275,177 shares of Common Stock, $.10 par value (the
"Common Stock"), and 49,570 shares of Class A Preferred Stock, $60 par value
(the "Preferred Stock"). No other class of securities of the Company is entitled
to notice of, or to vote at, the Annual Meeting of stockholders.
ACTION TO BE TAKEN AT THE ANNUAL MEETING
The accompanying proxy, unless the stockholder otherwise specifies in the
proxy, will be voted:
1. For the re-election of the three Class I director nominees named
herein to serve for a term of three years each or until their respective
successors shall be elected and qualified or until their earlier
resignation or removal;
2. To authorize an increase in the number of shares available for
issuance pursuant to the Company's current 1988 Non-Statutory Stock Option
Plan (the "1988 Option Plan");
3. To adopt a Non-Employee Directors Stock Option Plan (the "Formula
Stock Option Plan"); and
4. In the discretion of the proxyholders, as to the transaction of
such other business as may properly come before the Annual Meeting.
Where stockholders have appropriately specified how their proxies are to be
voted, they will be voted accordingly. If any other matter or business is
brought before the Annual Meeting, the proxyholders may vote the proxies in
their discretion. The Board of Directors is not presently aware of any other
matters or business to be brought before the Annual Meeting.
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of a majority of the
aggregate outstanding shares of Common Stock and Preferred Stock is necessary to
constitute a quorum at the Annual Meeting. The affirmative vote of the holders
of a majority of the outstanding shares of Common Stock and Preferred Stock,
voting together as one class, represented in person or by proxy at the Annual
Meeting, is necessary to approve all matters to be submitted to the
stockholders. In deciding all questions, a holder is entitled to one vote, in
person or by proxy, for each share of Common Stock or Preferred Stock held in
his name on the record date.
<PAGE> 5
Solely with respect to the election of directors, the bylaws of the Company
provide that a stockholder shall have that number of votes equal to the number
of shares held by him as of the record date multiplied by the number of
directors being elected and is entitled to cumulate his votes and cast them all
for any single nominee or to spread his votes, so cumulated, among as many
nominees and in such manner as he sees fit. Directors must be elected by a
plurality of the votes cast.
A stockholder who is present, in person or by proxy, and who withholds his
vote in the election of directors will be counted for purposes of determining
whether a quorum exists, but the withholding of his vote will not affect the
election of directors. A stockholder who is present, in person or by proxy, and
who abstains from voting on other proposals, will be counted for purposes of a
quorum, and the abstention will have the same effect as a vote against the
proposals. Brokers' "non-votes" are treated the same as votes withheld or
abstained.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted at the Annual Meeting. It may be
revoked by filing with the Assistant Secretary of the Company, Alice Winters,
4441 W. Airport Freeway, Irving, Texas 75062, a written notice of revocation or
duly executed proxy bearing a later date, or it may be revoked by attending the
Annual Meeting and voting in person. Attendance at the Annual Meeting will not,
by itself, revoke a proxy.
2
<PAGE> 6
PRINCIPAL HOLDERS OF CAPITAL STOCK
The table on the following page sets forth information, as of May 1, 1995,
relating to the beneficial ownership of the Company's Common Stock and Preferred
Stock by: (i) each director and Named Executive Officer (as hereinafter defined)
of the Company as of such date, (ii) the directors and the Named Executive
Officers of the Company as a group (11 persons) as of such date, and (iii) each
person, as that term is used in the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), known to the Company to own beneficially 5% or more of the
outstanding shares of Common Stock or Preferred Stock. Except as otherwise
indicated, each of the persons named in the table is believed by the Company to
possess sole voting and investment power with respect to the shares of Common
Stock or Preferred Stock beneficially owned by such person. Information as to
the beneficial ownership of Common Stock and Preferred Stock by directors and
Named Executive Officers of the Company has been furnished by the respective
directors and Named Executive Officers.
<TABLE>
<CAPTION>
PERCENTAGE OF CLASS
OUTSTANDING
NAME (AND ADDRESS FOR NUMBER OF SHARES OF NUMBER OF SHARES OF ------------------------------
5% BENEFICIAL OWNERS) COMMON STOCK PREFERRED STOCK COMMON STOCK PREFERRED STOCK
- ----------------------------------- ------------------- ------------------- ------------ ---------------
<S> <C> <C> <C> <C>
Charles A. Crocco, Jr.............. 1,930(A)(B) 0 (C) 0.0%
Richard M. Frank................... 690,024(D) 0 5.6% 0.0%
Anthony J. Gumbiner................ 0(A)(E)(F) 0 0.0% 0.0%
Richard T. Huston.................. 33,612(G) 0 (C) 0.0%
Robert L. Lynch.................... 613(A)(B) 0 (C) 0.0%
Michael H. Magusiak................ 42,177(H) 0 (C) 0.0%
Louis P. Neeb...................... 0(B) 0 0.0% 0.0%
Larry G. Page...................... 0(I) 0 0.0% 0.0%
Cynthia I. Pharr................... 0(B) 0 0.0% 0.0%
J. Thomas Talbot................... 7,500(A)(B) 0 (C) 0.0%
Brian M. Troup..................... 0(A)(E)(J) 0 0.0% 0.0%
Directors and Executive Officers as
a Group.......................... 775,856 0 6.3% 0.0%
The Hallwood Group Incorporated.... 1,784,193(K) 0 14.5% 0.0%
3710 Rawlins, Suite 1500
Dallas, TX 75219
Massachusetts Financial Services
Company.......................... 1,144,900(L) 0 9.3% 0.0%
500 Boylston Street
Boston, MA 02116-0741
Snyder Capital Management, Inc..... 1,173,200(M) 0 9.6% 0.0%
350 California Street
Suite 1460
San Francisco, CA 94104
Time Warner, Inc................... 0 16,011(N) 0.0% 32.3%
75 Rockefeller Plaza
New York, NY 10019
River Forest State Bank & Trust
Co............................... 22 3,139 0.0% 6.3%
7727 West Lake Street
River Forest, IL 60305
New Valley Corporation............. 780,619(O) 0 6.4% 0.0%
100 Southeast 2nd Street
Miami, FL 33131
</TABLE>
- ---------------
(Footnotes appear on the following page)
3
<PAGE> 7
(A) Excludes shares owned of record by The Hallwood Group, Inc. ("Hallwood"),
described in footnote (K).
(B) Excludes 7,500 shares purchasable pursuant to options issued under the
Company's 1988 Option Plan, which options vest in equal annual increments
of 2,500 shares on each of August 19, 1995, August 19, 1996 and August 19,
1997.
(C) Constitutes less than 1% of the Company's outstanding Common Stock.
(D) Includes 172,983 shares which are subject to forfeiture pursuant to the
terms of Mr. Frank's employment agreement. See "Employment Agreements."
(E) Excludes 200,144 shares pledged to IBJ Schroder Bank & Trust Company, as
trustee under an indenture as collateral for bonds issued by Hallwood
Holdings SA, a Luxembourg corporation ("HHSA"). HHSA previously owned
certain warrants issued by the Company which entitled HHSA to purchase such
shares, but HHSA distributed such warrants to its shareholders as part of a
reduction of capital and premium in July 1993. HHSA no longer claims any
beneficial interest in the shares, but the shares remain pledged as
collateral for bonds issued by HHSA. Mr. Gumbiner is a director of HHSA.
Mr. Gumbiner's address is c/o The Hallwood Group Incorporated, 3710 Rawlins
Street, Suite 1500, Dallas, Texas 75219. Mr. Troup is also a director of
HHSA. Mr. Troup's address is c/o The Hallwood Group Incorporated, 3710
Rawlins Street, Suite 1500, Dallas, Texas 75219. This note is based on
information in Amendment No. 3 to Schedule 13D of HHSA dated July 5, 1993.
(F) Excludes 496,382 shares held by a trust for which Mr. Gumbiner has the
power to designate and replace the trustees, 120,086 shares of which are
included in footnote (E).
(G) Includes 15,000 shares purchasable pursuant to options issued under the
1988 Option Plan but excludes 60,000 shares purchasable pursuant to options
issued under the 1988 Option Plan which are not exercisable within 60 days
of the date hereof.
(H) Includes 15,000 shares purchasable pursuant to options issued under the
1988 Option Plan but excludes 90,000 shares purchasable pursuant to options
issued under the 1988 Option Plan which are not exercisable within 60 days
of the date hereof.
(I) Excludes 15,000 shares purchasable pursuant to options issued under the
1988 Option Plan which are not exercisable within 60 days of the date
hereof.
(J) Excludes 330,922 shares held by a trust for which Mr. Troup has the power
to designate and replace the trustees, 80,058 shares of which are included
in footnote (E).
(K) Based on information in Amendment No. 8 to Schedule 13D dated June 3, 1994.
The directors of Hallwood are Anthony J. Gumbiner, Brian M. Troup, Charles
A. Crocco, Jr., Robert L. Lynch and J. Thomas Talbot. Mr. Gumbiner is
Chairman of the Board and Chief Executive Officer of Hallwood. Mr. Troup is
President and Chief Operating Officer of Hallwood. The Company has also
been informed that such shares are pledged as collateral to secure certain
obligations of Hallwood.
(L) Based on information in Amendment No. 1 to Schedule 13G dated February 6,
1995. This number includes 750,000 shares beneficially owned by MFS Series
Trust II -- MFS Emerging Growth Fund.
(M) Based on information in Amendment No. 1 to Schedule 13D received August 3,
1994. Of its total shares, Snyder Capital Management, Inc. has shared
voting power over 1,019,500 shares and shared dispositive power over
1,173,200 shares. This number also includes 117,000 shares owned by
Stirling Partners, of which Snyder Capital Management, Inc. is the general
partner.
(N) Based on information in Amendment No. 2 to Schedule 13D dated July 1, 1994.
Of its total shares, Time Warner, Inc. has shared voting power over 16,011
shares and shared dispositive power over 16,011 shares.
(O) Based on information in Schedule 13D dated April 26, 1995. This number also
includes 15,800 shares held by CPI Securities, L.P. ("CPIS") as to which
New Valley Corporation ("New Valley") may be deemed to be the beneficial
owner as a result of an agreement between New Valley and CPIS to act
together with respect to certain matters concerning the Common Stock. This
number includes 3,300 shares held by certain controlling persons of CPIS.
4
<PAGE> 8
PROPOSAL 1:
RE-ELECTION OF CLASS I DIRECTORS
The terms of the three Class I directors expire at the Annual Meeting of
the stockholders in 1995. The Board of Directors has nominated for re-election
at the Annual Meeting all three incumbent Class I directors, each to serve for a
term of three years. Each nominee of the Board of Directors has expressed his
intention to serve the entire term for which re-election is sought.
Directors will be elected by cumulative voting. To be elected as a
director, a candidate must be among the three candidates who receive the most
votes out of all votes cast at the Annual Meeting for the election of directors.
See "Quorum and Voting."
The following table lists the names and ages (as of May 1, 1995) of the
three director nominees and the six directors whose terms of office will
continue after the Annual Meeting, the year in which each director was first
elected as a director of the Company, the class to which each director has been
or will be elected, and the Annual Meeting at which the term of each director
will expire.
<TABLE>
<CAPTION>
DIRECTOR TERM
NOMINEE DIRECTORS AGE SINCE CLASS EXPIRES
- ----------------- --- -------- ----- -------
<S> <C> <C> <C> <C>
Richard M. Frank............................................. 47 1985 I 1995
Anthony J. Gumbiner.......................................... 50 1988 I 1995
Michael H. Magusiak.......................................... 39 1988 I 1995
CONTINUING DIRECTORS
- --------------------
Charles A. Crocco, Jr........................................ 56 1988 II 1996
Robert L. Lynch.............................................. 77 1988 II 1996
Cynthia I. Pharr............................................. 46 1994 II 1996
J. Thomas Talbot............................................. 59 1988 III 1997
Brian M. Troup............................................... 48 1988 III 1997
Louis P. Neeb................................................ 56 1994 III 1997
</TABLE>
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH OF THE
NAMED NOMINEES.
ADDITIONAL INFORMATION ABOUT THE EXECUTIVE OFFICERS, BOARD OF
DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS
EXECUTIVE OFFICERS
The following table sets forth the names and certain other information
regarding the executive officers of the Company as of May 1, 1995.
<TABLE>
<CAPTION>
YEAR FIRST ELECTED
AS EXECUTIVE
NAME AGE POSITION OFFICER
- ---- ---- -------- ------------------
<S> <C> <C> <C>
Richard M. Frank.................... 47 Chairman of the Board and Chief 1985
Executive Officer
Michael H. Magusiak................. 39 President 1988
Richard T. Huston................... 49 Executive Vice 1986
President -- Marketing and
Entertainment
Larry G. Page....................... 51 Executive Vice President, Chief 1994
Financial Officer and Treasurer
</TABLE>
5
<PAGE> 9
BUSINESS HISTORY OF EXECUTIVE OFFICERS AND DIRECTORS
A brief description of the business history of the directors and executive
officers of the Company is provided below.
RICHARD M. FRANK has been Chairman of the Board and Chief Executive Officer
of the Company since March 1986 and has been a director of the Company since
June 1985. He served as President and Chief Operating Officer from June 1985
until October 1988. He joined the Company in 1985.
MICHAEL H. MAGUSIAK was elected President of the Company in June 1994. He
had previously served as Executive Vice President, Chief Financial Officer and
Treasurer since June 1988. He has also served as a director of the Company since
1988. He was Vice President of the Company from October 1987 to June 1988 and
Controller of the Company from October 1987 to January 1989. He joined the
Company in July 1987.
RICHARD T. HUSTON has served as Executive Vice President of the Company
since July 1986 and as Director of Marketing and Strategic Development since
January 1993. His responsibilities were expanded in June 1994 to include
entertainment as well as marketing. He served as Director of Marketing and
Development from October 1988 to January 1993. He served as Vice President from
October 1985 to July 1986, as Director of Marketing from October 1985 to October
1988, and as a director from July 1986 to September 1988. He joined the Company
in 1985.
LARRY G. PAGE has served as Executive Vice President, Chief Financial
Officer and Treasurer of the Company since October 1994. Prior to joining the
Company, Mr. Page served as Vice President and Regional General Manager in the
retail services division of Comdata Holdings Corporation, a publicly-held
financial services company, from July 1985 to October 1994. Mr. Page is a
Certified Public Accountant and was a partner in various national and regional
public accounting firms, including Arthur Andersen LLP, from August 1978 through
July 1985.
CHARLES A. CROCCO, JR. was elected as a director of the Company in
September 1988. He is a shareholder in the New York City law firm of Crocco &
DeMaio, P.C. He has served as a director of Hallwood, a merchant bank and
diversified holding company, since 1981, and as a director of BancTEXAS Group,
Inc., a publicly-held bank holding company, since April 1988.
ANTHONY J. GUMBINER was elected as a director of the Company in September
1988. He has served as a director and Chairman of the Board of Hallwood since
1981 and as Chief Executive Officer of Hallwood since 1984; as Chairman of
Hallwood Holdings S.A., a real estate investment company, since March 1984; as a
director of Hallwood Energy Corporation, a publicly-held oil and gas company
that is the general partner of Hallwood Energy Partners L.P., since May 1984 and
as Chairman of the Board and Chief Executive Officer since February 1987; as a
director and Chairman of the Board of Hallwood Realty Corporation, which is the
general partner of Hallwood Realty Partners L.P., a publicly traded master
limited partnership, since 1990; and as a director of Hallwood Consolidated
Resources Corporation, an oil and gas company, since May 1992. He is a Solicitor
of the Supreme Court of Judicature of England.
ROBERT L. LYNCH was elected as a director of the Company in September 1988.
He has served as a director and Vice Chairman of Hallwood since May 1984. He is
Chairman of the Board and Chief Executive Officer of Perpetual Storage, Inc. and
has served as a director of that company since 1969.
LOUIS P. NEEB was elected as a director of the Company in August 1994. From
August 1982 to present, Mr. Neeb has been President of Neeb Enterprises, Inc., a
management consulting firm specializing in restaurants. From October 1993
through January 1994, he was Chairman of the Board of Spaghetti Warehouse, Inc.,
a publicly-traded restaurant company. From July 1991 through January 1994, Mr.
Neeb was President and Chief Executive Officer of Spaghetti Warehouse, Inc. From
September 1989 through June 1991, Mr. Neeb was President and Chief Executive
Officer of GEEST USA (and its affiliates), a refrigerated food business. Mr.
Neeb has also had other extensive experience in the restaurant industry
including serving as Chairman of the Board of Burger King Corporation. Mr. Neeb
was instrumental in the development of Applebee's Neighborhood Grill and Bar as
well as Bennigan's. Mr. Neeb has also been a member of the Board
6
<PAGE> 10
of Directors of the Franchise Finance Corporation of America, a publicly-traded
real estate trust which provides real estate for restaurants, since August 1994.
CYNTHIA I. PHARR was elected as a director of the Company in August 1994.
She is currently President and Owner of C. Pharr & Company, a communications
management consulting firm. She has served in that position since March 1993.
From May 1989 through February 1993, Ms. Pharr was President and Chief Executive
Officer of Tracy -- Locke/Pharr PR, a public relations firm. From August 1986
through April 1989, she was President and owner of C. Pharr & Company, Inc. a
public relations agency. Ms. Pharr has served as a member of the Board of
Directors of Spaghetti Warehouse, Inc. since August 1991, as well as Chairman of
the Board of GuestCare, Inc., a privately held technology company, from February
1994 to present.
J. THOMAS TALBOT was elected as a director of the Company in September
1988. He served as Chairman of the Board and Chief Executive Officer of HAL,
Inc., Hawaiian Airlines, and West Maui Airport from August 1989 until July 1991.
Mr. Talbot founded Jet America Airlines, Inc., a commercial airline company, and
served as its Chairman from December 1980 until October 1986. He also has been
owner of The Talbot Company, a sole proprietorship, since 1982; a partner of
Shaw and Talbot, a commercial real estate investment and development company,
since April 1975; and a partner of Pacific Management Group, an asset management
firm, since December 1986. Mr. Talbot has served as a director of Hallwood since
1984; as a director of Alliance Bancorporation, a bank holding company, since
April 1988 and as Chairman and Chief Executive Officer of Alliance
Bancorporation from August 1992 until February 1994; as a director of Fidelity
National Financial since April 1991; as a director of Resort Income Investors
from June 1992 until October 1993; as a Director of The Baldwin Company and the
Koll Real Estate Group, Inc. since June 1993; and as a Director of Hemmeter
Enterprises, Inc. since October 1993.
BRIAN M. TROUP was elected as a director of the Company in September 1988.
He has served as a director of Hallwood since 1981 and as President and Chief
Operating Officer of Hallwood since April 1986; as a director of Hallwood
Holdings S.A. since March 1984; as a director of Hallwood Energy Corporation
since May 1984; as a director of Hallwood Realty Corporation since 1990 and as a
director of Hallwood Consolidated Resources Corporation since May 1992. He is an
associate of the Institute of Bankers in Scotland and a member of the Society of
Investment Analysts in the United Kingdom.
Except as set forth above, none of the directors of the Company hold
directorships in any company with a class of securities registered pursuant to
Section 12 of the Securities Exchange Act of 1934 (the "Exchange Act") or
subject to the requirements of Section 15(d) of the Exchange Act or any company
registered as an investment company under the Investment Company Act of 1940.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
Four regularly scheduled meetings of the Board of Directors were held
during 1994. Each of the directors attended at least 75% of the meetings held by
the Board of Directors, and by each committee on which he or she served, in
1994.
The Board of Directors has established an Executive Committee of four
members to assist the Board of Directors in carrying out its duties. The
Executive Committee (comprised of Messrs. Frank, Gumbiner, Magusiak and Troup)
acts in the place of the Board of Directors when the Board of Directors is not
in session and may exercise substantially all of the powers of the Board of
Directors other than those powers specifically required by law or by the
Company's Bylaws to be exercised by the full Board of Directors. The Executive
Committee held informal meetings in person or by telephone on an irregular basis
in 1994.
The Board of Directors has also established an Audit Committee of three
members. The Audit Committee is comprised of Messrs. Crocco, Talbot and Troup.
The functions performed by the Audit Committee are: (i) consideration of the
Company's system of internal controls, (ii) review of the performance and
findings of the Company's Internal Audit Department and (iii) review of services
provided by the Company's independent auditors. The Audit Committee met four
times in 1994.
7
<PAGE> 11
The Board of Directors has established a Compensation Committee of three
members. The Compensation Committee is comprised of Messrs. Frank, Gumbiner and
Troup. The functions performed by the Compensation Committee are the: (i)
recommendation of compensation, including performance bonuses, payable to the
Company's executive officers (excluding Mr. Frank), and (ii) recommendation of
performance bonuses for other employees of the Company. The Compensation
Committee met on one occasion in 1994.
In March 1992, the Board of Directors established a Stock Option Committee
and a Stock Grant Committee, each comprised of Messrs. Gumbiner and Troup, to
administer the 1988 Option Plan and the Company's Stock Grant Plan,
respectively. These committees took actions by various unanimous written
consents in 1994.
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid to the Chief Executive
Officer and to each of the other most highly paid executive officers of the
Company (the "Named Executive Officers") for the fiscal years ended January 1,
1993, December 31, 1993, and December 30, 1994 (designated herein as fiscal
years 1992, 1993 and 1994, respectively.)
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
---------------------------------------------- --------------------
RESTRICTED
OTHER ANNUAL STOCK
FISCAL COMPENSATION AWARDS OPTIONS
NAME (AND PRINCIPAL POSITION) YEAR SALARY ($) ($)(A) BONUS ($) ($)(B) (#)
- ------------------------------------------- ------- ---------- ------------ --------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Richard M. Frank........................... 1994 1,000,000 25,005 -- -- --
(Chief Executive Officer) 1993 987,692 24,791 -- 11,823,841 --
1992 360,000 21,441 2,978,516 -- --
Richard T. Huston.......................... 1994 145,000 12,602 -- -- 60,000
(Executive Vice President) 1993 144,827 12,016 -- -- 10,000
1992 139,808 11,933 69,648 -- 15,000
Michael H. Magusiak........................ 1994 193,096 12,467 -- -- 90,000
(President) 1993 144,827 11,676 -- -- 10,000
1992 139,423 11,564 50,839 -- 15,000
Larry G. Page(C)........................... 1994 31,250 11,578 -- 15,000
(Executive Vice President) 1993 -- -- -- --
1992 -- -- -- --
John T. Spaight(D)......................... 1994 250,000 21,644 -- -- 60,000
(Executive Vice President) 1993 250,000 17,676 -- -- 10,000
1992 248,077 16,908 115,357 -- 15,000
</TABLE>
- ---------------
(A) Includes car allowance of $15,600 per year for Mr. Frank and $9,000 per year
for Messrs. Huston, Magusiak, Page and Spaight. Relocation expense of
$9,293 is included for Mr. Page in 1994.
(B) Dollar values are calculated as the closing market price of Common Stock on
the date of grant minus par value of $.10 per share payable by the
recipient multiplied by the number of shares of restricted stock awarded.
All such stock is awarded under the Company's Stock Grant Plan. The
aggregate value of such restricted shares held by Mr. Frank on December 30,
1994 (based on 248,708 shares at a closing price of $7.765) is $1,906,347.
Dividends are payable on such restricted stock on the same terms as on
other shares of the Company's Common Stock.
(C) The amount indicated is Mr. Page's actual salary received during fiscal 1994
which is less than his annualized salary of $127,000 because his employment
with the Company did not commence until October 1994.
(D) Mr. Spaight was President of the Company until June 1994 at which time he
became Executive Vice President -- Operations. Mr. Spaight resigned his
position with the Company in January 1995.
8
<PAGE> 12
EMPLOYMENT AGREEMENTS
Each of Messrs. Frank and Magusiak has entered into an employment agreement
(individually, an "Employment Agreement" and together, the "Employment
Agreements") with the Company, both of which expire on December 31, 1997. Mr.
Frank's Employment Agreement provides that he is to be paid a base annual salary
of $1,000,000 per year, with such additional benefits and/or compensation as may
be determined by the Board of Directors. Pursuant to his Employment Agreement,
Mr. Frank was issued 414,508 restricted shares of the Company's Common Stock in
April 1993 under the Stock Grant Plan, of which 20,725 shares would vest at the
end of each fiscal quarter of the Company during the term of his Employment
Agreement, other than the last of such fiscal quarters at the end of which
20,733 shares vest. As of May 1, 1995, 181,525 of such shares have vested.
Effective March 31, 1995, Mr. Frank forfeited 60,000 of the unvested restricted
shares previously awarded to him, which forfeiture is applied in equal annual
increments of 20,000 shares, applied quarterly to the shares otherwise scheduled
to vest for that particular quarter. Mr. Magusiak's Employment Agreement
originally provided for an annual base salary of $145,000, which amount may be
increased in such amounts and on such dates as the Compensation Committee of the
Board of Directors may determine. In January 1994, Mr. Magusiak's annual base
salary was increased to $175,000. In September 1994, Mr. Magusiak's annual base
salary was increased to $240,000. In addition, the Board of Directors, in its
sole discretion, may provide other compensation and/or benefits to Messrs. Frank
and Magusiak.
Under the terms of the respective Employment Agreements, if the covered
executive's employment with the Company is terminated by the Company (other than
as a result of "permanent disability" (as defined in the Employment Agreement)
or, in the case of Mr. Magusiak, upon his death or for "Cause" (as defined in
his Employment Agreement")), Mr. Frank will be entitled to receive a severance
amount equal to $3,000,000 and Mr. Magusiak will be entitled receive a severance
amount equal to twice his then current annual base salary (together, the
"Severance Amounts"). In the event Mr. Magusiak is terminated for Cause, he
shall receive his base salary through the date on which the Board of Directors
takes its action to terminate him. In the event of his death, Mr. Magusiak shall
be entitled to receive his base salary through the date of his death.
The Employment Agreements also provide that each of Messrs. Frank and
Magusiak will receive his respective Severance Amount in the event there is a
Change of Control (as defined below) of the Company and the covered executive
voluntarily terminates his employment within one year after such a Change of
Control. A "Change of Control" is deemed to have occurred with respect to the
Company if: (i) any person or group of persons acting in concert (other than
Hallwood) or its affiliates in which the covered executive is not an investor,
partner, officer, director or member shall acquire, directly or indirectly, the
power to vote, or direct the voting of, more than 33% of the then outstanding
voting securities of the Company or (ii) during any consecutive 18 month period
a majority of the Board of Directors is elected or appointed and consists of
persons who were not directors of the Company as of the date of the respective
Employment Agreement and whose election or appointment as directors of the
Company is actively opposed by the covered executive.
9
<PAGE> 13
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding stock options granted
to each of the Named Executive Officers in the fiscal year ended December 30,
1994.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK
NUMBER OF % OF TOTAL PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM($)
OPTIONS GRANTED EMPLOYEES IN PRICE EXPIRATION -----------------
(#) FISCAL YEAR (SHARE)($) DATE 5% 10%
--------------- ------------ ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Richard M. Frank....... -- -- -- -- -- --
Richard T. Huston...... 60,000(A) 16.8% (A) (A) 186,624 410,228
Michael H. Magusiak.... 60,000(B) 16.8% (B) (B) 190,165 418,237
30,000(C) 8.4% 8.13 8-18-99 67,385 148,903
Larry G. Page.......... 15,000(D) 4.2% 7.94 10-3-99 32,905 72,712
John T. Spaight(E)..... 60,000 16.8% (E) (E) -- --
</TABLE>
- ---------------
(A) Options to acquire 39,000 of such shares at an exercise price of $13.75 per
share, which options expire on January 11, 1999, are exercisable as follows:
(i) 40% on January 11, 1996, (ii) 30% on January 11, 1997 and (iii) 30% on
January 11, 1998 and options to acquire the remaining 21,000 shares, which
options expire on January 4, 2000, were repriced in 1995 with an exercise
price of $8.50 per share and a vesting schedule of: (i) 50% on January 6,
1997 and (ii) 50% on January 6, 1998. See "Ten-Year Option Repricings" and
"Compensation Committee Report on Executive Compensation."
(B) Options to acquire 40,800 of such shares at an exercise price of $13.75 per
share, which options expire on January 11, 1999, are exercisable as follows:
(i) 40% on January 11, 1996, (ii) 30% on January 11, 1997 and (iii) 30% on
January 11, 1998 and options to acquire the remaining 19,200 shares, which
options expire on January 4, 2000, were repriced in 1995 with an exercise
price of $8.50 per share and a vesting schedule of: (i) 50% on January 6,
1997 and (ii) 50% on January 6, 1998. See "Ten-Year Option Repricings" and
"Compensation Committee Report on Executive Compensation."
(C) Options to acquire these shares become exercisable on August 19, 1996.
(D) Options to acquire these shares are exercisable as follows: (i) 50% on
October 4, 1996, (ii) 25% on October 4, 1997 and (iii) 25% on October 4,
1998.
(E) Mr. Spaight resigned from his position with the Company in January 1995 and,
as a result, all of his options were cancelled.
TEN-YEAR OPTION REPRICINGS
The following table sets forth information regarding the repricing of stock
options during the last ten completed fiscal years.
<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL
OPTION
NUMBER OF SECURITIES MARKET PRICE OF STOCK EXERCISE PRICE NEW TERM REMAINING
UNDERLYING OPTIONS AT TIME OF AT TIME OF EXERCISE AT DATE OF
NAME DATE REPRICED REPRICING REPRICING PRICE REPRICING
- ------------------------ ------- -------------------- --------------------- -------------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Richard T. Huston....... 1/11/94 10,000(A) $ 13.75 $33.50 $ 13.75 4 years
Michael H. Magusiak..... 1/11/94 10,000(A) 13.75 33.50 13.75 4 years
John T. Spaight......... 1/11/94 10,000(A) 13.75 33.50 13.75 4 years
</TABLE>
- ---------------
(A) These options were forfeited in connection with the granting on January 11,
1994 of options to acquire 60,000 shares of Common Stock at an exercise
price of $13.75 per share.
10
<PAGE> 14
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth, for each of the Named Executive Officers,
information regarding his exercise of stock options during the fiscal year ended
December 30, 1994 and the value of his unexercised stock options as of December
30, 1994. The closing price for the Company's Common Stock, as reported by the
Nasdaq National Market, on December 30, 1994 (the last trading day of the fiscal
year) was $7.675.
<TABLE>
<CAPTION>
SHARES NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-
ACQUIRED OPTIONS AT THE-MONEY OPTIONS AT
ON VALUE DECEMBER 30, 1994 DECEMBER 30, 1994
EXERCISE REALIZED (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)
(#) (D) (#) ($)
-------- -------- --------------------------- ---------------------------
<S> <C> <C> <C> <C>
Richard M. Frank (A)........ -- -- 0 --
Richard T. Huston........... 16,875 $110,194 15,000(E) 0(E)
60,000(U)(B) 0(U)
Michael H. Magusiak......... 18,000 $124,172 15,000(E) 0(E)
90,000(U)(B) 0(U)
Larry G. Page............... -- -- 0(E) 0(E)
15,000(U)(B) 0(U)
John T. Spaight (C)......... -- -- 15,000(E)(C) 0(E)
60,000(U)(B)(C) 0(U)
</TABLE>
- ---------------
(A) Does not include shares issued under the Stock Grant Plan. See "Summary
Compensation Table."
(B) See "Option Grants in Last Fiscal Year" table.
(C) Mr. Spaight resigned from his position with the Company in January 1995 and
all such options were cancelled pursuant to the 1988 Option Plan.
(D) Calculated as the closing price of common stock on the date of exercise
(minus the exercise price) multiplied by the number of shares acquired on
exercise.
(E) Options which are exercisable within 60 days of the date hereof.
(U) Options which are not exercisable within 60 days of the date hereof.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The executive compensation program of the Company is designed as a tool to
reinforce the Company's strategic principles -- to be a premier and progressive
growth company with an objective of enhancing long-term stockholder value. To
this end, the following principles have guided the development of the executive
compensation program:
- Provide competitive levels of compensation to attract and retain the best
qualified executive talent. The Compensation Committee strongly believes
that the caliber of the Company's management group makes a significant
difference in the Company's success over the long-term.
- Embrace a "pay-for-performance" philosophy by placing significant amounts
of compensation "at risk" -- that is, a significant component of the
compensation payouts to executives must vary according to the overall
performance of the Company.
- Directly link executives' interests with those of stockholders by
providing opportunities for long-term incentive compensation based on
changes in stockholder value.
The executive compensation program is intended to appropriately balance the
Company's short-term operating goals with its long-term strategy through a
careful mix of base salary, annual bonuses (payable upon satisfaction by the
Company of established revenue and profitability objectives) and long-term
performance compensation through the issuance of stock options under the 1988
Option Plan.
11
<PAGE> 15
The compensation of the executive officers of the Company (excluding Mr.
Frank) is reviewed and determined annually by the Compensation Committee. The
compensation of such executive officers in 1994 was based on individual and
corporate performances as well as assigned responsibilities. In establishing and
reviewing executive compensation, consideration is also given to executive
salary ranges of comparable companies. Individual performance is reflected in
the officer's salary. Corporate performance is reflected in a bonus, payable
annually if earned, to each officer, based on the achievement of targets for
corporate revenue and profitability. Although no bonus compensation was actually
paid to executive officers for services rendered in 1994, bonus compensation of
each of the executive officers in 1994 would have been between 22% and 47.5% of
the officer's salary at the 1994 target levels for revenue and profitability.
The Stock Grant Committee and the Stock Option Committee are made up of the
non-employee director members of the Compensation Committee. The Stock Grant
Committee and Stock Option Committee ratify and approve option and grant
recommendations, respectively, made by the Compensation Committee. No stock
grants were awarded in 1994. However, the Compensation Committee determined the
number of options to issue in accordance with the 1988 Option Plan based upon
base salary and levels of responsibility.
In January 1994, the Stock Option Committee issued to certain of the
executive officers of the Company options to acquire 180,000 shares of Common
Stock (each with an exercise price of $13.75 per share) in connection with the
surrender by such individuals to the Company of previously granted options to
acquire 30,000 shares of Common Stock (each with an exercise price of $33.50 per
share). The issuance of these new options was determined to be in the best
interests of the stockholders of the Company in order to properly incentivize
such individuals to enhance stockholder value.
CEO PERFORMANCE EVALUATION
Although Mr. Frank's salary is established by the terms of his Employment
Agreement (see "Employment Agreements"), the Compensation Committee, excluding
Mr. Frank, nevertheless annually evaluates his performance based on the same
criteria as are applied to the other executive officers of the Company. Any
future stock option issuances or restricted stock grants to Mr. Frank, and any
increase in his annual base salary or the granting of a bonus, will be based on
individual and corporate performance, applying similar factors for each as
described above for the Company's other executives. The Compensation Committee
would also consider the number of unvested shares available to Mr. Frank under
his Employment Agreement and the Stock Grant Plan at such time.
The Compensation Committee has also considered the potential impact of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
adopted under the Omnibus Budget Reconciliation Act of 1993. This section
disallows a tax deduction for any publicly-held corporation for individual
compensation to certain executives of such corporation exceeding $1,000,000 in
any taxable year, unless compensation is performance-based. As discussed above,
Mr. Frank's annual base salary is $1,000,000. It is the intent of the Company
and the Compensation Committee to qualify to the maximum extent possible its
executives' compensation for deductibility under applicable tax laws. The
Compensation Committee will continue to monitor the impact of such limitations
on tax deductions and will take other appropriate actions if warranted in the
future.
The Compensation Committee is comprised of Messrs. Frank, Gumbiner and
Troup. The Stock Option Committee and the Stock Grant Committee are both
comprised of Messrs. Gumbiner and Troup.
Richard M. Frank
Anthony J. Gumbiner
Brian M. Troup
12
<PAGE> 16
COMPENSATION OF DIRECTORS
Ms. Pharr and Messrs. Crocco, Lynch, Neeb and Talbot, who are not otherwise
employed by the Company or by Hallwood or its affiliates, receive a retainer
from the Company at the rate of $10,000 per year plus $750 for each meeting of
the Board of Directors attended. Other directors, who are either officers or
employees of the Company or employed by Hallwood or its affiliates, do not
receive separate compensation for their services as directors of the Company.
PROPOSAL 2:
INCREASE IN NUMBER OF SHARES AVAILABLE
UNDER 1988 OPTION PLAN
The 1988 Option Plan became effective in December 1988. The purpose of the
1988 Option Plan is to secure for the Company and its stockholders the benefits
of the incentives inherent in stock ownership by certain directors and key
employees of the Company and its subsidiaries. The 1988 Option Plan is currently
administered by the Stock Option Committee, which is comprised of Messrs.
Gumbiner and Troup, who are not employed by the Company and who are ineligible
to receive options under the 1988 Option Plan. The Stock Option Committee has
the power to determine, in its discretion but subject to the limitations set
forth in the 1988 Option Plan, the persons to whom options are granted, the
number of shares covered by options and the exercise price of options. The Stock
Option Committee also determines the conditions, if any, imposed upon the
granting of options under the 1988 Option Plan. To date, the Stock Option
Committee has issued options under the 1988 Option Plan to eligible directors
(who are not members of the Stock Option Committee) and eligible employees in
correlation with their respective responsibilities to the Company. However, see
"Proposal 3: Addition of Formula Stock Option Plan." The periods over which
ownership of such options vest in the optionees is based on the period over
which the Stock Option Committee deems such incremental vesting of ownership
appropriate in order to support the Company's long term strategic plans.
In March 1993, the Stock Option Committee adopted, subject to stockholder
approval, a proposal to increase the number of shares available for grant under
the 1988 Option Plan from 1,098,025 to 1,348,025. This amendment was approved by
the stockholders in June 1993.
As a result, the aggregate number of shares of the Common Stock which may
be issued pursuant to options granted under the 1988 Option Plan currently may
not exceed 1,348,025. Options granted under the 1988 Option Plan which expire or
terminate without being exercised may be regranted prior to termination of the
1988 Option Plan. The exercise price for an option granted under the 1988 Option
Plan may be not less than the fair market value of the Common Stock as of the
date of the grant. Options granted pursuant to the 1988 Option Plan are
exercisable no later than five years after the date of the grant.
The 1988 Option Plan terminates on December 31, 1998, and no option may be
granted after such date pursuant to the 1988 Option Plan. Options granted under
the 1988 Option Plan may not be exercised to any extent until the optionee has
been continuously employed by the Company or a subsidiary for a period of at
least one year after the date of grant. Payment for shares purchased pursuant to
an option must be made at the time of exercise either in cash or in other shares
of Common Stock.
Options granted pursuant to the 1988 Option Plan may not be transferred,
except upon death or pursuant to a qualified domestic relations order, and may
only be exercised by the optionee, or, in the event of his death, by his heirs
or estate. If an optionee who has been employed for more than one year ceases to
be employed by the Company or its subsidiaries through termination or
resignation, the optionee may exercise his option within ten business days
following such termination or resignation, after which period of time any
unexercised option terminates. Even though an optionee has not been employed for
one year, upon his death, the option may be exercised by the optionee's heirs or
estate within three months following the optionee's death, after which period of
time any unexercised option terminates.
The Stock Option Committee may amend, modify or terminate the 1988 Option
Plan, including modification or waiver of terms as they may apply to individual
optionees. In August 1994, the Stock Option
13
<PAGE> 17
Committee amended the 1988 Option Plan to address certain technical issues
affecting, among other things, the 1988 Option Plan's compliance with the
provisions of Rule 16b-3 promulgated under the Exchange Act. A copy of the 1988
Option Plan, as amended, is attached hereto as Exhibit A. No amendment,
modification or termination of the 1988 Option Plan may adversely affect the
rights of any optionee under any then outstanding option contract without the
consent of the optionee. The 1988 Option Plan provides for automatic adjustment
to prevent dilution or enlargement of the optionees' rights in the event of a
stock split, stock dividend or similar transaction.
Under the Code, the holder of an option granted under the 1988 Option Plan
will realize no taxable income upon the receipt of the option but will realize
compensation upon the exercise of such option, taxable as ordinary income to the
extent that the fair market value on the date of exercise exceeds the option
price. The Company is entitled to a deduction from income in an equal amount at
the time the optionee realizes such income. Upon a resale of shares acquired
pursuant to exercise of an option by an optionee, any difference between the
sale price and the fair market value of the shares on the date of exercise of
the option will be treated as capital gain or loss.
As of May 1, 1995, there were 112,502 shares available for grant under the
1988 Option Plan. As a result, in April 1995, the Stock Option Committee
adopted, subject to the approval of the Company's stockholders, an amendment to
the 1988 Option Plan providing that the number of shares of Common Stock which
may be issued under the 1988 Option Plan would be increased from 1,348,025 to
1,848,025.
The Board of Directors believes that the proposed amendment to the 1988
Option Plan will enable the Company and its stockholders, through future grants
of stock options, to continue to secure the benefits of the incentives inherent
in stock ownership by certain of its employees.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ABOVE
DESCRIBED AMENDMENT TO THE 1988 OPTION PLAN.
PROPOSAL 3:
ADDITION OF FORMULA STOCK OPTION PLAN
In April 1995, the Board of Directors adopted the Formula Stock Option
Plan, subject to the approval thereof by the Company's stockholders. Options to
purchase up to 100,000 shares of Common Stock may be granted under the Formula
Stock Option Plan. The Formula Stock Option Plan provides for the granting of
nonqualified stock options to non-employee directors of the Company or its
Affiliates (as defined in the Formula Stock Option Plan) (the "Non-employee
Directors"). The goal of the Formula Stock Option Plan is to provide a means of
retaining and attracting competent non-employee personnel to serve on the Board
of Directors by extending to such individuals added long-term incentives for
high levels of performance and for unusual efforts designed to improve the
financial performance of the Company. The Formula Stock Option Plan would be
administered by a committee comprised of the President and the Chief Financial
Officer of the Company. A copy of the Formula Stock Option Plan is attached
hereto as Exhibit B. The description of the Formula Stock Option Plan contained
herein is not intended to be complete and is qualified in its entirety by
reference to Exhibit B, which contains the complete text of the Formula Stock
Option Plan.
On the date the Formula Stock Option Plan is approved by the stockholders,
each of Messrs. Gumbiner and Troup will be granted an option to purchase 7,500
shares of Common Stock. Any newly elected director would also receive an option
for 7,500 shares upon election. Thereafter, on the fifth business day of each
successive January, each Non-employee Director shall be granted an option to
purchase 2,500 shares of Common Stock. The number of shares subject to such
options shall be adjusted as a result of various changes in the capitalization
of the Company. Fifty percent (50%) of the options granted under the Formula
Stock Option Plan shall vest on each of the second and third anniversaries of
the respective dates of grant.
The exercise price of options granted under the Formula Stock Option Plan
will be the average of the closing prices of the Common Stock as reported by the
Nasdaq National Market for the five trading-day period ending on and including
the date of grant. No option granted under the Formula Stock Option Plan will
14
<PAGE> 18
be transferable by the optionholder other than upon death or pursuant to a
qualified domestic relations order. Options may be granted until five years
following the date of adoption of the Formula Stock Option Plan. No option will
be exercisable after the expiration of five years from its date of grant.
Options granted under the Formula Stock Option Plan generally will become
exercisable as set forth above. Upon the termination of the directorship of an
optionholder for any reason other than death or on account of any act of fraud
or intentional misrepresentation or embezzlement, misappropriation or conversion
of assets or opportunities of the Company or any affiliate, an option (to the
extent otherwise exercisable on the date of such termination) will be
exercisable by the optionholder at any time prior to the expiration date of the
option or within thirty days after the date of such termination of the
directorship, whichever is the shorter period. If an optionholder dies while
serving as a member of the Board of Directors, the option will be exercisable
(whether or not exercisable on the date of the death of such optionholder) at
any time prior to the expiration date of the option or within ninety days after
the date of death, whichever is the shorter period. An option granted under the
Formula Stock Option Plan will automatically terminate as of the date the
optionholder's directorship is terminated, if the directorship is terminated on
account of any act of fraud or intentional misrepresentation, or embezzlement,
misappropriation or conversion of assets or opportunities of the Company or any
affiliate.
The Board of Directors may not amend any provision of the Formula Stock
Option Plan relating to the amount and price of the Common Stock subject to the
options granted thereunder or the timing of grants thereunder more than once
every six months, other than to comport with changes in the Code, and applicable
law. Any amendment to the Formula Stock Option Plan must be approved by the
stockholders of the Company if the amendment would: (i) materially increase the
aggregate number of shares of Common Stock which may be issued pursuant to
options granted under the Formula Stock Option Plan, (ii) materially modify the
requirements as to eligibility for participation in the Formula Stock Option
Plan, or (iii) materially increase the benefits accruing to holders of options
under the Formula Stock Option Plan.
A Non-employee Director who is granted an option under the Formula Stock
Option Plan will not be subject to federal income tax upon the grant of the
option, and the Company will not be entitled to a tax deduction by reason of
such grant. Subject to the following sentence, upon exercise of the option, the
excess of the fair market value of the shares acquired on the exercise date over
the exercise price will be considered compensation taxable as ordinary income to
the optionholder, and the Company may claim a tax deduction at that time equal
to the amount of taxable income realized by the optionholder, provided that
applicable federal income tax withholding and reporting requirements are
satisfied. If any profits associated with a sale of Common Stock acquired
pursuant to the exercise of an option under the Formula Stock Option Plan could
subject the optionholder to liability under the six-month provisions of Section
16(b) of the Exchange Act, there will be no concurrent federal income tax
consequences to either the optionholder or the Company as a result of the
exercise of such option. The inclusion of such profits as income to the
optionholder is generally deferred until the earlier of: (i) the six-month
period to which the preceding sentence refers, or (ii) the date on which the
Section 16(b) restrictions terminate. However, if the optionholder makes a
timely and proper election under Section 83(b) of the Code to be taxed at the
time shares of Common Stock are transferred to him or her, then the excess of
the fair market value of shares of Common Stock on the exercise date over the
exercise price will be taxed as ordinary income. Such election must be made
within thirty days from the date of exercise. In the absence of such an
election, the excess of the fair market value of shares of Common Stock on the
date the Section 16(b) restrictions expire (or, if earlier, the date on which
the six-month period referred to above expires) over the exercise price will be
considered compensation taxable as ordinary income to the optionholder. The
Company will be entitled to a tax deduction in an amount equal to the amount
required to be recognized as ordinary income by the optionholder at the time the
optionholder is subject to tax, provided that the applicable federal income tax
withholding and reporting requirements are satisfied.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE
FORMULA STOCK OPTION PLAN.
15
<PAGE> 19
INDEMNIFICATION
The bylaws of the Company provide for each director and officer of the
Company to be indemnified by the Company, as of right, to the full extent
permitted or authorized by the laws of the State of Kansas against any
liability, judgment, fine, amount paid in settlement, cost and expense asserted
or threatened against or incurred by such person in his capacity, or arising out
of his status, as a director or officer. The Company's Restated Articles of
Incorporation include a provision which eliminates director liability for
monetary damages for breach of the director's duty of due care, as permitted
under Kansas law.
COMPENSATION COMMITTEE AND BOARD OF DIRECTORS
INTERLOCKS AND INSIDER PARTICIPATION
Richard M. Frank, Anthony J. Gumbiner and Brian M. Troup served on the
Compensation Committee of the Board of Directors in 1994. The functions
performed by the Compensation Committee are the: (i) recommendation of
compensation, including performance bonuses, payable to the Company's executive
officers (excluding Mr. Frank) and (ii) recommendation of performance bonuses
for other employees of the Company. Mr. Frank is Chairman of the Board and Chief
Executive Officer of the Company. Mr. Gumbiner is Chairman of the Board and
Chief Executive Officer of Hallwood. Mr. Troup is President and Chief Operating
Officer of Hallwood. See "Principal Holders of Capital Stock" and "Certain
Relationships and Related Transactions." As discussed under the heading
"Committees and Meetings of the Board of Directors," the Stock Option Committee
and the Stock Grant Committee are both comprised of Messrs. Gumbiner and Troup.
The Board of Directors is responsible for approving any amendment to either
Mr. Frank's or Mr. Magusiak's employment agreement. See "Employment Agreements."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Board of Directors intends that transactions with officers, directors
and affiliates will be entered into on terms no less favorable to the Company
than could be obtained from unrelated third parties and will be approved by at
least a simple majority of the directors of the Company.
With the exception of directors Pharr and Neeb, each of the directors of
the Company who are not employees of the Company are also directors of Hallwood
and Integra. As of May 1, 1995, Hallwood owned all of the common stock of
Integra. See "Principal Holders of Capital Stock" and "Business History of
Executive Officers and Directors."
Effective January 1989, the Company agreed to pay to Hallwood $125,000 per
year, in consideration for financial and management consulting services being
rendered to the Company by Hallwood in the ordinary course of business. The
Company's agreement with Hallwood will continue at the discretion of the Board
of Directors for such time and in such amounts as may be authorized so as to
fairly compensate Hallwood for its services.
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 portion of the home office
building subleased to Integra, with a fair value of approximately $120,000 per
year.
16
<PAGE> 20
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative monthly total stockholder
return (change in share price plus reinvestment of any dividends) on the
Company's Common Stock since January 3, 1989 (the date the Company's Common
Stock first traded on the NASDAQ system), versus two indexes. The graph assumes
$100 was invested on January 3, 1989. The Company has not paid any cash
dividends on its Common Stock during the applicable period. The share price of
the Company's Common Stock has been adjusted for three-for-two stock splits in
the form of stock dividends distributed on March 26, 1991 and March 20, 1992.
The Company's Common Stock is labelled on the graph as "SHBZ." The index
labelled "Eating and drinking places," which was prepared by the Center for
Research in Securities Prices ("CRSP") at The University of Chicago, Graduate
School of Business, 1101 East 58th Street, Chicago, Illinois 60637 (telephone
312-702-7467) measures the total return (weighted for the market capitalization
of the component companies) on the approximately 144 domestic and foreign
companies which operate restaurants or other eating and drinking places (SIC
Code 58) and whose equity securities are traded on the NASDAQ National Market or
the NASDAQ Small-Cap Market. The identities of the companies included in the
"Eating and drinking places" index will be made available in a prompt manner to
any stockholder upon written request addressed to Investor Relations at the
Company's Irving address. The index labelled "NASDAQ," also prepared by CRSP,
measures the total return on the approximately 4,000 United States companies
whose common stock is traded on the NASDAQ National Market or the NASDAQ
Small-Cap Market.
[CRC GRAPH]
17
<PAGE> 21
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors and the persons who own more than ten percent
of the Company's Common Stock to file initial reports of ownership of Common
Stock and reports of changes of ownership with the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc. and to
furnish the Company with copies of such reports. Based on review of such copies
and other records of the Company, the Company has no reason to believe that any
reports were untimely filed or that any Form 5 filings were made by any
executive officers, directors or persons owning more than ten percent of the
Company's Common Stock.
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Deloitte & Touche LLP served as the Company's independent
public accountants for the fiscal year ending December 30, 1994. A
representative of Deloitte & Touche LLP is expected to be present and available
at the Annual Meeting of stockholders to respond to appropriate questions and
will be given an opportunity to make a statement, if desired.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any stockholder who wishes to present a proposal for action at the 1996
annual meeting of stockholders and who wishes to have it set forth in the proxy
statement and identified in the form of proxy prepared by the Company, must
deliver such proposal to the Company at its principal executive offices, no
later than January 8, 1996, in such form as is required under regulations
promulgated by the Securities and Exchange Commission.
MISCELLANEOUS
The accompanying proxy is being solicited on behalf of the Board of
Directors of the Company. The expense of preparing, printing and mailing the
proxy and the material used in the solicitation thereof will be borne by the
Company. In addition to the use of the mails, proxies may be solicited by
directors and regular officers and employees of the Company by means of personal
interview, telephone or telegram. Arrangements may also be made with brokerage
houses and other custodians, nominees and fiduciaries for the forwarding of
solicitation materials to the beneficial owners of stock held of record by such
persons, and the Company may reimburse them for reasonable out-of-pocket
expenses of such solicitation.
By Order of the Board of Directors,
ALICE WINTERS
Assistant Secretary
Irving, Texas
May 4, 1995
18
<PAGE> 22
EXHIBIT A
SHOWBIZ PIZZA TIME, INC.
NON-STATUTORY STOCK OPTION PLAN
SHOWBIZ PIZZA TIME, INC., a corporation organized and existing under the
laws of the State of Kansas (the "Company"), hereby formulates and adopts, with
respect to the shares of common stock of the Company ("Common Stock"), a
non-statutory stock option plan for certain individuals who are directors or key
employees of the Company or its subsidiaries, as follows:
1. Purpose of Plan. The purpose of this Non-Statutory Option Plan (the
"Plan") is to encourage certain individuals who are directors or key employees
to participate in the ownership of the Company, and to provide additional
incentive for such individuals to promote the success of its business through
sharing in the future growth of such business.
2. Effectiveness of Plan. The provisions of this Plan became effective on
December 30, 1988.
3. Administration. This Plan shall be administered by the Stock Option
Committee of the Board of Directors of the Company (the "Committee"), which
shall be comprised of two (2) or more directors, each of whom shall be
"disinterested persons," as defined in Rule 16b-3(c)(2)(i), promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Committee shall have full power and authority to construe, interpret and
administer the Plan, and may from time to time adopt such rules and regulations
for carrying out this Plan as it may deem proper and in the best interests of
the Company. Subject to the terms, provisions and conditions of the Plan, the
Committee shall have the authority to select the individuals to whom options
shall be granted, to determine the number of shares subject to each option, to
determine the time or times when options will be granted, to determine the
option price of the shares subject to each option, to determine the time when
each option may be exercised, to fix such other provisions of each option
agreement as the Committee may deem necessary or desirable, consistent with the
terms of this Plan, and to determine all other questions relating to the
administration of this Plan. The interpretation and construction of this Plan by
the Committee shall be final, conclusive and binding upon all persons.
4. Eligibility. Options to purchase shares of Common Stock shall be
granted under this Plan only to those individuals selected by the Committee from
time to time who, in the sole discretion of the Committee, are currently
directors or key employees and who have made material contributions in the past,
or who are expected to make material contributions in the future, to the
successful performance of the Company. Options shall not be granted to any
individual while he is a member of the Committee.
5. Shares Subject to the Plan. Options granted under this Plan shall be
granted solely with respect to shares of Common Stock. Subject to any
adjustments made pursuant to the provisions of Section 12, the aggregate number
of shares of Common Stock which may be issued upon exercise of all the options
which may be granted under this Plan shall not exceed 1,348,025. If any option
granted under this Plan shall expire or terminate for any reason without having
been exercised in full, the unpurchased shares subject to such option shall be
added to the number of shares otherwise available for options which may be
granted in accordance with the terms of this Plan. The shares to be delivered
upon exercise of the options granted under this Plan shall be made available, at
the discretion of the Committee, from either the authorized but unissued shares
of Common Stock or any treasury shares of Common Stock held by the Company.
6. Option Contract. Each option granted under this Plan shall be evidenced
by a non-statutory stock option contract which shall be signed by an officer of
the Company and by the individual to whom the option is granted (the
"optionee"). The terms of said contract shall be in accordance with the
provisions of this Plan, but it may include such other provisions as may be
approved by the Committee. The granting of an option under this Plan shall be
deemed to occur on the date on which the contract evidencing such option is
executed by the Company and the optionee, and every optionee, upon the execution
of a contract shall be bound by the terms and restrictions of this Plan and such
contract.
A-1
<PAGE> 23
7. Option Price. The price at which shares of Common Stock may be
purchased under an option granted pursuant to this Plan shall be determined by
the Committee, but in no event shall the price be less than 100 percent of the
fair market value of such shares on the date that the option is granted. The
fair market value of shares of Common Stock for purposes of this Plan shall be
determined by the Committee, in it sole discretion.
8. Period and Exercise of Option. (a) Period -- Subject to the provisions
of Sections 9 and 10 hereof with respect to the death or termination of
employment of an optionee, the period during which each option granted under
this Plan may be exercised shall be fixed by the Committee at the time such
option is granted, provided that such period shall expire no later than five (5)
years from the date on which the option is granted (the "Granting Date").
(b) Employment -- The Option may not be exercised to any extent until the
optionee has been continuously, for a period of at least one (1) year after the
Granting Date, employed by the Company or a subsidiary of the Company.
(c) Exercise -- Any Option granted under this Plan may be exercised by the
optionee only by delivering to the Company written notice of the number of
shares with respect to which he is exercising his option right, paying in full
the option price of the purchased shares, and furnishing to the Company a
representation in writing signed by the optionee that he is familiar with the
business and financial condition of the Company, is purchasing the shares of
stock in good faith for himself for investment purposes and not with a view
towards the sale or distribution thereof, and will not effect any sale in
violation of any laws or regulations of the United States or any state. Subject
to the limitations of this Plan and the terms and conditions of the respective
stock option contract, each option granted under this Plan shall be exercisable
in whole or in part at such time or times as the Committee may specify in such
stock option contract.
(d) Payment for shares -- Payment for shares of Common Stock purchased
pursuant to an option granted under this Plan may be made in either cash or in
shares of Common Stock.
(e) Delivery of certificates -- As soon as practicable after receipt by the
Company of the notice and representation described in Subsection (c), and of
payment in full of the option price for all of the shares being purchased
pursuant to an option granted under this Plan, a certificate or certificates
representing such shares of stock shall be registered in the name of the
optionee and shall be delivered to the optionee. However, no certificate for
fractional shares of stock shall be issued by the Company notwithstanding any
request therefor. Neither any optionee, nor the legal representative, legatee or
distributee of any optionee, shall be deemed to be a holder of any shares of
stock subject to an option granted under this Plan unless and until the
certificate or certificates for such shares have been issued. All stock
certificates issued upon the exercise of any options granted pursuant to this
Plan may bear such legend as the Committee shall deem appropriate regarding
restrictions upon the transfer or sale of the shares evidenced thereby.
(f) Withholding -- The Company shall have the right to deduct any sums that
the Committee reasonably determines that Federal, state or local tax law
requires to be withheld with respect to the exercise of any option or as
otherwise may be required by those laws. The Company may require as a condition
to issuing shares of Common Stock upon exercise of the option that the optionee
or other person exercising the option pay any sums that Federal, state or local
tax law requires to be withheld with respect to the exercise. The Company shall
not be obligated to advise any optionee of the existence of the tax or the
amount which the Company will be so required to withhold. Upon the exercise of
an option, if tax withholding is required, an optionee may, with the consent of
the Committee, have shares of Common Stock withheld ("Share Withholding") by the
Company from the shares otherwise to be received; provided, however, that if the
optionee is subject to the provisions of Section 16 under the Exchange Act, no
Share Withholding shall be permitted unless such transaction complies with the
requirements of Rule 16b-3(e) promulgated under the Exchange Act. The number of
shares so withheld should have an aggregate fair market value (as determined in
accordance with the terms of the Plan) on the date of exercise sufficient to
satisfy the applicable withholding taxes.
A-2
<PAGE> 24
9. Termination of Employment. If an optionee shall cease to be an employee
of the Company or subsidiary of the Company for any reason other than death
after he shall have served in such capacity continuously for at least one (1)
year from the Granting Date, he may, but only within ten (10) business days next
succeeding such cessation, exercise his option to the extent that he was
entitled to exercise it at the date of such cessation. Nothing in this Plan or
any stock option contract shall be construed as an obligation on the part of the
Company or of any of its subsidiary corporations to continue the optionee as an
employee.
10. Death of optionee. In the event of the death of an optionee while
serving as an employee of the Company or its subsidiary, any option or
unexercised portion thereof granted to him under this Plan which is otherwise
exercisable may be exercised by the person or persons to whom such optionee's
rights under the option pass by operation of the optionee's will or the laws of
descent and distribution, at any time within a period of three (3) months
following the death of the optionee (even though such period is later than the
expiration date of the option as specified in Section 8(a) and in the respective
stock option contract). Such option shall be exercisable even though the
optionee's death occurs before he has continuously served as an employee of the
Company or its subsidiary for a period of one (1) year after the date of grant.
11. Nontransferability of Options. Each option granted under this Plan
shall not be transferable or assignable by the optionee other than by will or
the laws of descent and distribution, or pursuant to a qualified domestic
relations order and during the lifetime of the optionee may otherwise be
exercised only by him.
12. Adjustments upon Changes in Capitalization. In the event of any change
in the capital structure of the Company, including but not limited to a change
resulting from a stock dividend, stock split, reorganization, merger,
consolidation, liquidation or any combination or exchange of shares, the number
of shares of Common Stock subject to this Plan and the number of such shares
subject to each option granted hereunder shall be correspondingly adjusted by
the Committee. The option price for which shares of Common Stock may be
purchased pursuant to an option granted under this Plan shall be adjusted so
that there will be no change in the aggregate purchase price payable upon the
exercise of any option. The provisions of this Section shall not apply to the
one-for-ten reverse stock split proposed for adoption at the 1988 annual meeting
of the stockholders of the Company.
13. Amendment and Termination of Plan. No option shall be granted pursuant
to this Plan after December 31, 1998, on which date this Plan shall expire
except as to options then outstanding under the Plan, which options shall remain
in effect until they have been exercised or have expired. The Committee may at
any time before such date amend, modify or terminate the Plan. No amendment,
modification or termination of this Plan may adversely affect the rights of any
optionee under any then outstanding option granted hereunder without the consent
of such optionee.
Termination of Old Option Contract and Grant of New Option Contract. An
option may be granted under this Plan which may be conditioned upon the
termination of a non-statutory stock option contract previously granted to the
optionee which has not yet been terminated or been exercised.
A-3
<PAGE> 25
EXHIBIT B
SHOWBIZ PIZZA TIME, INC.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
<PAGE> 26
SHOWBIZ PIZZA TIME, INC.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I -- PURPOSE AND ADMINISTRATION................................................. B-1
1.1 Purpose...................................................................... B-1
1.2 Administration............................................................... B-1
1.3 Participation................................................................ B-1
1.4 Stock Subject to the Plan.................................................... B-1
1.5 Restrictions on Exercise..................................................... B-1
ARTICLE II -- STOCK OPTIONS............................................................. B-1
2.1 Grant and Option Price....................................................... B-1
2.2 Stock Option Agreement....................................................... B-2
2.3 Option Period................................................................ B-2
2.4 Vesting and Exercise of Options.............................................. B-2
2.5 Non-Transferability of Options............................................... B-2
2.6 Termination of Directorship.................................................. B-2
2.7 Issuance of Stock Certificates............................................... B-3
ARTICLE III -- OTHER PROVISIONS......................................................... B-3
3.1 Adjustments Upon Changes in Capitalization................................... B-3
3.2 Continuation of Directorship................................................. B-3
3.3 Amendment and Termination.................................................... B-4
3.4 Time of Exercise............................................................. B-4
3.5 Privileges of Stock Ownership and Non-Distributive Intent.................... B-4
3.6 Effective Date of the Plan................................................... B-4
3.7 Expiration................................................................... B-4
3.8 Governing Law................................................................ B-4
3.9 Application of Funds......................................................... B-4
3.10 No Liability for Good Faith Determinations................................... B-4
3.11 Information Confidential..................................................... B-4
3.12 Execution of Receipts and Releases........................................... B-5
3.13 No Guarantee of Interests.................................................... B-5
3.14 Payment of Expenses.......................................................... B-5
3.15 Company Records.............................................................. B-5
3.16 Information.................................................................. B-5
3.17 No Liability of Company...................................................... B-5
3.18 Company Action............................................................... B-5
3.19 Severability................................................................. B-5
3.20 Notice....................................................................... B-5
3.21 Waiver of Notices............................................................ B-5
3.22 Successors................................................................... B-5
3.23 Headings..................................................................... B-5
3.24 Word Usage................................................................... B-5
</TABLE>
<PAGE> 27
SHOWBIZ PIZZA TIME, INC.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
ARTICLE I
PURPOSE AND ADMINISTRATION
1.1 Purpose. The purpose of the ShowBiz Pizza Time, Inc. Non-Employee
Directors Stock Option Plan (the "Plan") is to strengthen ShowBiz Pizza Time,
Inc. (the "Company") by providing a means of retaining and attracting competent
non-employee personnel to serve on its board of directors by extending such
individuals added long-term incentives for high levels of performance and for
unusual efforts designed to improve the financial performance of the Company. In
order to effectuate this intent, the Company will, pursuant to this Plan, grant
to each non-employee director the herein specified options to acquire shares of
common stock of the Company ("Common Stock"), which options shall vest over a
specified period of time.
1.2 Administration. The Plan shall be administered by a committee (the
"Committee") which shall be comprised of the President of the Company and the
Chief Financial Officer of the Company.
Subject to the express provisions of the Plan, the Committee shall have
powers and authorities which are exclusively ministerial in nature, including
the authority to construe and interpret the Plan, to define the terms used in
the Plan, to prescribe, amend and rescind rules and regulations relating to the
administration of the Plan, and to make all other determinations necessary or
advisable for the administration of the Plan. The determinations of the
Committee on all such matters referred to in this Plan shall be conclusive. No
member of the Committee shall be liable for any action, failure to act,
determination or interpretation made in good faith with respect to the Plan or
any transaction under the Plan.
1.3 Participation. Each member of the Board of Directors of the Company
(the "Board") who is not employed by the Company or any Affiliate (collectively,
the "Non-Employee Directors") shall be eligible and shall participate in the
Plan. For purposes of the Plan, the term "Affiliate" shall mean any entity in
which the Company directly or through intervening subsidiaries owns twenty-five
percent (25%) or more of the total combined voting power or value of all classes
of stock or, in the case of an unincorporated entity, a twenty-five percent
(25%) or more interest in the capital and profits.
1.4 Stock Subject to the Plan. Subject to adjustment as provided in
Section 3.1 hereof, the stock to be offered under the Plan shall be treasury
shares or shares of the Company's authorized but unissued Common Stock
(hereinafter collectively called "Stock"). The aggregate number of shares of
Stock to be issued upon exercise of all options granted under the Plan shall not
exceed 100,000 shares, subject to adjustments as set forth in Section 3.1
hereof. If any option granted hereunder shall lapse or terminate for any reason
without having been fully exercised, the shares subject thereto shall again be
available for purposes of the Plan.
1.5 Restrictions on Exercise. No option granted hereunder may be exercised
until a registration statement under the Securities Act of 1933, as amended (the
"Act"), relating to the Stock issuable upon exercise of such option has been
filed with, and declared effective by, the Securities and Exchange Commission
(the "Commission"), and there is available for delivery a prospectus meeting the
requirements of Section 10 of the Act, or until the Committee has determined
that the issuance of Stock upon such exercise is exempt from the registration
and prospectus requirements of the Act.
ARTICLE II
STOCK OPTIONS
2.1 Grant and Option Price. (a) On the effective date of this Plan,
Anthony J. Gumbiner and Brian M. Troup shall each be granted an option to
purchase 7,500 shares of Stock. Thereafter, on the day a Non-Employee Director
is first elected or appointed to the Board, such Non-Employee Director shall be
granted an option to purchase 7,500 shares of Stock.
B-1
<PAGE> 28
(b) On the fifth Business Day in January of the year following the
effective date of the Plan, each Non-Employee Director who was previously
elected to the Board and who continues to serve in such capacity at such time
shall be granted an option to purchase 2,500 shares of Stock. For purposes of
the Plan, the term "Business Day" shall mean a day on which the Nasdaq National
Market is open for business and is conducting normal trading activity.
(c) The purchase price of the Stock covered by each option granted under
the Plan shall be equal to the Fair Market Value of such Stock on the grant
date. For purposes of the Plan, the term "Fair Market Value" shall mean the
average of the closing prices of the Common Stock as reported by the Nasdaq
National Market for the five trading-day period ending on and including the date
of grant.
(d) The total grant under both paragraphs (a) and (b) above shall be
limited accordingly to the greatest number of whole shares of Stock which may
thus be granted thereunder.
2.2 Stock Option Agreement. Each option granted pursuant to the Plan shall
be evidenced by a Stock Option Agreement ("Option Agreement"), in such form as
the Committee shall require, between the Company and the Non-Employee Director
to whom the option has been granted (the "Optionee").
2.3 Option Period. Except as otherwise provided herein, each option and
all rights or obligations thereunder shall expire on the fifth anniversary of
the grant date (the "Expiration Date"), and shall be subject to earlier
termination as hereinafter provided.
2.4 Vesting and Exercise of Options. (a) Subject to Section 3.2 hereof, an
option granted pursuant to Sections 2.1(a) or (b) hereof shall be exercisable
only to the extent of shares that have vested in accordance with the following
schedule:
<TABLE>
<CAPTION>
PORTION OF SHARES
THAT ARE VESTED
ON AND AFTER
SUCH ANNIVERSARY
ANNUAL ANNIVERSARY AND BEFORE
OF DATE OF GRANT NEXT ANNIVERSARY
------------------ -----------------
<S> <C>
First................................................................ 0%
Second............................................................... 50%
Third................................................................ 100%
</TABLE>
(b) The purchase price of the Stock purchased upon exercise of an option
shall be paid in full in cash or by check at the time of each exercise of an
option; provided, however, that if the Option Agreement so provides and upon
receipt of all regulatory approvals, the person exercising the option may
deliver in payment of a portion or all of the purchase price certificates for
Common Stock of the Company, which shall be valued at the Fair Market Value of
such Stock on the date of exercise of the option.
2.5 Non-Transferability of Options. An option granted under the Plan
shall, by its terms, be non-transferable by the Optionee other than by will or
by the laws of descent and distribution or pursuant to a qualified domestics
relations order. During the Optionee's lifetime, the option shall be exercisable
only by the Optionee or by the Optionee's duly appointed guardian or personal
representative.
2.6 Termination of Directorship. (a) If the directorship of the Optionee
is terminated for any reason other than (i) death of the Optionee, or (ii) on
account of any act of fraud or intentional misrepresentation or embezzlement,
misappropriation or conversion of assets or opportunities of the Company or any
Affiliate, an option (to the extent otherwise exercisable on the date of such
termination) shall be exercisable by the Optionee at any time prior to the
Expiration Date of the option or within thirty (30) days after the date of such
termination of the directorship, whichever is the shorter period.
(b) If an Optionee dies while serving as a member of the Board, the option
shall be exercisable (whether or not exercisable on the date of the death of
such Optionee) by the person or persons entitled to do so under the Optionee's
will, or, if the Optionee shall fail to make testamentary disposition of said
option or shall die intestate, by the Optionee's legal representative or
representatives, at any time prior to the Expiration Date of the option or
within ninety (90) days after the date of such death, whichever is the shorter
period. If an
B-2
<PAGE> 29
Optionee dies during the thirty (30) day period described in subsection (a)
above, the option shall be exercisable (but only to the extent exercisable on
the date of death of such Optionee) by the person or persons described above at
any time within the thirty (30) day period described in subsection (a) above or
within ninety (90) days after the date of such death, whichever is the longer
period, but in no event after the Expiration Date of the option.
(c) The option of a Non-Employee Director shall automatically terminate as
of the date his or her directorship is terminated, if the directorship is
terminated on account of any act of (a) fraud or intentional misrepresentation,
or (b) embezzlement, misappropriation or conversion of assets or opportunities
of the Company or any Affiliate.
2.7 Issuance of Stock Certificates. Upon exercise of an option, but
subject to the provisions of Section 3.5 of the Plan, the person exercising the
option shall be entitled to one stock certificate evidencing the shares acquired
upon such exercise; provided, however, that any person who tenders Common Stock
in payment of a portion or all of the purchase price of Stock purchased upon
exercise of the option shall be entitled to receive a separate certificate
representing the number of shares purchased in consideration of the tender of
such Common Stock.
ARTICLE III
OTHER PROVISIONS
3.1 Adjustments Upon Changes in Capitalization. (a) If a dividend or stock
split shall be hereinafter declared upon the Common Stock of the Company payable
in shares of Common Stock of the Company, the number of shares of Common Stock
then subject to any such option and the number of shares reserved for issuance
pursuant to the Plan but not yet covered by an option shall be adjusted by
adding to each such share the number of shares which would be distributable
thereon if such share had been outstanding on the date fixed for determining the
stockholders entitled to receive such stock dividend or stock split.
(b) If the outstanding shares of the Common Stock of the Company shall be
changed into or exchanged for a different number or kind of shares of stock or
other securities of the Company or of another corporation, whether through
reorganization, recapitalization, stock split, combination of shares, merger or
consolidation, then there shall be substituted for each share of Stock subject
to any such option and for each share of Stock reserved for issuance pursuant to
the Plan but not yet covered by an option, the number and kind of shares of
stock or other securities into which each outstanding share of Common Stock
shall be so changed or for which each such share shall be exchanged.
(c) If there shall be any change, other than as specified above in
subsection (a) and (b), in the number or kind of outstanding shares of Common
Stock of the Company or of any stock or other securities into which Common Stock
shall have been changed or for which it shall have been exchanged, then if the
Committee shall in its sole discretion determine that such change equitably
requires an adjustment in the number or kind of shares theretofore reserved for
issuance pursuant to the Plan but not yet covered by an option and of the shares
then subject to an option or options, such adjustment shall be made by the
Committee and shall be effective and binding for all purposes of the Plan and of
each Option Agreement.
(d) In the case of any such substitution or adjustment as provided for in
this Section 3.1, the option price in each Option Agreement for each share
covered thereby prior to such substitution or adjustment will be the option
price for all shares of stock or other securities which shall have been
substituted for such share or to which such adjustment provided for in this
Section 3.1 shall be made. No adjustment or substitution provided for in this
Section 3.1 shall require the Company pursuant to any Option Agreement to sell a
fractional share, and the total substitution or adjustment with respect to each
Option Agreement shall be limited accordingly.
3.2 Continuation of Directorship. Nothing contained in this Plan (nor in
any option granted pursuant to this Plan) shall confer upon any Non-Employee
Director any right to continue as a member of the Board or constitute any
contract or agreement or interfere in any way with the right of the Company to
remove such
B-3
<PAGE> 30
Non-Employee Director from the Board. Nothing contained herein or in any Option
Agreement shall affect any other contractual rights of a Non-Employee Director.
3.3 Amendment and Termination. The Board may at any time suspend or
terminate the Plan. No option may be granted during any suspension of the Plan
or after such termination. The amendment, suspension or termination of the Plan
shall not, without the consent of the Optionee, alter or impair any rights or
obligations under any option theretofore granted under the Plan.
The Board may at any time amend the Plan as it shall deem advisable without
further action on the part of the stockholders of the Company, provided, that
the Board may not amend any provision of the Plan relating to the amount and
price of Stock subject to the options granted hereunder or the timing of grants
hereunder more than once every six months, other than to comport with changes in
the Internal Revenue Code of 1986, as amended, the Employee Retirement Income
Security Act, or the rules thereunder, and provided further, that any amendment
to the Plan must be approved by the stockholders of the Company if the amendment
would (a) materially increase the aggregate number of shares of Stock which may
be issued pursuant to options granted under the Plan, (b) materially modify the
requirements as to eligibility for participation in the Plan, or (c) materially
increase the benefits accruing to holders of options under the Plan.
3.4 Time of Exercise. An option shall be deemed to be exercised when the
Secretary of the Company receives written notice of such exercise from the
person entitled to exercise the option together with payment of the purchase
price made in accordance with Section 2.4 of the Plan.
3.5 Privileges of Stock Ownership and Non-Distributive Intent. The holder
of an option shall not be entitled to the privilege of stock ownership as to any
shares of Stock not actually issued and delivered to the holder. Subject to the
provisions of Section 1.5 above, upon exercise of an option for Stock at a time
when there is not in effect under the Act a registration statement relating to
the Stock issuable upon exercise thereof or not available for delivery a
prospectus meeting the requirements of Section 10 of the Act, the holder of the
option shall execute a stock purchase agreement in which he shall represent and
warrant in writing to the Company that, inter alia, the shares of Stock
purchased are being acquired for investment and not with a view to the resale or
distribution thereof. No shares of Stock shall be issued upon the exercise of
any option unless and until there shall have been compliance with any then
applicable requirements of the Commission, other regulatory agencies having
jurisdiction and any exchanges upon which securities subject to the option may
be listed.
3.6 Effective Date of the Plan. The Plan shall be effective upon approval
by the affirmative vote of the holders of a majority of the outstanding shares
of Common Stock and the Company's outstanding shares of preferred stock, voting
as one class, present and entitled to vote at a meeting duly held or by the
written consent of the holders of a majority of the Common Stock and the
Company's outstanding shares of preferred stock, voting as one class, entitled
to vote.
3.7 Expiration. Unless previously terminated or extended by the Board, the
Plan shall expire at the close of business on the date which is the last day of
the five (5) year period beginning on the date on which the stockholders approve
the Plan, and no option shall be granted under it thereafter, but such
expiration shall not affect any option theretofore granted.
3.8 Governing Law. The Plan and the options issued hereunder shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Texas applicable to contracts made and performed within that State.
3.9 Application of Funds. The proceeds received by the Company from the
sale of shares pursuant to options shall be used for general corporate purposes.
3.10 No Liability for Good Faith Determinations. Neither the members of
the Board nor any member of the Committee shall be liable for any act, omission
or determination taken or made in good faith with respect to the Plan or any
option granted under it.
3.11 Information Confidential. As partial consideration for the granting
of each option hereunder, the Optionee shall agree with the Company that he will
keep confidential all information and knowledge which he
B-4
<PAGE> 31
has relating to the manner and amount of his participation in the Plan;
provided, however, that such information may be given in confidence to the
Optionee's spouse or to a financial institution to the extent that such
information is necessary.
3.12 Execution of Receipts and Releases. Any payment or any issuance or
transfer of shares of Stock to the Optionee, or to his legal representative,
heir, legatee or distributee, in accordance with the provisions hereof, shall,
to the extent thereof, be in full satisfaction of all claims of such persons
hereunder. The Board may require any Optionee, legal representative, heir,
legatee or distributee, as a condition precedent to such payment, to execute a
release and receipt therefor in such form as it shall determine.
3.13 No Guarantee of Interests. Neither the Board nor the Company
guarantees the Stock from loss or depreciation.
3.14 Payment of Expenses. All expenses incident to the administration,
termination or protection of the Plan, including, but not limited to, legal and
accounting fees, shall be paid by the Company.
3.15 Company Records. Records of the Company and any Affiliate regarding
the Optionee's period of service, termination of service and the reason
therefor, leaves of absence, and other matters shall be conclusive for all
purposes hereunder, unless determined by the Board to be incorrect.
3.16 Information. The Company and any Affiliate shall, upon request or as
may be specifically required hereunder, furnish or cause to be furnished all of
the information or documentation which is necessary or required by the Committee
to perform its duties and functions under the Plan.
3.17 No Liability of Company. The Company assumes no obligation or
responsibility to the Optionee or his or her personal representatives, heirs,
legatees or distributees for any act of, or failure to act on the part of, the
Board or the Committee.
3.18 Company Action. Any action required of the Company shall be by
resolution of the Board or by a person authorized to act by Board resolution.
3.19 Severability. If any provision of this Plan shall be held to be
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining provisions hereof, but shall be fully severable and the Plan shall
be construed and enforced as if the illegal or invalid provision had never been
included herein.
3.20 Notice. Whenever any notice is required or permitted hereunder, such
notice must be in writing and personally delivered or sent by mail. Except as
otherwise provided in Section 3.4 of this Plan, any notice required or permitted
to be delivered hereunder shall be deemed to be delivered hereunder shall be
deemed to be delivered on the date on which it is personally delivered or,
whether actually received or not, on the third (3rd) business day after it is
deposited in the United States mail, certified or registered, postage prepaid,
addressed to the person who is to receive it at the address which such person
has theretofore specified by written notice delivered in accordance herewith.
The Company or an Optionee may change, at any time and from time to time, by
written notice to the other, the address which it or he had theretofore
specified for receiving notice. Until it is changed in accordance herewith, the
Company and each Optionee shall specify as its and his address for receiving
notice the address set forth in the Option Agreement pertaining to the shares to
which such notice relates.
3.21 Waiver of Notices. Any person entitled to notice hereunder may waive
such notice.
3.22 Successors. The Plan shall be binding upon the Optionee, his or her
heirs, legatees and legal representatives, upon the Company, its successors and
assigns and upon the Board and its successors.
3.23 Headings. The titles and headings of sections and paragraphs are
included for convenience of reference only and are not to be considered in
construction of the provisions hereof.
3.24 Word Usage. Words used in the masculine shall apply to the feminine
where applicable and, wherever the context of this Plan dictates, the plural
shall be read as the singular and the singular as the plural.
B-5
<PAGE> 32
PROXY
SHOWBIZ PIZZA TIME, INC.
4441 West Airport Freeway
Irving, Texas 75062
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Larry G. Page and Richard T. Huston, and
each of them as proxies, with full power of substitution and revocation, and
appoints them to represent and vote, as designated on the reverse side, all of
the shares of Common Stock or Preferred Stock of ShowBiz Pizza Time, Inc. which
the undersigned is entitled to vote at the annual meeting of stockholders of
ShowBiz Pizza Time, Inc. to be held on June 8, 1995, or at any adjournment
thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE /SEE REVERSE
SIDE/
<PAGE> 33
/X/ PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1,2 AND 3.
<TABLE>
<S> <C>
FOR AGAINST ABSTAIN
1. ELECTION OF DIRECTORS 2. Proposal to authorize an / / / / / /
NOMINIES: Richard M. Frank, Anthony J. Gumbiner increase in the number of
and Michael H. Magusiak shares available for
issuance pursuant to the
/ / FOR / / WITHHELD Company's current 1988
ALL FROM ALL Non-Statutory Stock Option
NOMINEES NOMINEES Plan.
FOR AGAINST ABSTAIN
MARK HERE / / 3. Proposal to adopt a Non- / / / / / /
FOR ADDRESS Employee Directors Stock
CHANGE AND Option Plan.
NOTE BELOW
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON
______________________________________ SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
For all nominees except as noted above
When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation,
please sign in full corporate name by president or other
authorized officer. If a partnership, please in partnership
name by authorized person.
Please sign exactly as name appears above. When shares Signature __________________________ Date _________________
are held by joint tenants, both should sign. (Please Signature __________________________ Date _________________
make any address corrections above.)
</TABLE>
