UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period
ended June 28, 1996.
- Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition
period from _____________ to _______________.
Commission File Number 0-15782
SHOWBIZ PIZZA TIME, INC.
(Exact name of registrant as specified in its charter)
Kansas 48-0905805
(State or other jurisdiction of(I.R. S. Employer
incorporation or organization)Identification No.)
P.O. Box 152077
4441 West Airport Freeway
Irving, Texas 75015
(Address of principal executive offices,
including zip code)
(214) 258-8507
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No -
At June 28, 1996, an aggregate of 18,353,006 shares of the
registrant's Common Stock, par value of $.10 each (being the
registrant's only class of common stock), were outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
ShowBiz Pizza Time, Inc.:
Page
Consolidated balance sheets as of June 28, 1996 (unaudited)
and December 29, 1995 . . . . . . . . . . . . . . . . . . 2
Consolidated statements of earnings for the three months ended
June 28, 1996 and June 30, 1995 (unaudited) . . . . . . . . 3
Consolidated statements of earnings for the six months ended June
28, 1996 and June 30, 1995 (unaudited). . . . . . . . . . . 4
Consolidated statement of shareholders' equity for the six months
ended June 28, 1996 (unaudited) . . . . . . . . . . . . . . . 5
Consolidated statements of cash flows for the six months ended
June 28, 1996 and June 30, 1995 (unaudited) . . . . . . . . . 6
Notes to consolidated financial statements . . . . . . . . . . . 7
page 1
SHOWBIZ PIZZA TIME, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 28, 1996 AND DECEMBER 29, 1995
(Thousands, except share data)
ASSETS
<TABLE>
June 28, December 29,
1996 1995
--------- -----------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . $10,006 $ 5,589
Accounts receivable, including receivables
from related parties of $522 and
$415, respectively. . . . . . . . . . . . . . . 2,567 3,327
Current portion of notes receivable,
including receivables from
related parties of $301 and $327,
respectively. . . . . . . . . . . . . . . . . . 510 608
Inventories . . . . . . . . . . . . . . . . . . . 3,808 3,589
Prepaid expenses. . . . . . . . . . . . . . . . . 3,148 2,781
Current portion of deferred tax asset . . . . . . 9,440 4,147
------ ------
Total current assets . . . . . . . . . . . . . 29,479 20,041
------ ------
Investments in related parties . . . . . . . . . . 823 761
------ ------
Property and equipment . . . . . . . . . . . . . . 146,282 137,181
------ ------
Deferred tax asset . . . . . . . . . . . . . . . . 19,196 28,582
------ ------
Other assets:
Notes receivable, less current
portion, including receivables from
related parties of $1,575 and $1,983,
respectively . . . . . . . . . . . . . . . . . 6,567 7,072
Deferred charges, less amortization . . . . . . . 2,186 2,599
Other . . . . . . . . . . . . . . . . . . . . . . 2,613 2,774
------ ------
11,366 12,445
------ ------
$ 207,146 $ 199,010
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 105 $ 95
Accounts payable and accrued liabilities 31,462 29,836
------ ------
Total current liabilities. . . . . . . . . . . 31,567 29,931
------ ------
Long-term debt, less current portion . . . . . . . 33,997 35,753
------ ------
Deferred credits . . . . . . . . . . . . . . . . . 3,663 3,443
------ ------
Other liabilities. . . . . . . . . . . . . . . . . 1,383 1,391
------ ------
Redeemable preferred stock, $60
par value, redeemable for
$2,974 in 2005. . . . . . . . . . . . . . . . . . 2,056 2,005
------ ------
Shareholders' equity:
Common stock, $.10 par value;
authorized 50,000,000 shares; 21,462,182
and 21,435,092 shares issued,
respectively . . . . . . . . . . . . . . . . . . . 2,146 2,143
Capital in excess of par value. . . . . . . . . . . . 153,326 153,516
Retained earnings . . . . . . . . . . . . . . . . . . 12,003 4,733
Deferred compensation (2,732) (3,642)
Less treasury shares of 3,109,176
at both dates, at cost . . . . . . . . . . . . . . (30,263) (30,263)
------- -------
134,480 126,487
------ ------
$207,146 $199,010
======== =======
</TABLE>
See notes to consolidated financial statements.
page 2
SHOWBIZ PIZZA TIME, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Thousands, except per share data)
<TABLE>
Three Months Ended
June 28, 1996 June 30, 1995
------------ ------------
<S> <C> <C>
Food and beverage revenues . . . . . . . . . . . .$ 47,845 $ 42,862
Games and merchandise revenues . . . . . . . . . . 20,867 18,773
Franchise fees and royalties . . . . . . . . . . . 827 807
Interest income, including related
party income
of $60 and $48 respectively 291 207
Joint venture income (loss). . . . . . . . . . . . 18 (6)
------ ------
69,848 62,643
------- ------
Costs and expenses:
Cost of sales . . . . . . . . . . . . . . . . . . 34,700 33,553
Selling, general and administrative
expenses, including related party
expenses of $32 in both periods. . . . . . . . 10,267 11,163
Depreciation and amortization . . . . . . . . . . 6,098 5,487
Interest expense 862 740
Loss on property transactions . . . . . . . . . 23 110
Other operating expenses. . . . . . . . . . . . . 14,058 13,553
------ ------
66,008 64,606
------ -------
Income (loss) before income taxes. . . . . . . . . 3,840 (1,963)
------ -------
Income taxes:
Current expense 312 137
Deferred (benefit) expense 1,263 (920)
------ ------
1,575 (783)
------ ------
Net income (loss) $ 2,265 $ (1,180)
====== ======
Earnings per common and common equivalent share:
Primary:
Net income (loss) . . . . . . . . . . . . . . . $ .12 $ (.07)
====== ======
Weighted average shares outstanding . . . . . . . 18,521 18,039
======= =======
Fully diluted:
Net income (loss) $ .12 $ (.07)
====== ======
Weighted average shares outstanding . . . . . . . 18,531 18,039
====== ======
</TABLE>
See notes to consolidated financial statements.
page 3
SHOWBIZ PIZZA TIME, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Thousands, except per share data)
<TABLE>
Six Months Ended
--------------------
June 28, 1996 June 30, 1995
------------- -------------
<S> <C> <C>
Food and beverage revenues 102,121 $ 92,728
Games and merchandise revenues . . . . 43,551 40,323
Franchise fees and royaltie. . . . . . 1,968 1,853
Interest income, including
related party income
of $126 and $97, respectively 547 436
Joint venture income . . . . . . . . . . 113 54
------ ------
148,300 135,394
------- ------
Costs and expenses:
Cost of sales . . . . . . . . . . . . 72,160 70,954
Selling, general and administrative
expenses, including related party
expenses of $63 in both periods . . 21,683 22,460
Depreciation and amortization . . . . 11,979 10,851
Interest expense 1,753 1,453
Loss on property transactions. . . . . 112 39
Other operating expenses. . . . . . . 28,002 27,334
------ -------
135,689 133,091
------ -------
Income before income taxes . . . . . . 12,611 2,303
------ ------
Income taxes:
Current expense 1,426 525
Deferred expense 3,745 393
------ ------
5,171 918
------ ------
Net income $ 7,440 $ 1,385
====== ======
Earnings per common and common equivalent share:
Primary:
Net income . . . . . . . . . . . . . $ .39 $ .07
====== ======
Weighted average shares outstanding . .18,458 18,141
====== ======
Fully diluted:
Net income . . . . . . . . . . . . . $ .39 $ .07
====== ======
Weighted average shares outstanding . .18,512 18,168
====== ======
</TABLE>
See notes to consolidated financial statements.
page 4
SHOWBIZ PIZZA TIME, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(Unaudited)
(Thousands, except per share data)
<TABLE>
<S><C> <C> <C> <C> <C> <C> <C>
Common Capital in Deferred Treasury
Stock Excess of Retained Compen- Stock
Shares Par Value Par Value Earnings sation Shares Cost
- ------- --------- --------- ------- -------- ------ ------
Balances, December 29, 1995---
21,435 $ 2,143 $ 153,516 $ 4,733 $ (3,642) 3,109 $(30,263)
Net income -- 7,440
Redeemable preferred stock accretion --
(51)
Redeemable preferred stock dividends,
$2.40 per share -- (119)
Stock options exercised ---
28 3 194
Tax expense from the exercise of stock
options and stock grants --
(349)
Stock split costs --
(19)
Cash redemption of fractional shares --
(1) (16)
Amortization of deferred compensation --
910
- ------ ------- ------- ------- ------- ---- -------
Balances, June 28, 1996 --
21,462 $2,146 $153,326 12,003 $(2,732) 3,109 $(30,263)
====== ====== ======== ====== ======== ===== ========
</TABLE>
See notes to consolidated financial statements.
page 5
SHOWBIZ PIZZA TIME, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Thousands)
<TABLE>
Six Months Ended
June 28, 1996 June 30, 1995
---------------- --------------
<S> <C> <C>
Operating activities:
Net income . . . . . . . . . . . . . . $ 7,440 $ 1,385
Adjustments to reconcile net
income to cash
provided by operations:
Depreciation and amortization. . . . . . 11,979 10,851
Deferred tax expense . . . . . . . . . . 3,745 393
Loss on property transactions. . . . . . 112 39
Compensation expense under stock
grant plan 910 910
Other. . . . . . . . . . . . . . . . . 220 260
Net change in receivables, inventory,
prepaids, payables and
accrued liabilities 1,802 3,075
------ ------
Cash provided by operations 26,208 16,913
------ ------
Investing activities:
Purchases of property and equipment. . . .(20,807) (11,866)
Additions to notes receivable (800) (2,046)
Payments received on notes receivable. . . 1,403 1,215
Change in investments, deferred
charges and other assets . . . . . . . . 81 (1,064)
------ ------
Cash used in investing activities (20,123) (13,761)
------ ------
Financing activities:
Payments on line of credit (1,700) (29,200)
Proceeds from debt and line of credit 28,400
Reduction of capital lease obligations . . (46) (28)
Exercise of stock options. . . . . . . . . . 197 69
Redeemable preferred stock dividends . . . . (119) (119)
Other. . . . . . . . . . . . . . . . . . . . 78
----- -----
Cash used in financing activities (1,668) (800)
----- -----
Increase in cash and cash equivalents . . . 4,417 2,352
Cash and cash equivalents, beginning
of period. . . . . . . . . . . . . . . . . 5,589 2,381
------ ------
Cash and cash equivalents, end of period $ 10,006 $ 4,733
====== ======
</TABLE>
See notes to consolidated financial statements.
Page 6
SHOWBIZ PIZZA TIME, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 28, 1996 AND JUNE 30, 1995
(Unaudited)
1. Interim financial statements:
In the opinion of management, the accompanying financial
statements for the periods ended June 28, 1996 and June 30, 1995
reflect all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the Company's financial
condition, results of operations and cash flows.
Certain information and footnote disclosures normally included
in the consolidated financial statements prepared in accordance
with generally accepted accounting principles have been omitted.
The unaudited consolidated financial statements referred to above
should be read in conjunction with the financial statements and
notes thereto included in the Company's Form 10-K filed with the
Securities and Exchange Commission for the year ended December 29,
1995. Results of operations for the periods ended June 28, 1996 and
June 30, 1995 are not necessarily indicative of the results for the
year.
2. Earnings per common and common equivalent share:
Earnings per common and common equivalent share were computed
based on the weighted average number of common and common
equivalent shares outstanding during the period. Net income
available per common share has been adjusted for the items
indicated below, and earnings per common and common equivalent
share (adjusted for a three for two stock split effected May 22, 1996)
were computed as follows (thousands, except per share data):
<TABLE>
Three Months Ended Six Months Ended
--------------- ----------------
June 28, June 30, June 28, June 30,
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income (loss). . . . . . $ 2,265 $(1,180) $ 7,440 $ 1,385
Accretion of redeemable
preferred stock. . . . . . (24) (27) (51) (52)
Redeemable preferred
stock dividends. . . . . . (59) (59) (119) (119)
----- ----- ----- -----
Adjusted income (loss) applicable to common
and common equivalent shares . . .
$ 2,182 $(1,266) $7,270 $1,214
====== ====== ====== ======
Primary:
Weighted average number of common shares
outstanding . . . . . 18,243 18,039 18,232 18,084
Common stock equivalents:
Stock purchase options. 278 226 57
----- ----- ----- -----
Weighted average number of shares
outstanding . . . . . . 18,521 18,039 18,458 18,141
====== ====== ====== ======
Earnings (loss) per common and common
equivalent share. . . $ .12 $ (.07) $ .39 $ .07
====== ====== ===== =====
Fully diluted:
Weighted average number of common shares
outstanding . . . . . 18,243 18,039 18,232 18,084
Common stock equivalents:
Stock purchase options. 288 280 84
----- ---- ---- ----
Weighted average number of shares
outstanding. . . . . . 18,531 18,039 18,512 18,168
===== ===== ===== =====
Earnings (loss) per common and common
equivalent share . . . $ .12 $ (.07) $ .39 $ .07
===== ===== ===== =====
</TABLE>
page 7
SHOWBIZ PIZZA TIME, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 28, 1996 AND JUNE 30, 1995
(Unaudited)
3. Significant transaction:
In August 1996, the Company's line of credit agreement was
amended to provide the Company with available borrowings of up to
$15 million and extended the maturity date to June 1998. As a
result of this amendment, the Company's credit facility totals $48
million, which consists of $33 million in term notes and the $15
million line of credit. Interest under the amended line of credit
is dependent on earnings and debt levels of the Company and ranges
from prime plus 0% to .5% or at the Company's option, LIBOR plus 2%
to 3%.Currently, any borrowings under this line of credit would be
at prime plus 0% or, at LIBOR plus 2%. No amount was outstanding
under the line of credit at June 28, 1996. The Company is required
to comply with certain financial ratio tests during the terms of
the loan agreements. These tests did not change significantly with
the recent amendment to increase the line of credit.
Page 8
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Second Quarter 1996 Compared to Second Quarter 1995
- ---------------------------------------------------
A summary of the results of operations of the Company as a
percentage of revenues for the two quarters is shown below.
<TABLE>
Three Months Ended
June 28, 1996 June 30, 1995
-------------- -------------
<S> <C> <C>
Revenue 100.0% 100.0%
------ ------
Costs and expenses:
Cost of sales 49.8 53.5
Selling, general and
administrative 14.7 17.8
Depreciation and amortization 8.7 8.8
Interest expense 1.2 1.2
Loss on property
transactions .2
Other operating expenses 20.1 21.6
------ -----
94.5 103.1
------ -----
Income (loss) before
income taxes 5.5 (3.1)
Income tax expense
(benefit) 2.3 (1.2)
----- -----
Net income (loss) 3.2% (1.9)%
===== =====
</TABLE>
Revenues
--------
Revenues increased to $69.8 million in the second quarter of
1996 from $62.6 million in the second quarter of 1995 primarily due
to an increase of 11.5% in comparable store sales of the Company's
Chuck E. Cheese's restaurants which were open during all of the
second quarters of both 1996 and 1995. Management believes that
several factors contributed to the comparable store sales increase
with the primary factor being sales increases at repositioned
stores. Menu prices increased approximately 3.2 between the
periods.
Costs and Expenses
--------------------
Costs and expenses as a percentage of revenues decreased to
94.5% in the second quarter of 1996 from 103.1% in the second
quarter of 1995.
Cost of sales decreased as a percentage of revenues to 49.8%
in the second quarter of 1996 from 53.5% in the comparable period
of 1995. Cost of food, beverage, prize and merchandise items as a
percentage of restaurant sales decreased to 17.7% in the second
quarter of 1996 from 18.4% in the second quarter of 1995 primarily
due to the increase in menu prices. Restaurant labor expenses as a
percentage of restaurant sales decreased to 29.2% during the second
quarter of 1996 from 32.1% in the second quarter of 1995 primarily
due to an increase in comparable store sales and more effective
utilization of hourly employees.
Selling, general and administrative expenses as a percentage
of revenues declined to 14.7% in the second quarter of 1996 from
17.8% in the comparable period of 1995 primarily due to comparable
store sales increases and a reduction in advertising costs between
the two periods.
Depreciation and amortization expenses as a percentage of
revenues decreased slightly to 8.7% in the second quarter of 1996
from 8.8% in the second quarter of 1995 primarily due to the
increase in comparable store sales.
page 9
Interest expense increased to approximately $862,000 in the
second quarter of 1996 from $740,000 in the second quarter of 1995
due primarily to increased borrowing since the second quarter of
1995.
The Company provided for a loss on property transactions of
approximately $23,000 in the second quarter of 1996 and $110,000 in
the second quarter of 1995 due to the replacement of assets arising
from the enhancement of facilities and entertainment packages of
restaurants.
Other operating expenses decreased as a percentage of revenues
to 20.1% in the second quarter of 1996 from 21.6% in the second
quarter of 1995 primarily due to the increase in comparable store
sales and the fact that a significant portion of operating costs
are fixed.
Net Income
----------
The Company had net income of $2.3 million in the second
quarter of 1996 compared to a loss of $1.2 million in the second
quarter of 1995 due to the changes in revenues and expenses
discussed above. The Company's primary and fully diluted earnings
per share was $.12 per share in the second quarter of 1996 compared
to a loss of $.07 per share in the second quarter of 1995.
First Six Months of 1996 Compared to First Six Months of 1995
- --------------------------------------------------------------
A summary of the results of operations of the Company as a
percentage of revenues for the first six months is shown below.
<TABLE>
Six Months Ended
June 28, 1996 June 30, 1995
------------ ------------
<S> <C> <C>
Revenue 100.0% 100.0%
------ -------
Costs and expenses:
Cost of sales 48.7 52.4
Selling, general and
administrative 14.6 16.6
Depreciation and
amortization 8.1 8.0
Interest expense 1.2 1.1
Loss on property
transactions .1
Other operating expenses 18.9 20.2
------ ------
91.6 98.3
------ ------
Income before income taxes 8.4 1.7
Income tax expense 3.5 .7
------ ------
Net income 4.9% 1.0%
====== ======
</TABLE>
Revenues
--------
Revenues increased to $148.3 million in the first six months
of 1996 from $135.4 million in the comparable period of 1995
primarily due to an increase of 9.4% in comparable store sales of
the Company's Chuck E. Cheese's restaurants which were open during
all of the first six months of both 1996 and 1995. Management
believes that several factors contributed to the comparable store
sales increase with the primary factor being sales increases at
repositioned stores. Menu prices increased approximately 3.1%
between the periods.
Costs and Expenses
-------------------
Costs and expenses as a percentage of revenues decreased to
91.5% in the first six months of 1996 from 98.3% in the first six
months of 1995.
Page 10
Cost of sales decreased as a percentage of revenues to 48.7 in
the first six months of 1996 from 52.4% in the comparable period of
1995. Cost of food, beverage, prize and merchandise items as a
percentage of restaurant sales decreased to 17.4% in the first six
months of 1996 from 18.2% in the comparable period of 1995
primarily due to the increase in menu prices. Restaurant labor
expense as as a percentage of restaurant sales decreased to 28.5%
during the first six months of 1996 from 31.2% in the first six
months of 1995 primarily due to an increase in comparable store
sales and more effective utilization of hourly employees.
Selling, general and administrative expenses as a percentage
of revenues declined to 14.6% in the first six months of 1996 from
16.6% in the comparable period of 1995 primarily due to comparable
store sales increases and a reduction in advertising costs between
the two periods.
Depreciation and amortization expenses as a percentage of
revenues increased slightly to 8.1% in the first six months of 1996
from 8.0% in the first six months of 1995 primarily due to
increased capital expenditures related to the repositioning of
restaurants.
Interest expense increased to approximately $1.8 million in
the first six months of 1996 from $1.5 million in the first six
months of 1995 due primarily to increased borrowing since the
second quarter of 1995.
The Company had a loss on property transactions of $112,000 in
the first six months of 1996 and $139,000 in 1995 due to the
replacement of assets arising from the enhancement of facilities
and entertainment packages of restaurants. The loss in 1995 was
partially offset by a net gain of $100,000 from the sale of certain
assets which had been held for resale.
Other operating expenses decreased as a percentage of revenues
to 18.9% in the first six months of 1996 from 20.2% in the
comparable period of 1995 primarily due to the increase in
comparable store sales and the fact that a significant portion of
operating costs are fixed.
Net Income
----------
The Company had net income of $7.4 million in the first six
months of 1996 compared to $1.4 million in the first six months of
1995 due to the changes in revenues and expenses discussed above.
The Company's primary and fully diluted earnings per share was $.39
per share in the first six months of 1996 compared to $.07 per
share in the first six months of 1995.
Financial Condition, Liquidity and Capital Resources
- ----------------------------------------------------
Cash provided by operations increased to $26.2 million in the
first six months of 1996 from $16.9 million in the comparable
period of 1995. Cash outflows from investing and financing
activities for the first six months of 1996 were $20.1 million and
$1.7 million, respectively. The Company's primary requirements for
cash relate to planned capital expenditures and debt service. The
Company expects that it will satisfy such requirements from cash
provided by operations and funds available under its loan
agreements.
In August 1996, the Company increased its line of credit to $15
million from $5 million and extended the maturity date to June 1998
from June 1997. Interest under the amended line of credit is
dependant on earnings and debt levels of the Company and ranges
from prime plus 0% to .5% or, at the option of the Company, LIBOR
plus 2% to 3%. Currently, any borrowings under this line of credit
would be at prime plus 0% or at LIBOR plus 2%. No amount was
outstanding under the line of credit at June 28, 1996. The
Company's total credit facility of $48 million now consists of $33
million in term notes and the $15 million line of credit. The
credit facility includes term notes totaling $18 million with
annual interest of 10.02% maturing in 2001, term notes totaling $10
million with annual interest equal to the London Interbank Offered
Rate ("LIBOR") plus 3.5% maturing in 2000 and term notes of $5
million with annual interest equal to LIBOR plus 3.5% maturing in
1997. The Company is required to comply with certain financial
ratio tests during the terms of the loan agreements. These tests
did not change significantly with the recent amendment to increase
the line of credit.
page 11
The Company believes that the success of its facility and
entertainment enhancement program in addition to new restaurant
development will continue to be significant factors in its ability
to generate increased revenues over the foreseeable future. The
Company continues to evolve and expand its efforts to significantly
enhance its Chuck E. Cheese's locations. This "repositioning"
program is being carried out on a market by market basis and
involves: an improved exterior identity, a facility upgrade, an
expanded free ball-crawl with tubes and tunnels suspended from or
reaching to the ceiling, and an enhancement of the variety and
number of games and rides offered to its guests. The Company
completed 21 and 76 restaurants under this program in 1994 and
1995, respectively, and completed an additional 58 restaurants
during the first six months of 1996. The Company currently plans
to reposition substantially all Company-operated restaurants by the
end of 1996. The Company anticipates that the repositioning of the
remaining restaurants will cost on the average approximately
$325,000 per restaurant. However, this amount can vary
significantly at a particular restaurant depending on the several
factors, including the restaurant's square footage, date of the
most recent remodel and the existing assets at the restaurant. In
the event certain site characteristics considered essential to the
success of a restaurant deteriorate, the Company will consider
closing the restaurant or relocating the restaurant to a more
desirable site.
In August 1996, the Company signed a letter of intent to
purchase all of the Chuck E. Cheese's restaurants owned by its
largest franchisee, McBiz Corporation ("McBiz"). Under the terms
of the proposed transaction, the Company would purchase 19
restaurants operated by McBiz plus the 49% minority interest of one
restaurant presently operated as a joint venture by the two
companies. In addition to the cash purchase price of $2.6 million,
the Company would reimburse McBiz for remodeling costs for three
restaurants which have been recently remodeled or are in progress.
The transaction is structured as an asset purchase with the Company
assuming no liabilities and is contingent on several factors
including renegotiated leases. The transaction is estimated to be
completed in September 1996.
The Company has implemented several strategies, including its
"repositioning" program, to strengthen the sales vitality of its
existing unit base in what management believes is a competitive
market. At June 28, 1996, approximately 69% of all Company-
operated restaurants have been repositioned. As a result of its
strategies, comparable store sales increased 2.3%, 7.7% and 11.5%
in the fourth quarter of 1995 and the first and second quarter of
1996, respectively.
The Company believes it will realize substantial benefit from
utilization of approximately $54 million in net operating loss
carryforwards to reduce its federal income tax liability. Such net
operating loss carryforwards expire from years 1999 through 2002.
Although the use of such carryforwards could, under certain
circumstances, be limited, the Company is presently unaware of the
occurrence of any event which would result in the imposition of
such limitation. The Company has adopted an amendment to its
Restated Articles of Incorporation which is intended to prevent
changes in ownership of its common stock that would cause such
limitation. In addition, the Company has investment tax credit,
job tax credit and alternative minimum tax credit carryforwards of
approximately $7 million of which $5.8 million expires from years
1997 through 2008. Tax credit carryforwards can be utilized by the
Company only after all net operating loss carryforwards have been
realized. If the improvement in the Company's results of operations
does not continue, a portion of the net operating loss and tax
credit carryforwards could expire prior to utilization resulting in
a charge against income. Taxable income for the five years ending
December 29, 1995 was approximately $48 million. Based on the
results of the repositioned restaurants and the Company's current
plans to reposition substantially all of its Company-operated
restaurants by the end of 1996, the Company currently projects
future taxable income levels sufficient to realize its net
operating loss and tax credit carryforwards prior to their
expiration after considering an allowance of $1.1 million for the
estimated expiration of tax credit carryforwards in 1997.
page 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
There are no legal proceedings against the Company which have
arisen in the ordinary couse of its business or otherwise, which
the Company believes are material in amount.
Item 2. Changes in Securities.
None to report during quarter for which this report is filed.
Item 3. Defaults Upon Senior Securities.
None to report during quarter for which this report is filed.
Item 4. Submission of Matters to a Vote of Security Holders
On June 20, 1996, at the Company's annual meeting of
shareholders, the Company's shareholders re-elected Charles A.
Crocco, Jr., Robert L. Lynch, and Cynthia I. Pharr to serve the
Company as directors. The following votes were cast with respect
to the election of these directors:
For Withheld
Charles A. Crocco, Jr. 10,352,575 886,169
Robert L. Lynch 10,351,754 886,990
Cynthia I. Pharr 10,590,037 648,707
Richard M. Frank, Anthony J. Gumbiner, Brian M. Troup, Michael
H. Magusiak, Louis P. Neeb, and J. Thomas Talbot terms of office as
directors of the Company continued after the meeting.
The shareholders also approved amendments to the Employee and
Non-Employee Directors Stock Option Plans, and the Stock Grant Plan
providing that (1) individuals who are granted options under the
Stock Option Plans must sign and return their option contracts to
the Company prior to the expiration of 120 days after the date such
options are granted or the option will be void and of no further
force or effect, and (2) in the event a "Change of Control" (as
defined in the amendments) with respect to the Company occurs, then
the options outstanding under the Employee Plan or Directors Plan
that are not otherwise exercisable and the shares awarded under the
Grant Plan that are not vested shall be exercisable and vested,
respectively, even though certain conditions otherwise provided in
the Plans, option contracts or awards have not been satisfied at
the time of the "Change of Control." The votes cast with respect
to the proposal to authorize amendments to the Employee and Non-Employee
Directors Stock Option Plans, and the Stock Grant Plan
were as follows:
For Against Abstain Non Vote
9,978,982 1,149,031 62,281 48,450
The shareholders also approved an amendment to the Restated
Articles of Incorporation to increase the authorized number of
shares of its Common Stock from 30,000,000 shares to 50,000,000
shares. The votes cast with respect to the proposal to authorize
an amendment to the Restated Articles of Incorporation were as
follows:
For Against Abstain Non Vote
8,953,979 2,180,756 55,559 48,450
page 13
Item 5. Other Information.
None to report during quarter for which this report is filed.
Item 6. Exhibits and Reports on Form 8-K.
EXHIBIT INDEX
a) Exhibits
Exhibit
Number Description
------- ---------
3 (a) -- Restated Articles of
Incorporation of the
Company, as amended to
date.
10 (a) -- Non-Statutory Stock
Option Plan of the
Company, as amended to
date.
10 (b) -- Non-employee Directors
Stock Option Plan of the
Company, as amended to
date.
10 (c) -- Stock Grant Plan of the
Company, as amended to
date.
10 (d) -- Specimen form of
Contract under the Non-
Statutory Stock Option
Plan of the Company, as
amended to date.
10 (e)(1) -- Loan Agreement in the
stated amount of
$2,000,000.00, between
Bank One, Texas N.A. and
the Company.
10 (e)(2) -- Promissory Note in the
stated amount of
$2,000,000.00, between
Bank One, Texas N.A. and
the Company.
10 (e)(3) -- Security Agreement in
the stated amount of
$2,000,000.00, between
Bank One, Texas N.A. and
the Company.
10 (f) -- Specimen form of the
Company's current
Franchise Agreement, as
amended to date.
10 (g) -- Specimen form of the
Company's current
Development Agreement,
as amended to date.
(b) Reports on Form 8-K
None filed during the quarter for which this report is
filed.
Page 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
SHOWBIZ PIZZA TIME, INC.
Dated: August 9, 1996 By:/s/ Larry G. Page
-----------------------
Larry G. Page
Executive Vice President
and Chief Financial Officer
page 15
EXHIBIT INDEX
=============
Exhibit
Number Description
------- -----------
3 (a) Restated Articles of Incorporation of the
Company, as amended to date.
10 (a) Non-Statutory Stock Option Plan of the
Company, as amended to date.
10 (b) Non-employee Directors Stock Option Plan
of the Company, as amended to date.
10 (c) Stock Grant Plan of the Company, as
amended to date.
10 (d) Specimen form of Contract under the
Non-Statutory Stock Option Plan of the
Company, as amended to date.
10 (e)(1) Loan Agreement in the stated amount of
$2,000,000.00, between Bank One,
Texas N.A. and the Company.
10 (e)(2) Promissory Note in the stated amount of
$2,000,000.00, between Bank One, Texas N.A.
and the Company.
10 (e)(3) Security Agreement in the stated amount of
$2,000,000.00, between Bank One, Texas N.A.
and the Company.
10 (f) Specimen form of the Company's current
Franchise Agreement, as amended to date.
10 (g) Specimen form of the Company's current
Development Agreement, as amended to date.
27 Financial Data Schedule
RESTATED ARTICLES OF INCORPORATION
OF
SHOWBIZ PIZZA TIME INC. / Exhibit 3(a)
------------
The undersigned, ShowBiz Pizza Time, Inc., a Kansas
corporation originally incorporated on April 30, 1980 as ShowBiz
Pizza Place, Inc., for the purpose of amending and restating its
Articles of Incorporation in accordance with the Kansas General
Corporation Code, does hereby make and execute these Restated
Articles of Incorporation of ShowBiz Pizza Time, Inc., and does
hereby certify (i) that such Restated Articles of Incorporation
only restate and integrate and do not further amend the provisions
of the corporation's Articles of Incorporation, as heretofore
amended or supplemented, and that there is no discrepancy between
those provisions and the provisions of the Restated Articles of
Incorporation, and (ii) that such Restated Articles of
Incorporation were duly adopted by the directors in accordance with
the provisions of K.S.A. 17-6605.
FIRST. The name of the corporation is:
ShowBiz Pizza Time, Inc.
SECOND. The address of its registered office in the State of
Kansas is First National Bank Building, c/o The Corporation
Company, Inc., Topeka, Shawnee County, Kansas 66603. The name of
its registered agent at such address is The Corporation Company,
Inc.
THIRD. The nature of the business or objects or purposes to
be conducted, transacted, promoted or carried on by the corporation
is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Code of the State of
Kansas.
In addition to the powers and privileges conferred upon the
corporation by law and those incidental thereto, the corporation
shall possess and may exercise all the powers and privileges which
are necessary or convenient to the conduct, promotion or attainment
of the business, objects or purposes of the corporation.
FOURTH. The total number of shares of stock that the
corporation shall have authority to issue is Fifty Million Five
Hundred Forty-Nine Thousand Five Hundred Ninety-Three (50,549,593)
shares, which shall be divided into three (3) classes as follows:
(a) Forty-Nine Thousand Five Hundred Ninety-Three (49,593), share;
of Class A Preferred Stock, of the par value of Sixty Dollars
($60.00) each (hereinafter "Preferred A Shares"), (b) Five Hundred
Thousand (500,000) shares of Class B Preferred Stock, of the par
value of one Hundred Dollars ($100.00) each (hereinafter "Preferred
B Shares"), and (c) Fifty Million (50,000,000) shares of Common
Stock, of the par value of One Dollar, ($1.00) each (hereinafter
"Common Shares"). The designations, powers, preferences, and
rights of each class, and the qualifications, limitations, or
restrictions thereof, shall be as set forth in this ARTICLE FOURTH.
Section 4.1. Dividends.
----------- ----------
4.1.1. Dividend Rate on Preferred A Shares. The
holders of Preferred A Shares shall be entitled to receive, when,
as, and if declared by the Board of Directors of the corporation to
the extent and out of funds legally available for the payment of
dividends, cash dividends at the rate of (a) Ninety Cents ($0.90)
per share per quarter for each of the eight full fiscal quarters of
the corporation following the Preferred Dividend Commencement Date
(as defined in subsection 4.1.2 hereof), and (b) One Dollar and
Twenty Cents ($1.20) per share per quarter for each full fiscal
quarter thereafter.
4.1.2. Preferred Dividend Commencement Date. The
Preferred Dividend Commencement Date shall be the first day of the
fifth full fiscal quarter of the corporation beginning after the
first issuance of Preferred A Shares (which date for reference
purposes is May 21, 1985).
4.1.3. Accrual and Cumulation of Preferred Dividends.
Dividends on the Preferred A Shares shall (a) accrue at the rates
set forth in subsection 4.1.1 hereof, whether or not earned or
declared; (b) be payable before any dividends (other than a
dividend payable solely in Common Shares or Preferred B Shares) on
Common Shares or Preferred B Shares are paid, declared, or set
aside for, payment; and (c) be cumulative, so that if dividends
accrued under this Section on the outstanding Preferred A Shares
have not been paid or set aside for payment, for any fiscal quarter
or quarters, the amount of the deficiency shall first be declared
and fully paid or set aside for payment, but without interest,
before any distribution, by dividend or otherwise (other than a
distribution solely in Common Shares or Preferred B Shares) is
declared, paid, or set aside for payment on the Common Shares or
Preferred B Shares. Unless otherwise declared by the Board of
Directors, no dividends shall accrue or cumulate on the Preferred
A Shares before the Preferred Dividend Commencement Date.
4.1.4. Restriction on Dividends on Other Stock. The
corporation shall not declare, pay, or set aside for payment any
dividend or other distribution with respect to the Common Shares or
Preferred B Shares (other than a distribution solely in Common
Shares or Preferred B Shares)
(a) until after the first dividend required to be paid on the
Preferred A Shares pursuant to subsection 4.1.1 hereof has been
declared and paid or set aside for payment; and (b) unless an
amount equal to all dividends on the Preferred A Shares required to
be paid under this Section, including an unpaid cumulated
dividends, has been declared and paid or set aside for payment.
4.1.5. Definition of "Set Aside for Payment". For the
purpose of this ARTICLE FOURTH, a dividend or other distribution to
the holders of the Preferred A Shares shall be deemed to have been
"set aside for payment" if and only if funds sufficient for the
payment in full of such dividend or distribution have been
deposited with a bank or trust company in the States of Texas, New
York, or California, as a trust fund, with irrevocable instructions
and authority to the bank or trust company to pay said amounts to
the holders of the Preferred A Shares on the date for payment
thereof and to pay to the corporation all interest and other income
earned with respect to such amounts so deposited.
4.1.6. Record Date: Payment Date. With respect to
each fiscal quarter of the corporation for which the holders of the
Preferred A Shares are entitled to receive a dividend and for which
the Board of Directors of the corporation has declared a dividend
on the Preferred A Shares ('Dividend Quarter"), such dividend shall
be payable to the holders of record of Preferred A Shares on the
last day of the Dividend Quarter and shall be paid no later than 90
days after the last day of the Dividend Quarter (the "Preferred
Dividend Payment Date").
4.1.7. Dividends on Common Shares. Subject to all the
provisions hereof and of any resolution or resolutions (the
"Preferred B Resolutions") of the Board of Directors of this
corporation providing for the issuance of any series of Preferred
B Shares, and further subject to the prior rights and privileges of
the holders of Preferred A Shares and Preferred B Shares, the
holders of Common Shares shall be entitled to receive dividends
when, as, and if declared by the Board of Directors of the
corporation, to the extent and out of funds legally available for
the payment of dividends.
Section 4.2. Liquidation Preference. In the event of the
voluntary or involuntary liquidation, dissolution, or winding up of
the corporation, the holders of Preferred A Shares shall be
entitled to be paid out of the net assets of the corporation an
amount equal to the sum of Sixty Dollars ($60.00) per share, plus
all unpaid dividends cumulated in respect of the outstanding
Preferred A Shares, before any distribution or payment is made to
the holders of Preferred B Shares or Common Shares. In the event
that the net assets of the corporation are insufficient to pay the
full amount then due to the holders of Preferred A Shares, the
entire net assets, of the corporation shall be distributed among
the holders of Preferred A Shares in direct proportion to the
number of Preferred A Shares held by each. The consolidation or
merger of the corporation into or with any other corporation or
corporations, in the manner provided by law, shall not be deemed to
be a liquidation, dissolution, or winding up of the affairs of the
corporation. After the payment to the holders of Preferred A
Shares of all amounts to which they are entitled, as hereinabove
provided, the holders of the shares of each series of the Preferred
B Shares then outstanding shall be entitled to receive out of the
remaining net assets of the corporation, but, only in accordance
with the preferences, if any, provided for such series, before any
distribution or payment shall be made to the holders of the Common
Shares, the amount per share fixed by the Preferred B Resolutions
to be received by the holders of shares of each such series on such
voluntary or involuntary liquidation, dissolution, or winding-up,
as the case may be. If such payment shall have been made in full
to the holders of all outstanding Preferred B Shares of all series,
or duly provided for, the remaining net assets of the corporation,
if any, shall be distributed to the holders of the Common Shares in
direct proportion to the number of Common Shares held by each.
However, if upon any such liquidation, dissolution, or winding-up,
the net assets of the corporation available for distribution among
the holders of any one or more series of the Preferred B Shares,
that (a) are entitled to a preference over the holders of the
Common Shares upon such liquidation, dissolution, or winding-up,
and (b) rank equally in connection therewith, shall be insufficient
to make payment in full of the preferential amount to which the
holders of such shares shall be entitled, then such assets shall be
distributed among the holders of each such series of the Preferred
B Shares ratably according to the respective amounts to which they
would be entitled with respect to the shares held by them upon such
distribution if all amounts payable on or with respect to such
shares were paid in full.
Section 4.3. Redemption of Preferred A Shares.
----------- -------------------------------
4.3.1. Optional Redemption. The corporation may, at any
time or from time to time at its sole option, redeem all or part of
the outstanding Preferred A Shares. The redemption price of a
Preferred A Share under this subsection is Sixty Dollars ($60.00)
plus the amount of all unpaid dividends cumulated with respect to
such share under subsection 4.1.3 hereof.
4.3.2. Mandatory Purchase. The corporation shall redeem,
at the price specified in subsection 4.3.1 above, or purchase in
the open market, such number of Preferred A Shares at such time or
times, if any, as may be necessary to reduce the number of.
Preferred A Shares outstanding on the last day of each of the
corporation's fiscal years set forth below to not more than the
number of shares set forth opposite such year, as follows:
Maximum
Number of
Year Shares Outstanding
1990 483,333
1991 466,666
1992 450,006
1993 433,333
1994 416,666
1995 400,000
1996 383,333
1997 366,666
1998 350,000
1999 333,333
2000 316,666
2001 300,000
2002 283,333
2003 266,666
2004 250,000
2005 -0-
4.3.3. Mandatory Purchase Upon Payment of Guaranteed
Debt.
4.3.3.1. Definitions.
------- -----------
(a) For purposes hereof, the term "BHC
Affiliate" shall mean and refer to (i) Brock
Hotel Corporation, a Delaware corporation
("BHC"), (ii) any corporation, partnership, or
other entity in which BHC has an interest,
(iii) any individual or any corporation,
partnership, or other entity owning at least
ten percent (10%) of the issued and
outstanding voting stock of BHC or (iv) any
other entity controlling, controlled by, or
under common control with BHC.
(b) For purposes hereof, the term "Approved
Loan" shall mean and refer to a loan,
capitalized or other lease, or other financing
arrangement with respect to which (i) the
proceeds are used to prepay Guaranteed
Obligations (as hereinafter defined), (ii) the
interest rate does not exceed the blended
interest rates of the Guaranteed Obligations
that are prepaid with such proceeds, and (iii)
the amortization of which is no less favorable
to the corporation than the aggregate schedule
of payments or mandatory prepayments (other
than by reason of a default on a Guaranteed
Obligation) required pursuant to the
Guaranteed Obligations so prepaid.
(c) For purposes hereof, the term "Equity
Holder" shall mean and refer to any party
having an equity interest in the corporation.
4.3.3.2. Mandatory Purchase.
-------- -------------------
(a) In the event that the corporation prepays
(as opposed to any regularly scheduled payment
or mandatory prepayment, other than by reason
of' a default on a Guaranteed Obligation) or
refinances for any reason (other than out of
the proceeds of (i) any capital contributions
or Approved Loans made to the corporation by a
BHC Affiliate or by any Equity Holder, or (ii)
any loans made to the corporation that are
guaranteed by BHC or any Equity Holder), at
any time prior to January 1, 1988, any debt,
liability or obligation of the corporation
that is guaranteed by BHC or any Equity Holder
(such debts, liabilities and obligations
collectively, the "Guaranteed Obligations"),
so that immediately following such prepayment
or refinancing there remains outstanding
Guaranteed Obligations in an aggregate amount
of less than Fifty Million Dollars
($50,000,000), the corporation shall
repurchase, either through redemption or
through purchase on the open market, that
number of Preferred A Shares with an aggregate
par value equal to the product of (a) the
amount of Guaranteed Obligations reduced by
such prepayment or refinancing (but only in
the amount such prepaid or refinanced
Guaranteed Obligations reduce the total
Guaranteed Obligations below $50,000,000, or
thereafter continue to reduce the Guaranteed
Obligations) multiplied by (b) thirty-five
percent (35%).
(b) In addition, if, prior to January 1,
1988, any event occurs which, either under
applicable law or under the provisions of any
agreement governing any Guaranteed Obligation
(whether or not such provision is enforceable
as a matter of law), would, either
immediately, or with the passage of time or
giving of notice (or both), accelerate the
time that payment on such Guaranteed
Obligation is due and payable, or otherwise
result in such Guaranteed Obligation being
deemed to have matured, in whole or in part,
before its regularly scheduled due date, and
if, at any time after such event occurs, and
prior to the reinstatement, if any, of the
regular payment schedule on such Guaranteed
Obligation by the agreement of the creditor
thereon, any payment or distribution is made
out of assets of the corporation on account of
such Guaranteed Obligation (whether before or
after January 1, 1988), so that, immediately
following such payment or distribution, there
remains Outstanding Guaranteed Obligations in
an aggregate amount of less than Fifty Million
Dollars ($50,000,000), the corporation shall
repurchase, either through redemption or
through purchases on the open market, that
number of Preferred A Shares with an aggregate
par value equal to the product of (a) the
amount of the Guaranteed Obligations so
reduced (but only in the amount such payment
or distribution reduces the total Guaranteed
Obligations below $50,000,000, or thereafter
continues to reduce the Guaranteed
Obligations) multiplied by (b) thirty-five
percent (35%).
(c) Furthermore, in the event that prior to
January l, 1988 the corporation pays, or
assets of the corporation are used to repay,
BHC or any Equity Holder (other than out of
positive cash flow generated by the
corporation from operations in accordance with
past practices, which past practices shall not
be deemed to include the sale of real estate
or the sale of any entire restaurant as a
unit), on account of funds advanced to the
corporation by BHC or such Equity Holder to
repay any Guaranteed Obligations, and such
repayment to BHC or such Equity Holder occurs
at a time when the remaining outstanding
Guaranteed Obligations are in an aggregate
amount of less than $50,000,000, then the
corporation shall repurchase, either through
redemption or purchases on the open market,
that number of Preferred A Shares with an
aggregate par value equal to the product of
(a) the amount of such repayment to BHC or
such Equity Holder (but not to exceed the
amount by which the Guaranteed Obligations
total less than $50,000,000) multiplied by (b)
thirty five percent (35%). For purposes of
this paragraph (c): (1) any funds advanced by
BHC or such Equity Holder to the corporation
from and after the date on which Preferred A
Shares are first issued (the "Beginning Date")
to fund negative cash flow (other than funds
specifically advanced and earmarked for the
upgrading of existing restaurants or the
construction of new restaurants) shall be
deemed to have been advanced to repay
Guaranteed Obligations repaid by the
corporation since the Beginning Date up to the
amount of the Guaranteed Obligations paid by
the corporation after the Beginning Date; (2)
an amount equal to the net proceeds of any
sales of assets made after the Beginning Date
that are not consistent with the corporation's
past practices (which past practices shall not
be deemed to include the sale of real estate
or the sale of any entire restaurant as a
unit) shall be deemed to have been advanced by
BHC or an Equity Holder to the corporation
after the Beginning Date to repay Guaranteed
obligations, and repaid by the corporation to
BHC or such Equity Holder after the Beginning
Date; (3) any repayments made to BHC or an
Equity Holder on account of advances made by
BHC or such Equity Holder to the corporation
shall be deemed to have been applied first to
repay advances made by BHC or such Equity
Holder to the corporation to repay Guaranteed
Obligations; and (4) any repayments of
Approved Loans made to any BHC Affiliate other
than BHC shall be deemed to have been repaid
to BHC on account of funds advanced by BHC to
repay Guaranteed Obligations.
(d) The corporation's obligation to redeem or
repurchase Preferred A Shares in accordance
with any of the foregoing subparagraphs (a),
(b), and (c) of this subsection 4.3.3.2 shall
not be affected by any prior purchase or
redemption of Preferred A Shares by the
corporation or any BHC Affiliate other than a
redemption or purchase of Preferred A Shares
made within twenty (20) days prior to the time
such obligation arises and made for the
specific purpose of satisfying such
obligation, as evidenced by a statement to
such effect included in any written
confirmations regarding such redemption or
purchase forwarded to a selling broker by the
corporation, any purchasing BHC Affiliate, or
their purchasing broker.
4.3.4. Procedure-for Redemption.
------ -------------------------
4.3.4.1. Date and Place of Redemption. The Board
of Directors of the corporation may, by
resolution, fix the date and place of
redemption (which place may be within or
without the State of Kansas).
4.3.4.2. Notice. The corporation shall notify
each holder of Preferred A Shares to be
redeemed of the amount of his shares to
be redeemed and the date and place of
redemption by United States Mail, first-class postage
prepaid, addressed to each
such stockholder at his last known post
office address as shown on the stock
record books of the corporation, mailed
no later than twenty (20) days before the
date of redemption.
4.3.4.3. Effectiveness of Redemption. If the
notice required by subsection 4.3.4.2
above has been duly given and, on or
before the date fixed for redemption, the
funds necessary to effect such redemption
have been set aside for payment to the
holders of the Preferred A Shares to be
redeemed, then, whether or not a
certificate evidencing shares to be
redeemed has been surrendered, the shares
evidenced thereby shall no longer be
outstanding, and the right to receive
dividends thereon, the right to vote the
same, and all other rights with respect
to such shares shall cease and terminate
on the date so fixed for redemption,
except only the right of the holder of
such Preferred A Shares to receive the
redemption price therefor, without
interest, upon surrender of the
certificate or certificates evidencing
the same, duly endorsed for transfer.
4.3.4.4. Selection of Shares for Redemption. If at
any time less than all of the outstanding
Preferred A Shares are to be redeemed,
the shares to be redeemed shall be
selected by lot or in such other manner
as the Board of Directors of the
corporation may deem fair and
appropriate.
4.3.4.5. Board of Directors' Authority. Subject
to the limitations and provisions hereof,
the Board of Directors shall have the
full power and authority to prescribe the
manner in which, and the terms and
conditions upon which, Preferred A Shares
shall be redeemed.
4.3.5. Cancellation. All Preferred A Shares redeemed,
purchased, or otherwise acquired by the corporation in any manner
shall be cancelled and shall not be reissued.
Section 4.4. Voting Rights.
----------- -------------
4.4.1. Generally. The holders of the Common Shares
have one (1) vote for each Common Share so held. The holders of
the Preferred A Shares have one (1) vote for each Preferred A Share
so held, and shall vote along with the holders of Common Shares and
not as a separate class (except as hereafter provided or as
otherwise provided by law), upon each and any matter submitted to
a vote of the stockholders of the corporation. Subject to Section
4.10 hereof, the holders of the Preferred B Shares shall have such
voting rights as are provided in the Preferred B Resolutions.
4.4.2. Upon Default. Upon the occurrence and during
the continuance of any Event of Default (as defined at Section 4.5
below), the holders of the Preferred A Shares, voting separately as
a class, shall be entitled to elect the smallest number of
directors that then shall constitute a majority of the directors of
all of the then authorized number of directors of the corporation.
The holders of the Common Shares and the holders of the Preferred
B Shares (to the extent provided by the Preferred B Resolutions)
shall elect the remaining directors. In such event, only holders
of Preferred A Shares may vote for directors to be elected by
holders of the Preferred A Shares and only holders of Common Shares
and the holders of the Preferred B Shares (to the extent provided
by the Preferred B Resolutions) may vote for directors to be
elected by holders of the Common Shares and the holders of the
Preferred B Shares (to the extent provided by the Preferred B
Resolutions).
4.4.3. Approval for Certain Transactions.
------ ----------------------------------
4.4.3.1. Certain Transactions. Unless the
corporation has first obtained the approval of the holders of
two-thirds (2/3) of the outstanding Preferred A Shares, the
corporation shall not:
(a) amend these Articles of Incorporation in
a manner that would materially adversely
affect the holders of the Preferred A Shares;
or
(b) increase the authorized number of
Preferred A Shares; or
(c) merge or consolidate with any other
corporation; or
(d) sell, convey, or otherwise, dispose of
all or substantially all of the property or
business of the corporation; or
(e) amend Sections 4.1 and 4.2 above if such
amendment would materially adversely affect
the holders of the Preferred A Shares.
4.4.3.2. Junior Preferred Stock. Unless the
corporation has first obtained the approval of the holders of
two-thirds (2/3) of the outstanding Preferred A Shares, the
corporation shall not, whether in the Preferred B Resolutions
or otherwise:
(a) create any class of preferred stock
having preferences over or being on a par with
the Preferred A Shares as to dividends,
redemption, or liquidation; or
(b) create any class of preferred stock that
are subject to redemption while any of the
Preferred A Shares are outstanding; or
(c) create any class of preferred stock upon
which dividends are to be paid at any time in
an amount that, when calculated as a
percentage of the par value of such preferred
stock, is in excess of the dividends payable
at such time pursuant to subsection 4.1.1
hereof on the Preferred A Shares, when
calculated as a percentage of the par value of
the Preferred A Shares, or
(d) create any class of preferred stock
upon which dividends shall by payable prior to
the Preferred Dividend Commencement Date or
upon which dividends shall be payable if
dividends accrued under subsection 4.1.3 on
the outstanding Preferred A Shares have not
been paid or set aside for payment for any
fiscal quarter or quarters; or
(e) create any class of preferred stock that
is convertible into Common Shares at a price
below the greater of (i) Three Dollars and
Fifty Cents ($3.50) per Common Share or (ii)
an amount that is one hundred fifty percent
(150%) of the average of the mean between the
bid and asked prices of the Common Shares
during the twenty (20) trading days prior to
the issuance of such junior preferred stock.
Section 4.5. Default.
----------- -------
4.5.1. Events of Default. The occurrence of any of
the following events shall be deemed to be an "Event of Default"
for purposes of this ARTICLE FOURTH:
(a) any failure to redeem or purchase Preferred A Shares as
required by subsections 4.3.2 and 4.3.3 hereof in the manner
and amount and at the time and place specified in Section 4.3
hereof, if such shares are not otherwise purchased in the
manner and amount and at the time and place specified in
Section 4.3 hereof by a BHC Affiliate; and
(b) the failure of the corporation, whether or not declared
and whether or not funds are legally available, for the
payment thereof, on or before any Preferred Dividend Payment
Date, to pay the lesser of: (i) the dividends cumulated in
respect of the Preferred A Shares at the end of the fiscal
quarterly accounting period ended next preceding such
Preferred Dividend Payment Date; or (ii) twenty-five percent
(25%) of the Available Cash Flow (as hereinafter defined) of
the corporation during the four (4) consecutive fiscal
quarterly accounting periods ending with the next preceding
fiscal quarterly accounting period prior to such Preferred
Dividend Payment Date. The term "Available Cash Flow," as
used herein with respect to any given period of four (4)
fiscal quarterly accounting periods shall mean and refer to an
amount equal to: (A) the after-tax net income of the
corporation during such period, plus (B) the depreciation,
amortization and other similar non-cash charges deducted by
the corporation during such period in determining its after
tax net income, minus (C) mandatory (as opposed to voluntary)
payments during such period of the principal portion (as
opposed to interest) of rental payments under leases
capitalized on the books of the corporation for financial
reporting purposes minus (D) all dividends paid by the
corporation on Preferred A Shares during such period, minus
(E) all principal and interest payments, if any, made by the
corporation to Pizza Time Theatre, Inc., or its successors and
assigns, with respect to indebtedness with an original term in
excess of six (6) months, and minus (F) the sum of Seven
Million Five Hundred Thousand Dollars ($7,500,000.00).
4.5.2. Effect of Failure to Redeem or Purchase. The
sole effect of the occurrence and continuance of any such Event of
Default (as hereinafter defined) shall be:
(a) the adjustment of voting rights of the holders of
Preferred A Shares as provided in subsection 4.4.2
hereof; and
(b) the continuance of all dividend, voting and other
rights of the holders of Preferred A Shares not so
redeemed as herein required, including, without
limitation, the right to receive dividends pursuant to
Section 4.1 hereof and to be redeemed pursuant to Section
4.3 hereof, to the extent that the corporation has funds
legally available for such purposes.
4.5.3. Cure. An Event of Default shall be deemed to
continue until such time as (a) the number. of Preferred A Shares
then held by holders other than the corporation or a BHC Affiliate
does not exceed the maximum number of Preferred A Shares then
permitted to be outstanding pursuant to subsections 4.3.2 and 4.3.3
hereof; and (b) the corporation shall have declared, and paid or
set aside for payment, such aggregate amount as would have been
theretofore required to have been declared and paid on all past
Dividend Payment Dates to prevent an Event of Default from having
occurred with respect to any Preferred A Shares then outstanding.
4.5.4. Certain Shares Purchased by a BHC Affiliate.
------ --------------------------------------------
4.5.4.1. Redemption Restriction. In the event any
of the Preferred A Shares required to be redeemed or purchased
pursuant to Section 4.3 hereof are purchased by a BHC
Affiliate other than the corporation, as permitted in
paragraph (a) of subsection 4.5.1 or in subsection 4.5.3
hereof, then such Preferred A Shares shall not be later
redeemed or purchased pursuant to subsection 4.3 hereof until
all other Preferred A Shares have been redeemed or purchased
from all holders other than a BHC Affiliate.
4.5.4.2. Resale Restriction. In the even any
Preferred A Shares required to be redeemed or purchased
pursuant to Section 4.3 hereof are purchased by a BHC
Affiliate other than the corporation, as permitted in
paragraph (a) of subsection 4.5.1 or in subsection 4.5.3
hereof, then such Preferred A Shares shall not be sold by such
purchaser so long as any Preferred A Shares are held by any
holder that is not a BHC Affiliate. A legend setting forth
such restriction shall be placed on each certificate
representing the Preferred A Shares subject to the restriction
imposed by this subsection 4.5.4.2.
Section 4.6. Election of New Directors Upon Default.
----------- ---------------------------------------
4.6.1. Number of Directors. Upon the occurrence of
any Event of Default and the election held pursuant to subsection
4.6.4 hereof, the number of the corporation's directors shall be
five (5).
4.6.2. New Election.
----- ------------
4.6.2.1 Notice. Within ten (10) days after
receipt of a written request or requests for a shareholder's
meeting from the holder or holders of five percent (5%) or
more of the Preferred A Shares after the occurrence of an
Event of Default, the Secretary of the corporation shall
notice and call a meeting of the shareholders of the
corporation for the purpose of electing new directors.
4.6.2.2. Time and Place. Such meeting shall occur
at the principal office of the corporation or such other
location as the Board of Directors in good faith determines to
be convenient to the majority of the shareholders. The
meeting shall occur within fifty (50) days after the last day
the Secretary is required to notice and call the meeting. The
meeting may be a special meeting or an annual meeting.
4.6.2.3. Other Matters. The shareholders may
consider other matters as they are permitted to consider by
these Articles, the bylaws of the corporation, or by law,
provided that nomination and election of new directors by the
holders of the Preferred A Shares shall be the first item of
business.
4.6.2.4. Quorum. Holders of one-third (1/3) of the
Preferred A Shares shall constitute a quorum for the election
of directors to be elected by the holders of the Preferred A
Shares.
4.6.3. Resignations of Directors During
Continuance of an Event of Default. All members of the Board
of Directors shall be deemed to have resigned on the date of
the meeting held pursuant to subsection 4.6.2.2 hereof.
4.6.4. Election of Directors During Continuance of
an Event of Default. At the meeting held pursuant to
subsection 4.6.2.2 hereof, the holders of Preferred A Shares,
Preferred B Shares, and Common Shares shall be entitled to
vote for the election of directors of the corporation as
provided in subsection 4.4.2 hereof.
4.6.5. Vacancies. During the continuance of an
Event of Default, vacancies on the Board of Directors created
other than by the operation of subsection 4.6.3 may be filled
only by action of directors who were elected by holders of
shares of stock of the same class as those who elected the
director whose successor is to be chosen. All other vacancies
shall be filed as provided in the Bylaws of the corporation.
4.6.6. Termination of Event of Default. The terms
of the directors elected or appointed by or on behalf of the
holders of Preferred A Shares shall expire, and the number of
the corporation's directors shall revert to the number that
existed immediately prior to the Event of Default that
resulted in the election of directors by classes,
automatically at such time as there is no Event of Default
continuing under this ARTICLE FOURTH.
Section 4.7. No Conversion Rights. The Preferred A
Shares shall not be convertible into Common Shares.
Section 4.8. All Shares Nonassessable. All shares of
stock of the corporation of any class shall be nonassessable.
Section 4.9. No Preemptive Rights. No holder of any
shares of the corporation shall be entitled as such, as a
matter of right, to purchase or subscribe for any shares of -stock of
the corporation of any class, whether now or
hereafter authorized or whether issued for cash, property
bonds, notes, debentures, other securities, or stock
convertible into shares of stock of the corporation or
carrying or evidencing any right to purchase shares of stock
of any class.
Section 4.10. No Nonvoting Equity Securities. The
corporation shall not authorize or issue any class or series
o f non-voting equity securities.
Section 4.11. Preferred B Shares.
------------ -------------------
4.11.1. Issuance. Preferred B Shares may be
issued in one or more series at such time or times as the
Board of Directors may determine. All shares of any one
series shall be of equal rank and identical in all respects.
Preferred B Shares may be issued for such consideration or
considerations as the Board of Directors may determine,
provided that the value of such consideration or
considerations shall equal or exceed, in the good faith
business judgment of the Board of Directors, the greater of
(i) the aggregate par value of the Preferred B Shares to be
issued or (ii) the fair market value of the Preferred B Shares
to be issued, if an active trading market has developed for
the series of Preferred B Shares being so issued.
4.11.2. Authorization. Subject to the
restrictions set forth in subsection 4.4.3.2 hereof, authority
is hereby expressly granted to the Board of Directors to fix
from time to time, by resolution or resolutions providing for
the issue of any series of Preferred B Shares, the powers,
designations, preferences, and relative, participating,
optional, or other rights, if any, and the qualifications,
limitations, or restrictions thereof, if any, of such series,
including, without limiting the generality of the foregoing,
the following:
(a) The distinctive designation and number of shares
comprising such series, which number may (except where
otherwise provided by the Board of Directors in creating such
series) be increased or decreased (but not below the number of
shares then outstanding) from time to time by action of the
Board of Directors;
(b) The dividend rate or rates on the shares of such
series and the preferences, if any, over any other series of
Preferred B Shares (or of any other series of Preferred B
Shares over such series) with respect to dividends, the terms
and conditions upon which and the periods with respect to
which dividends shall be payable, whether and upon what
conditions such dividends shall be cumulative and, if
cumulative, the date or dates from which dividends shall
cumulate;
(c) Whether or not the shares of such series shall be
redeemable, the limitations and restrictions with respect to
such redemptions, the time or times when, the price or prices
at which, and the manner in which such shares shall be
redeemable, including the manner of selecting shares of such
series for redemption if less than all shares of such series
are to be redeemed;
(d) The rights to which the holders of shares of such
series shall be entitled, and the preferences if any, over any
other series of Preferred B Shares (or of any other series of
Preferred B Shares over such series), upon the voluntary or
involuntary liquidation, dissolution, or winding-up of the
corporation, which rights may vary depending on whether such
liquidation, dissolution, or winding-up is voluntary or
involuntary, and, if voluntary, may vary at different dates;
(e) Whether or not the shares of such series shall be
subject to the operation of a purchase, retirement, or sinking
fund, and, if so, whether and upon what conditions such
purchase, retirement, or sinking fund shall be cumulative or
noncumulative, the extent to which and the manner in which
such fund shall be applied to the purchase or redemption of
the shares of such series for retirement or to other corporate
purposes and the terms and provisions relative to the
operation thereof;
(f) Whether or not the shares of such series shall be
convertible into or exchangeable for shares of stock of any
other class or classes, or of any other series of the same
class and, if so convertible or exchangeable, the price or
prices or the rate or rates of conversion or exchange and the
method, if any, of adjusting the same, and any other terms and
conditions of such conversion or exchange;
(g) The voting powers, full and/or limited, if any, of
the shares of such series; and whether or not and under what
conditions the shares of such series (alone or together with
the shares of one or more other series of Preferred B Shares
having similar provisions) shall be entitled to vote
separately as a single class for the election of one or more
directors of the corporation in case of dividend arrearages or
other specified events, or upon other matters;
(h) Whether or not the issuance of any additional shares
of such series, or of any shares of any other series, shall be
subject to restrictions as to issuance, or as to the powers,
preferences, or rights of any such other series; and
(i) Any other preferences, privileges, and powers, and
relative, participating, optional, or other special rights,
and qualifications, limitations, or restrictions of such
series, as the Board of Directors may deem advisable and as
shall not be inconsistent with the provisions of these
Articles of Incorporation or law.
4.11.3. Dividends. After the requirements with
respect to preferential dividends on the Preferred A Shares
(fixed pursuant to Section 4.1 hereof) shall have been met:
4.11.3.1. Fixing of Dividends. The shares of each
series of Preferred B Shares shall entitle the holders thereof
to receive, when, as, and if declared by the Board of
Directors out of funds legally available for dividends, cash
dividends at the rate, under the conditions, for the periods,
and on the dates fixed by the resolution or resolutions of the
Board of Directors pursuant to authority granted in this
Section 4., for each series, and no more, before any dividends
on the Common Shares (other than a distribution solely in
Common Shares) shall be paid, declared, or set apart for
payment.
4.11.3.2. Restrictions on Dividends on Common
andother Junior Stock. Unless dividends on all outstanding
shares of each series of the Preferred B Shares shall have
been fully paid or declared and set aside for payment, for all
past quarterly dividend periods, and unless all required
sinking fund payments, if any, shall have been made or
provided for, no dividend (except a dividend payable in Common
Shares and/or shares of any other class of stock ranking
junior to the Preferred B Shares) shall be paid upon or
declared. or set apart for the Common Shares or any other
class of stock ranking junior to the Preferred B Shares.
4.11.4. Reissuance of Preferred B Shares.
Preferred B Shares redeemed, converted, exchanged, purchased,
retired, or surrendered to the corporation, or which have been
issued and reacquired in any manner, shall have the status of
authorized and unissued Preferred B Shares and may be reissued
by the Board of Directors as shares of the same or any other
series of Preferred B Shares.
FIFTH. The number of directors of the corporation shall be as
provided in the Bylaws of the corporation.
SIXTH. The corporation is to have perpetual existence.
SEVENTH. The private property of the stockholders shall not
be subject to the payment of corporate debts to any extent
whatsoever.
EIGHTH. Elections of directors need not be by ballot unless
the Bylaws of the corporation so provide.
NINTH. The Bylaws of the corporation may from time to time be
altered, amended, or repealed, or new Bylaws may be adopted, in any
of the following ways: (i) by the holders of a majority of the
outstanding shares of stock of the corporation entitled to vote, or
(ii) by a majority of the full Board of Directors and any change so
made by the stockholders may thereafter be further changed by a
majority of the Directors; provided, however, that the power of the
Board of Directors to alter, amend, or repeal Bylaws, or to adopt
new Bylaws, may be denied as to any Bylaws or portion thereof by
the stockholders if, at the time of enactment, the stockholders
shall so expressly provide.
TENTH. The corporation may agree to the terms and conditions
upon which any director, officer, employee or agent accepts his
office or position and in its Bylaws, by contract or in any other
manner may agree to indemnify and protect any director, officer,
employer or agent of the corporation, or any person who serves at
the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or
other enterprise, to the extent permitted by the laws of the State
of Kansas.
ELEVENTH. Whenever a compromise or arrangement is proposed
between this corporation and its creditors or any class of them or
between this corporation and its stockholders or any class of them,
any court of competent jurisdiction within the State of Kansas, on
the application in a summary way of this corporation or of any
creditor or stockholder thereof or on the application of any
receiver or receivers appointed for this corporation under the
provisions of Section 104 of the General Corporation Code of Kansas
or on the application of trustees in dissolution or of any receiver
or receivers appointed for this corporation under the provisions of
Section 98 of the General Corporation Code of Kansas, may order a
meeting of the creditors or class of creditors, or of the
stockholders or class of stockholders of this corporation, as the
case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in
value of the creditors or class of creditors, or of the
stockholders or class of stockholders of this corporation, as the
case may be, agree to any compromise or arrangement and to any
reorganization of this corporation as a consequence of such
compromise or arrangement, the said compromise or arrangement and
the said reorganization, if sanctioned by the court to which the
said application has been made, shall be binding on all the
creditors or class of creditors, or on all the stockholders or
class of stockholders, of this corporation, as the case may be, and
also on this corporation.
TWELFTH. Except as may be otherwise provided by statute, the
corporation shall be entitled to treat the registered holder of any
shares of the corporation as the owner of such shares and of all
rights derived from such shares for all purposes, and the
corporation shall not be obligated to recognize any equitable or
other claim to or interest in such shares or rights on the part of
any other person, including, but without limiting the generality of
the term "person," a purchaser, pledgee, assignee or transferee of
such shares or rights, unless and until such person becomes the
registered holder of such shares. The foregoing shall apply
whether or not the corporation shall have either actual or
constructive notice of the interest of such person.
THIRTEENTH. Meetings of stockholders may be held within or
without the State of Kansas, as the Bylaws may provide. The books
of the corporation may be kept (subject to any provision contained
in the statutes of Kansas) outside the State of Kansas at such
place or places as may be designated from time to time by the Board
of Directors or in the Bylaws of the corporation.
FOURTEENTH. The corporation reserves the right to amend,
alter, change or repeal any provision contained in these Articles
of Incorporation in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are
granted subject to this reservation.
IN WITNESS WHEREOF, these Restated Articles of Incorporation
have been executed by the corporation by its Executive Vice and
attested by its Secretary on this 5th day of September 1986.
SHOWBIZ PIZZA TIME, INC.
[CORPORATE SEAL]
By
----------------------------
Thomas J. Chadwick
Executive Vice President
ATTEST:
- -------------------------
Alice Winters, Secretary
STATE OF TEXAS
COUNTY OF DALLAS
BE IT REMEMBERED, that on this 5th day of September, 1989,
before me, the undersigned, a Notary Public in and for said County
and State, personally appeared Thomas J. Corcoran, Jr., who
declared that he is the executive Vice President of the corporation
named in the foregoing instrument, and duly acknowledged before me
that he executed the foregoing instrument on behalf of the
corporation.
IN WITNESS WHEREOF, I have hereunto subscribed my name and
affixed my official seal the day and year last above written.
--------------------------
Notary in and for the State
of Texas
My Commission Expires: ----------
CERTIFICATE OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
SHOWBIZ PIZZA TIME, INC.
SHOWBIZ PIZZA TIME, INC., a corporation organized and existing
under and by virtue of the laws of the State of Kansas, does hereby
certify:
FIRST: That at a meeting of the Board of Directors of said
corporation on September 9, 1988, resolutions were duly adopted
setting forth proposed amendments to the Restated Articles of
Incorporation of said corporation, declaring their advisability,
and further declaring that said amendments be submitted for
approval at the annual meeting of stockholders to be held on
October 18, 1988, with the recommendation by the Board of Directors
that the stockholders approve said amendments. The proposed
amendments set forth in said resolutions of the Board of Directors
are as follows:
Amendment No. 1 to Restated Articles of Incorporation.
------------------------------------------------------
ARTICLE FIFTH of the Restated Articles of Incorporation shall
be amended to read in its entirety as follows:
FIFTH. The number of directors of the corporation shall
be as provided in the Bylaws of the corporation.
Commencing with the annual meeting of stockholders in 1988, in
lieu of electing the whole number of directors annually, the
directors shall be divided into three (3) classes, Class I, Class
II and Class III, with three (3) directors in Class I and two in
each of Classes II and III. At the annual meeting of stockholders
of 1988, directors of Class I shall be elected to hold office for
a term expiring at the next succeeding annual meeting of
stockholders; directors of Class II shall be elected to hold office
for a term expiring at the second succeeding annual meeting of
stockholders; and directors of Class III shall be elected to hold
office for a term expiring at the third succeeding annual meeting
of stockholders. At each annual meeting of stockholders subsequent
to the annual meeting of stockholders in 1988, the successors to
the class of directors whose term shall then expire shall be
elected to hold office for a term expiring at the third succeeding
annual meeting. Each director shall hold office for the term for
which he was elected and until his successor is elected and
qualified or until his earlier resignation or removal. Any
increase or decrease in the authorized number of directors shall be
apportioned by the Board of Directors among the classes so as to
make all classes as nearly equal in number as possible. No
decrease in the authorized number of directors shall shorten the
term of any incumbent director. A director who is chosen in the
manner provided in the Bylaws to fill a vacancy in the Board of
Directors or to fill a newly-created directorship resulting from an
increase in the authorized number of directors shall hold office
until the next election of the class for which such director shall
have been chosen and until his successor is elected and qualified
or until his earlier resignation or removal. Directors of the
corporation may be removed only for cause.
Upon the occurrence of any Event of Default (as defined in the
Restated Articles of Incorporation of the corporation) and the
election held pursuant to Subsection 4.6.4. of the Restated
Articles of Incorporation of the corporation, the effectiveness of
the provisions of the immediately preceding paragraph shall be
suspended, and the five (5) directors elected in accordance with
Section 4.6 of the Restated Articles of Incorporation shall serve
until the next annual meeting of stockholders and until their
respective successors are elected and qualified or until their
successors are elected and qualified or until their earlier
registration or removal. Upon the discontinuance of an Event of
Default, the suspension of the effectiveness of the provisions of
the immediately preceding paragraph shall automatically cease; the
directors whose terms shall not have expired by reason of the
discontinuance of such Event of Default shall be designated as
Class III directors; the remaining directors, subject to applicable
Kansas law, may appoint directors in accordance with the provisions
of Section 14 of the Bylaws or may call a special meeting of
stockholders to elect directors to fill the vacancies created by
the expiration of the terms of directors elected or approved by or
on behalf of the holders of the Class A Preferred Stock of this
corporation and to fill any newly created directorships resulting
from an increase in the number of directors due to a cessation in
such suspension; and the terms of each class of directors shall be
determined by the provisions of the immediately preceding paragraph
as though such directors had been elected at the 1988 annual
meeting of stockholders.
Amendment No. 2 to Restated Articles of Incorporation.
-----------------------------------------------------
ARTICLES NINTH of Incorporation of the Corporation shall be
amended to read in its entirety as follows:
NINTH. The provisions of the Bylaws of this corporation
contained in Section 13 of 14 thereof may be amended, altered,
changed or repealed from time to time by directors constituting at
least two-thirds ( ) of the authorized number of directors of the
corporation; provided, however, that the stockholders at an annual
meeting, or special meeting, may also amend, alter, change or
repeal such provisions by the affirmative vote of the holders of
two-thirds ( ) of the issued and outstanding shares of all classes
of stock of the corporation entitled to vote thereon, voting as one
class. All provisions of the Bylaws, other than those referred to
above in this paragraph, may be amended or repealed and new Bylaws
not inconsistent or in conflict with those provisions referred to
above in this paragraph may be added from time to time by a
majority of the Board of Directors then in office; provided,
however, that the stockholders at an annual meeting, or special
meeting, may also from time to time amend all provisions of the
Bylaws, other than those referred to above in this paragraph, and
add new Bylaws not inconsistent or in conflict with those
provisions referred to above in this paragraph by the affirmative
vote of the holders of a majority of all classes of stock of the
corporation entitled to vote thereon, voting as one class. Any
amendment to the Bylaws adopted by the stockholders as aforesaid
may thereafter be further amended by the directors as aforesaid
unless the stockholders shall have provided otherwise in such
amendment.
Amendment No. 3 to Restated Articles of Incorporation.
-------------------------------------------------------
ARTICLE FOURTEENTH of the Restated Articles of Incorporation
of the Corporation shall be amended to read in its entirety as
follows:
FOURTEENTH. The corporation reserves the right to amend,
alter, change or repeal any provisions contained in these Restated
Articles of Incorporation, and all rights conferred upon
stockholders herein are granted subject to this reservation. The
provisions contained in the Articles FIFTH, NINTH and FOURTEENTH of
these Restated Articles of Incorporation may be amended, altered,
changed or repealed from time to time only upon (1) the approval of
directors constituting at least two-thirds ( ) of the authorized
number of directors of the corporation, and (2) the affirmative
vote of the holders of two-thirds ( ) of the issued and outstanding
shares of all classes of stock of the corporation entitled to vote
thereon, voting as one class at any annual or special meeting of
the stockholders. All provisions of these Restated Articles of
Incorporation, other than those referred to above in this Article,
may be amended, altered, changed or replaced in the manner now or
hereafter prescribed by statute.
Amendment No. 4 to the Restated, Articles of Incorporation.
The first paragraph of ARTICLE FOURTH of the Restated Articles of
Incorporation of the Corporation shall be amended to read in its
entirety as follows:
FOURTH. The total number of shares of stock that the
corporation shall have authority to issue is Ten Million Five
Hundred Forty-Nine Thousand Five Hundred Seventy-Two (10,549,752)
shares, which shall be divided into three (3) classes as follows:
(i) Forty-Nine Thousand Five Hundred Seventy-Two (49,572) shares of
Class A Preferred Stock, of the par value of Sixty Dollars ($60.00)
each (hereinafter "Preferred A Shares"); (ii) Five Hundred Thousand
(500,000) shares of Class B Preferred Stock, of the par value of
One Hundred Dollars ($100.00) each (hereinafter "Preferred B
Shares"); and (iii) Ten Million (10,000,000) shares of Common
Stock, of the par value of Ten Cents ($.10) each (hereinafter
"Common Shares"). The designations, powers, preferences, and
rights of each class, and the qualifications, limitations, or
restrictions thereof, shall be as set forth in this ARTICLE FOURTH.
Amendment No. 5 to the Restated Articles of Incorporation.
The following new section shall be added to the end of ARTICLE
FOURTH of the Restated Articles of Incorporation of the
Corporation:
Section 4.12. Share Combination. Each ten (10) shares of
previously authorized Common Stock, par value $.10 per share, of
the Corporation ("Old Common Stock"), shall be hereby combined into
one (1) share of Common Stock, par value $.10 per share of the
Corporation ("New Common Stock"). Each previously issued
certificate which represented shares of Old Common Stock shall
hereafter represent the number of shares of New Common Stock into
which the shares of Old Common Stock represented by such
certificate shall be combined; provided, however, that each person
holding of record a stock certificate or certificate which
represented shares of Old Common Stock, shall receive, upon
surrender of such certificate or certificate, a new certificate or
certificates evidencing and representing the number of shares of
New Common Stock to which such person is entitled and provided
further that the Corporation shall not issue fractional shares of
New Common Stock with respect to this combination. In lieu of
fractional shares, the Corporation shall pay stockholders cash for
such fractional shares, on the basis of the fair value of such
fractional shares as of the date of effectiveness of this Section.
The Board of Directors (or the Executive Committee thereof) shall
determine in good faith the fair value for such fractional shares,
and such determination shall be conclusive evidence thereof.
Amendment No. 6 to the Restated Articles of Incorporation .
The following ARTICLE FIFTEENTH shall be added to the Restated
Articles of Incorporation of the Corporation:
FIFTEENTH. No director shall be liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty
as a director, provided that this Article shall not eliminate or
limit the liability of a director (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under
the provisions of K.S.A. 17-6424 and amendments thereto or (iv) for
any transaction from which the director derived an improper
personal benefit.
SECOND: That thereafter, pursuant to resolution of its Board
of Directors, the annual meeting of the stockholders of said
corporation was duly called and held on October 18, 1988, upon
notice in accordance with Section 17-6512 of the Kansas General
Corporation Code, at which meeting the necessary number of shares
as required by statute were voted in favor of said amendments.
THIRD: That said amendments were duly adopted in accordance
with the provisions of Section 17-6602 of the Kansas General
Corporation Code.
IN WITNESS WHEREOF, ShowBiz Pizza Time, Inc. has caused
its corporate seal to be hereunto affixed and this certificate to
be signed by Richard M. Frank, its President and Chief Executive
Officer, and Ronald F. Saupe, its Secretary, and each of them does
hereby affirm and acknowledge, under penalties of perjury, that
this Certificate of Amendment is the act and deed of said
corporation and that the facts stated herein are true.
DATED: October 18, 1988. SHOWBIZ PIZZA TIME, INC.
By: -------------------------
Richard M. Frank
President and Chief
Executive Officer
ATTEST:
- ------------------------
Ronald F. Saupe
Secretary THE STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, on this day personally
appeared RICHARD M. FRANK, President and Chief Executive Officer of
ShowBiz Pizza Time, Inc., a Kansas corporation, known to me to be
the person and officer whose name is subscribed to the foregoing
instrument, and acknowledged to me that he executed the same for
the purposes and considerations therein expressed, in the capacity
therein stated and as the act and deed of said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 18th day of
October, 1988
-------------------------
Notary Public in and for
the State of Texas
My commission expires:
- --------------------------
CERTIFICATE OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
SHOWBIZ PIZZA TIME, INC.
SHOWBIZ PIZZA TIME, INC., a corporation organized and existing
under and by virtue of the laws of the State of Kansas, does hereby
certify:
FIRST: That at a meeting of the Board of Directors of said
corporation on June 14, 1989, resolutions were duly adopted setting
forth proposed amendments to the Restated Articles of Incorporation
of said corporation, declaring their advisability, and further
declaring that said amendments be submitted for approval at the
annual meeting of stockholders to be held on October 16, 1989, with
the recommendation by the Board of Directors that the stockholders
approve said amendments. The proposed amendments set forth in said
resolutions of the Board of Directors are as stated below:
ARTICLE FOURTH of the Restated Articles of Incorporation of
ShowBiz Pizza Time, Inc., is to be amended so as to add thereto a
new Section 4.13 to read as follows:
Section 4.13. Restrictions on Transfer.
------------ -------------------------
4.13.1. Certain Transfers Prohibited. Until December 31,
2002, (i) any attempted or purported transfer or registration of
transfer of any shares of the Common Stock, to any person or entity
(or group of persons or entities in concert) who directly or
indirectly owns, or whose shares are or would be attributed to any
person, entity or group who directly or indirectly owns, in either
case prior to the transfer and after giving effect to the
applicable attribution rules of the Internal Revenue Code of 1986,
as amended (the "Code"), more than 4.75% of the value of the
outstanding capital stock (within the meaning of Section 382 of the
code) of the corporation shall be void ab initio insofar as it
purports to transfer ownership to the transferee and (ii) any
attempted or purported transfer or registration of transfer of any
shares of the Common Stock, to any person or entity (or group of
persons or entities acting in concert) not described in clause (i)
who directly or indirectly would own, or whose shares would be
attributed to any person, entity or group who directly or
indirectly would own, in either case as a result of an immediately
after the transfer and after giving effect to the applicable
attribution rules of the Code, more than 4.75% of the value of the
outstanding capital stock (within the meaning of Section 382 of the
Code) of the corporation shall, as to the number of shares
representing such excess ever 4.75%, be void ab initio insofar as
it purports to transfer ownership to the transferee; provided,
however, that neither clause (i) nor clause (ii)shall prevent a
transfer if the transferor or purported transferee obtains the
written approval of the Board of Directors of the corporation. The
Board of Directors may require, as a condition to any transfer,
that the transferor or the purported transferee provide the
corporation with an opinion of counsel satisfactory to the
corporation to the effect that the transfer will not result in an
"ownership change" within the meaning of Section 382 of the Code.
No employee or agent of the corporation shall be permitted to
register in the stock register maintained by the Company or its
transfer agent any attempted or purported transfer made in
violation of this Section 4.13. Any unpermitted registration of a
transfer made in violation of this Section 4.13 will be void ab
initio. No intended transferee of shares of the Common Stock in
any such attempted or purported transfer or unpermitted
registration shall be recognized as a stockholder of the
corporation for any purpose whatsoever.
4.13.2. Effect of Attempted Transfer. In the event of an
attempted or purported transfer or unpermitted registration in
violation of this Section 4.13, the corporation shall be deemed to
be the exclusive and irrevocable agent for the transferor of the
shares of Common Stock that are subject to the restrictions set
forth in Section 4.13.1 above. The corporation shall be such agent
for the limited purpose of consummating a sale of such shares to an
eligible transferee, which may include without limitation the
transferor. The record ownership of the subject shares shall
remain in the name of the transferor until the shares have been
sold by the corporation or its assignee, as agent, to an eligible
transferee. The corporation shall be entitled to assign its agency
hereunder to any person or entity including, but not limited to,
the intended transferee of the shares, for the purpose of effecting
a permitted sale of such shares. Neither the corporation, as
agent, nor any assignee of its agency hereunder, shall be deemed to
be a stockholder of the corporation nor be entitled to any rights
of a stockholder of the corporation, including, but not limited to,
any right to vote such Common Stock or to receive dividends or
liquidating distributions in respect thereof, if any, but the
corporation or its assignee shall only have the right to sell and
transfer such shares on behalf of and as agent for the transferor
to another person or entity, provided that a transfer to such other
person or entity does not violate the provisions of this Section
4.13. The rights to vote and to receive dividends and liquidating
distributions with respect to such shares shall remain with the
transferor. In the event of a permitted sale and transfer, whether
by the corporation or its assignee, as agent, the proceeds of such
sale shall be applied first to reimburse the corporation or its
assignee for any expenses incurred by the corporation acting in its
role as the agent for the sale of such shares, second, to the
extent of any remaining proceeds, to reimburse the intended
transferee for any payments made to the transferor by such intended
transferee for such shares, and the remainder, if any, to the
original transferor.
4.13.3. Corporation's Right to Acquire Shares. For a period
of 90 days after its receipt of knowledge of an attempted or
purported transfer or unpermitted registration of shares in
violation of this Section 4.13, the corporation may elect to
acquire such shares at the same purchase price agreed to be paid by
the intended. transferee, in which case the corporation shall be
obligated to pay to the intended transferee of such shares, as
restitution on behalf of the transferor out of the purchase price,
the amount of any payments made by such intended transferee to the
transferor for such shares and to pay any remainder of the purchase
price to the transferor; such amounts shall be payable to the
intended transferee and the transferor , as the may be, in three
equal installments, without interest, each installment to be paid
to the intended transferee and the transferor pro rata in
accordance with the total amount payable to each. The first such
installment shall be payable within 10 days after the corporation
exercises such right and the remaining installments all be payable
on the first and second anniversaries, respectively, of such
exercise. The corporation may exercise such election by giving
written notice thereof to the transferor and to the intended
transferee.
4.13.4. Stock Certificate Legend. All certificates
hereafter issued evidencing ownership of shares of Common Stock
shall bear a conspicuous legend as follows:
"THE SHARES OF COMMON STOCK REPRESENTED HEREBY
ARE SUBJECT TO TRANSFER RESTRICTIONS PURSUANT
TO ARTICLE FOURTH OF THE RESTATED ARTICLES OF
INCORPORATION OF THE COMPANY, REFERENCE TO
WHICH IS MADE FOR ALL PURPOSES."
4.13.5. Enforcement. The Board of Directors shall have the
discretion to issue instructions to, or make suitable arrangements
with, the transfer agent, if any for the corporation's Common
Stock, whereby the transfer agent would establish and enforce a
mechanism for policing the transfer prohibitions established by
this Section 4.13. The Board of Directors shall also have authority
to delegate to one or more officers of the corporation the power
and authority to police and enforce the provisions of this Section
4.13 on behalf of the corporation.
SECOND: That thereafter, pursuant to resolution of its Board
of Directors, the annual meeting of the stockholders of said
corporation was duly called and held on October 16, 1989, upon
notice in accordance with Section 17-6512 of the Kansas General
Corporation Code, at which meeting the necessary number of shares
as required by statute were voted in favor of said amendments.
THIRD: That said amendments were duly adopted in accordance
with the provisions of Section 17-6602 of the Kansas General
Corporation Code.
IN WITNESS WHEREOF, ShowBiz Pizza Time, Inc. has caused
its corporate seal to be hereunto affixed and this certificate to
be signed by Richard M. Frank, its President and Chief Executive
Officer, and Ronald F. Saupe, its Secretary, and each of them does
hereby affirm and acknowledge, under penalties of perjury, that
this Certificate of Amendment is the act and deed of said
corporation and that the facts stated herein are true.
DATED: October 16, 1989.
SHOWBIZ PIZZA TIME, INC.
By:
---------------------------
Richard M. Frank
Chairman and Chief
Executive Officer
ATTEST:
- -------------------------
Ronald F. Saupe
Secretary
THE STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, on this day personally
appeared RICHARD M. FRANK, Chairman and Chief Executive Officer of
ShowBiz Pizza Time, Inc., a Kansas corporation, known to me to be
the person and officer whose name is subscribed to the foregoing
instrument, and acknowledged to me that he executed the same for
the purposes and consideration therein expressed, in the capacity
therein stated and as the act and deed of said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 16th day of
October, 1989.
------------------------
Notary Public in and for
the State of Texas
My commission expires:
- ---------------------
CERTIFICATE OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
SHOWBIZ PIZZA TIME, INC.
SHOWBIZ PIZZA TIME, INC., a corporation organized and existing
under and by virtue of the laws of the State of Kansas, does hereby
certify:
FIRST: That at a meeting of the Board of Directors of said
corporation on March 9, 1992, resolutions were duly adopted setting
forth proposed amendments to the Restated Articles of Incorporation
of said corporation, declaring their advisability, and further
declaring that said amendments be submitted for approval at the
annual meeting of stockholders to be held on May 29, 1992, with the
recommendation by the Board of Directors that the stockholders
approve said amendments. The proposed amendments set forth in said
resolutions of the Board of Directors are as follows:
The first paragraph of ARTICLE FOURTH of the Restated Articles
of Incorporation of the Corporation shall be amended to read in its
entirety as follows:
FOURTH. The total number of shares of stock that the
corporation shall have authority to issue is Thirty Million Five
Hundred Forty-Nine Thousand Five Hundred Seventy (30,549,570)
shares, which shall be divided into three (3) classes as follows:
(i) Forty-Nine Thousand Five Hundred Seventy (49,570) shares of
Class A Preferred Stock, of the par value of Sixty Dollars ($60.00)
each (hereinafter "Preferred A Shares"); (ii) Five Hundred Thousand
(500,000) shares of Class B Preferred Stock, of the par value of
One Hundred Dollars ($100.00) each (hereinafter "Preferred B
Shares"); and (iii) Thirty Million (30,000,000) shares of Common
Stock, of the par value of Ten Cents ($.10) each (hereinafter
"Common Shares"). The designations, powers, preferences, and
rights of each class, and the qualifications, limitations, or
restrictions thereof, shall be as set forth in this ARTICLE FOURTH.
SECOND: That thereafter, pursuant to resolution of its Board
of Directors, the annual meeting of the stockholders of said
corporation was duly called and held on May 29, 1992, upon notice
in accordance with Section 17-6512 of the Kansas General
Corporation Code, at which meeting the necessary number of shares
as required by statute were voted in favor of said amendments.
THIRD: That said amendments were duly adopted in accordance
with the provisions of Section 17-6602 of the Kansas General
Corporation Code.
IN WITNESS WHEREOF, ShowBiz Pizza Time, Inc. has caused
its corporate seal to be hereunto affixed and this certificate to
be signed by Richard M. Frank, its Chairman of the Board and Chief
Executive Officer, and Ronald F. Saupe, its Secretary, and each of
them does hereby affirm and acknowledge, under penalties of
perjury, that this Certificate of Amendment is the act and deed of
said corporation and that the facts stated herein are true.
DATED: May 29, 1992
SHOWBIZ PIZZA TIME, INC.
By:
---------------------------
Richard M. Frank
Chairman of the Board and
Chief Executive Officer
ATTEST:
- ----------------------
Ronald F. Saupe
Secretary
THE STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, on this day personally
appeared RONALD F. SAUPE, Secretary of ShowBiz Pizza Time, Inc., a
Kansas corporation, known to me to be the person and officer whose
name is subscribed to the foregoing instrument, and acknowledged to
me that he executed the same for the purposes and considerations
therein expressed, in the capacity therein stated and as the act
and deed of said corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 29th day of
May, 1992.
--------------------------
Notary Public in and for
the State of Texas
My commission expires:
- ----------------------
CERTIFICATE OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
SHOWBIZ PIZZA TIME, INC.
SHOWBIZ PIZZA TIME, INC., a corporation organized and existing
under and by virtue of the laws of the State of Kansas, does hereby
certify:
FIRST: That at a meeting of the Board of Directors of said
corporation on May 15, 1996, resolutions were duly adopted setting
forth a proposed amendment to the Restated Articles of
Incorporation of said corporation, declaring their advisability,
and further declaring that said amendments be submitted for
approval at the annual meeting of stockholders to be held on June
20, 1996, with the recommendation by the Board of Directors that
the stockholders approve said amendment. The proposed amendment
set forth in said resolutions of the Board of Directors is as
follows:
The first paragraph of ARTICLE FOURTH of the Restated
Articles of Incorporation of the Corporation shall be
amended to read in its entirety as follows:
FOURTH. The total number of shares of
stock that the corporation shall have
authority to issue is Fifty Million Five
Hundred Forty-Nine Thousand Five Hundred
Seventy (50,549,570) shares, which shall be
divided into three (3) classes as follows:
(i) Forty-Nine Thousand Five Hundred Seventy
(49,570) shares of Class A Preferred Stock, of
the par value of Sixty Dollars ($60.00) each
(hereinafter "Preferred A Shares"); (ii) Five
Hundred Thousand (500,000) shares of Class B
Preferred Stock, of the par value of One
Hundred Dollars ($100.00) each (hereinafter
"Preferred B Shares"); and Fifty Million
(50,000,000) shares of Common Stock, of the
par value of Ten Cents ($0.10) each
(hereinafter "Common Shares"). The
designations, powers, preferences, and rights
of each class, and the qualifications,
limitations, or restrictions thereof, shall be
as set forth in this ARTICLE FOURTH.
SECOND: That thereafter, pursuant to resolution of its Board
of Directors, the annual meeting of the stockholders of said
corporation was duly called and held on June 20, 1996, upon notice
in accordance with Section 17-6512 of the Kansas General
Corporation Code, at which meeting the necessary number of shares
as required by statute were voted in favor of said amendment.
THIRD: That said amendment was duly adopted in accordance
with the provisions of Section 17-6602 of the Kansas General
Corporation Code.
IN WITNESS WHEREOF, ShowBiz Pizza Time, Inc. has caused its
corporate seal to be hereunto affixed and this certificate to be
signed by Richard M. Frank, its Chairman of the Board and Chief
Executive Officer, and Marshall R. Fisco, Jr., its Secretary, and
each of them does hereby affirm and acknowledge, under penalty of
perjury, that to the best of their knowledge this Certificate of
Amendment is the act and deed of said corporation and that the
facts stated herein are true.
DATED: July 9, 1996
SHOWBIZ PIZZA TIME, INC.
[SEAL]
By:
---------------------------
Richard M. Frank
Chairman of the Board and
Chief Executive Officer
ATTEST:
- ----------------------------
Marshall R. Fisco, Jr.
Secretary
THE STATE OF TEXAS
COUNTY OF DALLAS
BEFORE ME, the undersigned authority, on this day personally
appeared Richard M. Frank, and Marshall R. Fisco, Jr., Chairman of
the Board and Chief Executive Officer, and Secretary, respectively,
of ShowBiz Pizza Time, Inc., a Kansas corporation, known to me to
be the persons and officers whose names are subscribed to the
foregoing instrument, and acknowledged to me that they executed the
same for the purposes and consideration therein expressed, in the
capacity therein stated and as the act and deed of said
corporation.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ---- day of
- ------------, 1996.
-----------------------
Notary Public in and for
the State of Texas
My commission expires:
- ----------------------
SHOWBIZ PIZZA TIME, INC.
NON-STATUTORY STOCK OPTION PLAN - Exhibit 10(a)
-------------
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 1,848,025. 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 options 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 grant 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 every Optionee, upon the execution
of a contract, shall be bound by the terms and restrictions of this
Plan and such contract; provided, however, if an Optionee does not
sign and return to the Company one (1) duplicate original of their
option contract prior to the expiration of one hundred and twenty
(120) days after the grant date, then the grant shall be withdrawn,
and the option shall be void and of no further force or effect.
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 Section 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 required 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 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.
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 lease 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. Non-Transferability 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, and the Company continues
thereafter as the surviving entity, then 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.
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.
14. 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.
15. Change of Control. If while unexercised options remain
outstanding under the Plan, a Change of Control (as hereinafter
defined) shall have occurred, then all such options shall be
exercisable in full, notwithstanding Section 8(b) hereof or any
other provision in the Plan or Option Contract to the contrary.
For purposed of the Plan, a "Change of Control" shall be deemed to
have occurred with respect to the Company: (A) on the date in which
the Company executes an agreement or an agreement in principle (i)
with respect to any merger, consolidation or other business
combination by the Company with or into another entity and the
Company is not the surviving entity, or (ii) to sell or otherwise
dispose of all or substantially all of its assets, or (iii) to
adopt a plan of liquidation; or (B) on the date in which public
announcement is made that the "beneficial ownership" (as defined in
Rule 13d-3 under the Exchange Act) of securities representing more
than 50% of the combined voting power of the Company is being
acquired by a "person" within the meaning of sections 13(d) and
14(d) of the Exchange Act; or (C) if, during any period of eighteen
(18) consecutive months, individuals who at the beginning of such
period were members of the Board of Directors cease for any reason
to constitute at least a majority thereof (unless the appointment
or election, or the nomination for election by the Company's
stockholders, of each new director was approved by a vote of at
least a majority of the directors then still in office who were
directors at the beginning of such period); provided, however, that
in no event shall a change in the composition of the Company's
Board of Directors pursuant to an election of Board members
pursuant to Section 4.6 of the Company's Articles of Incorporation,
as amended, constitute or result in a Change of Control for
purposes of this Section 15.
The Committee shall have the right, at the time of grant or
subsequently, in its sole discretion, to establish conditions under
which a specific employee may cease to be a full-time employee of
the Company or any of its Subsidiaries but not be deemed to have
terminated his employment with the Company or any of its
Subsidiaries for purposes of the Plan, including but not limited to
conditions involving part-time employment or consulting services.
Unless otherwise specifically provided for in an employee's stock
option contract or in an amendment or supplement thereto, an
employee's employment with the Company or any of its Subsidiaries
shall be deemed to terminate when he ceases to be a full-time
employee of the Company or any of its Subsidiaries.
In the event of a merger, consolidation, reorganization or
recapitalization of the Company, the Committee shall have the right
to accelerate the vesting schedule with respect to all or any
portion of the shares of Common Stock granted to any or all of the
employees under the Plan, if and to the extent it deems appropriate
in its sole discretion.
SHOWBIZ PIZZA TIME, INC.
NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN - Exhibit 10(b)
-------------
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 vetoing 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) 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 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:
Portion of Shares
That are Vested
On or After
Such Anniversary
Annual Anniversary and Before
of Date of Grant Next Anniversary
- ------------------ -------------------
First 0%
Second 50%
Third 100%
(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 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 numbers 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, and the Company continues thereafter as the
surviving entity, 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 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 or
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 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.
3.25 Change of Control. If while any unexercised options
remain outstanding under the Plan, a Change of Control (as
hereinafter defined) shall have occurred, then all such options
shall be exercisable in full, notwithstanding Section 2.4 hereof or
any other provision in the Plan or Option Agreement to the
contrary. For purposes of the Plan, a "Change of Control" shall be
deemed to have occurred with respect to the Company: (A) on the
date in which the Company executes an agreement or an agreement in
principle (i) with respect to any merger, consolidation or other
business combination by the Company with or into another entity and
the Company is not the surviving entity, or (ii) to sell or
otherwise dispose of all or substantially all of its assets, or
(iii) to adopt a plan of liquidation; or (B) on the date in which
public announcement is made that the "beneficial ownership" [as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")], of securities representing more than
50% of the combined voting power of the Company is being acquired
by a "person" within the meaning of sections 13(d) and 14(d) of the
Exchange Act; or (C) if, during any period of eighteen (18)
consecutive months, individuals who at the beginning of such period
were members of the Board of Directors cease for any reason to
constitute at least a majority thereof (unless the appointment or
election, or the nomination for election by the Company's
stockholders, of each new director was approved by a vote of at
least a majority of the directors then still in office who were
directors at the beginning of such period); provided, however, that
in no event shall a change in the composition of the Company's
Board of Directors pursuant to an election of Board members
pursuant to Section 4.6 of the Company's Articles of Incorporation,
as amended, constitute or result in a Change of Control for
purposes of this Section 3.25.
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 Applications 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 not 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 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 required 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 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.
SHOWBIZ PIZZA TIME, INC.
STOCK GRANT PLAN - Exhibit 10(c)
---------------
1. Purpose. The purpose of the Plan is to provide senior
executives of the Company or any of its Subsidiaries with a
proprietary interest in the Company through the granting of stock
which will:
(a) increase the interest of the senior executives in
the Company's welfare;
(b) furnish an incentive to the senior executives to
continue their services to the Company or its
Subsidiaries; and
(c) provide a means through which the Company may
attract able persons to enter its employ or the employ of
its Subsidiaries.
2. Administration. The Plan will be administered by the
Committee.
3. Participants. The Committee shall, from time to time,
select the particular senior executives of the Company or any of
its Subsidiaries to whom shares of Common Stock of the Company are
to be granted, and who will, upon such grant, become participants
in the Plan.
4. Shares Subject to the Plan. The Committee may not makes
grants under the Plan for more than an aggregate of 1,145,758
shares of Common Stock. Such maximum number of shares shall be
adjusted to reflect any stock dividend, stock split, share
combination, recapitalization or the like, of or by the Company.
Shares to be granted may be made available from either authorized
but unissued Common Stock or Common Stock held by the Company in
its treasury. Share of Common Stock granted under the Plan that
are cancelled, surrendered, or forfeited to the Company under the
vesting restrictions imposed on such shares pursuant to Section 6
of the Plan, or otherwise, may be regranted under the Plan.
5. Grants of Stock. The Committee shall determine from time
to time the number of shares of Common Stock to be granted to
senior executives of the Company or its Subsidiaries. All grants
of Common Stock under the Plan shall be made by the Committee. Each
grant of Common Stock under the Plan shall be authorized by a
resolution of the Committee and evidenced by a certificate of
participation setting forth the name of the participant, the number
of shares of Common Stock granted, the date of grant, the vesting
schedule applicable to the shares of Common Stock granted and such
other provisions as may be deemed appropriate by the Committee, but
neither such resolution nor such certificate may be inconsistent
with the Plan.
Any grant of shares of Common Stock to a senior executive
shall not be deemed either to entitle the senior executive to, or
to disqualify the senior executive from, (i) participation in any
other grant of shares of Common Stock under the plan, (ii)
participation in any stock option or other plan of the Company or
(iii) the continuance of his employment by the Company or any of
its Subsidiaries.
6. Restrictions on Stock Granted Under the Plan. All shares
of Common Stock granted under the Plan shall be subject to the
following restriction or provisions:
(a) With respect to each separate grant of shares of
Common Stock hereunder, the shares so granted may not be
sold or otherwise alienated or hypothecated (except to
the Company) until the participant has become vested in
those shares as hereinafter provided in this Section 6.
(b) Except as otherwise expressly provided herein, in
the event a participant's employment terminates, if such
termination is for any reason other than normal
retirement, death, total disability or early retirement
with the consent of the Board, then the participant shall
forfeit to the Company those shares in which he has not
become vested under the provisions of this Section 6 and
his certificate of participation, or any amendment or
supplement thereto, as of the date of his termination.
(c) In the event a participant's employment terminates
because of normal retirement or early retirement with the
consent of the Board, then the Committee shall have the
right at the time of the grant, or subsequently, to
provide for the acceleration of, or to accelerate, the
vesting schedule with respect to all or any portion of
the shares of Common Stock granted to such participant,
if and to the extent it deems appropriate in its sole
discretion.
(d) In the event a participant's employment terminates
because of his death or total disability, then the
vesting schedule with respect to all shares of Common
Stock granted to such participant prior to his death or
total disability shall be accelerated, automatically and
without further action of the Committee, to the date next
preceding the date of such participant's termination of
employment, and the participant shall then be fully
vested as to all shares so granted him hereunder.
(e) In the event that a participant's employment with
the Company and its Subsidiaries is terminated by the
employer by written notice to the participant, or
otherwise (as opposed to a voluntary termination or
termination resulting from the death, total disability or
retirement of the participant), if such termination is
for any reason other than "For Cause" (as herein after
defined), then the Committee shall have the right, at the
time of grant, or subsequently, to provide for the
acceleration of, or to accelerate, the vesting schedule
with respect to all or any portion of the shares of
Common Stock granted to such participant under the Plan,
if and to the extent it deems appropriate in its sole
discretion. For purposes hereof, a participant's
employment shall be deemed to have been terminated by the
Company "For Cause" only if such termination shall be
based upon such participant's gross negligence or willful
misconduct in the performance of his duties with the
Company or any of its Subsidiaries or such participant's
conviction of a felony.
(f) The Committee shall have the right, at the time of
grant or subsequently, in its sole discretion, to
establish conditions under which a specific participant
may cease to be a full-time employee of the Company or
any of its Subsidiaries but not be deemed to have
terminated his employment with the Company or any of its
Subsidiaries for purposes of the Plan, including but not
limited to conditions involving part-time employment or
consulting services. Unless otherwise specifically
provided for in a participant's certificate of
participation or in an amendment or supplement thereto,
a participant's employment with the Company or any of its
Subsidiaries shall be deemed to terminate when he ceases
to be a full-time employee of the Company or any of its
Subsidiaries.
(g) All shares of Common Stock granted to a participant
under the Plan shall be subject to forfeiture under a
vesting schedule to be determined by the Committee and
set forth in the certificate of participation issued to
the participant; provided, however, that such shares
shall be subject to a vesting schedule providing the full
vesting within a period not shorter than two years from
the date of grant (subject to acceleration as provided
for in the Plan) and not longer than ten years from the
date of grant.
(h) Upon a Change of Control (as hereinafter defined),
the vesting schedule with respect to all of the shares of
Common Stock granted to any participant under the Plan
shall be accelerated, notwithstanding Section 6(g) hereof
or any other provision in the Plan or certificate of
participation to the contrary, as long as such
participant's employment has not been terminated as of
the Change of Control. For purposes of the Plan, a
"Change of Control" shall be deemed to have occurred with
respect to the Company: (1) on the date in which the
Company executes an agreement or an agreement in
principle (A) with respect to any merger, consolidation
or other business combination by the Company with or into
another entity and the Company is not the surviving
entity, or (B) to sell or otherwise dispose of all or
substantially all of its assets, or (C) to adopt a plan
of liquidation; or (2) on the date in which public
announcement is made that the "beneficial ownership" [as
defined in Rule 13d-3 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")], of securities
representing more than 50% of the combined voting power
of the Company is being acquired by a "person" within the
meaning of sections 13(d) and 14(d) of the Exchange Act;
or (3) if, during any period of eighteen (18) consecutive
months, individuals who at the beginning of such period
were members of the Board of Directors cease for any
reason to constitute at least a majority thereof (unless
the appointment or election, or the nomination for
election by the Company's stockholders, of each new
director was approved by a vote of at least a majority of
the directors then still in office who were directors at
the beginning of such period); provided, however, that in
no event shall a change in the composition of the
Company's Board of Directors pursuant to an election of
Board members pursuant to Section 4.6 of the Company's
Articles of Incorporation, as amended, constitute or
result in a Change of Control for purposes of this
subsection.
(i) Upon approval of this Plan by stockholders of the
Company, as provided for in Section 16 hereof, unvested
shares granted to a participant shall have the right to
vote, and the participant shall receive any dividends
thereon duly declared by the Company according to law,
less any taxes or other amounts which the Company may be
required to withhold with respect thereto; provided,
however, that if shares are forfeited hereunder prior to
being voted or prior to the actual payment of any such
dividend, the participant to whom such shares had been
granted shall have no right to vote, or to receive such
dividend, as to the shares so forfeited.
7. Other Restrictions on Stock Granted Under the Plan. The
Committee may impose such other conditions or restrictions upon the
grant of any shares, or upon any shares of Common Stock granted,
under the Plan as it may deem necessary or advisable, including,
without limitation, conditions requiring reimbursement to the
Company of any withholding taxes for which the Company may be
liable in respect of any shares of Common Stock so granted,
restrictions under the Securities Act of 1933, as amended (the
"1933 Act"), compliance with the requirements of any stock exchange
upon which such shares, or shares of the same class, are then
listed, and restrictions under any Blue Sky or state securities
laws applicable to such shares. At the time any shares of Common
Stock are granted to any participant under the Plan, the
participant shall pay in cash or by check to the Company an amount
equal to a sum calculated by multiplying the then par value of such
shares by the number of shares so granted. In the event any shares
of Common Stock granted to a participant under the Plan are
forfeited, the Company shall pay in cash or by check to the
participant an amount equal to a sum calculated by multiplying the
then par value of such shares by the number of shares so forfeited,
if and to the extent the Company is then legally permitted to do
so.
8. Escrow and Legend. In order to enforce the restrictions
imposed upon the shares of Common Stock granted under the Plan, all
certificates representing such shares shall remain in the physical
custody of the Company, in escrow, until all of the restrictions
imposed pursuant to this Plan which could result in the forfeiture
of such shares have terminated, and the Committee may cause a
legend or legends to be placed on any certificates representing
shares of Common Stock granted under the Plan, which legend or
legends may make appropriate reference to the restrictions imposed
hereunder and any restrictions upon transferability under the 1933
Act and under state Blue Sky or securities laws. The certificates
evidencing shares of Common Stock held in escrow pursuant to this
Section 8 shall be held in custody by the Company until the
participant has become fully vested as to such shares and the
participant has made arrangements satisfactory to the Board for
reimbursement to the Company of any amounts which the Company may
be required to withhold in respect of such shares. Upon the making
of such satisfactory arrangements for reimbursement of amounts
which the Company may be required to withhold in respect of such
shares and the satisfaction of all conditions under this Plan, the
Company shall deliver to the participant, or his legal
representative, the certificates representing all shares of Common
Stock as to which the participant has become fully vested, with any
legend making reference to restrictions imposed hereunder (other
than any restrictions under the 1933 Act of state Blue Sky or
securities laws) being removed.
9. Reimbursement of Withholding Taxes. A participant may, at
his election, satisfy the obligation hereunder to reimburse the
Company for any amounts which the Company may be required to
withhold in respect of any shares of Common Stock granted to the
participant hereunder by the payment to the Company of the amount
of such tax liability in cash or the transfer and delivery to the
Company, free and clear of any and all liens, claims and
encumbrances whatsoever, of that number of shares of Common Stock
(which may include, without limitation, shares of Common Stock
granted to the participant hereunder and as to which the
participant has become fully vested) having an aggregate "fair
market value," on the date of such transfer and delivery to the
Company, equal to the amount of such tax liability. For purposes
hereof, the "fair market value" of shares of Common Stock shall be
determined as follows:
(a) During such time as shares of Common Stock are
listed upon an established stock exchange, the "fair
market value" thereof shall be deemed to be the mean
between the high and low trading prices thereof on such
exchange on the last trading day on which there were
sales of Common Stock reported next preceding the date of
any such transfer and delivery; and
(b) During such time as shares of Common Stock are not
listed upon an established stock exchange, the "fair
market value" thereof shall be deemed to be the mean
between the dealer "bid" and "asked" prices thereof in
the over-the-counter market on the last trading day on
which shares of Common Stock were quoted next preceding
the date of any such transfer and delivery. The
participant and the Company may rely upon information
published in the "Wall Street Journal", or other similar
financial publication, in determining such "bid" and
"asked" or trading prices.
10. Registration of Common Stock. The Company shall, on or
before June 1, 1989, prepare and file a registration statement
under the 1933 Act on Form S-8 (or such other comparable form as
may then be available) with respect to shares of Common Stock
granted or to be granted hereunder and shall use its best efforts
to cause the same to become and remain effective. The Company
shall use its best efforts to cause such registration statement on
Form S-8 to provide for the "shelf registration" of such shares for
reoffer or resale pursuant to Rule 415 promulgated under the 1933
Act (or such other comparable rule as may then be in effect) and to
include in such registration statement on Form S-8 a separate
prospectus covering such reoffers or resales prepared in accordance
with the requirements of Form S-3 (or such other comparable form as
may then be available). In no event shall the Company be required
to prepare and file a separate registration statement with respect
to the reoffer or resale by participants of any shares of Common
Stock granted hereunder. The costs of filing and maintaining such
registration statement on Form S-8, and of any separate prospectus
included therein, shall be borne solely by the Company. In the
event that the Company shall fail to carry out its obligations
under this Section 10 with respect to any participant, and such
default shall continue for more than thirty (30) days following
written notice of such default given by a particular participant to
the Company, then and in such event the vesting schedule with
respect to all shares of Common Stock granted to such participant
hereunder shall be accelerated, automatically and without further
action of any party, to the date such notice was given, and such
participant shall then be fully vested as to all shares so granted
him hereunder.
11. Adjustment of Shares.
(a) If at anytime while the Plan is in effect there
shall be any increase of decrease in the number of issued
and outstanding shares of Common Stock through the
declaration of a stock dividend or through any
recaptialization resulting in a stock split-up,
combination or exchange of shares, then an appropriate
adjustment shall be made in the maximum number of shares
then subject to being granted under the Plan, so that the
same proportion of the Company's issued and outstanding
shares shall continue to be subject to being so granted
under this Plan.
(b) If the Company is the surviving entity following a
consolidation or merger with another corporation or
following its participation in a corporate
reorganization, then the stock, securities or other
assets which the participant is entitled to receive, or
has received, in any such transaction by reason of
ownership of shares of Common Stock which are subject to
forfeiture, shall be held in escrow by the Company in
accordance with Section 8 of the Plan and shall be
subject to the same restrictions and conditions as those
to which the granted shares were subject.
(c) The existence of any outstanding shares subject to
forfeiture under the Plan shall not affect in any manner
the right or power of the Company to make, authorize or
consummate (1) any or all adjustments, recapitalizations,
reorganizations or other changes in the capital structure
or business of the Company or any of its Subsidiaries;
(2) any merger or consolidation of the Company or any of
its Subsidiaries; (3) any issue by the Company or any of
its Subsidiaries of debt securities or equity securities;
(4) the dissolution or liquidation of the Company or any
of its Subsidiaries; (5) any sale, transfer or assignment
of all or any part of the assets or business of the
Company or any of its Subsidiaries; or (6) any other
corporate act or proceeding, whether of a similar
character or otherwise.
12. Interpretation. The Committee shall interpret the Plan
and shall prescribe such rules and regulations in connection with
the operation of the Plan as it determines to be advisable for the
administration of the Plan. The Committee may rescind and amend
its rules and regulations from time to time.
13. Amendment or Discontinuance. The Plan may be amended or
discontinued by the Board without the approval of the stockholders
of the Company; provided, however, that no such amendment may
without the approval of the stockholders of the Company:
(a) increase the aggregate number of shares of Common
Stock subject to the Plan; or
(b) change the class of persons eligible to receive
grants under the Plan.
No amendment or discontinuance of the Plan may, without the
prior written consent of the participant, adversely affect the
right of any participant to receive any shares of Common Stock
previously granted under the Plan to such participant.
14. Effect of this Plan. Neither the adoption of the Plan
nor any action of the Committee or the Board shall be deemed to
give any senior executive any right to be granted shares of Common
Stock of the Company or any other rights. A certificate of
participation evidencing the grant of Common Stock hereunder shall
be delivered to the participant, evidencing his rights under the
Plan.
15. Definitions. For the purpose of this Plan, unless the
context requires otherwise, the following terms shall have the
meanings indicated:
(a) "Plan" means this Stock Grant Plan, as amended from
time to time.
(b) "Company" means ShowBiz Pizza Time, Inc., a Kansas
Corporation.
(c) "Board" means the Board of Directors of t he
Company.
(d) "Committee means the Stock Grant Committee of the
Board, consisting of two (2) Directors who are not
employees of the Company, thereby being ineligible for
grants under the Plan.
(e) "Common Stock" means the Common Stock which the
Company is currently authorized to issue or may in the
future be authorized to issue (as long as the Common
Stock varies from that currently authorized, if at all,
only in amount of par value).
(f) "Subsidiary" means any corporation in an unbroken
chain of corporations beginning with the Company if, at
the time of the grant, each of the corporations other
than the last corporation in the unbroken chain owns
stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other
corporations in the chain, and "Subsidiaries" means more
than one of any such corporations.
16. Non-Transferability 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.
17. Effectiveness of Plan. The provisions of this Plan
became effective on December 30, 1988.
SHOWBIZ PIZZA TIME, INC.
1988 NON-STATUTORY STOCK OPTION CONTRACT - Exhibit 10(d)
-------------
THIS 1988 NON-STATUTORY STOCK OPTION CONTRACT (hereinafter
referred to as "Contract") is made and entered into on ----------
(the "Granting Date"), by and between SHOWBIZ PIZZA TIME, INC., a
Kansas corporation (the "Company"), and ------------- (the
"Optionee").
WITNESSETH:
WHEREAS, the Board of Directors of the Company (the "Board of
Directors") has adopted the ShowBiz Pizza Time, Inc. Non-Statutory
Stock Option Plan (the "Plan"), pursuant to which the Stock Option
Committee of the Board of Directors (the "Committee") may grant,
from time to time, on or prior to October 18, 1998, non-statutory
options to purchase shares of the Common Stock of ShowBiz Pizza
Time, Inc. to individuals who are directors or key employees of the
Company or of any of its subsidiary corporations, in such amounts
and under such form of agreement as shall be determined by the
Committee; and
WHEREAS, pursuant to the Plan, the Committee has determined
that the Optionee shall be granted an option to purchase shares of
the Common Stock of ShowBiz Pizza Time, Inc. on the terms and
conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual promises and
covenants herein contained and other good and valuable
consideration, the parties hereto do hereby agree as follows:
1. Incorporation of the Plan. A copy of the Plan is attached
hereto and incorporated herein by reference, and all of the
terms, conditions and provisions contained therein shall be
deemed to be terms, conditions and provisions of this
Contract. All terms used herein which are defined in the Plan
shall have the meanings given them in the Plan.
2. Grant of Option. Pursuant to the authorization of the Board
of Directors, and subject to the terms, conditions and
provisions contained in the Plan and this Contract, the
Company hereby grants to the Optionee, an option (the
"Option") to purchase from the Company all or any part of an
aggregate of ------- (--------------- ) shares of the Common
Stock of ShowBiz Pizza Time, Inc., at the purchase price of
------------------- Dollars (----------- ) per share. The date
first written above shall be deemed to be the Granting Date of
the Option.
3. Period of Exercise. The Option granted hereunder shall be
exercisable from time to time by the Optionee subject to the
following restrictions:
(a) Vesting and Expiration Dates. Optionee may exercise up
to an aggregate of ---------. The Option shall expire at
12:00 midnight on ----------.
(b) Exercise During Lifetime of Optionee. The Option shall
be exercisable during the lifetime of the Optionee only
by him.
(c) Exercise after Death of Optionee. The Option shall be
exercisable after the death of the Optionee only if the
Optionee shall at the time of his death have been an
employee of the Company or a subsidiary, and then (i)
only by or on behalf of such person or persons to whom
the Optionee's rights under the Option shall have been
passed by the Optionee's will or, if the right to
exercise the Option is not specifically bequeathed by
will, by his legal representative or representatives,
(ii) only to the extent that the Optionee was entitled to
exercise said Option at the date of his death, and (iii)
only if said Option is exercised prior to the expiration
of three (3) months from the date of his death.
(d) Cessation of Employment. The Option may not be exercised
by the Optionee except while he is an employee of the
Company or a subsidiary, or, if he shall cease to be an
employee for any other reason other than death after he
has been continuously so employed, for at least one (1)
year after the Granting Date, he may, but only within ten
(10) business days next succeeding such cessation of
employment, exercise his option.
4. Manner of Exercise. The Option granted hereunder shall be
exercised by delivering to the Company from time to time
within the time limits specified in Paragraph 3 hereof a
notice specifying the number of shares the Optionee then
desires to purchase (and with respect to which the Optionee
has acquired the right to purchase, as described in Paragraph
3(a) above), together with either: (i) a cashier's check
payable in United States currency (unless a personal check
shall be acceptable to the Company) to the order of the
Company for an amount equal to the option price for such
number of shares; or (ii) with the prior consent of the
Committee, and upon receipt of all regulatory approvals,
certificate for Common Stock of the Company, valued at the
Fair Market Value (determined as provided in the Plan) of such
Common Stock on the date of exercise of this option, as
payment of all or any portion of the option price for such
number of shares; and (iii) such other instruments or
agreements duly signed by the Optionee as in the opinion of
counsel for the Company may be necessary or advisable in order
that the issuance of such number of shares comply with
applicable rules and regulations under the Securities Act of
1933, as amended (the "Act"), any appropriate state securities
laws or any requirement of any national securities exchange or
market system on which such stock may be traded. As soon as
practicable after any such exercise of the Option in whole or
in part by the Optionee, the Company will deliver to the
Optionee at Optionee's address, as set forth below, a
certificate for the number of shares with respect to which the
Option shall have been so exercised, issued in the Optionee's
name. Such stock certificate shall carry such appropriate
legend, and such written instructions shall be given to the
Company's transfer agent, as may be deemed necessary or
advisable by counsel for the Company to satisfy the
requirements of the Act or any state securities law.
5. Withholding. To the extent required by law the Company shall
withhold any taxes required to be withheld under any
applicable Federal, state or other law and transmit such
withheld amounts to the appropriate taxing authority. The
Company may condition the transfer of stock after the exercise
of the Option upon the Optionee's agreement to remit to the
Company the amount of employment taxes which are required to
be withheld or, with the consent of the Committee, to satisfy
such withholding obligation by means of Share Withholding, as
such term is defined in the Plan.
6. Notices. All notices, surrenders and other communications
required or allowed to be made or given in connection with the
Option granted hereunder shall be in writing, shall be
effective when received, and shall be hand delivered or sent
by registered or certified mail (i) if to the Company, to
ShowBiz Pizza Time, Inc., 4441 West Airport Freeway, Irving,
Texas 75062, or (ii) if to the Optionee, to the Optionee at
the address shown beneath his signature hereto, or to such
other address as to which may have notified the company
pursuant to this section.
7. Binding Effect. This Contract shall bind, and except as
specifically provided in the Plan and this Contract, shall
inure to the benefit of, the respective heirs and legal
representatives of the parties hereto.
8. Governing Law. This Contract and the rights of all persons
claiming hereunder shall be construed and determined in
accordance with the laws of the State of Texas.
9. Multiple Counterparts. This Contract may be executed in two
or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
10. Expiration of Offer. If Optionee has not accepted the
Company's offer herein contained by signing and returning to
the Company one (1) duplicate original of this Contract prior
to the expiration of one hundred and twenty (120) days after
the Granting Date, then the offer herein contained shall be,
withdrawn, void and of no further force or effect.
IN WITNESS WHEREOF, the Company has caused this Contract to be
executed by its officer hereunto duly authorized and its corporate
seal to be hereunto affixed, and the Optionee has hereunto set his
hand, as of the date and year first written above.
SHOWBIZ PIZZA TIME, INC.
(CORPORATE SEAL)
By: -------------------------------
Richard M. Frank
Chairman and Chief Executive Officer
ATTEST
- ---------------------------------
Marshall R. Fisco, Jr., Secretary
------------------------------
Optionee Signature
Printed Name : ---------------
Tax I.D. Number: ---------------
Address: 4441 West Airport
Freeway
Irving, Texas 75062
LOAN AGREEMENT BY AND BETWEEN
SHOWBIZ PIZZA TIME, INC. and BANK ONE, TEXAS,
NATIONAL ASSOCIATION - Exhibit 10(e)(1)
---------------
INDEX
1. Credit Facilities . . . . . . . . . . . . . . . . . . .1
2. Promissory Notes. . . . . . . . . . . . . . . . . . . 2
3. Collateral. . . . . . . . . . . . . . . . . . . . . . 2
4. Representations and Warranties. . . . . . . . . . . . 3
5. Conditions Precedent to Advances. . . . . . . . . . . 4
6. Affirmative Covenants . . . . . . . . . . . . . . . . 4
7. Financial Covenants . . . . . . . . . . . . . . . . . 10
8. Negative Covenants. . . . . . . . . . . . . . . . . . 11
9. Events of Default . . . . . . . . . . . . . . . . . . 14
10. Remedies. . . . . . . . . . . . . . . . . . . . . . . 16
11. Rights Cumulative . . . . . . . . . . . . . . . . . . 16
13. Benefits. . . . . . . . . . . . . . . . . . . . . . . 16
14. Notices . . . . . . . . . . . . . . . . . . . . . . . 16
15. Construction. . . . . . . . . . . . . . . . . . . . . 17
16. Invalid Provisions. . . . . . . . . . . . . . . . . . 17
17. Expenses. . . . . . . . . . . . . . . . . . . . . . . 17
18. Participation of the Loans. . . . . . . . . . . . . . 17
19. Entire Agreement. . . . . . . . . . . . . . . . . . . 17
20. Counterparts. . . . . . . . . . . . . . . . . . . . . 17
ADDENDUM I . . . . . . . . . . . . . . . . . . . . . . . . . . 19
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Loan Agreement") dated January 18,
1996 (the "Effective Date") is entered into by and between SHOWBIZ
PIZZA TIME, INC., a Kansas corporation ("Borrower"), and BANK ONE,
TEXAS, NATIONAL ASSOCIATION, a national banking association
("Bank"). The capitalized terms shall have the meanings defined
within the text or in the definitions included in Addendum I to
this Loan Agreement.
1. (a) Credit Facilities. Subject to the terms and
conditions set forth in this Loan Agreement, the Notes (hereinafter
defined) and all other documents evidencing, securing, governing,
guaranteeing and/or pertaining to the Notes evidencing the Loans,
as hereinafter defined (collectively, together with the Loan
Agreement, referred to hereinafter as the "Loan Documents"), Bank
hereby agrees to provide to Borrower the credit facility or
facilities hereinbelow (whether one or more, the "Credit
Facilities"). Subject to the terms and conditions set forth
herein, Bank agrees to lend to Borrower, on a revolving basis from
time to time during the period commencing on the date hereof and
continuing through and including 11:00 a.m. (Central time) on June
27, 1997 (the "Termination Date"), such amounts as Borrower may
request hereunder (the "Commitments"); provided, however, the total
principal amount outstanding at any time shall not exceed TWO
MILLION AND NO/100 DOLLARS ($2,000,000.00) (the "Revolving Line of
Credit"). Subject to the terms and conditions hereof, Borrower may
borrow, repay and reborrow hereunder. The sums advanced under the
Revolving Line of Credit shall be used for issuance of letters of
credit. All advances under the Credit Facilities shall be
collectively called the "Loans". Bank reserves the right to
require Borrower to give Bank not less than one (1) Business Day
prior notice of each requested advance under the Credit Facilities,
specifying (i) the aggregate amount of such requested advance, (ii)
the requested date of such advance, and (iii) the purpose for such
advance, with such advances to be requested in a form satisfactory
to Bank.
(b) Letters of Credit.
(i) Bank agrees to issue Letters of Credit in a form to be
agreed to by the Borrower and Bank, issued at any time
commencing on the date hereof and expiring on a date not
exceeding one year from its date of issuance; provided,
however, that (i) no Letter of Credit shall expire later than
the Termination Date; (ii) Bank will not issue any Letter of
Credit to the extent that, after giving effect to such
issuance, the amount available to be drawn under all Letters
of Credit plus the advances under the Loans would exceed the
Revolving Line of Credit.
(ii) The Borrower shall pay, except as otherwise
provided in the last sentence of this Section, to Bank in immediately
available funds upon notice to the Borrower the amount of each
payment made by Bank under a Letter of Credit.
Notwithstanding Section 14, such notice may be given by
telephone, but shall be confirmed that same day by a
teletransmission in a writing from Bank to the Borrower.
Payment by the Borrower to Bank on account of a payment under
a Letter of Credit shall be made in immediately available
funds by 3:00 p.m. (Dallas, Texas time) on the day notice
thereof is given if notice is given prior to 12:00 p.m.
(Dallas, Texas time) on such day. If notice is given by Bank
after 12:00 p.m. (New York City time), payment shall be made
by the Borrower by 1:00 p.m. (Dallas, Texas time) on the next
succeeding Business Day. Interest on any amounts paid by Bank
under a Letter of Credit shall accrue beginning on the date
payment by the Borrower is due and payable at the rate
specified the Notes. If (i) such payment due from the
Borrower is not made on the date such payment is otherwise due
and payable, (ii) the conditions precedent in Section 5 hereof
have been satisfied and (iii) the Borrower shall give Bank
irrevocable written notice signed by a duly authorized officer
of the Borrower (which notice may be sent via
teletransmission) on or before 11:00 a.m., Dallas, Texas time,
on a day succeeding the date such payment is otherwise due and
payable, then the amount of such payment due and unpaid plus
any interest accrued thereon shall automatically, and without
any further action on the part of the Borrower or Bank, be
converted into and become a Loan for all purposes of this Loan
Agreement subject to all the terms and conditions of this Loan
Agreement relating to Loans.
(iii) Each Letter of Credit shall be issued on at least
three Business Days' notice from the Borrower to Bank
specifying the date such Letter of Credit will be issued (the
"Issuance Date"), the amount, the expiry date, the name of the
proposed beneficiary of such Letter of Credit (the "Proposed
Beneficiary"), and such other information and documents as
reasonably may be required or requested by Bank for the
issuance of or drawing under such Letter of Credit.
Notwithstanding Section 14, such notice may be given by
telephone, but shall be confirmed that same day by
teletransmission in a writing from the Borrower to Bank. On
the Issuance Date specified by the Borrower in such notice and
upon fulfillment of the applicable conditions set forth in
Section 5, Bank will issue the Letter of Credit to the
Proposed Beneficiary in the amount specified in such notice.
(c) Letter of Credit Fees. In consideration of the
issuance by Bank of each Letter of Credit, the Borrower hereby
agrees to pay Bank a fee with respect to the amount available
to be drawn under such Letter of Credit issued, computed on
the basis of a 360-day year for the actual number of days
occurring in the period in which such Letter of Credit is
outstanding, at a rate equal to 1.5% per annum (the "Annual
Fee") on the amount available to be drawn under such Letter of
Credit issued plus Bank's normal fees, including but not
limited to, fees for issuance, amendments, cancellations,
postage and telecommunications charges where necessary. Such
fees are to be paid as incurred in immediately available
funds, except that the Annual Fee shall be paid in immediately
available funds quarterly in arrears on the first day of each
calendar quarter and on the date of expiration or earlier
termination of such Letter of Credit.
2. Promissory Notes. The Loans shall be evidenced by one or
more promissory notes (whether one or more, together with any
renewals, extensions and increases thereof, the "Notes") duly
executed by Borrower and payable to the order of Bank, in form and
substance acceptable to Bank. Interest on the Notes shall accrue
at the rate set forth therein. The principal of and interest on
the Notes shall be due and payable in accordance with the terms and
conditions set forth in the Notes and in this Loan Agreement.
3. Collateral. As collateral and security for the
indebtedness evidenced by the Notes and any and all other
indebtedness or obligations from time to time owing by Borrower to
Bank, Borrower shall grant, and hereby grants, to Bank, its
successors and assigns, a first and prior lien and security
interest in and to the property described hereinbelow, together
with any and all PRODUCTS AND PROCEEDS thereof (the "Collateral"):
(a) Those certain real properties located at 7110 South
Westmoreland, Dallas, Dallas County, Texas 75237, 711
Coliseum Blvd. West, Fort Wayne, Allen County, Indiana 46808,
6065 Youngerman Circle, Jacksonville, Duval County, Florida
32244, 7350 Plantation, Pensacola, Escambia County, Florida
32501, together with all improvements, fixtures, equipment and
other appurtenances attached thereto.
(b) All equipment and fixtures of whatsoever kind and
character now or hereafter possessed, held, acquired, leased
or owned by Borrower and used or usable in Borrower's business
at the locations described in the immediately preceding
paragraph (including, without limiting the generality of the
foregoing, those certain items set forth on the additional
sheets, if any, attached hereto and made a part hereof by
reference as Exhibit "A"), together with all replacements,
accessories, additions, substitutions and accessions to all of
the foregoing, and all records relating in any way to the
foregoing (including, without limitation, any computer
software, whether on tape, disk, card, strip, cartridge or any
other form).
Borrower agrees to execute such security agreements, assignments,
deeds of trust and other agreements and documents as Bank shall
deem appropriate and otherwise require from time to time to more
fully create and perfect Bank's lien and security interests in the
Collateral. Borrower shall provide a mortgagee's policy of title
insurance to Bank on each of the tracts of real property included
in the Collateral, insuring the priority of Bank's first and prior
lien in and to such real property subject only to such title
exceptions as Bank may approve in writing. The title insurance
shall be in the aggregate amount of $2,000,000.00 allocated among
the real properties as Bank shall determine. Borrower shall
provide "as built" surveys of each of the real properties,
certified to Bank by a registered public land surveyor, if Bank
requests such surveys.
4. Representations and Warranties. Borrower hereby
represents and warrants, and upon each request for an advance under
the Credit Facilities further represents and warrants, to Bank as
follows:
(a) Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Kansas and all other states where it is doing business, and
has all requisite power and authority to execute and deliver
the Loan Documents; and
(b) The execution, delivery, and performance of this
Loan Agreement and all of the other Loan Documents by Borrower
have been duly authorized by all necessary action by Borrower,
and constitute legal, valid and binding obligations of
Borrower, enforceable in accordance with their respective
terms, except as limited by bankruptcy, insolvency or similar
laws of general application relating to the enforcement of
creditors' rights and except to the extent specific remedies
may generally be limited by equitable principles; and
(c) The execution, delivery and performance of this Loan
Agreement and the other Loan Documents, and the consummation
of the transactions contemplated hereby and thereby, do not
(i) conflict with, result in a violation of, or constitute a
default under (A) any provision of its articles or certificate
of incorporation or bylaws, if Borrower is a corporation, or
its partnership agreement, if Borrower is a partnership, or
any agreement or other instrument binding upon Borrower, or
(B) any law, governmental regulation, court decree or order
applicable to Borrower, or (ii) require the consent, approval
or authorization of any third party; and
(d) Each financial statement of Borrower supplied to the
Bank truly discloses and fairly presents Borrower's financial
condition as of the date of each such statement;
(e) There has been no Material Adverse Effect
(hereinafter defined) on such financial condition or results
of operations of Borrower subsequent to the date of the most
recent financial statement supplied to the Bank; and
(f) There are no actions, suits or proceedings, pending
or, to the knowledge of Borrower, threatened against or
affecting Borrower or the properties of Borrower, before any
court or governmental department, commission or board, which,
if determined adversely to Borrower, would have a Material
Adverse Effect on the financial condition, properties, or
operations of Borrower; and
(g) Borrower has filed all federal, state and local tax
reports and returns required by any law or regulation to be
filed by it and has either duly paid all taxes, duties and
charges indicated due on the basis of such returns and
reports, or made adequate provision for the payment thereof,
and the assessment of any material amount of additional taxes
in excess of those paid and reported is not reasonably
expected.
5. Conditions Precedent to Advances. Bank's obligation to
make any advance under this Loan Agreement and the other Loan
Documents shall be subject to the conditions precedent that, as of
the date of such advance and after giving effect thereto (i) all
representations and warranties made to Bank in this Loan Agreement
and the other Loan Documents shall be true and correct, as of and
as if made on such date, (ii) no Material Adverse Effect on the
financial condition of Borrower since the effective date of the
most recent financial statements furnished to Bank by Borrower
shall have occurred and be continuing, (iii) no event has occurred
and is continuing, or would result from the requested advance,
which with notice or lapse of time, or both, would constitute an
Event of Default (as hereinafter defined), and (iv) Bank's receipt
of all Loan Documents appropriately executed by Borrower and all
other proper parties.
6. Affirmative Covenants. Until (i) the Notes and all other
obligations and liabilities of Borrower under this Loan Agreement
and the other Loan Documents are fully paid and satisfied, and (ii)
the Bank has no further commitment to lend hereunder, Borrower
agrees and covenants that it will, unless Bank shall otherwise
consent in writing:
(a) The Borrower shall furnish to Bank:
(i) Quarterly Statements -- within one Business Day
after the day that is 45 days after the end of each
quarterly fiscal period in each fiscal year of the
Borrower (other than the last quarterly fiscal period of
each such fiscal year), duplicate copies of,
(A) consolidated and consolidating
balance sheets of the Borrower and its
Subsidiaries as at the end of such quarter,
(B) consolidated and consolidating
statements of income, changes in shareholders'
equity and cash flows of the Borrower and its
Subsidiaries, for such quarter and (in each
case of the second and third quarters) for the
portion of the fiscal year ending with such
quarter,
setting forth in each case in comparative form the
figures for the corresponding periods in the previous
fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to quarterly financial
statements generally, and certified by a Senior Financial
Officer as fairly presenting, in all material respects,
the financial positions of the companies being reported
on and their results of operations and cash flows,
subject to changes resulting from year-end adjustments;
provided, that delivery within the time period specified
above of copies of the Borrower's Quarterly Report on
Form 10-Q prepared in compliance with the requirements
therefor and filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of
this Section 6.1(a);
(ii) Annual Statements -- within one Business Day
after the day that is 90 days after the end of each
fiscal year of the Borrower, duplicate copies of,
(A) consolidated and consolidating
balance sheets of the Borrower and its
8Subsidiaries as at the end of such year, and
(B) consolidated and consolidating
statements of income, changes in shareholders'
equity and cash flows of the Borrower and its
Subsidiaries for such year,
setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP, and accompanied
by
(A) by an opinion thereon of independent
public accountants of recognized national
standing, which opinion shall state that such
financial statements present fairly, in all
material respects, the financial position of
the companies being reported upon and their
results of operations and cash flows and have
been prepared in conformity with GAAP, and
that the examination of such accountants in
connection with such financial statements has
been made in accordance with generally
accepted auditing standards, and that such
audit provides a reasonable basis for such
opinion in the circumstances, and
(B) a certificate of such accountants
stating that they have reviewed Sections 7(a),
7(b), 7(c), 8(b) and 8(d) of this Agreement
and stating further whether, in making their
audit, they have become aware of any condition
or event that then constitutes a Default or an
Event of Default under said Sections, and, if
they are aware that any such condition or
event then exists, specifying the nature and
period of the existence thereof (it being
understood that such accountants shall not be
liable, directly or indirectly, for any
failure to obtain knowledge of any Defaults or
Event of Default unless such accountants
should have obtained knowledge thereof in
making an audit in accordance with generally
accepted auditing standards or did not make
such an audit),
provided, that the delivery within the time period
specified above of the Borrower's Annual Report of Form
10-K for such fiscal year (together with the Borrower's
annual report to shareholders, if any, prepared pursuant
to Rule 14a-3 under the Exchange Act) prepared in
accordance with the requirements therefor and filed with
the Securities and Exchange Commission, together with the
accountant's certificate described in clause (B) above,
shall be deemed to satisfy the requirements of this
Section;
(iii) SEC and Other Reports -- promptly upon their
becoming available, one copy of (i) each financial
statement, report, notice or proxy statement sent by the
Borrower or any Subsidiary generally to its shareholders
or to it creditors (other than the Borrower or another
Subsidiary), and (ii) each regular or periodic report,
each registration statement (without exhibits except as
expressly requested by such holder), and each prospectus
and all amendments thereto filed by the Borrower or any
Subsidiary with the Securities and Exchange Commission
and of each press release and other statements made
available generally by the Borrower or any Subsidiary to
the public concerning developments that are Material;
(iv) Notice of Default or Event of Default --
promptly, and in any event within five days after a
Responsible Officer becoming aware of the existence of
any Default or Event of Default or that any Person has
given any notice or taken any action with respect to a
claimed default hereunder or that any Person has given
any notice or taken any action with respect to a claimed
default of the type referred to in Section 9.1, a written
notice specifying the nature and period of existence
thereof and what action the Borrower is taking or
proposes to take with respect thereto;
(v) ERISA Matters -- promptly, and in any event within
five days after a Responsible Officer becoming aware of
any of the following, a written notice setting forth the
nature thereof and the action, if any, that the Borrower
or an ERISA Affiliate proposes to take with respect
thereto:
(A) with respect to any Plan, any reportable
event, as defined in section 4043(b) of ERISA and
the regulations thereunder, for which notice
thereof has not been waived pursuant to such
regulations as in effect on the date hereof; or
(B) the taking by the PBGC of steps to
institute, or the threatening by the PBGC of the
institution of, proceedings under section 4042 of
ERISA for the termination of, or the appointment of
a trustee to administer, any Plan, or the receipt
by the Borrower or any ERISA Affiliate of a notice
from a Multiemployer Plan that such action has been
taken by the PBGC with respect to such
Multiemployer Plan; or
(C) any event, transaction or condition that
could result in the incurrence of any liability by
the Borrower or any ERISA Affiliate pursuant to
Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit
plans, or in the imposition of any Lien on any of
the rights, properties or assets of the Borrower or
any ERISA Affiliate pursuant to Title I or IV of
ERISA or such penalty or excise tax provisions, if
such liability or Lien, taken together with any
other such liabilities or Liens then existing,
could reasonably be expected to have a Material
Adverse Effect;
(vi) Accountants Reports -- promptly, and in any
event within 30 days of receipt thereof by a Responsible
Officer of the Borrower, copies of any report as to
material inadequacies in accounting controls submitted by
independent accountants in connection with any audit of
the Borrower or any Subsidiary;
(vii) Material Litigation -- promptly, and in
any event within 30 days after a Responsible Office of
the Borrower becomes aware of any litigation, arbitration
or administrative proceedings affecting the Borrower or
any of its Subsidiaries and which, if adversely
determined, could be reasonably expected to have a
Material Adverse Effect, a written statement of a
Responsible Officer describing the nature and status of
such matters and what action the Borrower or a Subsidiary
has taken, is taking or proposes to take with respect
thereto;
(viii) Notices from Governmental Authority --
promptly, and in any event within 30 days of receipt
thereof, copies of any notice to the Borrower or any
Subsidiary from any Federal or state Governmental
Authority relating to any order, ruling, statute, or
other law or regulation that could reasonably be expected
to have a Material Adverse Effect; and
(ix) Requested Information -- with reasonable
promptness, such other data and information relating to
the business, operations, affairs, financial condition,
assets or properties of the Borrower or any of its
Subsidiaries or relating to the ability of the Borrower
to perform its obligations hereunder and under the other
Loan Documents as from time to time may be reasonably
requested by Bank.
(b) Additional Quarterly Reports and Certificate. The
financial statements required to be furnished under Section
6(i) and (ii) hereof, shall be accompanied by:
(i) Compliance Certificate -- the information
(including detailed calculations) required in order to
establish whether the Borrower was in compliance with the
requirements of Sections 7(a), 7(b) and 7(c) during the
quarterly or annual period covered by the statements then
being furnished (including with respect to each such
Section, where applicable, the calculations of the
maximum or minimum amount, ratio or percentage, as the
case may be, permissible under the terms of such
Sections, and the calculation of the amount, ratio or
percentage then in existence); and
(ii) Default -- a statement that such Senior
Financial Officer has reviewed the relevant terms hereof
and has made, or caused to be made, under his or her
supervision, a review of the transactions and conditions
of the Borrower and its Subsidiaries from the beginning
of the quarterly or annual period covered by the
statements then being furnished to the date of the
certificate and that such review shall not have disclosed
the existence during such period of any condition or
event that constitutes a Default or an Event of Default
or, if any such condition or event existed or exists
(including, without limitation, any such event or
condition resulting from the failure of the Borrower or
any Subsidiary to comply with any Environmental Law),
specifying the nature and period of existence thereof and
what action the Borrower shall have taken or proposes to
take with respect thereto.
(c) Inspection by Bank. The Borrower shall permit the
representatives of Bank:
No Default -- if no Default or Event of Default then
exists, at the expense of such holder and upon reasonable
prior notice to the Borrower, to visit the principal
executive office of the Borrower, to discuss the affairs,
finances and accounts of the Borrower and its
Subsidiaries with the Borrower's officers, and (with the
consent of the Borrower, which consent will not be
unreasonably withheld) its independent public
accountants, and (with the consent of the Borrower, which
consent will not be unreasonably withheld) to visit the
other offices and properties of the Borrower and each
Subsidiary, all at such reasonable times and as often as
may be reasonably requested in writing; and
Default -- if a Default or Event of Default then
exists, at the expense of the Borrower, to visit and
inspect any of the offices or properties of the Borrower
or any Subsidiary, to examine all their respective books
of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their
respective affairs, finances and accounts with their
respective officers, employees, and independent public
accountants (and by this provision the Borrower
authorizes said accountants to discuss the affairs,
finances and accounts of the Borrower and its
Subsidiaries), all at such times and as often as may be
requested.
(d) Compliance With Laws. The Borrower will and will
cause each of its Subsidiaries to comply with all laws,
ordinances or governmental rules or regulations to which each
of them is subject, including without limitation Environmental
Laws, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental
authorizations necessary to the ownership of their respective
properties or to the conduct of their respective businesses,
in each case to the extent necessary to ensure that non-compliance
with such laws, ordinances, or governmental rules
or regulations or failures to obtain or maintain in effect
such licenses, certificates, permits, franchises and other
governmental authorizations could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(e) Insurance. (i) The Borrower shall, and shall cause
each of its Subsidiaries to, (A) keep all of its properties
adequately insured at all times with responsible insurance
carriers against loss or damage by fire and other hazards and
(B) maintain adequate insurance at all times with responsible
carriers against liability on account of damage to persons and
property and under all applicable workmen's compensation laws.
For the purposes of this Section, insurance shall be deemed
adequate if the same is not less extensive in coverage and
amount than is customarily maintained by other persons engaged
in the same or similar business similarly situated.
(ii) The Borrower, from time to time upon request of
Bank, promptly shall furnish or cause to be furnished to
Bank evidence, in form and substance satisfactory to
Bank, of the maintenance of all insurance required by
this Section to be maintained, including, but not limited
to, such originals or copies as Bank may request of
policies, certificates of insurance, riders and
endorsements relating to such insurance and proof of
premium payments.
(f) Maintain Properties. The Borrower will and will
cause each of its Subsidiaries to maintain and keep, or cause
to be maintained and kept, their respective properties in good
repair, working order and condition (other than ordinary wear
and tear), so that the business carried on in connection
therewith may be properly conducted at all times, provided
that this Section shall not prevent the Borrower or any
Subsidiary from discontinuing the operation and the
maintenance of any of its properties if such discontinuance is
desirable in the conduct of its business and the Borrower has
concluded that such discontinuance could not, individually or
in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(g) Taxes and Claims. The Borrower shall duly pay and
discharge, and shall cause each of its Subsidiaries to file
all tax returns required to be filed in any jurisdiction and
to pay and discharge all taxes shown to be due and payable on
such returns and all other taxes, assessments, governmental
charges, or levies imposed on them or any of their properties,
assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have
become delinquent and all claims for which sums have become
due and payable that have or might become a Lien on properties
or assets of the Borrower or any Subsidiary; provided, that
neither the Borrower nor any Subsidiary need pay any such tax
or assessment or claim if (i) the amount, applicability or
validity thereof is contested by the Borrower or such
Subsidiary on a timely basis in good faith and in appropriate
proceedings, and the Borrower or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the
books of the Borrower or such Subsidiary or (ii) the
nonpayment of all such taxes and assessments in the aggregate
could not reasonably be expected to have a Material Adverse
Effect.
(h) Corporate Existence. The Borrower shall, and shall
cause each of its Subsidiaries to, do or cause to be done all
things necessary to preserve, renew and keep in full force and
effect (i) its corporate existence (except as otherwise may be
permitted by Section 8(c) hereof) and (ii) all rights and
franchises (as franchisee) unless, in the good faith judgment
of the Borrower, the termination of or failure to preserve and
keep in full force and effect any such right or franchise
could not, individually or in the aggregate, have Material
Adverse Effect.
(i) Change in Business. The Borrower shall, and shall
cause each of its Subsidiaries to, remain engaged solely in
the business of owning and operating family
restaurant/entertainment centers and other businesses directly
related thereto.
(j) Maintenance of Security Interest. The Borrower
shall maintain perfected, first priority security interests in
the Collateral securing any Loan in favor of Bank in
accordance with the terms of any applicable mortgage or pledge
agreement entered into in connection therewith, subject only
to the Liens permitted pursuant to Section 8(a) hereof.
(k) Further Assurances. Upon the request of Bank, the
Borrower at its cost and expense shall, and shall cause each
of its Subsidiaries to, duly execute and deliver, or cause to
be duly executed and delivered, to Bank such further
instruments and do and cause to be done such further acts as
may be reasonably necessary or proper in the opinion of Bank
to carry out more effectually any encumbrance or pledge of
Collateral in connection with any Loan.
(l) Other Indebtedness Covenants. If the Borrower or
any Subsidiary at any time after the Effective Date and prior
to the Termination Date shall enter into any agreement
relating to Indebtedness with any party (the "Other Lender"),
that requires the Borrower or any Subsidiary to comply with
financial covenants that are in addition to or more
restrictive than the financial covenants in this Loan
Agreement at the time, or that permits the Other Lender to
accelerate or require the Borrower or any Subsidiary to
purchase or repay such Indebtedness prior to its stated
maturity by reason of a default or event of default that is in
addition to or more restrictive than the Defaults of Events or
Default specified in this Loan Agreement at the time (in any
such case howsoever described in such agreement), each
covenant, event of default or other provision to such effect,
and each related definition, in such agreement (as amended or
modified from time to time thereafter) shall be deemed to be
incorporated by reference in this Loan Agreement, mutatis
mutandis, as if then and thereafter set forth herein in full.
Promptly after entering into any such agreement (or any
amendment or modification thereof) the Borrower will furnish
a copy thereof (or a copy of the covenant, event of default or
other provision that is incorporated by reference in this Loan
Agreement as aforesaid) to Bank.
7. Financial Covenants. Unless otherwise specified, all
accounting and financial terms and covenants set forth below are to
be determined according to GAAP. Borrower agrees to maintain the
financial covenants and ratios set forth hereinbelow:
(a) Net Worth. Borrower will maintain, at all times,
its Consolidated Net Worth at not less than the sum of (i) One
Hundred Fifteen Million and No/100 Dollars ($115,000,000.00)
plus (ii) seventy-five percent (75%) of Consolidated Net
Income for fiscal year 1995 and each fiscal year ending after
the date of this Loan Agreement (but without any deduction for
any consolidated net loss in any fiscal year) plus (iii) the
amount of cash proceeds from the sale of equity securities
issued after the date of this Loan Agreement.
(b) Debt Service. Borrower will maintain, as of the
last day of each fiscal quarter, a ratio of Consolidated
Indebtedness to EBITDA for the four consecutive quarterly
accounting periods ending with such fiscal quarter of not more
than 1.75 to 1.00.
(c) Interest Coverage. Borrower will maintain, as of
the end of each fiscal quarter, a Consolidated Fixed Charge
Coverage Ratio for any period of four consecutive quarterly
accounting periods of not less than the applicable ratio shown
for the applicable period as follows:
For Quarterly Accounting
Periods on or about these dates: Ratio
------------------------------- ------
December 31, 1995 to September 30, 1996 1.50 to 1.00
October 1, 1996 to September 30, 1997 1.75 to 1.00
October 1, 1997 and thereafter 2.00 to 1.00
(d) Prepayment on Senior Debt. Borrower shall not
prepay or make any other extraordinary payments or
distributions with respect to any payment on account of any
debt under that certain 10.02% Series A Senior Notes due 2001
or Floating Rate Series B Senior Notes due 2000 as more fully
described in that certain Note Purchase Agreement dated as of
June 15, 1995 between Borrower and the purchasers named
therein, except those prepayments or extraordinary payments
that are presently specifically described in such Note
Purchase Agreement, without compliance with the following
requirements: (i) the outstanding principal balance and
outstanding accrued unpaid interest of the Credit Facilities
shall be paid in full, (ii) the Credit Facilities shall be
submitted to the proper loan approval person or committee of
Bank for consideration for reaffirmation or termination of the
Revolving Line of Credit by Bank in its sole discretion and
(iii) the Credit Facilities shall be submitted to the Texas
Loan Approval Unit of Bank for consideration for reaffirmation
or termination of the Revolving Line of Credit by Bank in its
sole discretion.
8. Negative Covenants. Until (i) the Notes and all other
obligations and liabilities of Borrower under this Loan Agreement
and the other Loan Documents are fully paid and satisfied, and (ii)
the Bank has no further commitment to lend hereunder:
(a) Liens. (i) The Borrower will not and will not
permit any Subsidiary to create, assume, incur or suffer to
exist any Lien upon or with respect to any property or assets,
whether now owned or hereafter acquired, securing any
Indebtedness; provided, that nothing in this Section shall
prohibit:
(A) Liens in respect of property of the
Borrower or a Subsidiary existing on the date
hereof and described in financial statements
previously delivered to Bank, and Liens relating to
any extension, renewal or replacement of
Indebtedness secured by any such Lien, provided
that the principal amount of Indebtedness secured
by any such Lien is not increased and such Lien
does not extend to or cover any property of the
Borrower or such Subsidiary, as the case may be,
other than the property covered by such Lien on the
date hereof;
(B) Liens in respect of property acquired by
the Borrower or a Subsidiary after the date hereof,
(1) existing on such property at the time of
acquisition thereof (and not incurred in
anticipation thereof), whether or not the
Indebtedness secured thereby is assumed by the
Borrower or a Subsidiary, or (2) created within 180
days after acquisition or completion of
construction of improvements on such property, to
secure Indebtedness assumed or incurred to finance
all or any part of the purchase price or cost of
construction of improvements on such property; or
(3) in the case of any Person that hereafter
becomes a Subsidiary or is consolidated with or
merged with or into the Borrower or a Subsidiary or
sells, leases or otherwise disposes of all or
substantially all of its property to the Borrower
or a Subsidiary, existing at the time such Person
becomes a Subsidiary or is so consolidated or
merged or effects such sale, lease or other
disposition of property (and not incurred in
anticipation thereof); provided that in any such
case:
(x) no such Lien shall extend to or
cover any other property of the Borrower or
such Subsidiary, as the case may be,
(y) the aggregate principal amount of
Indebtedness secured by all such Liens in
respect of any such property shall not exceed
the cost of such property at the time of such
acquisition or, in the case of a Lien in
respect of property existing at the time of
such Person becoming a Subsidiary or being so
consolidated or merged or effecting such sale,
lease or other disposition, the fair market
value of such property at such time, and
(z) no Lien may be created pursuant to
subclause (2) above prior to December 31,
1996;
(iii) Liens securing Indebtedness owed by a
Subsidiary to the Borrower or to a Wholly-Owned
Subsidiary; and
(iv) Liens securing reimbursement obligations
in connection with letters of credit obtained by
the Borrower or a Subsidiary (including Letters of
Credit issued under this Loan Agreement), provided
that the aggregate unpaid principal amount of
Indebtedness in respect of all such letters of
credit secured by such Liens permitted by this
Section does not at any time exceed $5,000,000.
For purposes of this Section, any Lien existing in respect of
property at the time such property is acquired or in respect
of property of a Person at the time such Person is acquired,
consolidated or merged with or into the Borrower or a
Subsidiary shall be deemed to have been created at that time.
(ii) In case any property is subjected to a Lien in
violation of Section 8(a)(i), the Borrower will make or cause
to be made effective provision whereby the obligations of the
Borrower hereunder and under the other Loan Documents will be
secured equally and ratably with all Indebtedness and other
obligations secured by such Lien, and in any case Bank shall
have the benefit, to the full extent that, and with such
priority as, Bank may be entitled thereto under applicable
law, of an equitable lien on such property securing the
obligations of the Borrower hereunder and under the other Loan
Documents. Such violation of Section 8(a)(i) shall constitute
an Event of Default hereunder, whether or not any such
provision is made pursuant to this Section 8(a)(ii).
(b) Asset Sales. The Borrower will not and will not
permit any Subsidiary to effect any Asset Sale other than:
(i) Asset Sales in the ordinary course of business,
(ii) Asset Sales of property or assets by a
Subsidiary to the Borrower or a Wholly-Owned
Subsidiary or a Person then becoming a Wholly-Owned
Subsidiary,
(iii) Asset Sales consisting of the Borrower's
investment as of the date of this Agreement in
shares or Indebtedness issued by Monterey
Acquisition Corp., the owner of Monterey Tex-Mex
Restaurants, and
(iv) other Asset Sales; provided that
(A) immediately before and after giving
effect to each such Asset Sale, no Default or
Event of Default shall have occurred and be
continuing,
(B) the aggregate net book value of
property or assets disposed of in each Asset
Sale and all other Asset Sales by the Borrower
and its Subsidiaries (1) during the
immediately preceding twelve months does not
exceed 5% of Consolidated Capitalization and
(2) during the period from the Effective Date
to and including the effective date of such
proposed Asset Sale does not exceed 10% of
Consolidated Capitalization (in each case
determined as of the last day of the quarterly
accounting period ending on or most recently
prior to the effective date of such proposed
Asset Sale), and
(C) such Asset Sales in the aggregate
shall not involve a substantial number of
Chuck E. Cheese's restaurants (except in
connection with closing in the ordinary course
of business) or any intangible assets related
to Chuck E. Cheese's restaurants generally,
and,
provided, further, that for purposes of clause (B) above
there shall be excluded the net book value of property or
assets disposed of in an Asset Sale if and to the extent
such Asset Sale is made for cash, payable in full upon
the completion of such Asset Sale, and an amount equal to
the net proceeds realized upon such Asset Sale is applied
by the Borrower or such Subsidiary, as the case may be,
within one year after the effective date of such Asset
Sale to reinvest in similar categories of property or
assets for use in the business of the Borrower and its
Subsidiaries (but not in a transaction permitted by
Section 8(a)(i)(B).
(c) Merger and Consolidation. The Borrower will not and
will not permit any Subsidiary to enter into any transaction
of merger or consolidation with any Person, except that the
Borrower may merge or consolidate with any other Person,
provided that (i) the Borrower shall be the surviving and
continuing corporation and (ii) no Default or Event of Default
shall have occurred and be continuing, and provided, further,
that any Subsidiary of the Borrower may merge or consolidate
with the Borrower or a Wholly-Owned Subsidiary of the
Borrower.
(d) Subsidiary Indebtedness and Equity. (i) The
Borrower will not permit any Subsidiary to create, assume,
incur, guarantee or otherwise become liable in respect of any
Indebtedness except:
(A) Indebtedness securing Liens permitted by
clause (A), (B) or (C) of Section 8(a)(i), and
(B) Indebtedness of a Wholly-Owned Subsidiary
owing to the Borrower or another Wholly-Owned
Subsidiary.
For purposes of this Section, a Subsidiary shall be deemed to have
incurred indebtedness in respect of any obligation previously owed
to the Borrower or to a Wholly-Owned Subsidiary on the date the
obligee ceases for any reason to be the Borrower or a Wholly-Owned
Subsidiary and a Person that hereafter becomes a Subsidiary shall
be deemed at that time to have incurred all of its outstanding
Indebtedness.
(ii) Notwithstanding the provisions of Section 8(b)
(other than Section 8(b)(iii)), the Borrower will not sell or
otherwise dispose of and will not permit any Subsidiary to
issue, sell, transfer or otherwise dispose of any shares of
capital stock of any class (including as "capital stock" for
the purposes of this Section, any warranties, rights or
options to purchase or otherwise acquire capital stock or
other securities exchangeable for or convertible into capital
stock) of any Subsidiary of the Borrower to any Person other
than the Borrower or a Wholly-Owned Subsidiary of the
Borrower; provided, however, that notwithstanding the
foregoing, to the extent necessary either to (A) permit a
Subsidiary to operate in conformity with applicable licensing
or other similar requirements or (B) provide for any required
directors' qualifying shares, the Borrower may sell and any
Subsidiary may issue, sell and transfer shares of capital
stock of a Subsidiary to Persons other than the Borrower or a
Wholly-Owned Subsidiary of the Borrower.
(e) Transactions with Affiliates. The Borrower will not
and will not permit any Subsidiary to enter into directly or
indirectly any transaction or Material group of related
transactions (including without limitation the purchase,
lease, sale or exchange of properties of any kind or the
rendering of any service) with any Affiliate (other than the
Borrower or another Subsidiary), except in the ordinary course
and pursuant to the reasonable requirements of the Borrower's
or such Subsidiary's business and upon fair and reasonable
terms no less favorable to the Borrower or such Subsidiary
than would be obtainable in a comparable arm's-length
transaction with a Person not an Affiliate.
(f) Prohibited Payments. The Borrower will not and will
not permit any Subsidiary to make, or obligate itself to make,
any Prohibited Payment.
(g) Lease-Backs. Notwithstanding the provisions of
Section 8(b) hereof, the Borrower will not and will not permit
any Subsidiary to enter into any arrangements, directly or
indirectly, with any Person, whereby the Borrower or any of
its Subsidiaries shall sell or transfer any property, whether
now owned or hereafter acquired, used or useful in their
respective businesses in connection with the rental or lease
of the property so sold or transferred or of other property
which the Borrower or any of its Subsidiaries intends to use
for substantially the same purpose or purposes as the
properties so sold or transferred.
(h) Negative Pledges. The Borrower will not and will
not permit any Subsidiary to enter into any agreement
(excluding this Loan Agreement and the other Loan Documents)
prohibiting the creation or assumption of any Lien upon its
properties, revenues, or assets, whether now owned or
hereafter acquired; provided, however, that notwithstanding
the foregoing, the Borrower may enter into any such agreement
in connection with and securing Indebtedness that is (i)
scheduled to mature after the Termination Date, (ii) in an
aggregate principal amount not in excess of $12,000,000 less
the Revolving Line of Credit outstanding from time to time
hereunder, and (iii) lent by a Person other than a commercial
bank or trust company or an Affiliate thereof.
9. Events of Default. Each of the following shall
constitute an "Event of Default" of "Default" under this Loan
Agreement:
(a) The failure, refusal or neglect of Borrower to pay
when due any part of the principal of, or interest on, the
Notes or any other indebtedness or obligations owing to Bank
by Borrower from time to time, which failure, refusal and
neglect continues for five (5) days after the date of written
notice of same from Bank to Borrower; or
(b) The failure of Borrower or any Obligated Party (as
defined below) to timely and properly observe, keep or perform
any covenant, agreement, warranty or condition required herein
or in any of the other Loan Documents; or
(c) The occurrence of an event of default under any of
the other Loan Documents; or
(d) Any representation contained herein or in any of the
other Loan Documents made by Borrower or any Obligated Party
is false or misleading in any material respect; or
(e) The occurrence of any event which permits the
acceleration of the maturity of any Indebtedness in the amount
of $1,000,000.00 or more owing by Borrower to any third party
under any agreement or understanding; or
(f) If Borrower or any Obligated Party: (i) becomes
insolvent, or makes a transfer in fraud of creditors, or makes
an assignment for the benefit of creditors, or admits in
writing its inability to pay its debts as they become due;
(ii) generally is not paying its debts as such debts become
due; (iii) has a receiver or custodian appointed for, or take
possession of, all or substantially all of the assets of such
party, either in a proceeding brought by such party or in a
proceeding brought against such party and such appointment is
not discharged or such possession is not terminated within
sixty (60) days after the effective date thereof or such party
consents to or acquiesces in such appointment or possession;
(iv) files a petition for relief under the United States
Bankruptcy Code or any other present or future federal or
state insolvency, bankruptcy or similar laws (all of the
foregoing hereinafter collectively called "Applicable
Bankruptcy Law") or an involuntary petition for relief is
filed against such party under any Applicable Bankruptcy Law
and such involuntary petition is not dismissed within sixty
(60) days after the filing thereof, or an order for relief
naming such party is entered under any Applicable Bankruptcy
Law, or any composition, rearrangement, extension,
reorganization or other relief of debtors now or hereafter
existing is requested or consented to by such party; (v) fails
to have discharged within a period of sixty (60) days any
attachment, sequestration or similar writ levied upon any
property of such party; or (vi) fails to pay within sixty (60)
days any final money judgment against such party; or
(g) If Borrower or any obligated Party is an entity, the
liquidation, dissolution, merger or consolidation of any such
entity or, if Borrower or any Obligated Party is an
individual, the death or legal incapacity of any such
individual; or
(h) The issuance or entry of (i) any judgment in excess
of $500,000.00 against Borrower that is not discharged, bonded
or dismissed within thirty (30) days after such issuance or
entry; or (ii) any attachment or other lien against any of the
property of Borrower for an amount in excess of $500,000.00
that is not discharged, bonded or dismissed within sixty (60)
days after such entry; or
(i) The failure, refusal or neglect of Borrower or any
Obligated Party to maintain the financial ratios and covenants
set forth in Section 7 herein which failure, refusal or
neglect continues for thirty (30) days after the date of
written notice of same from Bank to Borrower.
Nothing contained in this Loan Agreement shall be construed to
limit the events of default enumerated in any of the other Loan
Documents and all such events of default shall be cumulative. The
term "Obligated Party", as used herein, shall mean any party other
than Borrower who secures, guarantees and/or is otherwise obligated
to pay all or any portion of the Indebtedness evidenced by the
Notes.
10. Remedies. Upon the occurrence of any one or more of the
foregoing Events of Default, (a) the entire unpaid balance of
principal of the Notes, together with all accrued but unpaid
interest thereon, and all other indebtedness owing to Bank by
Borrower at such time shall, at the option of Bank, become
immediately due and payable without further notice, demand,
presentation, notice of dishonor, notice of intent to accelerate,
notice of acceleration, protest or notice of protest of any kind,
all of which are expressly waived by Borrower, and (b) Bank may, at
its option, cease further advances under any of the Notes;
provided, however, concurrently and automatically with the
occurrence of an Event of Default under subparagraph (f) in the
immediately preceding paragraph: (i) further advances under the
Notes shall cease, and (ii) the Notes and all other Indebtedness
owing to Bank by Borrower at such time shall, without any action by
Bank, become due and payable, without further notice, demand,
presentation, notice of dishonor, notice of acceleration, notice of
intent to accelerate, protest or notice of protest of any kind, all
of which are expressly waived by Borrower. All rights and remedies
of Bank set forth in this Loan Agreement and in any of the other
Loan Documents may also be exercised by Bank, at its option to be
exercised in its sole discretion, upon the occurrence of an Event
of Default.
11. Rights Cumulative. All rights of Bank under the terms of
this Loan Agreement shall be cumulative of, and in addition to, the
rights of Bank under any and all other agreements between Borrower
and Bank (including, but not limited to, the other Loan Documents),
and not in substitution or diminution of any rights now or
hereafter held by Bank under the terms of any other agreement.
12. Waiver and Agreement. Neither the failure nor any delay
on the part of Bank to exercise any right, power or privilege
herein or under any of the other Loan Documents shall operate as a
waiver thereof, nor shall any single or partial exercise of such
right, power or privilege preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. No
waiver of any provision in this Loan Agreement or in any of the
other Loan Documents and no departure by Borrower therefrom shall
be effective unless the same shall be in writing and signed by
Bank, and then shall be effective only in the specific instance and
for the purpose for which given and to the extent specified in such
writing. No modification or amendment to this Loan Agreement or to
any of the other Loan Documents shall be valid or effective unless
the same is signed by the party against whom it is sought to be
enforced.
13. Benefits. This Loan Agreement shall be binding upon and
inure to the benefit of Bank and Borrower, and their respective
successors and assigns, provided, however, that Borrower may not,
without the prior written consent of Bank, assign any rights,
powers, duties or obligations under this Loan Agreement or any of
the other Loan Documents.
14. Notices. Except as otherwise provided herein for oral or
telephonic notices, all notices, requests, demands or other
communications required or permitted to be given pursuant to this
Loan Agreement shall be in writing and given by (i) personal
delivery, (ii) expedited delivery service with proof of delivery,
or (iii) United States mail, postage prepaid, registered or
certified mail, return receipt requested, sent to the intended
addressee at the address set forth on the signature page hereof and
shall be deemed to have been received either, in the case of
expedited delivery service, as of the date of first attempted
delivery at the address and in the manner provided herein, or in
the case of mail, three (3) days after deposit in a depository
receptacle under the care and custody of the United States Postal
Service. Either party shall have the right to change its address
for notice hereunder to any other location within the continental
United States by notice to the other party of such new address at
least thirty (30) days prior to the effective date of such new
address.
15. Construction. This Loan Agreement and the other Loan
Documents have been executed and delivered in the State of Texas,
shall be governed by and construed in accordance with the laws of
the State of Texas, and shall be performable by the parties hereto
in the county in Texas where the Bank's address set forth on the
signature page hereof is located. Notwithstanding the foregoing,
any Loan Documents creating a mortgage, lien, encumbrance or
security interest in property, real, personal or otherwise, shall
be construed in accordance with the law of the state in which such
property is located to the extent necessary to give full effect to
any such Loan Documents and the mortgage, lien, encumbrance or
security interest created thereby.
16. Invalid Provisions. If any provision of this Loan
Agreement or any of the other Loan Documents is held to be illegal,
invalid or unenforceable under present or future laws, such
provision shall be fully severable and the remaining provisions of
this Loan Agreement or any of the other Loan Documents shall remain
in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance.
17. Expenses. Borrower shall pay all costs and expenses
(including, without limitation, reasonable attorneys' fees) in
connection with (i) any action required in the course of
administration of the indebtedness and obligations evidenced by the
Loan Documents including but not limited to appraisals and review,
audits review, environmental audits and review (each as may be
limited in this Loan Agreement), but excluding general
administrative overhead expenses, and (ii) any action in the
enforcement of Bank's rights upon the occurrence of an Event of
Default.
18. Participation of the Loans. Borrower agrees that Bank
may, at its option, sell interests in the Loans and its rights
under this Loan Agreement to a financial institution or
institutions and, in connection with each such sale, Bank may
disclose any financial and other information available to Bank
concerning Borrower to each prospective purchaser.
19. Entire Agreement. This Loan Agreement (together with the
other Loan Documents) contains the entire agreement among the
parties regarding the subject matter hereof and supersedes all
prior written and oral agreements and understandings among the
parties hereto regarding same. If there are any conflicts between
this Loan Agreement and the other Loan Documents, this Loan
Agreement shall control; provided however that the Loan Documents
shall be interpreted to the greatest extent possible to give effect
to all terms contained therein, and the inclusion of additional
terms in any of the Loan Documents which are not contained in this
Loan Agreement shall not be deemed to be a conflict.
20. Counterparts. This Loan Agreement may be separately
executed in any number of counterparts, each of which shall be an
original, but all of which, taken together, shall be deemed to
constitute one and the same instrument.
Executed by the parties on the date first written above.
BANK:
BANK ONE, TEXAS, N.A.
By:
Name: Paul C. Koch
Title: Vice President
Bank's Address:
1717 Main Street, 3rd Floor
Dallas, Texas 75201
BORROWER:
SHOWBIZ PIZZA TIME, INC.
By:
Name: Larry G. Page
Title: Executive Vice
President & Chief
Financial Officer
Borrower's Address:
4441 W. Airport Freeway
Irving, Texas 75062
<PAGE>
ADDENDUM I
TO
LOAN AGREEMENT
Defined Terms. As used in this Loan Agreement, the terms
defined in the body of the Loan Agreement shall have the respective
meanings ascribed thereto and the following terms shall have the
following respective meanings:
"Affiliate" means, at any time, and with respect to any
Person, (a) any other Person that at such time directly
or indirectly through one or more intermediaries
Controls, or is Controlled by, or is under common Control
with, such first Person, and (b) any Person beneficially
owing or holding, directly or indirectly, 10% or more of
any class of voting or equity interests of the Borrower
or any Subsidiary or any corporation of which the
Borrower and its Subsidiaries beneficially own or hold,
in the aggregate, directly or indirectly, 10% or more of
any class of voting or equity interests. As used in this
definition, "Control" means the possession, indirectly or
indirectly, of the power to direct or cause the direction
of the management and policies of a Person, whether
through the ownership of voting securities, by contract
or otherwise. Unless the context otherwise clearly
requires, any reference to an "Affiliate" is a reference
to an Affiliate of the Borrower.
"Asset Sale" shall mean any direct or indirect sale, transfer,
lease (as lessor), loan or other disposition of any property
or assets.
"Business Day" shall mean any other day except Saturday,
Sunday or other day on which Bank is not open for business at
its offices set forth herein.
"Capital Lease" shall mean, at any time, a lease with respect
to which the lessee is required concurrently to recognize the
acquisition of an asset and the incurrence of a liability in
accordance with GAAP.
"Capitalized Lease Obligations" shall mean, with respect to
any person, all outstanding obligations of such person or
respect of Capital Leases taken at the capitalized amount
thereof accounted for as Indebtedness in accordance with GAAP.
"Change of Control" shall mean (a) the acquisition through
purchase or otherwise (including the agreement to act in
concert with more), by any Person or "group" (within the
meaning of Section 13(d) or 14(d) of the Exchange Act)
directly or indirectly, in one or more transactions, of the
beneficial ownership or control of securities representing
more than 25% of the combined voting power of the Borrower's
Voting stock or (b) the acquisition by an Person, entity or
"group" (within the meaning of Section 13(d) or 14(d) of the
Exchange Act), of the power (whether or not exercised) to
elect a majority of the Board of Directors of the Borrower.
For purposes of this definition, "beneficial ownership" shall
have the meaning set forth in Rule 13d-3 of the Securities and
Exchange Commission adopted pursuant to the Exchange Act.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the rules and regulations
promulgated thereunder from time to time.
"Commitments" shall mean the Bank's commitment to lend
the Revolving Line of Credit as stated in Section 1 of
this Loan Agreement.
"Commitment Period" at any date shall mean the period
from and including the Effective Date to, but excluding,
the Termination Date.
"Consolidated Capitalization" shall mean, at any date,
the sum of (a) Consolidated Indebtedness plus (b)
Consolidated Net Worth plus (c) deferred tax liabilities
(if any), all as determined on a consolidated basis for
the Borrower and its Subsidiaries in accordance with
GAAP.
"Consolidated Fixed Charge Coverage Ratio" shall mean, for any
period, the ratios of (a) the sum of (i) EBITDA for such
period plus (ii) Consolidated Operating Lease Rentals for such
period to (b) the sum of (i) Consolidated Interest Expenses
for such period plus (ii) Consolidated Operating Lease Rentals
for such period.
"Consolidated Indebtedness" shall mean, at any date, all
Indebtedness of Borrower and its Subsidiaries determined on a
consolidated basis in accordance with GAAP.
"Consolidated Interest Expenses" shall mean, for any period,
the sum for Borrower and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP, of all amounts
which would be deducted in computing Consolidated Net Income
on account of interest on Indebtedness (including imputed
interest in respect of (I) Capitalized Lease Obligations and
amortization of debt discount and expense).
"Consolidated Net Income" shall mean, for any period, the net
income of Borrower and its Subsidiaries for such period,
determined on an consolidated basis in accordance with GAAP,
excluding (i) the proceeds of any life insurance, (ii) any
gains arising from (A) the sale or other disposition of any
assets (other than current assets) to the extent that the
aggregate amount of the gains during such period exceeds the
aggregate amount of the losses during such period from the
sale, abandonment or other disposition of assets (other than
current assets), (B) any write up of assets or (C) the
acquisition of outstanding securities of Borrower or any
Subsidiary, (iii) any amount representing any interest in the
undistributed earnings of any other person (other than a
Subsidiary), (iv) any earnings, prior to the date of
acquisition, of any person acquired in any manner, and any
earnings of any Subsidiary acquired prior to its becoming a
Subsidiary, (v) any earnings of a successor to or transferee
of the assets of Borrower prior to its becoming such successor
or transferee, (vi) any deferred credit (or amortization of a
deferred credit) arising from the acquisition of any person,
and (vii) any extraordinary gains not covered by clause (ii)
above.
"Consolidated Net Worth" shall mean, as of any date, on a
consolidated basis for Borrower and its Subsidiaries, (a) the
sum of (i) capital stock taken at par or stated value plus
(ii) capital in excess of par or stated value relating to
capital stock plus (iii) retained earnings (or minus any
retained earning deficit) minus (b) the sum of (i) capital
stock constituting treasury stock plus (ii) capital stock
subscribed for and unissued plus (iii) deferred compensation
plus (iv) other equity accounts.
"Consolidated Operating Lease Rentals" shall mean, for any
period, the sum of the rental and other obligations required
to be paid by Borrower and its Subsidiaries as lessee under
all leases of real or personal property (other than Capital
Leases), excluding any amounts required to be paid by the
lessee (whether or not therein designated as rental or
additional rental) on account of maintenance and repairs,
insurance, taxes, assessments, water rates and similar
charges, all determined on a consolidated basis in accordance
with GAAP.
"Default" shall mean an event or condition the occurrence
or existence of which would, with the lapse of time or
the giving of notice or both, become an Event of Default.
"Dollars" and "$" shall mean dollars in lawful currency
of the United States of America.
"EBITDA" shall mean, for any period, Consolidated Net Income
plus all amounts deducted in the computation thereof on
account of (i) Consolidated Interest Expense, (ii)
depreciation and amortization expenses (including amortization
of deferred compensation) and other noncash charges, (iii)
income and profits taxes and (iv) extraordinary losses (if
any) of the type described in clauses (ii) through (vii) of
definition of "Consolidated Net Income" that are deducted in
determining consolidated net income for such period.
"Effective Date" of this Loan Agreement shall mean the
date on which (i) counterparts of this Loan Agreement
executed and delivered by the parties hereto shall have
been received by Bank and (ii) the conditions precedent
set forth in Section 5 hereto shall have been satisfied
or waived in writing by Bank.
"Eligible Affiliate" shall mean, as of any date of
determination, any Affiliate of the Borrower (other than
a Subsidiary) that would qualify as a Subsidiary if the
Borrower were to exercise its then existing rights to
acquire additional Voting Stock in such Affiliate;
provided, however, that, as of the date hereof, "Eligible
Affiliate" shall include all entities disclosed by
Borrower to Lender that do not qualify as a Subsidiary.
"Environmental Laws" means any and all Federal, state,
local, and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the
protection of the environment or the release of any
materials into the environment, including but not limited
to those related to hazardous substances or wastes, air
emissions and discharges to waste or public systems.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the rules and
regulations promulgated thereunder from time to time in
effect.
"ERISA Affiliate" means any trade or business (whether or
not incorporated) that is treated as a single employer
together with Borrower under Section 414 of the Code.
"Event of Default" shall mean any of the events specified in
Section 9.1 hereof.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect from time to time,
consistently applied.
"Governmental Authority" means
(a) the government of
(i) the United States of America or any
Sate or other political subdivision thereof,
or
(ii) any jurisdiction in which the
company or any Subsidiary conducts all or any
part of its business, or which asserts
jurisdiction over any properties of the
Borrower or any Subsidiary, or
(b) any entity exercising executive,
legislative, judicial, regulatory or administrative
functions of, or pertaining to, any such
government.
"Guaranty" means with respect to any person, any obligation
(except the endorsement in the ordinary course of business of
negotiable instruments for deposit or collection) of such
person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation of any other person
in any manner, whether directly or indirectly, including
without limitation, obligations incurred through an agreement,
contingent or otherwise, by such a person: (i) to purchase
such Indebtedness or obligation or any property constituting
security therefor; (ii) to advance or supply funds (A) for the
purchase or payment of such Indebtedness or obligation; or (B)
to maintain any working capital or other balance sheet
condition or any income statement condition of any other
person or otherwise to advance or make available funds for the
purchase or payment of such Indebtedness or obligations; or
(C) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of any other person
to make payment of the Indebtedness or obligation; or (D)
otherwise to insure the owner of such Indebtedness or
obligation against loss in respect thereof. In any
computation of the Indebtedness or other liabilities of the
obligor under any Guaranty, the Indebtedness or other
obligations that are subject to such Guaranty shall be assumed
to be direct obligations of such obligor.
"Indebtedness" shall mean, with respect to any person, at any
time, without duplication (i) its liabilities for borrowed
money, (ii) its liabilities for the deferred purchase price of
the property acquired by such person (excluding accounts
payable arising in the ordinary course of business and not
overdue but including all liabilities created or arising under
any conditional sale or other title retention agreement with
respect to any such property), (iii) its Capitalized Lease
Obligations, (iv) all liabilities for borrowed money secured
by any Lien with respect to any property owned by such person
(whether or not it is assumed or otherwise become liable for
such liabilities), (v) all its liabilities in respect of
letters of credit or instruments serving a similar function
issued or accepted for its account by banks and other
financial institutions (whether or not representing
obligations for borrowed money), (vi) Swaps of such person,
and (vii) any Guaranty of such person with respect to
liabilities of the type described in any of clauses (i)
through (vi) above. Indebtedness of any person shall include
all obligations of such person of the character described in
clauses (i) through (vi) to the extent such person remains
legally liable in respect thereof, notwithstanding that any
such obligation is deemed to be extinguished under GAAP.
"Investment" in any Person shall mean any loan, advance,
or extension of credit to or for the account of; any
guaranty, endorsement or other direct or indirect
contingent liability in connection with the obligations,
capital stock or dividends of; any ownership, purchase or
acquisition of any assets, business, capital stock,
obligations or securities of; or any other interest in or
capital contribution to; such Person.
"Letter of Credit" shall mean a standby letter of credit
issued by Bank pursuant to and in accordance with Section
2(b).
"Lien" shall mean, with respect to any person, any mortgage,
lien, pledge, charge, security interest or other encumbrance,
or any interest or title of any vendor, lessor, lender, or
other secured party to or of such person under any conditional
sale or other title retention agreement or Capital Lease, upon
or with respect to any property or asset of such person
(including in the case of stock, stockholder agreements,
voting trust agreements and all similar arrangements).
"Loan Documents" shall mean this Loan Agreement, the Notes and
all other documents evidencing, securing, governing,
guaranteeing and/or pertaining to the Notes.
"Material" shall mean material in relation to the
business, operations, affairs, financial condition,
profits, assets, properties or prospects of the Borrower
and its Subsidiaries taken as a whole.
"Multiemployer Plan" shall mean any Plan that is a
"multiemployer plan" (as such term is defined in Section
4001(a)(3) of ERISA).
"PBGC" shall mean the Pension Benefit Guaranty
Corporation referred to and defined in ERISA or any
successor thereto.
"Person" means an individual, partnership, corporation,
limited liability company, association, trust,
unincorporated organization, or a government or agency or
political subdivision thereof.
"Plan" means an "employee benefit plan" (as defined in
section 3(3) of ERISA) that is or, within the preceding
five years, has been established or maintained, or to
which contributions are or, within the preceding five
years, have been made or required to be made, by the
Borrower or any ERISA Affiliate or with respect to which
the Borrower or any ERISA Affiliate may have any
liability.
"Prohibited Payment" shall mean with respect to any
Person (the "Referenced Person") any of the following
when paid (or when the proceeds of which are paid) by or
on behalf of the Referenced Person to any other Person:
(i) any defeasance, redemption, repurchase or
other acquisition or retirement for value prior to
scheduled maturity of any Indebtedness (A) ranked
subordinate in right of payment to the Notes or (B)
having a maturity date subsequent to the maturity
of the Notes,
(ii) any expenditure or the incurrence of any
liability to make any expenditure for any
Restricted Investment, or
(iii) the payment of any principal of,
interest on, or any amounts due in respect of, any
Indebtedness not permitted by Section 8.4 hereof.
"Property" or "property" shall mean, unless otherwise
specifically limited, real or personal property of any
kind, tangible or intangible, choate or inchoate.
"Responsible Officer" means any Senior Financial Officer
and any other officer of the Borrower with responsibility
for the administration of the relevant portion of any
Loan Document.
"Restricted Investment" shall mean any Investment, to the
extent it does not constitute (i) a Short Term
Investment, (ii) an Investment in a Subsidiary or an
Eligible Affiliate or a Minority Affiliate, (iii) an
Investment in a Person as a result of which such Person
becomes a Subsidiary or Eligible Affiliate or a Minority
Affiliate, (iv) an Investment made in the ordinary course
of business in a franchisee or licensee, or (v) a
guaranty of certain obligations related to restaurant
building and equipment leases entered into in the
ordinary course of business, provided, however, that
Investments in Minority Affiliates in excess of
$5,000,000 outstanding at any one time shall constitute
Restricted Investments.
"Senior Financial Officer" means the chief financial
officer, principal accounting officer, treasurer or
comptroller of the Borrower.
"Short Term Investment" shall mean an Investment in
(i) direct obligations of the United States
of America, or obligations of any instrumentality
or agency thereof;
(ii) demand deposits in, negotiable
certificates of deposit issued by, or negotiable
bankers' acceptances (eligible for discount at
Federal Reserve Banks) of, or repurchase agreements
in respect of obligations described in clause (i)
with, Bank or any bank or trust company organized
under the laws of the United States of America or
any State thereof having capital and surplus of not
less than $250,000,000; and
(iii) readily marketable commercial paper
which, at the time of acquisition, is rated at
least A-1 by Standard & Poor's Corporation or P-1
by Moody's Investor Services, Inc.;
provided, that all of such Investments described in
clauses (i), (ii) and (iii) shall be payable in Dollars
and shall mature within twelve months after the date of
acquisition thereof.
"Subsidiary" shall mean, as to any person, any corporation or
other business entity, a majority of the combined voting power
of all Voting Stock which is owned by such person or one or
more of its Subsidiaries or such person in one or more of its
Subsidiaries. Unless the context otherwise clearly requires,
a reference to a "Subsidiary" is a reference to a Subsidiary
of Borrower.
"Swaps" shall mean, with respect to any person, payment
obligations with respect to interest rate swaps, currency
swaps and similar obligations obligating such person to make
payments, whether periodically or upon the happening of a
contingency. For the purposes of this Loan Agreement, the
amount of the obligation under any Swap shall be the amount
determined in respect thereof as of the end of the most
recently ended fiscal quarter of such person, based on the
assumption that such Swap had terminated at the end of such
fiscal quarter, and in making such determination, if any
agreement relating to such Swap provides for the netting of
amounts payable by and to such person thereunder or if any
such agreement provides for the simultaneous payment of
amounts by and to such person, then in each such case, the
amount of such obligation shall be the net amount so
determined.
"Termination Date" shall mean the earlier of (i) the date
on which this Agreement shall terminate in accordance
with the provisions of Section 1 hereof or (ii) the
Business Day, if any, on which the Commitments of Bank
are terminated in accordance with Section 9.1 hereof.
"Voting Stock" shall mean, with respect to any person, any
shares of stock or other equity interests of any class or
classes of such person whose holders are entitled under
ordinary circumstances (irrespective of whether at the time
stock or other equity interests of any other class are classes
shall have or might have voting power by reason of the
happening of any contingency) to vote for the election of a
majority of the directors, managers, trustees or other
governing body of such person.
"Wholly-Owned Subsidiary" means, at any time, any
Subsidiary all of the equity interests (except directors'
qualifying shares) and voting interests of which are
owned by any one or more of the Borrower and the
Borrower's other Wholly-Owned Subsidiaries at such time.
PROMISSORY NOTE - Exhibit 10(e)(2)
----------------
$2,000,000.00 January 18, 1996
FOR VALUE RECEIVED, on or before June 27, 1997 ("Maturity
Date") the undersigned and if more than one, each of them, jointly
and severally ("Borrower"), does hereby unconditionally promise to
pay to the order of BANK ONE, TEXAS, NATIONAL ASSOCIATION ("Bank"),
at its offices in Dallas County, Texas at 1717 Main Street, 3rd
Floor, Dallas, Texas 75201, Attention: Paul C. Koch, the
principal amount of TWO MILLION AND NO/100 DOLLARS ($2,000,000.00)
("Total Principal Amount"), or such amount less than the Total
Principal Amount which is outstanding from time to time if the
total amount outstanding hereunder is less than the Total Principal
Amount, in lawful money of the United States of America, together
with interest on such portion of the Total Principal Amount which
has been drawn until paid at the rates per annum provided below.
1. Definitions. For purposes of this Note, unless the
context otherwise requires, the following terms shall have the
definitions assigned to such terms as follows:
"Adjusted Base Rate" shall mean a rate equal to the sum of (i)
the Base Rate, plus (ii) one-half of one percent (1/2%) per annum.
"Adjusted LIBOR Rate" shall mean with respect to each Interest
Period, on any day thereof an amount equal to the sum of (i) three
percent (3%), plus, (ii) the quotient of (a) the LIBOR Rate with
respect to such Interest Period, divided by (b) the remainder of
1.0 less the Reserve Requirement in effect on such day. Each
determination by Bank of the Adjusted LIBOR Rate shall, in the
absence of manifest error, be conclusive and binding.
"Base Rate" shall mean the rate established from time to time
by Bank as its Base Rate of interest (which may not be the lowest,
best or most favorable rate of interest which Bank may charge on
loans to its customers).
"Base Rate Balance" shall mean that portion of the principal
balance of this Note bearing interest at a rate based upon the
Adjusted Base Rate.
"Business Day" shall mean any day other than a Saturday,
Sunday or any other day on which Bank is authorized to be closed.
"Consequential Loss" shall mean, with respect to Borrower's
payment of all or any portion of the then outstanding principal
amount of any LIBOR Balance on a day other than the last day of the
Interest Period related thereto, any loss, cost or expense incurred
by Bank in redepositing such principal amount, including the sum of
(i) the interest which, but for such payment, Bank would have
earned in respect of such principal amount so paid, for the
remainder of the Interest Period applicable to such sum, reduced,
if Bank is able to redeposit such principal amount so paid for the
balance of such Interest Period, by the interest earned by Bank as
a result of so redepositing such principal amount plus (ii) any
expense or penalty incurred by Bank on redepositing such principal
amount.
"Contract Rate" shall mean a rate of interest based upon the
Adjusted LIBOR Rate or Adjusted Base Rate in effect at any time
pursuant to an Interest Notice.
"Dollars" shall mean lawful currency of the United States of
America.
"Event of Default" shall mean the (a) failure of Borrower to
pay any installment of principal of or interest on this Note to
Bank when due and such failure continues for five (5) days after
the date of written notice of such failure from Bank to Borrower,
(b) the occurrence of an event of default specified in any of the
other Loan Documents, or (c) the bankruptcy or insolvency of, the
assignment for the benefit of creditors by, or the appointment of
a receiver for any of the property of, or the liquidation,
termination, dissolution or death or legal incapacity of, any party
liable for the payment of this Note, whether as maker, endorser,
guarantor, surety or otherwise.
"Excess Interest Amount" shall mean, on any date, the amount
by which (i) the amount of all interest which would have accrued
prior to such date on the principal of this Note, had the
applicable Contract Rate at all times been in effect without
limitation by the Maximum Rate, exceeds (ii) the aggregate amount
of interest accrued on this Note on or prior to such date.
"Interest Notice" shall mean the notice given by Borrower to
Bank of the Interest Options selected hereunder. Each Interest
Notice shall specify the Interest Option selected, the amount of
the unpaid principal balance of this Note to bear interest at the
rate selected and, if the Adjusted LIBOR Rate is specified, the
length of the applicable Interest Period. An Interest Notice may
be written or oral (if promptly confirmed thereafter in writing)
and Bank is hereby authorized and directed to honor all telephonic
Interest Notices from any person authorized to request advances
hereunder.
"Interest Option" shall have the meaning assigned to such term
in paragraph 6 hereof.
"Interest Payment Date" shall mean (i) in the case of the Base
Rate Balance, on the last day of each fiscal quarter beginning
March 31, 1996 and continuing regularly thereafter and on the
Maturity Date, and (ii) in the case of any LIBOR Balance, the last
day of the corresponding Interest Period with respect to such LIBOR
Balance and the maturity of this Note; provided, however, such
interest shall also be due and payable, on any LIBOR Balance whose
corresponding Interest Period is 180 days, on the 91st day of such
Interest Period.
"Interest Period" shall mean, with respect to any LIBOR
Balance, a period commencing: (i) on any date which, pursuant to
an Interest Notice, the principal amount of such LIBOR Balance
begins to accrue interest at the Adjusted LIBOR Rate, or (ii) the
Business Day following the last day of the immediately preceding
Interest Period in the case of a rollover to a successive Interest
Period and ending 30, 60, 90 or 180 days thereafter as Borrower
shall elect in accordance with the provisions hereof; provided,
that: (A) any Interest Period which would otherwise end on a day
which is not a LIBOR Business Day shall be extended to the
succeeding LIBOR Business Day and (B) any Interest Period which
would otherwise end after the Maturity Date shall end on the
Maturity Date.
"LIBOR Balance" shall mean any principal balance of this Note
which, pursuant to an Interest Notice, bears interest at a rate
based upon the Adjusted LIBOR Rate for the Interest Period
specified in such Interest Notice.
"LIBOR Business Day" shall mean a day on which dealings in
Dollars are carried out in the London interbank eurodollar market.
"LIBOR Rate" shall mean, with respect to each Interest Period,
the London Interbank Offered Rate for a period of time equal or
comparable to such Interest Period, as quoted in the Money Rates
section of The Wall Street Journal on the first day of such
Interest Period.
"Loan Agreement" shall mean that certain Loan Agreement of
even date herewith by and between Bank and Borrower.
"Loan Documents" shall mean this Note, the Loan Agreement and
all other documents evidencing, securing, governing, guaranteeing
and/or pertaining to this Note.
"Maximum Rate" shall mean, with respect to the holder hereof,
the maximum nonusurious interest rate, if any, that at any time, or
from time to time, may be contracted for, taken, reserved, charged,
or received on the indebtedness evidenced by this Note under the
laws which are presently in effect in the United States and the
State of Texas applicable to such holder and such indebtedness or,
to the extent permitted by law, under such applicable laws of the
United States and the State of Texas which may hereafter be in
effect and which allow a higher maximum nonusurious interest rate
than applicable laws now allow. To the extent that Tex. Rev. Civ.
Stat. Ann. art. 5069-1.04, as amended (the "Act"), is relevant to
any holder of this Note for the purposes of determining the Maximum
Rate, each such holder elects to determine such applicable legal
rate under the Act pursuant to the "indicated rate ceiling," from
time to time in effect, as referred to and defined in article
1.04(a)(1) of the Act; subject, however, to the limitations on such
applicable ceiling referred to and defined in article 1.04(b)(2) of
the Act, and further subject to any right such holder may have
subsequently, under applicable law, to change the method of
determining the Maximum Rate. If no Maximum Rate is established by
applicable law, then the Maximum Rate shall be equal to eighteen
percent (18%).
"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System from time to time in effect
and shall include any successor or other regulation relating to
reserve requirements applicable to member banks of the Federal
Reserve System.
"Reserve Requirement" shall, on any day, mean that percentage
(expressed as a decimal fraction) which is in effect on such day,
as provided by the Board of Governors of the Federal Reserve System
(or any successor governmental body) for determining the reserve
requirements (including without limitation, basic, supplemental,
marginal and emergency reserves) under Regulation D with respect to
"Eurocurrency liabilities" as currently defined in Regulation D, or
under any similar or successor regulation. For purposes of this
definition, any LIBOR Balances hereunder shall be deemed
"Eurocurrency liabilities" under Regulation D without benefit of or
credit for prorations, exemptions or offsets under Regulation D.
Bank's determination of the Reserve Requirement shall be
conclusive.
2. Payments of Interest and Principal. Interest on the
unpaid principal balance of this Note shall be due and payable on
each Interest Payment Date as it accrues and the entire unpaid
principal balance of this Note, and all accrued but unpaid interest
thereon, shall be due and payable on the Maturity Date.
3. Rates of Interest. The unpaid principal of the Base Rate
Balance shall bear interest at a rate per annum which shall from
day to day be equal to the lesser of (i) the Adjusted Base Rate in
effect from day to day, or (ii) the Maximum Rate. The unpaid
principal of each LIBOR Balance shall bear interest at a rate per
annum which shall from day to day be equal to the lesser of (i) the
Adjusted LIBOR Rate for the Interest Period in effect with respect
to such LIBOR Balance, or (ii) the Maximum Rate. Each change in
the interest rate applicable to a Base Rate Balance shall become
effective without prior notice to Borrower automatically as of the
opening of business on the date of such change in the Adjusted Base
Rate. Interest on this Note shall be calculated on the basis of
the actual days elapsed in a year consisting of 360 days.
1. Interest Recapture. If on each Interest Payment Date or
any other date on which interest payments are required hereunder,
Bank does not receive interest on this Note computed at the
Contract Rate because such Contract Rate exceeds or has exceeded
the Maximum Rate, then Borrower shall, upon the written demand of
Bank, pay to Bank in addition to the interest otherwise required to
be paid hereunder, on each Interest Payment Date thereafter, the
Excess Interest Amount (calculated as of such later Interest
Payment Date); provided that in no event shall Borrower be required
to pay, for any Interest Period, interest at a rate exceeding the
Maximum Rate effective during such period.
Interest on Past Due Amounts. To the extent any interest
is not paid on or before the fifth day after it becomes due and
payable, Bank may, at its option, add such accrued but unpaid
interest to the principal of this Note. Notwithstanding anything
herein to the contrary, upon an Event of Default or at maturity,
whether by acceleration or otherwise, all principal of this Note
shall, at the option of Bank, bear interest at the Maximum Rate
until paid.
6. Interest Option. Subject to the provisions hereof,
Borrower shall have the option (an "Interest Option") of having
designated portions of the unpaid principal balance of this Note
bear interest at a rate based upon the Adjusted LIBOR Rate or
Adjusted Base Rate as provided in paragraph 3 hereof; provided,
however, that the selection of the Adjusted LIBOR Rate for a
particular Interest Period shall not be for less than $100,000.00
of unpaid principal or an integral multiple thereof. The Interest
Option shall be exercised in the manner provided below:
i) At Time of Borrowing. Contemporaneously with each
request for an advance by Borrower under paragraph 9 herein,
Borrower shall give Bank an Interest Notice indicating the
initial Interest Option selected with respect to the principal
balance of such advance.
ii) At Expiration of Interest Periods. At least two (2)
Business Days prior to the termination of any Interest Period,
Borrower shall give Bank an Interest Notice indicating the
Interest Option to be applicable to the corresponding LIBOR
Balance upon the expiration of such Interest Period. If the
required Interest Notice shall not have been timely received
by Bank prior to the expiration of the then relevant Interest
Period, Borrower shall be deemed to have selected a rate based
upon the Adjusted Base Rate to be applicable to such LIBOR
Balance upon the expiration of such Interest Period and to
have given Bank notice of such selection.
iii) Conversion From Adjusted Base Rate. During any
period in which any portion of the principal hereof bears
interest at a rate based upon the Adjusted Base Rate, Borrower
shall have the right, on any Business Day (the "Conversion
Date"), to convert all or a portion of such principal amount
from the Base Rate Balance to a LIBOR Balance by giving Bank
an Interest Notice of such selection at least two (2) Business
Days prior to such Conversion Date.
An Interest Notice may be written, oral or telephonic and Bank is
hereby authorized and directed to honor all Interest Notices
hereunder. Borrower agrees to indemnify and hold Bank harmless
from any loss or liability incurred by Bank in connection with
honoring any telephonic or other oral Interest Notices. All
Interest Notices are effective only upon receipt by Bank. Each
Interest Notice shall be irrevocable and binding upon Borrower.
7. Special Provisions for LIBOR Pricing.
a. Inadequacy of LIBOR Loan Pricing. If Bank
determines that, by reason of circumstances affecting the
interbank eurodollar market generally, deposits in Dollars (in
the applicable amounts) are not being offered to United States
financial institutions in the interbank eurodollar market for
such Interest Period, or that the rate at which such Dollar
deposits are being offered will not adequately and fairly
reflect the cost to Bank of making or maintaining a LIBOR
Balance for the applicable Interest Period, Bank shall
forthwith give notice thereof to Borrower, whereupon until
Bank notifies Borrower that the circumstances giving rise to
such suspension no longer exist, if the LIBOR Rate ceases to
be quoted in The Wall Street Journal, (i) the right of
Borrower to select an Interest Option based upon the LIBOR
Rate shall be suspended, and (ii) Borrower shall be deemed to
have converted each LIBOR Balance to the Base Rate Balance in
accordance with the provisions hereof on the last day of the
then-current Interest Period applicable to such LIBOR Balance.
b. Illegality. If the adoption of any applicable
law, rule or regulation, or any change therein, or any change
in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or
compliance by Bank with any request or directive (whether or
not they have the force of law) of any such authority, central
bank or comparable agency shall make it unlawful or impossible
for Bank to make or maintain a LIBOR Balance, Bank shall so
notify Borrower. Upon receipt of such notice, Borrower shall
be deemed to have converted any LIBOR Balance to the Base Rate
Balance, on either (i) the last day of the then-current
Interest Period applicable to such LIBOR Balance if Bank may
lawfully continue to maintain and fund such LIBOR Balance to
such day, or (ii) immediately, if Bank may not lawfully
continue to maintain such LIBOR Balance to such day.
8. Extension, Place and Application of Payments. Should the
principal of, or any interest on, this Note become due and payable
on any day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day, and interest shall be
payable with respect to such extension. All payments of principal
of, and interest on, this Note shall be made in lawful money of the
United States of America in immediately available funds. Payments
made to Bank by Borrower hereunder shall be applied first to
accrued but unpaid interest and then to outstanding principal.
9. Advances. Subject to the terms of this Note and the Loan
Agreement, Borrower may request advances ("Advances") hereunder and
make payments from time to time during the term of this Note,
provided that it is understood and agreed that the aggregate
principal amount outstanding from time to time hereunder shall not
exceed the sum of the Total Principal Amount. The unpaid balance
of this Note shall increase and decrease with each new Advance or
payment hereunder as the case may be. This Note shall not be
deemed terminated or cancelled prior to the Maturity Date, although
the entire principal balance hereof may from time to time be paid
in full. Subject to the provisions of this Note and the Loan
Agreement, Borrower may borrow, repay and reborrow hereunder from
the date hereof until the Maturity Date. Each Advance hereunder
shall be in an amount not less than $25,000.00 or an integral
multiple thereof. If any Advance request is received by Bank on or
prior to 12:00 p.m. (Dallas, Texas time) on funds designated to
accrue interest at the Adjusted Base Rate, Bank shall make
available at Bank's office in Dallas, Texas not later than 2:00
p.m. (Dallas, Texas time) on the day of such Advance request (or
the date specified in such request), the amount of such request in
immediately available funds. If any Advance request is received by
Bank after 12:00 p.m. (Dallas, Texas time) on funds designated to
accrue interest at the Adjusted Base Rate, Bank shall make
available at Bank's office in Dallas, Texas not later than 2:00
p.m. (Dallas, Texas time) on the Business Day after the day of such
request (or a later date if specified in such request), the amount
of such request in immediately available funds. Each request for
an Advance on funds designated to accrue interest at the Adjusted
LIBOR Rate must be received by Bank not less than three (3)
Business Days prior to the date upon which the Advance requested is
desired by Borrower. Each request for an Advance hereunder must be
accompanied by an Interest Notice for the funds to be advanced
thereunder; provided, however, if an Interest Notice does not
accompany an Advance request, Borrower shall be deemed to have
designated the Adjusted Base Rate. Each request for an Advance by
Borrower hereunder shall be irrevocable and binding on Borrower.
An Advance request may be written, oral or telephonic and Bank is
authorized and directed to honor all such requests for Advances
from any person authorized to request Advances hereunder. Borrower
agrees to indemnify and hold Bank harmless from any loss or
liability incurred by Bank in connection with honoring any such
telephonic or other oral requests for Advances. All Advance
requests are effective only upon receipt by Bank.
10. Loan Agreement. This Note is subject to the terms and
provisions of the Loan Agreement, which is incorporated herein by
reference for all purposes. The holder of this Note is entitled to
the benefits provided in the Loan Agreement. If there are any
conflicts between this Note and the Loan Agreement, the Loan
Agreement shall control.
11. Prepayments; Consequential Loss. Any prepayment made
hereunder shall be made together with all interest accrued but
unpaid on this Note through the date of such prepayment.
Contemporaneously with each prepayment of principal, Borrower shall
give Bank written or oral notice indicating whether such prepayment
is to be applied to the Base Rate Balance or a particular LIBOR
Balance. If such notice is not timely received by Bank, Borrower
shall be deemed to have selected to prepay the Base Rate Balance
and, if any sums remain after satisfying all of the Base Rate
Balance, the remaining sums shall be applied to any LIBOR
Balance(s) that Bank determines in its sole discretion. Borrower
agrees to indemnify and hold Bank harmless from any loss or
liability incurred by Bank in connection with honoring telephonic
or other oral notices indicating how prepayment is to be applied.
If Borrower makes any payment of principal with respect to any
LIBOR Balance on any day prior to the last day of the Interest
Period applicable to such LIBOR Balance, Borrower shall reimburse
Bank on demand the Consequential Loss incurred by Bank as a result
of the timing of such payment. A Certificate of Bank setting forth
the basis for the determination of a Consequential Loss shall be
delivered to Borrower and shall, in the absence of manifest error,
be conclusive and binding as to such determination and amount.
12. Additional Costs. Borrower agrees to pay to Bank all
Additional Costs within ten (10) days of receipt by Borrower from
Bank of a statement setting forth the amount or amounts due and the
basis for the determination from time to time of such amount or
amounts, which statement shall be conclusive and binding upon
Borrower absent manifest error. Failure on the part of Bank to
demand compensation for any Additional Costs in any Interest Period
shall not constitute a waiver of Bank's right to demand
compensation for any Additional Costs incurred during any such
Interest Period or in any other subsequent or prior Interest
Period. The term "Additional Costs" shall mean such additional
amount or amounts as Bank shall reasonably determine will
compensate Bank for actual costs incurred by Bank in maintaining
LIBOR Rates on the LIBOR Balances or any portion thereof as a
result of any change, after the date of this Note, in applicable
law, rule or regulation or in the interpretation or administration
thereof by, or the compliance by Bank with any request or directive
from, any domestic or foreign governmental authority charged with
the interpretation or administration thereof (whether or not having
the force of law) or by any domestic or foreign court changing the
basis of taxation of payments to Bank of the LIBOR Balances or
interest on the LIBOR Balances or any portion thereof at an
Adjusted LIBOR Rate or any other fees or amounts payable under this
Note or the Loan Agreement (other than taxes imposed on all or any
portion of the overall net income of Bank by the State of Texas or
the Federal government), or imposing, modifying or applying any
reserve, special deposit or similar requirement against assets of,
deposits with or for the account of, credit extended by, or any
other acquisition of funds for loans by Bank, or imposing on Bank,
as the case may be, or on the London interbank market any other
condition affecting this Note, the Loan Agreement or the LIBOR
Balances so as to increase the cost of Bank making or maintaining
Adjustable LIBOR Rates with respect to the LIBOR Balances or any
portion thereof or to reduce the amount of any sum received or
receivable by Bank under this Note or the Loan Agreement (whether
of principal, interest or otherwise), by an amount deemed by Bank
in good faith to be material, but without duplication for Reserve
Requirement.
13. Notices. Except as otherwise provided herein for oral or
telephonic notices, all notices, requests, demands or other
communications required or permitted to be given pursuant to this
Agreement shall be in writing and given by (i) personal delivery,
(ii) expedited delivery service with proof of delivery, or (iii)
United States mail, postage prepaid, registered or certified mail,
return receipt requested, sent to the intended addressee at the
address set forth herein and shall be deemed to have been received
either, in the case of expedited delivery service, as of the date
of first attempted delivery at the address and in the manner
provided herein, or in the case of mail, three (3) days after
deposit in a depository receptacle under the care and custody of
the United States Postal Service. Either party shall have the
right to change its address for notice hereunder to any other
location within the continental United States by notice to the
other party of such new address at least thirty (30) days prior to
the effective date of such new address.
14. Legal Fees. If this Note is placed in the hands of any
attorney for collection, or if it is collected through any legal
proceeding at law or in equity or in bankruptcy, receivership or
other court proceedings, Borrower agrees to pay all costs of
collection including, but not limited to, court costs and
reasonable attorneys' fees.
15. Waivers. Borrower and each surety, endorser, guarantor
and any other party ever liable for payment of any sums of money
payable on this Note, jointly and severally waive presentment and
demand for payment, protest, notice of protest, intention to
accelerate, acceleration and non-payment, or other notice of
default, and agree that their liability under this Note shall not
be affected by any renewal or extension in the time of payment
hereof, or in any indulgences, or by any release or change in any
security for the payment of this Note, and hereby consent to any
and all renewals, extensions, indulgences, releases or changes,
regardless of the number of such renewals, extensions, indulgences,
releases or changes; provided, however, this Note may not be
amended or modified except by a written instrument signed by the
Borrower and the holder hereof.
No waiver by Bank of any of its rights or remedies hereunder
or under any other document evidencing or securing this Note or
otherwise shall be considered a waiver of any other subsequent
right or remedy of Bank; no delay or omission in the exercise or
enforcement by Bank of any rights or remedies shall ever be
construed as a waiver of any right or remedy of Bank; and no
exercise or enforcement of any such rights or remedies shall ever
be held to exhaust any right or remedy of Bank.
16. Remedies. Upon the occurrence of any Event of Default,
the holder hereof may, at its option, (i) declare the entire unpaid
balance of principal and accrued by unpaid interest on this Note to
be immediately due and payable, (ii) refuse to advance any
additional amounts under this Note, (iii) foreclose all liens
securing payment hereof, (iv) pursue any and all other rights,
remedies and recourses available to the holder hereof, including
but not limited to, any such rights, remedies or recourses under
the Loan Documents, at law or in equity, or (v) pursue any
combination of the foregoing.
17. Spreading. Any provision herein, or in any document
securing this Note, or any other document executed or delivered in
connection herewith, or in any other agreement or commitment,
whether written or oral, expressed or implied, to the contrary
notwithstanding, neither Bank nor any holder hereof shall in any
event be entitled to receive or collect, nor shall or may amounts
received hereunder be credited, so that Bank or any holder hereof
shall be paid, as interest, a sum greater than the maximum amount
permitted by applicable law to be charged to the person,
partnership, firm or corporation primarily obligated to pay this
Note at the time in question. If any construction of this Note or
any document securing this Note, or any and all other papers,
agreements or commitments, indicate a different right given to Bank
of any holder hereof to ask for, demand or receive any larger sum
as interest, such is a mistake in calculation or wording which this
clause shall override and control, it being the intention of the
parties that this Note, and all other instruments securing the
payment of this Note or executed or delivered in connection
herewith shall in all things comply with the applicable law and
proper adjustments shall automatically be made accordingly. In the
event that Bank or any holder hereof ever receives, collects or
applies as interest, any sum in excess of the Maximum Rate, if any,
such excess amount shall be applied to the reduction of the unpaid
principal balance of this Note, and if this Note is paid in full,
any remaining excess shall be paid to Borrower. In determining
whether or not the interest paid or payable, under any specific
contingency, exceeds the Maximum Rate, if any, Borrower and Bank or
any holder hereof shall, to the maximum extent permitted under
applicable law: (a) characterize any nonprincipal payment as an
expense or fee rather than as interest, (b) exclude voluntary
prepayments and the effects thereof, (c) "spread" the total amount
of interest throughout the entire term of this Note; provided that
if this Note is paid and performed in full prior to the end of the
full contemplated term hereof, and if the interest received for the
actual period of existence thereof exceeds the Maximum Rate, if
any, Bank or any holder hereof shall refund to Borrower the amount
of such excess, or credit the amount of such excess against the
aggregate unpaid principal balance of all advances made by the Bank
or any holder hereof under this Note at the time in question.
18. Choice of Law. This Note is being executed and
delivered, and is intended to be performed in the State of Texas.
Except to the extent that the law of any United States may apply to
the terms hereof, the substantive laws of the State of Texas shall
govern the validity, construction, enforcement and interpretation
of this Note. In the event of a dispute involving this Note or any
other instruments executed in connection herewith, the undersigned
irrevocably agrees that venue for such dispute shall lie in any
court of competent jurisdiction in Dallas, County, Texas.
SHOWBIZ PIZZA TIME, INC.
By:
Name: Larry G. Page
Title: Executive Vice
President and
Chief Financial
Officer
SECURITY AGREEMENT - Exhibit 10(e)(3)
THIS SECURITY AGREEMENT ("Agreement") is made as of January
18, 1996, by SHOWBIZ PIZZA TIME, INC., a Kansas corporation
(hereinafter called "Debtor", whether one or more), in favor of
BANK ONE, TEXAS, NATIONAL ASSOCIATION, a national banking
association ("Bank"). Debtor hereby agrees with Bank as follows:
1. Definitions. As used in this Agreement, the following
terms shall have the meanings indicated below:
(a) The term "Borrower" shall mean Debtor.
(b) The term "Code" shall mean the Uniform Commercial
Code as in effect in the State of Texas on the date of this
Agreement or as it may hereafter be amended from time to time.
(c) The term "Collateral" shall mean all of the property
set forth below including without limitation, any property
specifically described on Schedule "A" attached hereto and
made a part hereof.
All equipment, machinery, apparatus, fittings,
personal property and fixtures of whatsoever kind and
character now or hereafter possessed, held, acquired,
leased or owned by Debtor and used or usable in Debtor's
business, together with all replacements, accessories,
additions, substitutions and accessions to all of the
foregoing, all records relating in any way to the
foregoing (including, without limitation, any computer
software, whether on tape, disk, card, strip, cartridge
or any other form), to the extent that the foregoing
property is located on, attached to, annexed to, related
to, used or usable or intended to be used in connection
with any present or future operation or business, or
otherwise made a part of, or is or shall become fixtures
upon, real property, such real property and the record
owner thereof is described on Exhibit "A" attached hereto
and made a part hereof.
The term Collateral, as used herein, shall also
include all PRODUCTS and PROCEEDS of all of the foregoing
(including without limitation, insurance payable by
reason of loss or damage to the foregoing property) and
any property, securities, guaranties or monies of Debtor
which may at any time come into the possession of Secured
Party (as hereinafter defined). The designation of
proceeds does not authorize Debtor to sell, transfer or
otherwise convey any of the foregoing property except
finished goods intended for sale in the ordinary course
of Debtor's business or as otherwise provided herein.
(d) The term "Indebtedness" shall mean:
(i) that certain Promissory Note dated of even date
herewith executed by Debtor and payable to Bank in the
original amount of $2,000,000.00, (ii) all accrued but
unpaid interest on any of the indebtedness described in
(i) above, (iii) all obligations owing to Secured Party
under any documents evidencing, securing, governing
and/or pertaining to all or any part of the indebtedness
described in (i) and (ii) above, (iv) all costs and
expenses incurred by Secured Party in connection with the
collection and administration of all or any part of the
indebtedness and obligations described in (i), (ii) and
(iii) above or the protection or preservation of, or
realization upon, the collateral securing all or any part
of such indebtedness and obligations, including without
limitation all reasonable attorneys' fees, and (v) all
renewals, extensions, modifications and rearrangements of
the indebtedness and obligations described in (i), (ii),
(iii) and (iv) above.
(e) The term "Loan Documents" shall mean all instruments
and documents evidencing, securing, governing, guaranteeing
and/or pertaining to the Indebtedness.
(f) The term "Obligated Party" shall mean any party
other than Borrower who secures, guarantees and/or is
otherwise obligated to pay all or any portion of the
Indebtedness.
(g) The term "Secured Party" shall mean Bank, its
successors and assigns, including without limitation, any
party to whom Bank, or its successors or assigns, may assign
its rights and interests under this Agreement.
All words and phrases used herein which are expressly defined in
Section 1.201 or Chapter 9 of the Code shall have the meaning
provided for therein. Other words and phrases defined elsewhere in
the Code shall have the meaning specified therein except to the
extent such meaning is inconsistent with a definition in Section
1.201 or Chapter 9 of the Code.
2. Security Interest. As security for the Indebtedness,
Debtor, for value received, hereby grants to Secured Party a
continuing security interest in the Collateral.
3. Representations and Warranties. Debtor hereby represents
and warrants the following to Secured Party:
(a) Due Authorization. The execution, delivery and
performance of this Agreement and all of the other Loan
Documents by Debtor have been duly authorized by all necessary
corporate action of Debtor, to the extent Debtor is a
corporation, or by all necessary partnership action, to the
extent Debtor is a partnership.
(b) Enforceability. This Agreement and the other Loan
Documents constitute legal, valid and binding obligations of
Debtor, enforceable in accordance with their respective terms,
except as limited by bankruptcy, insolvency or similar laws of
general application relating to the enforcement of creditors'
rights and except to the extent specific remedies may
generally be limited by equitable principles.
(c) Ownership and Liens. Debtor has good and marketable
title to the Collateral free and clear of all liens, security
interests, encumbrances or adverse claims, except for the
security interest created by this Agreement. No dispute,
right of setoff, counterclaim or defense exists with respect
to all or any part of the Collateral. Debtor has not executed
any other security agreement currently affecting the
Collateral and no effective financing statement or other
instrument similar in effect covering all or any part of the
Collateral is on file in any recording office except as may
have been executed or filed in favor of Secured Party.
(d) No Conflicts or Consents. Neither the ownership,
the intended use of the Collateral by Debtor, the grant of the
security interest by Debtor to Secured Party herein nor the
exercise by Secured Party of its rights or remedies hereunder,
will (i) conflict with any provision of (A) any domestic or
foreign law, statute, rule or regulation, (B) the articles or
certificate of incorporation, charter, bylaws or partnership
agreement, as the case may be, of Debtor, or (C) any
agreement, judgment, license, order or permit applicable to or
binding upon Debtor, or (ii) result in or require the creation
of any lien, charge or encumbrance upon any assets or
properties of Debtor or of any person except as may be
expressly contemplated in the Loan Documents. Except as
expressly contemplated in the Loan Documents, no consent,
approval, authorization or order of, and no notice to or
filing with, any court, governmental authority or third party
is required in connection with the grant by Debtor of the
security interest herein or the exercise by Secured Party of
its rights and remedies hereunder.
(e) Security Interest. Debtor has and will have at all
times full right, power and authority to grant a security
interest in the Collateral to Secured Party in the manner
provided herein, free and clear of any lien, security interest
or other charge or encumbrance. This Agreement creates a
legal, valid and binding security interest in favor of Secured
Party in the Collateral securing the Indebtedness. Possession
by Secured Party of all certificates, instruments and cash
constituting Collateral from time to time and/or the filing of
the financing statements delivered prior hereto and/or
concurrently herewith by Debtor to Secured Party will perfect
and establish the first priority of Secured Party's security
interest hereunder in the Collateral.
(f) Location. Debtor's residence or chief executive
office, as the case may be, and the office where the records
concerning the Collateral are kept is located at its address
set forth on the signature page hereof. Except as specified
elsewhere herein, all Collateral shall be kept at such address
and such other addresses as may be listed in Schedule "B"
attached hereto and made a part hereof.
(g) Solvency of Debtor. As of the date hereof, and
after giving effect to this Agreement and the completion of
all other transactions contemplated by Debtor at the time of
the execution of this Agreement, (i) Debtor is and will be
solvent, (ii) the fair saleable value of Debtor's assets
exceeds and will continue to exceed Debtor's liabilities (both
fixed and contingent), (iii) Debtor is and will continue to be
able to pay its debts as they mature, and (iv) if Debtor is
not an individual, Debtor has and will have sufficient capital
to carry on Debtor's businesses and all businesses in which
Debtor is about to engage.
(h) Compliance with Environmental Laws. Except as
disclosed in writing to Secured Party: (i) Debtor is
conducting Debtor's businesses in material compliance with all
applicable federal, state and local laws, statutes,
ordinances, rules, regulations, orders, determinations and
court decisions, including without limitation, those
pertaining to health or environmental matters such as the
Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986 (collectively, together with
any subsequent amendments, hereinafter called "CERCLA"), the
Resource Conservation and Recovery Act of 1976, as amended by
the Used Oil Recycling Act of 1980, the Solid Waste Disposal
Act Amendments of 1980, and the Hazardous Substance Waste
Amendments of 1984 (collectively, together with any subsequent
amendments, hereinafter called "RCRA"), the Texas Water Code
and the Texas Solid Waste Disposal Act; (ii) none of the
operations of Debtor is the subject of a federal, state or
local investigation evaluating whether any material remedial
action is needed to respond to a release or disposal of any
toxic or hazardous substance or solid waste into the
environment; (iii) Debtor has not filed any notice under any
federal, state or local law indicating that Debtor is
responsible for the release into the environment, the disposal
on any premises in which Debtor is conducting its businesses
or the improper storage, of any material amount of any toxic
or hazardous substance or solid waste or that any such toxic
or hazardous substance or solid waste has been released,
disposed of or is improperly stored, upon any premise on which
Debtor is conducting its businesses; and (iv) Debtor otherwise
does not have any known material contingent liability in
connection with the release into the environment, disposal or
the improper storage, of any such toxic or hazardous substance
or solid waste. The terms "hazardous substance" and
"release", as used herein, shall have the meanings specified
in CERCLA, and the terms "solid waste" and "disposal", as used
herein, shall have the meanings specified in RCRA; provided,
however, that to the extent that the laws of the State of
Texas establish meanings for such terms which are broader than
that specified in either CERCLA or RCRA, such broader meanings
shall apply.
4. Affirmative Covenants. Debtor will comply with the
covenants contained in this Section 4 at all times during the
period of time this Agreement is effective unless Secured Party
shall otherwise consent in writing.
(a) Ownership and Liens. Debtor will maintain good and
marketable title to all Collateral free and clear of all
liens, security interests, encumbrances or adverse claims,
except for the security interest created by this Agreement and
the security interests and other encumbrances expressly
permitted by the other Loan Documents. Debtor will not permit
any dispute, right of setoff, counterclaim or defense to exist
with respect to all or any part of the Collateral. Debtor
will cause any financing statement or other security
instrument with respect to the Collateral to be terminated,
except as may exist or as may have been filed in favor of
Secured Party. Debtor will defend at its expense Secured
Party's right, title and security interest in and to the
Collateral against the claims of any third party.
(b) Further Assurances. Debtor will from time to time
at its expense promptly execute and deliver all further
instruments and documents and take all further action
necessary or appropriate or that Secured Party may request in
order (i) to perfect and protect the security interest created
or purported to be created hereby and the first priority of
such security interest, (ii) to enable Secured Party to
exercise and enforce its rights and remedies hereunder in
respect of the Collateral, and (iii) to otherwise effect the
purposes of this Agreement, including without limitation:
(A) executing and filing such financing or continuation
statements, or amendments thereto; and (B) furnishing to
Secured Party from time to time statements and schedules
further identifying and describing the Collateral and such
other reports in connection with the Collateral, all in
reasonable detail satisfactory to Bank.
(c) Inspection of Collateral. Debtor will keep adequate
records concerning the Collateral and will permit Secured
Party and all representatives and agents appointed by Secured
Party to inspect any of the Collateral and the books and
records of or relating to the Collateral at any time during
normal business hours, to make and take away photocopies,
photographs and printouts thereof and to write down and record
any such information.
(d) Payment of Taxes. Debtor (i) will timely pay all
property and other taxes, assessments and governmental charges
or levies imposed upon the Collateral or any part thereof,
(ii) will timely pay all lawful claims which, if unpaid, might
become a lien or charge upon the Collateral or any part
thereof, and (iii) will maintain appropriate accruals and
reserves for all such liabilities in a timely fashion in
accordance with generally accepted accounting principles.
Debtor may, however, delay paying or discharging any such
taxes, assessments, charges, claims or liabilities so long as
the validity thereof is contested in good faith by proper
proceedings and provided Debtor has set aside on Debtor's
books adequate reserves therefor; provided, however, Debtor
understands and agrees that in the event of any such delay in
payment or discharge and upon Secured Party's written request,
Debtor will establish with Secured Party an escrow acceptable
to Secured Party adequate to cover the payment of such taxes,
assessments and governmental charges with interest, costs and
penalties and a reasonable additional sum to cover possible
costs, interest and penalties (which escrow shall be returned
to Debtor upon payment of such taxes, assessments,
governmental charges, interests, costs and penalties or
disbursed in accordance with the resolution of the contest to
the claimant) or furnish Secured Party with an indemnity bond
secured by a deposit in cash or other security acceptable to
Secured Party. Notwithstanding any other provision contained
in this Subsection, Secured Party may at its discretion
exercise its rights under Subsection 6(c) at any time to pay
such taxes, assessments, governmental charges, interest, costs
and penalties.
(e) Mortgagee's and Landlord's Waivers. Debtor shall
cause each mortgagee of real property owned by Debtor and each
landlord of real property leased by Debtor to execute and
deliver agreements satisfactory in form and substance to
Secured Party by which such mortgagee or landlord waives or
subordinates any rights it may have in the Collateral.
5. Negative Covenants. Debtor will comply with the
covenants contained in this Section 5 at all times during the
period of time this Agreement is effective, unless Secured Party
shall otherwise consent in writing.
(a) Transfer or Encumbrance. Debtor will not (i) sell,
assign (by operation of law or otherwise), transfer, exchange,
lease or otherwise dispose of any of the Collateral, (ii)
grant a lien or security interest in or execute, file or
record any financing statement or other security instrument
with respect to the Collateral to any party other than Secured
Party, or (iii) deliver actual or constructive possession of
any of the Collateral to any party other than Secured Party,
except for (A) sales and leases of inventory in the ordinary
course of business, and (B) the sale or other disposal of any
item of equipment which is worn out or obsolete and which has
been replaced by an item of equal suitability and value, owned
by Debtor and made subject to the security interest under this
Agreement, but which is otherwise free and clear of any lien,
security interest, encumbrance or adverse claim; provided,
however, the exceptions permitted in clauses (A) and (B) above
shall automatically terminate upon the occurrence of an Event
of Default.
(b) Impairment of Security Interest. Debtor will not
take or fail to take any action which would in any manner
impair the value or enforceability of Secured Party's security
interest in any Collateral.
(c) Possession of Collateral. Debtor will not cause or
permit the removal of any Collateral from its possession,
control and risk of loss, nor will Debtor cause or permit the
removal of any Collateral from the addresses specified on
Schedule "B" to this Agreement other than (i) as permitted by
Subsection 5(a), or (ii) in connection with the possession of
any Collateral by Secured Party or by its bailee.
(d) Goods. Debtor will not permit any Collateral which
constitutes goods to at any time (i) be covered by any
document except documents in the possession of the Secured
Party, (ii) become so related to, attached to or used in
connection with any particular real property so as to become
a fixture upon such real property, or (iii) be installed in or
affixed to other goods so as to become an accession to such
other goods unless such other goods are subject to a perfected
first priority security interest under this Agreement.
(e) Compromise of Collateral. Debtor will not adjust,
settle, compromise, amend or modify any Collateral, except an
adjustment, settlement, compromise, amendment or modification
in good faith and in the ordinary course of business;
provided, however, this exception shall automatically
terminate upon the occurrence of an Event of Default or upon
Secured Party's written request. Debtor shall provide to
Secured Party such information concerning (i) any adjustment,
settlement, compromise, amendment or modification of any
Collateral, and (ii) any claim asserted by any account debtor
for credit, allowance, adjustment, dispute, setoff or
counterclaim, as Secured Party may request from time to time.
(f) Financing Statement Filings. Debtor recognizes that
financing statements pertaining to the Collateral have been or
may be filed where Debtor maintains any Collateral, has its
records concerning any Collateral or has its residence or
chief executive office, as the case may be. Other than as
permitted by Section 5(a) or in connection with the possession
of any Collateral by Secured Party or its bailee, Debtor will
not cause or permit any change in the location of (i) any
Collateral, (ii) any records concerning any Collateral, or
(iii) Debtor's residence or chief executive office, as the
case may be, to a jurisdiction other than as represented in
Subsection 3(f) unless Debtor shall have notified Secured
Party in writing of such change at least thirty (30) days
prior to the effective date of such change, and shall have
first taken all action required by Secured Party for the
purpose of further perfecting or protecting the security
interest in favor of Secured Party in the Collateral. In any
written notice furnished pursuant to this Subsection, Debtor
will expressly state that the notice is required by this
Agreement and contains facts that may require additional
filings of financing statements or other notices for the
purpose of continuing perfection of Secured Party's security
interest in the Collateral.
6. Rights of Secured Party. Secured Party shall have the
rights contained in this Section 6 at all times during the period
of time this Agreement is effective.
(a) Additional Financing Statements Filings. Debtor
hereby authorizes Secured Party to file, without the signature
of Debtor, one or more financing or continuation statements,
and amendments thereto, relating to the Collateral. Debtor
further agrees that a carbon, photographic or other
reproduction of this Security Agreement or any financing
statement describing any Collateral is sufficient as a
financing statement and may be filed in any jurisdiction
Secured Party may deem appropriate.
(b) Power of Attorney. Debtor hereby irrevocably
appoints Secured Party as Debtor's attorney-in-fact, such
power of attorney being coupled with an interest, with full
authority in the place and stead of Debtor and in the name of
Debtor or otherwise, from time to time in Secured Party's
discretion, to take any action and to execute any instrument
which Secured Party may deem necessary or appropriate to
accomplish the purposes of this Agreement, including without
limitation: (i) to obtain and adjust insurance required by
Secured Party hereunder; (ii) to demand, collect, sue for,
recover, compound, receive and give acquittance and receipts
for moneys due and to become due under or in respect of the
Collateral; (iii) to receive, endorse and collect any drafts
or other instruments, documents and chattel paper in
connection with clause (i) or (ii) above; and (iv) to file any
claims or take any action or institute any proceedings which
Secured Party may deem necessary or appropriate for the
collection and/or preservation of the Collateral or otherwise
to enforce the rights of Secured Party with respect to the
Collateral.
(c) Performance by Secured Party. If Debtor fails to
perform any agreement or obligation provided herein, Secured
Party may itself perform, or cause performance of, such
agreement or obligation, and the expenses of Secured Party
incurred in connection therewith shall be a part of the
Indebtedness, secured by the Collateral and payable by Debtor
on demand.
(d) Request for Environmental Inspections. Upon Secured
Party's reasonable request from time to time, Debtor will
obtain at Debtor's sole expense an inspection or audit of
Debtor's operations from an engineering or consulting firm
approved by Secured Party, indicating the presence or absence
of toxic or hazardous substances and solid wastes on any
premises in which Debtor is conducting its business; provided,
however, Debtor will be obligated to pay for the cost of any
such inspection or audit no more than one time in any twelve
(12) month period unless Secured Party has a reasonable belief
that toxic or hazardous substances or solid wastes have been
dumped on any such premises. If Debtor fails to order or
obtain an inspection or audit within ten (10) days after
Secured Party's request, Secured Party may at its option order
such inspection or audit, and Debtor grants to Secured Party
and its agents, employees, contractors and consultants access
to the premises in which it is conducting its business and a
license (which is coupled with an interest and is irrevocable)
to obtain inspections and audits. Debtor agrees to promptly
provide Secured Party with a copy of the results of any such
inspection or audit received by Debtor. The cost of such
inspections and audits, for which Debtor is obligated to pay,
shall be a part of the Indebtedness, secured by the Collateral
and payable by Debtor on demand.
7. Events of Default. Each of the following constitutes an
"Event of Default" under this Agreement:
(a) Failure to Pay Indebtedness. The failure, refusal
or neglect of Borrower to make payment of the Indebtedness or
any portion thereof, as the same shall become due and payable
at maturity (whether by acceleration or otherwise) and any
applicable notice and cure period shall have expired; or
(b) Non-Performance of Covenants. The failure of
Borrower or any Obligated Party to timely and properly
observe, keep or perform any covenant, agreement, warranty or
condition required herein or in any of the other Loan
Documents and any applicable notice and cure period shall have
expired; or
(c) Default Under other Loan Documents. The occurrence
of an event of default under any of the other Loan Documents;
or
(d) False Representation. Any representation contained
herein or in any of the other Loan Documents made by Borrower
or any Obligated Party is false or misleading in any material
respect; or
(e) Default to Third Party. The occurrence of any event
which permits the acceleration of the maturity of any
indebtedness in the amount of $1,000,000.00 or more owing by
Borrower to any third party under any agreement or
understanding; or
(f) Bankruptcy or Insolvency. If Borrower or any
Obligated Party:
(i) becomes insolvent, or makes a transfer in
fraud of creditors, or makes an assignment for the
benefit of creditors, or admits in writing its inability
to pay its debts as they become due; or
(ii) generally is not paying its debts as such
debts become due; or
(iii) has a receiver or custodian appointed for,
or take possession of, all or substantially all of the
assets of such party or any of the Collateral, either in
a proceeding brought by such party or in a proceeding
brought against such party and such appointment is not
discharged or such possession is not terminated within
thirty (30) days after the effective date thereof or such
party consents to or acquiesces in such appointment or
possession; or
(iv) files a petition for relief under the
United States Bankruptcy Code or any other present or
future federal or state insolvency, bankruptcy or similar
laws (all of the foregoing hereinafter collectively
called "Applicable Bankruptcy Law") or an involuntary
petition for relief is filed against such party under any
Applicable Bankruptcy Law and such involuntary petition
is not dismissed within thirty (30) days after the filing
thereof, or an order for relief naming such party is
entered under any Applicable Bankruptcy Law, or any
composition, rearrangement, extension, reorganization or
other relief of debtors now or hereafter existing is
requested or consented to by such party; or
(v) fails to have discharged within a period
of thirty (30) days any attachment, sequestration or
similar writ levied upon any property of such party; or
(vi) fails to pay within thirty (30) days any
final money judgment against such party; or
(g) Execution on Collateral. The Collateral or any
portion thereof is taken on execution or other process of law
in any action against Debtor; or
(h) Abandonment. Debtor abandons the Collateral or any
portion thereof; or
(i) Action by Other Lienholder. The holder of any lien
or security interest on any of the assets of Debtor, including
without limitation, the Collateral (without hereby implying
the consent of Secured Party to the existence or creation of
any such lien or security interest on the Collateral),
declares a default thereunder or institutes foreclosure or
other proceedings for the enforcement of its remedies
thereunder; or
(j) Liquidation, Death and Related Events. If Borrower
or any Obligated Party is an entity, the liquidation,
dissolution, merger or consolidation of any such entity or, if
Borrower or any Obligated Party is an individual, the death or
legal incapacity of any such individual.
8. Remedies and Related Rights. If an Event of Default
shall have occurred, and without limiting any other rights and
remedies provided herein, under any of the other Loan Documents or
otherwise available to Secured Party, Secured Party may exercise
one or more of the rights and remedies provided in this Section.
(a) Remedies. Secured Party may from time to time at
its discretion, without limitation and without notice except
as expressly provided in any of the Loan Documents:
(i) exercise in respect of the Collateral all
the rights and remedies of a secured party under the Code
(whether or not the Code applies to the affected
Collateral);
(ii) require Debtor to, and Debtor hereby
agrees that it will at its expense and upon request of
Secured Party, assemble the Collateral as directed by
Secured Party and make it available to Secured Party at
a place to be designated by Secured Party which is
reasonably convenient to both parties;
(iii) reduce its claim to judgment or foreclose
or otherwise enforce, in whole or in part, the security
interest granted hereunder by any available judicial
procedure;
(iv) sell or otherwise dispose of, at its
office, on the premises of Debtor or elsewhere, the
Collateral, as a unit or in parcels, by public or private
proceedings, and by way of one or more contracts (it
being agreed that the sale or other disposition of any
part of the Collateral shall not exhaust Secured Party's
power of sale, but sales or other dispositions may be
made from time to time until all of the Collateral has
been sold or disposed of or until the Indebtedness has
been paid and performed in full), and at any such sale or
other disposition it shall not be necessary to exhibit
any of the Collateral;
(v) buy the Collateral, or any portion
thereof, at any public sale;
(vi) buy the Collateral, or any portion
thereof, at any private sale if the Collateral is of a
type customarily sold in a recognized market or is of a
type which is the subject of widely distributed standard
price quotations;
(vii) apply for the appointment of a receiver
for the Collateral, and Debtor hereby consents to any
such appointment; and
(viii) at its option, retain the Collateral in
satisfaction of the Indebtedness whenever the
circumstances are such that Secured Party is entitled to
do so under the Code or otherwise.
Debtor agrees that in the event Debtor is entitled to receive
any notice under the Uniform Commercial Code, as it exists in
the state governing any such notice, of the sale or other
disposition of any Collateral, reasonable notice shall be
deemed given when such notice is deposited in a depository
receptacle under the care and custody of the United States
Postal Service, postage prepaid, at Debtor's address set forth
on the signature page hereof, five (5) days prior to the date
of any public sale, or after which a private sale, of any of
such Collateral is to be held. Secured Party shall not be
obligated to make any sale of Collateral regardless of notice
of sale having been given. Secured Party may adjourn any
public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was
so adjourned.
(b) Application of Proceeds. If any Event of Default
shall have occurred, Secured Party may at its discretion apply
or use any cash held by Secured Party as Collateral, and any
cash proceeds received by Secured Party in respect of any sale
or other disposition of, collection from, or other realization
upon, all or any part of the Collateral, which shall be
applied or used in the following order:
(i) to the repayment or reimbursement of the
reasonable costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses)
incurred by Secured Party in connection with (A) the
administration of the Loan Documents, (B) the custody,
preservation, use or operation of, or the sale of,
collection from, or other realization upon, the
Collateral, and (C) the exercise or enforcement of any of
the rights and remedies of Secured Party hereunder;
(ii) to the payment or other satisfaction of
any liens and other encumbrances upon the Collateral;
(iii) to the satisfaction of the Indebtedness;
(iv) by holding such cash and proceeds as
Collateral;
(v) to the payment of any other amounts
required by applicable law (including without limitation,
Section 9.504(a)(3) of the Code or any other applicable
statutory provision); and
(vi) by delivery to Debtor or any other party
lawfully entitled to receive such cash or proceeds
whether by direction of a court of competent jurisdiction
or otherwise.
(c) Deficiency. In the event that the proceeds of any
sale of, collection from, or other realization upon, all or
any part of the Collateral by Secured Party are insufficient
to pay all amounts to which Secured Party is legally entitled,
Borrower and any party who guaranteed or is otherwise
obligated to pay all or any portion of the Indebtedness shall
be liable for the deficiency, together with interest thereon
as provided in the Loan Documents.
(d) Non-Judicial Remedies. In granting to Secured Party
the power to enforce its rights hereunder without prior
judicial process or judicial hearing, Debtor expressly waives,
renounces and knowingly relinquishes any legal right which
might otherwise require Secured Party to enforce its rights by
judicial process. Debtor recognizes and concedes that
non-judicial remedies are consistent with the usage of trade,
are responsive to commercial necessity and are the result of
a bargain at arm's length. Nothing herein is intended to
prevent Secured Party or Debtor from resorting to judicial
process at either party's option.
(e) Other Recourse. Debtor waives any right to require
Secured Party to proceed against any third party, exhaust any
Collateral or other security for the Indebtedness, or to have
any third party joined with Debtor in any suit arising out of
the Indebtedness or any of the Loan Documents, or pursue any
other remedy available to Secured Party. Debtor further
waives any and all notice of acceptance of this Agreement and
of the creation, modification, rearrangement, renewal or
extension of the Indebtedness. Debtor further waives any
defense arising by reason of any disability or other defense
of any third party or by reason of the cessation from any
cause whatsoever of the liability of any third party. Until
all of the Indebtedness shall have been paid in full, Debtor
shall have no right of subrogation and Debtor waives the right
to enforce any remedy which Secured Party has or may hereafter
have against any third party, and waives any benefit of and
any right to participate in any other security whatsoever now
or hereafter held by Secured Party. Debtor authorizes Secured
Party, and without notice or demand and without any
reservation of rights against Debtor and without affecting
Debtor's liability hereunder or on the Indebtedness to (i)
take or hold any other property of any type from any third
party as security for the Indebtedness, and exchange, enforce,
waive and release any or all of such other property,
(ii) apply such other property and direct the order or manner
of sale thereof as Secured Party may in its discretion
determine, (iii) renew, extend, accelerate, modify,
compromise, settle or release any of the Indebtedness or other
security for the Indebtedness, (iv) waive, enforce or modify
any of the provisions of any of the Loan Documents executed by
any third party, and (v) release or substitute any third
party.
9. Indemnity. Debtor hereby indemnifies and agrees to hold
harmless Secured Party, and its officers, directors, employees,
agents and representatives (each an "Indemnified Person") from and
against any and all liabilities, obligations, claims, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature (collectively, the "Claims")
which may be imposed on, incurred by, or asserted against, any
Indemnified Person (whether or not caused by any Indemnified
Person's sole, concurrent or contributory negligence) arising in
connection with the Loan Documents, the Indebtedness or the
Collateral (including without limitation, the enforcement of the
Loan Documents and the defense of any Indemnified Person's actions
and/or inactions in connection with the Loan Documents), except to
the limited extent the Claims against an Indemnified Person are
proximately caused by such Indemnified Person's gross negligence or
willful misconduct. If Debtor or any third party ever alleges such
gross negligence or willful misconduct by any Indemnified Person,
the indemnification provided for in this Section shall nonetheless
be paid upon demand, subject to later adjustment or reimbursement,
until such time as a court of competent jurisdiction enters a final
judgment as to the extent and effect of the alleged gross
negligence or willful misconduct. The indemnification provided for
in this Section shall survive the termination of this Agreement and
shall extend and continue to benefit each individual or entity who
is or has at any time been an Indemnified Person hereunder.
10. Miscellaneous.
(a) Entire Agreement. This Agreement contains the
entire agreement of Secured Party and Debtor with respect to
the Collateral. If the parties hereto are parties to any
prior agreement, either written or oral, relating to the
Collateral, the terms of this Agreement shall amend and
supersede the terms of such prior agreements as to
transactions on or after the effective date of this Agreement,
but all security agreements, financing statements, guaranties,
other contracts and notices for the benefit of Secured Party
shall continue in full force and effect to secure the
Indebtedness unless Secured Party specifically releases its
rights thereunder by separate release. If there are any
conflicts between this Agreement and that certain Loan
Agreement dated of even date herewith by and between Debtor
and Secured Party, the Loan Agreement shall control.
(b) Amendment. No modification, consent or amendment of
any provision of this Agreement or any of the other Loan
Documents shall be valid or effective unless the same is in
writing and signed by the party against whom it is sought to
be enforced.
(c) Actions by Secured Party. The lien, security
interest and other security rights of Secured Party hereunder
shall not be impaired by (i) any renewal, extension, increase
or modification with respect to the Indebtedness, (ii) any
surrender, compromise, release, renewal, extension, exchange
or substitution which Secured Party may grant with respect to
the Collateral, or (iii) any release or indulgence granted to
any endorser, guarantor or surety of the Indebtedness. The
taking of additional security by Secured Party shall not
release or impair the lien, security interest or other
security rights of Secured Party hereunder or affect the
obligations of Debtor hereunder.
(d) Waiver by Secured Party. Secured Party may waive
any Event of Default without waiving any other prior or
subsequent Event of Default. Secured Party may remedy any
default without waiving the Event of Default remedied.
Neither the failure by Secured Party to exercise, nor the
delay by Secured Party in exercising, any right or remedy upon
any Event of Default shall be construed as a waiver of such
Event of Default or as a waiver of the right to exercise any
such right or remedy at a later date. No single or partial
exercise by Secured Party of any right or remedy hereunder
shall exhaust the same or shall preclude any other or further
exercise thereof, and every such right or remedy hereunder may
be exercised at any time. No waiver of any provision hereof
or consent to any departure by Debtor therefrom shall be
effective unless the same shall be in writing and signed by
Secured Party and then such waiver or consent shall be
effective only in the specific instances, for the purpose for
which given and to the extent therein specified. No notice to
or demand on Debtor in any case shall of itself entitle Debtor
to any other or further notice or demand in similar or other
circumstances.
(e) Costs and Expenses. Debtor will upon demand pay to
Secured Party the amount of any and all costs and expenses
(including without limitation, attorneys' fees and expenses),
which Secured Party may incur in connection with (i) the
transactions which give rise to the Loan Documents, (ii) the
preparation of this Agreement and the perfection and
preservation of the security interests granted under the Loan
Documents, (iii) the administration of the Loan Documents,
(iv) the custody, preservation, use or operation of, or the
sale of, collection from, or other realization upon, the
Collateral, (v) the exercise or enforcement of any of the
rights of Secured Party under the Loan Documents, or (vi) the
failure by Debtor to perform or observe any of the provisions
hereof.
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS AND APPLICABLE FEDERAL LAWS, EXCEPT TO THE EXTENT
PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF
THE SECURITY INTEREST GRANTED HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL, ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF TEXAS.
(g) Venue. This Agreement has been entered into in the
county in Texas where Bank's address for notice purposes is
located, and it shall be performable for all purposes in such
county. Courts within the State of Texas shall have
jurisdiction over any and all disputes arising under or
pertaining to this Agreement and venue for any such disputes
shall be in the county or judicial district where this
Agreement has been executed and delivered.
(h) Severability. If any provision of this Agreement is
held by a court of competent jurisdiction to be illegal,
invalid or unenforceable under present or future laws, such
provision shall be fully severable, shall not impair or
invalidate the remainder of this Agreement and the effect
thereof shall be confined to the provision held to be illegal,
invalid or unenforceable.
(i) No Obligation. Nothing contained herein shall be
construed as an obligation on the part of Secured Party to
extend or continue to extend credit to Borrower.
(j) Notices. All notices, requests, demands or other
communications required or permitted to be given pursuant to
this Agreement shall be in writing and given by (i) personal
delivery, (ii) expedited delivery service with proof of
delivery, or (iii) United States mail, postage prepaid,
registered or certified mail, return receipt requested, sent
to the intended addressee at the address set forth on the
signature page hereof or to such different address as the
addressee shall have designated by written notice sent
pursuant to the terms hereof and shall be deemed to have been
received either, in the case of personal delivery, at the time
of personal delivery, in the case of expedited delivery
service, as of the date of first attempted delivery at the
address and in the manner provided herein, or in the case of
mail, three (3) days after deposit in a depository receptacle
under the care and custody of the United States Postal
Service. Either party shall have the right to change its
address for notice hereunder to any other location within the
continental United States by notice to the other party of such
new address at least thirty (30) days prior to the effective
date of such new address.
(k) Binding Effect and Assignment. This Agreement
(i) creates a continuing security interest in the Collateral,
(ii) shall be binding on Debtor and the heirs, executors,
administrators, personal representatives, successors and
assigns of Debtor, and (iii) shall inure to the benefit of
Secured Party and its successors and assigns. Without
limiting the generality of the foregoing, Secured Party may
pledge, assign or otherwise transfer the Indebtedness and its
rights under this Agreement and any of the other Loan
Documents to any other party. Debtor's rights and obligations
hereunder may not be assigned or otherwise transferred without
the prior written consent of Secured Party.
(l) Termination. It is contemplated by the parties
hereto that from time to time there may be no outstanding
Indebtedness, but notwithstanding such occurrences, this
Agreement shall remain valid and shall be in full force and
effect as to subsequent outstanding Indebtedness. Upon (i)
the satisfaction in full of the Indebtedness, (ii) the
termination or expiration of any commitment of Secured Party
to extend credit to Borrower, (iii) written request for the
termination hereof delivered by Debtor to Secured Party, and
(iv) written release or termination delivered by Secured Party
to Debtor, this Agreement and the security interests created
hereby shall terminate. Upon termination of this Agreement
and Debtor's written request, Secured Party will, at Debtor's
sole cost and expense, return to Debtor such of the Collateral
as shall not have been sold or otherwise disposed of or
applied pursuant to the terms hereof and execute and deliver
to Debtor such documents as Debtor shall reasonably request to
evidence such termination.
(m) Cumulative Rights. All rights and remedies of
Secured Party hereunder are cumulative of each other and of
every other right or remedy which Secured Party may otherwise
have at law or in equity or under any of the other Loan
Documents, and the exercise of one or more of such rights or
remedies shall not prejudice or impair the concurrent or
subsequent exercise of any other rights or remedies.
(n) Gender and Number. Within this Agreement, words of
any gender shall be held and construed to include the other
gender, and words in the singular number shall be held and
construed to include the plural and words in the plural number
shall be held and construed to include the singular, unless in
each instance the context requires otherwise.
(o) Descriptive Headings. The headings in this
Agreement are for convenience only and shall in no way
enlarge, limit or define the scope or meaning of the various
and several provisions hereof.
EXECUTED as of the date first written above.
DEBTOR:
SHOWBIZ PIZZA TIME, INC.
By:
Name: Larry G. Page
Title: Executive Vice
President and
Chief Financial
Officer
Debtor's Address:
4441 W. Airport Freeway
Irving, Texas 75062
SECURED PARTY:
BANK ONE, TEXAS, NATIONAL
ASSOCIATION
By:
Name: Paul C. Koch
Title: Vice President
Secured Party's Address:
1717 Main Street, 3rd Floor
Dallas, Texas 75201<PAGE>
SCHEDULE "A"
TO
SECURITY AGREEMENT
DATED JANUARY 18, 1996
BY AND BETWEEN
BANK ONE, TEXAS, NATIONAL ASSOCIATION
AND
SHOWBIZ PIZZA TIME, INC.
The following property is a part of the Collateral as defined in
Subsection 1(b):
<PAGE>
SCHEDULE "B"
TO
SECURITY AGREEMENT
DATED JANUARY 18, 1996
BY AND BETWEEN
BANK ONE, TEXAS, NATIONAL ASSOCIATION
AND
SHOWBIZ PIZZA TIME, INC.
The other addresses referenced in Subsection 3(f) are as follows:
EXHIBIT "A"
TO
SECURITY AGREEMENT
DATED JANUARY 18, 1996
BY AND BETWEEN
BANK ONE, TEXAS, NATIONAL ASSOCIATION
AND
SHOWBIZ PIZZA TIME, INC.
Location:
Owner of Record:
Legal Description:
SHOWBIZ PIZZA TIME, INC.
FRANCHISE AGREEMENT - Exhibit 10(f)
-------------
4441 West Airport Freeway
P.O. Box 152077
Irving, TX 75062
SHOWBIZ PIZZA TIME, INC. FRANCHISE AGREEMENT
PAGE
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
I. GRANT. . . . . . . . . . . . . . . . . . . . . . . . . 2
II. TERM AND RENEWAL . . . . . . . . . . . . . . . . . . . 3
III. DUTIES OF FRANCHISOR . . . . . . . . . . . . . . . . . 4
IV. FEES . . . . . . . . . . . . . . . . . . . . . . . . . 6
V. SITE SELECTION . . . . . . . . . . . . . . . . . . . . 8
VI. DUTIES OF FRANCHISEE . . . . . . . . . . . . . . . . . 10
VII. PROPRIETARY MARKS. . . . . . . . . . . . . . . . . . . 17
VIII. ANIMATED ENTERTAINMENT RIGHTS AND
ENTERTAINMENT FUND . . . . . . . . . . . . . . . . . . 20
IX. OPERATIONAL POLICIES . . . . . . . . . . . . . . . . . 22
X. CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . 22
XI. ACCOUNTING AND RECORDS . . . . . . . . . . . . . . . . 23
XII. ADVERTISING. . . . . . . . . . . . . . . . . . . . . . 25
XIII. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . 27
XIV. TRANSFERABILITY OF INTEREST. . . . . . . . . . . . . . 28
XV. RELOCATION OF FRANCHISED RESTAURANT. . . . . . . . . . 33
XVI. DEFAULT AND TERMINATION. . . . . . . . . . . . . . . . 33
XVII. OBLIGATIONS UPON TERMINATION . . . . . . . . . . . . . 36
XVIII. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . 40
XIX. TAXES, PERMITS AND INDEBTEDNESS OF FRANCHISEE. . . . . 41
XX. INDEPENDENT CONTRACTOR AND INDEMNIFICATION . . . . . . 42
XXI. APPROVALS AND WAIVERS. . . . . . . . . . . . . . . . . 45
XXII. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . 46
XXIII. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . 46
XXIV. SEVERABILITY AND CONSTRUCTION. . . . . . . . . . . . . 46
XXV. CURRENCY REQUIREMENT . . . . . . . . . . . . . . . . . 47
XXVI. MEDIATION AND APPLICABLE LAW . . . . . . . . . . . . . 47
XXVII. ACKNOWLEDGEMENTS . . . . . . . . . . . . . . . . . . . 49
XXVIII. GUARANTY . . . . . . . . . . . . . . . . . . . . . . . 50
ATTACHMENT A - Franchisee's Principals and Initial Equity Owners
ATTACHMENT B - Guaranty
ATTACHMENT C - Cornerstones
ATTACHMENT D - Confidentiality and Noncompetition Agreement
ATTACHMENT E - Lease Rider
ATTACHMENT F - Advertising Cooperative Agreement
SHOWBIZ PIZZA TIME, INC.
FRANCHISE AGREEMENT
THIS AGREEMENT, made and entered into-------------------------, 199--,
by and between ShowBiz Pizza Time, Inc., a Kansas
corporation (hereinafter referred to as "Franchisor"), and --------------------
(hereinafter referred to as "Franchisee").
WITNESSETH:
WHEREAS, Franchisor owns and franchises a distinctive
system (hereinafter "System") relating to the establishment,
development, and operation of family-oriented pizza restaurants,
the distinguishing characteristics of which System include, without
limitation, entertainment at the restaurant by video display and/or
three-dimensional computer- controlled animated characters which
play or appear to play instruments, sing and talk; separate areas
with a variety of rides, amusement games and other attractions;
characteristic decorations, furnishings and materials; specially-designed
equipment and equipment layouts; trade secret food
products and other special recipes, menus and food and beverage
designations; food and beverage preparation and service procedures
and techniques; operating procedures for sanitation and
maintenance; methods and techniques for inventory and cost
controls, record keeping and reporting, personnel training and
management, and advertising and promotional programs; Cornerstones
for operation (as defined in Paragraph VI.T, below); and
Operational Policies (as defined in Paragraph IX.A, below) all of
which may be changed, improved or further developed by Franchisor
from time to time;
WHEREAS, Franchisor is the owner of the entire right, title
and interest in the mark "Chuck E. Cheese", and owns and/or has the
right to use and license others to use such other trade names,
trademarks and service marks, as are now designated (and may
hereinafter be designated by Franchisor in writing) as part of the
System (hereinafter "Proprietary Marks"), and Franchisor continues
to develop, use and control the Proprietary Marks for the benefit
and exclusive use of itself and its franchisees in order to
identify for the public the source of products and services
marketed thereunder and to represent the System's high standards of
quality and service;
WHEREAS, Franchisor owns and/or has the right to use and
license others to use certain unique technology, computer hardware
and software, artistic designs, scripts and musical scores, staging
and lighting techniques and configurations, manufacturing know-how
and other intellectual property relating to video display
entertainment and three-dimensional computer-controlled animated
characters, including, any improvements, additions, replacements,
patents, trademarks, service marks, copyrights, and other
intellectual and artistic property related thereto, and all plans,
specifications and written documents necessary for the operation,
maintenance and repair thereof (all of which is hereinafter
"Animated Entertainment");
WHEREAS, Franchisor has used and licensed others to use
Animated Entertainment as an integral and central feature of the
System restaurants, including certain three-dimensional computer-
controlled animated characters which have become identified by the
public with System restaurants, and Franchisor will continue to use
and license others to use as an integral and central feature of the
System such animated characters as Franchisor may designate;
WHEREAS, Franchisee desires to operate a restaurant under
the System and wishes to obtain a franchise from Franchisor for
that purpose, as well as to receive the training and other
assistance as may be provided by Franchisor in connection
therewith; and
WHEREAS, Franchisee understands and acknowledges the
importance of Franchisor's high and uniform standards of quality
and service and the necessity of operating the business franchised
hereunder in conformity with Franchisor's standards and
specifications.
NOW, THEREFORE, the parties, in consideration of the
undertakings and commitments of each party to the other party set
forth herein, hereby mutually agree as follows:
I. GRANT
A. Franchisor grants to Franchisee the right and Franchisee
undertakes the obligation, upon the terms and conditions set forth
in this Agreement: (a) to establish and operate a family-oriented
pizza restaurant (the "Franchised Restaurant"), and (b) to use the
Proprietary Marks and the System, solely in connection therewith.
B. Franchisee shall operate the Franchised Restaurant only
at (the "Approved Location"). If, at the time
of execution of this Agreement, a location for the Franchised
Restaurant has not been obtained by Franchisee and approved by
Franchisor, Franchisee shall lease or acquire a location, subject
to Franchisor's approval, as provided in Paragraph V hereof.
Franchisee shall not relocate the Franchised Restaurant without the
prior written approval of Franchisor.
C. Except as otherwise provided in this Agreement, during
the term of this Agreement, Franchisor shall not establish or
operate, or license any other person to establish or operate, a
Chuck E. Cheese family-oriented pizza restaurant at any location
within the following area:
(the "Protected Territory"). Franchisor retains all other rights.
Except as described in this Paragraph I.C, Franchisor shall at all
times have the right to offer and sell, and license others to offer
and sell, any goods or services under any marks (including the
Proprietary Marks) at and from any location (regardless of whether
within or outside the Protected Territory, or proximity to the
Approved Location) to any customers.
D. Franchisee acknowledges that the System may be
supplemented, improved, or otherwise modified from time to time by
Franchisor. Franchisor shall have sole discretion to determine
whether a potential characteristic of the System shall be deemed to
be part of the System. Franchisee agrees to comply with all
reasonable requirements of Franchisor in that regard, including,
without limitation, offering and selling new or different products
or services as specified by Franchisor and upgrading and/or
altering Franchisee's facility.
II. TERM AND RENEWAL
A. Except as otherwise provided in this Agreement, the term
of this franchise shall run for fifteen (15) years from the date of
opening of the Franchised Restaurant which date shall be specified
in writing by Franchisor.
B. Franchisee may, at Franchisee's option, renew this
franchise for one (1) additional period of ten (10) years, provided
that at the end of the initial term:
1. Franchisee has given Franchisor written notice of
election to renew not less than nine (9) months nor more than
twelve (12) months prior to the end of the initial term;
2. Franchisor shall have inspected the Franchised
Restaurant premises and equipment not less than six (6) months nor
more than nine (9) months prior to expiration of the initial term,
and Franchisee shall have completed to Franchisor's satisfaction
all maintenance, refurnishing, renovating and remodeling of the
premises and equipment as Franchisor shall require in order to meet
Franchisor's then-current standards for restaurants in the System,
no later than thirty (30) days prior to expiration of the initial
term;
3. Franchisee is not in default of any provision of
this Agreement, any amendment hereof or successor hereto, or any
other agreement between Franchisee and Franchisor, or its
subsidiaries and affiliates, and has substantially complied with
all the terms and conditions of such agreements during the terms
thereof;
4. Franchisee has satisfied all monetary obligations
owed by Franchisee to Franchisor and its subsidiaries and
affiliates and has timely met these obligations throughout the term
of this Agreement;
5. Franchisee shall have executed upon renewal
hereunder Franchisor's then-current form of Franchise Agreement,
which agreement shall supersede in all respects this Agreement, and
the terms of which may differ from the terms of this Agreement
including, without limitation, a higher percentage royalty fee,
contributions and System assessments; provided, however, Franchisee
shall be required to pay, in lieu of the then-current initial
franchise fee, a renewal fee which shall be fifty percent (50%) of
the then-current initial franchise fee as set by Franchisor;
6. Franchisee and Franchisee's Principals (a defined in
Paragraph XIV hereof) shall comply with Franchisor's then-current
qualification and training requirements; and
7. Franchisee and Franchisee's Principals shall execute
a general release, in a form prescribed by Franchisor, of any and
all claims against Franchisor, its subsidiaries and affiliates, the
Association (as defined in Paragraph VI.K hereof) and their
respective officers, directors, shareholders agents and employees.
III. DUTIES OF FRANCHISOR
A. Franchisor shall provide Franchisee with such site
selection assistance as described in Paragraph V.F hereof.
B. Franchisor shall make available to Franchisee a set of
prototype plans (blue prints) and specifications (not for
construction) for the Franchised Restaurant, which plans and
specifications shall be adapted by Franchisee to Franchisee's site
as provided in Paragraph V.C hereof.
C. Franchisor shall provide, if not previously provided to
Franchisee, a standard floor plan as provided in Paragraph VI.C
hereof.
D. Franchisor shall provide initial training, which shall be
mandatory, for Franchisee's restaurant general manager and one
technician (the latter being employed by Franchisee to maintain the
Animated Entertainment, rides, amusement games and other
attractions). At the option and expense of Franchisee, Franchisor
shall also make available initial training to additional employees
of Franchisee. Franchisor shall also make available other required
or optional training as it deems appropriate. All training shall
be conducted at such location(s) as Franchisor may designate and
shall be subject to the terms and conditions set forth in Paragraph
VI.E of this Agreement.
E. Franchisor shall provide one (1) representative to
provide on-site opening assistance and supervision for a minimum of
seven (7) days and for up to ten (10) days at no charge to
Franchisee.
F. Franchisor shall specify the computer-controlled animated
characters and all other components and accessories, including,
without limitation, all hardware and software, of the Animated
Entertainment to be utilized at the Franchised Restaurant
(hereinafter "components"). Franchisor shall approve and designate
a source or sources of supply for components. Upon not less than
sixty (60) days prior written request by Franchisee, Franchisor
will provide, prior to the opening of the Franchised Restaurant, a
technician for installation of the Animated Entertainment at the
Franchised Restaurant for up to ten (10) days at no charge to
Franchisee. Franchisor shall offer to Franchisee, on the terms
specified in the confidential Operational Policies, as hereinafter
defined, technical assistance and consultation regarding the
maintenance and repair of the Animated Entertainment components.
G. Franchisor shall, subject to the terms and conditions set
forth in Paragraph VIII.C of this Agreement, use its best efforts
to obtain licenses from performing rights societies as may be
required to authorize Franchisee to use musical compositions
contained in the Animated Entertainment programs. In the event
Franchisor obtains such licenses Franchisor shall forward payment
on behalf of Franchisee (for which Franchisee shall reimburse
Franchisor) for the music performance fees due under such licenses.
H. Franchisor shall furnish Franchisee with specifications
for all fixtures, equipment, and signs for the Franchised
Restaurant and shall specify the minimum number and types of rides,
amusement games and other attractions to be maintained at the
Franchised Restaurant.
I. Franchisor shall provide to Franchisee two (2) on-site
construction visits to verify compliance with Franchisor's
standards.
J. Franchisor shall provide such continuing advisory
assistance, as Franchisor deems advisable, to Franchisee in the
operation of the Franchised Restaurant. Franchisor shall also
provide from time to time periodic newsletters and bulletins to
Franchisee.
K. Franchisor shall provide Franchisee one copy of the
Operational Policies, which may consist of several volumes, as more
fully described in Paragraph IX hereof.
L. In order to maintain high standards of quality,
cleanliness, appearance and service of the Franchised Restaurant:
1. Franchisor shall conduct, as Franchisor deems
advisable, evaluations of the Franchised Restaurant and evaluations
of the products sold and used and the service rendered therein; and
2. Franchisor, upon request and subject to the terms
set forth in Paragraphs VI.P and Q hereof, shall provide its
standards and specifications for nonproprietary items to Franchisee
or Franchisee's suppliers.
M. Franchisor shall not, by virtue of any approvals, advice
or services provided to Franchisee, assume responsibility or
liability to Franchisee or any third parties to which it would not
otherwise be subject.
N. Franchisor shall provide Franchisee with such advice and
assistance as Franchisor deems advisable in determining the
advertising and promotional plans for the Franchised Restaurant.
O. Franchisee acknowledges and agrees that any duty or
obligation imposed on Franchisor by this Agreement may be performed
by any designee, employee, or agent of Franchisor, as Franchisor
may direct.
IV. FEES
1. In consideration of the franchise granted herein,
Franchisee shall pay to Franchisor the following fees:
2. An initial franchise fee of Fifty Thousand Dollars
($50,000) prior to or upon execution of this Agreement. In the
event this Agreement is terminated by Franchisor upon Franchisee's
default (a) prior to Franchisor's approval of a site for the
Franchised Restaurant, the initial fee shall be fully refundable
subject to a charge not to exceed twenty percent (20%) of the
initial franchise fee to cover reasonable administrative and other
expenses and the opportunity costs incurred by Franchisor; (b)
after Franchisor's approval of a site for the Franchised
Restaurant, Franchisor shall retain fifty percent (50%) of the
initial fee as consideration for the reasonable administrative and
other expenses and opportunity costs it has incurred; and (c) after
construction of the Franchised Restaurant commences, the initial
fee shall be deemed fully earned and nonrefundable.
2. From the date the Franchised Restaurant is opened
and thereafter, a continuing monthly royalty fee on or before the
fifteenth (15th) day of each month based on a percentage of gross
sales (as defined hereinafter) during the preceding calendar month.
The royalty fee is an amount equal to 3.8% of the gross sales at
the Franchised Restaurant, subject to the immediately following
sentence. During the term of this Agreement, Franchisor shall have
the right, at its option, upon ninety (90) days' prior notice to
Franchisee, to increase the royalty fee to an amount not to exceed
5.0% of the gross sales of the Franchised Restaurant. In such
event, Franchisee shall commence payment of the increased royalty
fee in the month immediately following the expiration of the
ninety-day period.
B. 1. Subject to the terms and conditions specified in
Paragraph IV.B.2 hereof, Franchisee shall also remit to the
Association (or directly to Franchisor, if so directed by the
Association) on a monthly basis the following: 0.4% of
Franchisee's gross sales at the Franchised Restaurant as a
contribution to the Entertainment Fund (as defined in Paragraph
VIII.D hereof) and 0.4% of Franchisee's gross sales at the
Franchised Restaurant as a contribution to the Advertising Fund (as
defined in Paragraph XII.C hereof). Franchisor shall, for each of
its company-owned restaurants, make contributions to such funds at
the same percentage of gross sales required of franchisees within
the System. The Entertainment Fund and the Advertising Fund shall
be maintained and administered, as provided in Paragraph XII. The
monthly contribution to the Entertainment Fund and the Advertising
Fund (including the TV Ad Fee described below) shall be subject at
any time to increase upon a majority vote (counted as hereinafter
stated) cast by all System franchisees in good standing under their
franchise agreements (e.g., not subject to a pending default notice
from Franchisor). Each franchisee shall be provided thirty (30)
days advance notice and opportunity to vote on the proposed
increase and shall be entitled to one (1) vote per System
restaurant in operation, and a majority vote required for any
increase shall be a majority of all restaurants represented by the
votes cast. Franchisor shall provide written notice to Franchisee
at least sixty (60) days prior to the effective date of any
increase so approved by such majority vote.
2. Franchisee shall also remit to the Advertising Fund
on a monthly basis five-tenths of one percent (0.5%) of
Franchisee's gross sales at the Franchised Restaurant (the "Media
Fund Fee"), which shall be used solely for the purpose of
purchasing national network television advertising. Franchisee
shall be required to pay the Media Fund Fee until the Media Fund
Fee is withdrawn as provided in this Paragraph IV.B.2. The Media
Fund Fee shall only be withdrawn upon (1) the unilateral election
of Franchisor or (2) the vote of System franchisees in good
standing under their respective franchise agreements, with thirty
(30) days advance notice of such vote, one vote per franchised
restaurant location and a simple majority of restaurants voting in
favor of withdrawal; provided however, that if such vote or
election shall be taken on or before March 1 of any calendar year,
it shall first become effective on September 1 of the same year,
and if such vote or election shall have been taken after March 1 of
any calendar year, it shall first become effective September 1 of
the following calendar year. Not less than six (6) months
following any such withdrawal, the Media Fund Fee may be
reinstated, upon the unilateral election by Franchisor or by vote
in favor of reinstatement in accordance with the procedure
described in Subparagraph (2) of this Paragraph IV.B.2 Such
reinstatement shall become effective as described above in this
Paragraph IV.B.2.
C. Franchisee shall be required to spend monthly a minimum
of three percent (3.0%) of the gross sales of the Franchised
Restaurant for local advertising and promotion in Franchisee's Area
of Dominant Influence ("ADI"), at least two-thirds (2/3) of which
amount shall be spent for television advertising or advertising in
some other media approved by Franchisor. During the term of this
Agreement, Franchisor shall have the right, at its option, upon
ninety (90) days prior notice to Franchisee, to increase the
minimum amount to an amount not to exceed 5.0% of the gross sales
of the Franchised Restaurant. In such event, Franchisee shall
commence spending the increased minimum amount in the month
immediately following the expiration of the ninety-day period. The
obligation to make expenditures on local advertising shall be
reduced by an amount equal to Franchisee's contributions to a
Cooperative, as defined below in Paragraph XII.D. The obligation
of Franchisee to make expenditures on local advertising shall also
be reduced by an amount equal to the Media Fund Fee while the Media
Fund Fee remains in effect.
D. All monthly payments required in Paragraphs IV.A.2 and
IV.B shall be paid to Franchisor or its designee by the fifteenth
(15th) day of each month on the gross sales during the preceding
calendar month, and shall be submitted to Franchisor together with
any monthly reports required under Paragraph XI.B of this
Agreement. Any payment or report not actually received by
Franchisor or its designee on or before such date shall be deemed
overdue. If any payment is overdue, Franchisee shall pay to
Franchisor and/or its designee, in addition to the overdue amount,
interest on such amount from the date it was due until paid, at one
and one-half percent (1.5%) per month or the maximum rate permitted
by law, whichever is less. Entitlement to such interest shall be
in addition to any of the remedies Franchisor may have.
E. The obligations to make monthly payments required in
Paragraphs IV.A.2 and IV.B shall give rise to and remain, until
paid in full, a lien in favor of Franchisor against any and all of
the personal property, machinery, fixtures, equipment and inventory
owned by Franchisee at the Franchised Restaurant, and against the
proceeds and replacements thereof. Franchisee hereby irrevocably
appoints Franchisor as its attorney-in-fact (surviving any
termination or expiration hereof) to execute and file in the name
of Franchisee as debtor such instruments, including Uniform
Commercial Code financing statements, as may be required by
Franchisor from time to time to evidence such lien.
F. "Gross sales" as used herein shall include the gross
receipts from the sale of all beverages, food and merchandise sold
at or from the Franchised Restaurant and all gross receipts from
the operation at the Franchised Restaurant of all rides, amusement
games and other attractions, vending machines and all other income
of every kind and nature related to the Franchised Restaurant,
including, without limitation, all monies deposited in rides,
amusement games and other attractions (including 100% of monies
deposited in rides, amusement games and other attractions leased by
Franchisee on a "shared-revenue" or "coin-sharing" basis, which
such arrangements are strictly prohibited by Franchisor, pursuant
to Paragraph VI.J. hereof), bill and coin changers and any other
vending machines, and all revenue from the sale of tokens but
excluding the tokens themselves, whether for cash or credit and
regardless of collection in the case of credit. However, "gross
sales" shall not include any promotional materials given away by
Franchisee and any sales taxes or other taxes collected by
Franchisee for transmittal to the appropriate taxing authority.
G. Franchisee shall pay such other fees or amounts described
in this Agreement.
V. SITE SELECTION
A. Within one hundred twenty (120) days after the date first
above written in this Agreement, Franchisee shall identify a site
for the Franchised Restaurant, at Franchisee's expense and as
provided in Paragraph V.D hereof. The site shall be within the
following territory:
(the "Site Selection Territory").
B. Failure by Franchisee to identify a site for the
Franchised Restaurant within the time required in Paragraph V.A
shall constitute a default under this Agreement. Time is of the
essence.
C. Franchisor shall not establish, nor franchise another to
establish, a family-oriented pizza restaurant under the Proprietary
Marks and System within the Site Selection Territory until
Franchisor approves a location for the Franchised Restaurant, or
until the time set forth in Paragraph V.A hereof expires, whichever
event first occurs.
D. Prior to Franchisee's acquisition by lease or purchase of
a site for the Franchised Restaurant, Franchisee shall submit to
Franchisor, in the form specified by Franchisor, a completed site
review form, such other information or materials as Franchisor may
reasonably require, and a letter of intent or other evidence
satisfactory to Franchisor which confirms Franchisee's favorable
prospects for obtaining the proposed site. If the premises will be
leased, Franchisee shall also submit to Franchisor evidence that
the lease will contain such terms and conditions for leasing as
Franchisor may require pursuant to Paragraph VI.B hereof.
Recognizing that time is of the essence, Franchisee must submit a
proposed site, together with the information and materials required
by this Paragraph V.D, to Franchisor for its approval within one
hundred twenty (120) days after execution of this Agreement.
Franchisor shall have thirty (30) days after receipt of such
information and materials from Franchisee to approve or disapprove,
in Franchisor's sole discretion, the site as a location for the
Franchised Restaurant. No proposed site shall be deemed approved
unless it has been expressly approved in writing by Franchisor.
E. Franchisee shall execute a lease for the premises which
contains such rider and other terms as Franchisor may require
pursuant to Paragraph VI.B of this Agreement, or shall enter into
a binding commitment to purchase such premises, within thirty (30)
days of receipt of site approval from Franchisor.
F. Franchisor shall provide to Franchisee such site
selection assistance as Franchisor deems appropriate and one (1)
on-site evaluation, if required for site approval by Franchisor,
pursuant to Paragraph V.D hereof, at no charge to Franchisee. For
any additional on-site evaluations, Franchisee shall reimburse
Franchisor for its reasonable expenses, including, without
limitation, air travel expenses and a per diem charge for room and
board.
G. Franchisee shall furnish Franchisor with a copy of any
executed lease within ten (10) days after execution thereof.
H. After a Site for the Franchised Restaurant has been
approved in writing by Franchisor and acquired by Franchisee
pursuant to Paragraph V.D hereof, the site shall constitute the
Approved Location referred to in Paragraph I.B hereof.
I. Franchisee hereby acknowledges and agrees that
Franchisor's approval of a site does not constitute an assurance,
representation or warranty of any kind, express or implied, as to
the suitability of the site for the Franchised Restaurant or for
any other purpose. Franchisor's approval of the site indicates
only that Franchisor believes the site complies with acceptable
minimum criteria established by Franchisor solely for its purposes
as of the time of the evaluation. Both Franchisee and Franchisor
acknowledge that application of criteria that have been effective
with respect to other sites and premises may not be predictive of
potential for all sites and that, subsequent to Franchisor's
approval of a site, demographic and/or economic factors, such as
competition from other similar businesses, included in or excluded
from Franchisor's criteria could change, thereby altering the
potential of a site. Such factors are unpredictable and are beyond
Franchisor's control. Franchisor shall not be responsible for the
failure of a site approved by Franchisee to meet Franchisee's
expectations as to revenue or operational criteria. Franchisee
further acknowledges and agrees that its acceptance of a franchise
for the operation of the Franchised Restaurant at the site is based
on its own independent investigation of the suitability of the
site.
VI. DUTIES OF FRANCHISEE
A. Franchisee and Franchisee's Principals understand and
acknowledge that every detail of the Franchised Restaurant is
important to Franchisee, Franchisor and other franchisees in order
to develop and maintain the high standards and public image of
System restaurants, to increase the demand for the products and
services sold by all franchisees, and to protect Franchisor's
reputation and goodwill.
B. Franchisee shall obtain Franchisor's written approval of
the lease agreement or the purchase agreement, whichever is
applicable, prior to execution by Franchisee of such agreement. In
order to be approved by Franchisor, the lease, if applicable, must
contain, among other things, a rider, prepared by Franchisor and
executed by Franchisor, Franchisee and the lessor, in the form and
manner attached hereto as Attachment E.
C. Franchisee shall obtain, at its expense, before
commencing any construction of the Franchised Restaurant premises,
and furnish to Franchisor for its prior approval, which shall not
unreasonably be withheld, but without which approval no
construction shall be commenced, the following:
1. Complete plans and specifications, which adapt
Franchisor's standard plans and specifications to Franchisee's site
and to local or state laws, regulations or ordinances, and which
conform to the floor plan designed by Franchisor for Franchisee's
site. Franchisee's complete plans and specifications, when
approved by Franchisor, shall not thereafter be changed or modified
without the prior written consent of Franchisor;
2. A statement in the form prescribed by Franchisor and
signed by Franchisee, certifying that Franchisee has:
a. fully complied with the requirements of the
above Paragraph VI.C.1;
b. employed a qualified architect or engineer to
prepare construction documents and supervise the construction of
the Franchised Restaurant premises and completion of all
improvements (such statement shall also identify the architect or
engineer and describe his qualifications);
c. obtained all such permits and certifications
required for lawful construction and operation of the Franchised
Restaurant premises, including, without limitation, zoning, access,
sign and fire requirements; and
d. obtained required licenses to sell beer and/or
wine, unless otherwise prohibited, and to operate rides, amusement
games and other attractions as required herein.
3. A construction schedule acceptable to Franchisor.
Franchise shall furnish to Franchisor, on or before the first day
of each calendar month following Franchisee's submittal to
Franchisor of the statement described above in Paragraph VI.C.2 and
continuing through and including the month following completion of
the construction of the Franchised Restaurant premises, a statement
in the form prescribed by Franchisor and signed by Franchisee,
certifying Franchisee's continued compliance with and maintenance
of the requirements of Paragraph VI.C.2.
D. Franchisee shall commence construction of the Franchised
Restaurant within a reasonable period of time, not to exceed six
(6) months from the date of execution of this Agreement and shall
provide written notice to Franchisor of the date construction
commenced within ten (10) days after such commencement. Upon
Franchisee's written request, Franchisor may, in its sole
discretion, extend for a period of thirty (30) days the six-month
period specified above for commencement of construction.
Franchisee shall pay to Franchisor an extension fee of Two Thousand
Five Hundred Dollars ($2,500) for each thirty (30) day extension
granted of the date for commencement of construction. The
extension fee shall be paid to Franchisor with each written request
for an extension and shall be fully refunded in the event
Franchisor, in its sole discretion, declines to grant the requested
extension. The extension fee shall not be refunded under any other
circumstances. Franchisee shall maintain continuous construction
of the Franchised Restaurant premises and shall complete
construction, including all exterior and interior carpentry,
electrical, painting and finishing work, and installation of all
fixtures, equipment and signs, in accordance with the approved site
layout and plan at Franchisee's expense, within six (6) months if
a space conversion, or twelve (12) months if the erection of a
free-standing building, of the date specified immediately above for
commencement of construction and any extensions of that date
granted by Franchisor, exclusive of time lost by reason of strikes,
lockouts, fire and other casualties and Acts of God. Franchisee
further agrees that Franchisor and its agents shall have the right
to inspect the construction at all reasonable times. After
completion of construction, Franchisee shall have all Animated
Entertainment and rides, amusement games and other attractions
installed, and shall obtain a Certificate of Occupancy, and after
obtaining Franchisor's written approval for opening, shall open the
Franchised Restaurant within thirty (30) days from the date
construction is completed. Franchisee and Franchisor agree that
time is of the essence in the construction and opening of the
Franchised Restaurant.
E. Prior to the opening of the Franchised Restaurant,
Franchisee's restaurant general manager and one technician employed
by Franchisee to maintain the Animated Entertainment components and
rides, amusement games and other attractions shall attend and
complete, to Franchisor's satisfaction, initial training conducted
by Franchisor. Franchisee may, at Franchisee's option and expense,
send additional employees to Franchisor's initial training. All
subsequent personnel employed by Franchisee in either the position
of restaurant general manager or technician shall, prior to
assuming the position, attend and successfully complete
Franchisor's initial training; provided, however, that in the event
a new manager or technician is employed in an emergency situation
without a prior opportunity to attend such training, Franchisor may
grant written permission for such person to commence such training
within sixty (60) days after commencement of employment.
Franchisor may periodically make other required or optional
training available to Franchisee's employees, as well as other
programs, seminars and materials, and Franchisee shall ensure that
all employees, as Franchisor may direct, satisfactorily complete
any required training within the time specified. All training
shall be provided at such location as Franchisor may designate and
Franchisee shall be responsible for Franchisee's employees' travel
expenses and room, board and wages during the training. Other than
the initial training for Franchisee's original restaurant general
manager and technician, Franchisor reserves the right to charge a
reasonable fee to Franchisee for training, seminars and materials,
whether required or optional. Franchisor reserves the right to
require, as a condition of providing training, that Franchisee's
restaurant general manager and employees execute confidentiality
and noncompetition agreements prepared by Franchisor. Franchisor
also reserves the right to control the frequency of any optional
training. Franchisee shall be obligated to accept on-site opening
assistance and supervision provided by Franchisor as specified in
Paragraph III.D. With respect to additional opening assistance and
supervision required by Franchisor or requested by Franchisee,
including additional representatives of Franchisor, Franchisee will
be required to pay to the Franchisor a fee (to be determined by
Franchisor, based upon the number of representatives and days of
assistance required) and shall reimburse to Franchisor the air
travel expenses and a per diem charge for room and board for each
additional day or representative.
F. At least one hundred fifty (150) days prior to the
anticipated date of completion of construction of the Franchised
Restaurant, Franchisee shall order the Animated Entertainment
components specified by Franchisor from the supplier or suppliers
designated and/or approved by Franchisor. All payment terms for
the specified components shall be arranged by Franchisee with the
supplier, and such supplier shall be solely responsible for
delivering the components to the Franchised Restaurant in a timely
fashion and good working order.
G. Franchisor shall not be responsible and shall not have
liability to Franchisee for either late delivery or unsatisfactory
condition of products, goods or services, including Animated
Entertainment components, ordered from third parties, regardless of
the cause thereof.
H. Franchisee shall arrange to have the Animated
Entertainment components, except software, delivered to the
Franchised Restaurant after the Franchised Restaurant has been
prepared for the installation of the components. After the
Franchised Restaurant has been prepared for the installation and
all of the Animated Entertainment components have been delivered,
Franchisee shall be obligated to accept installation of the
Animated Entertainment by Franchisor's technician as specified in
Paragraph III.F. If the technician is required for more than ten
(10) days the Franchisee will be required to pay Franchisor a fee
(to be determined by Franchisor, based upon the number of days
required) and shall reimburse Franchisor for additional actual air
travel expenses and a per diem charge for room and board for each
technician. The date of installation shall be mutually arranged by
Franchisee and Franchisor.
I. The maintenance and repair of the Animated Entertainment
components shall be the responsibility of Franchisee, and
Franchisee shall at all times maintain the components in good
repair and working order. Franchisee shall also assist in the
installation of all retrofits and replacements to the Animated
Entertainment components which are required by Franchisor and paid
for out of the Entertainment Fund. Franchisee shall relinquish and
deliver to the Entertainment Fund title and possession of any
existing components which are replaced by the Fund, and all such
replacements shall become the property of Franchisee.
J. Prior to opening the Franchised Restaurant and throughout
the term hereof, Franchisee shall purchase or lease and maintain at
the Franchised Restaurant the minimum number and type of rides,
amusement games and other attractions specified by Franchisor.
Franchisee shall obtain Franchisor's written approval prior to
installing any ride, game or other attraction at the Franchised
Restaurant which has not been previously approved in writing by
Franchisor. If any of the rides, amusement games and other
attractions to be installed at the Franchised Restaurant are
leased, the lease shall permit Franchisee to substitute rides,
amusement games and other attractions subject to the lease, and
will provide for Franchisee's control over the maintenance and
operation and the collection of monies from the rides, amusement
games and other attractions that are subject to the proposed lease.
Franchisee is prohibited from leasing any rides, amusement games
and other attractions on a "shared-revenue" or "coin sharing"
basis.
K. Franchisee agrees to join, and maintain membership in
good standing in the International Association of ShowBiz Pizza
Time Restaurants, Inc. ("Association") or such other association of
franchisees as may be formed by Franchisor. The Association shall
maintain and administer the Entertainment Fund and the Advertising
Fund pursuant to its bylaws, and the Association shall also serve
as an advisory council to Franchisor with respect to advertising,
entertainment, training, research and development and other matters
relating to the operation of System restaurants. As long as
Franchisee is in good standing under this Agreement and the
Association bylaws, Franchisee shall be a member with full voting
rights and privileges in the Association. Other franchisees of the
System and Franchisor shall also be members of the Association.
All members of the Association in good standing shall be entitled
to one (1) vote per restaurant in operation under the System on all
matters on which the members are authorized to vote under this
Agreement and the bylaws of the Association.
L. Franchisee shall use the Franchised Restaurant premises
solely for the operation of the Franchised Restaurant; keep the
Franchised Restaurant open and in normal operation for such minimum
hours and days as Franchisor may from time to time prescribe; and
refrain from using or suffering the use of the premises for any
other purpose or activity at any time without first obtaining the
written consent of Franchisor.
M. Franchisee shall maintain the Franchised Restaurant in
the highest degree of sanitation, repair and condition, and in
connection therewith shall within three (3) months after receipt of
notice from Franchisor, make such additions, alterations, repairs
and replacements thereto (but no others without Franchisor's prior
written consent) as may be required for that purpose, including,
without limitation, such periodic repainting, equipment repairs and
replacement of obsolete signs, games, rides, equipment, and floor
coverings (including carpet and tile) as Franchisor may reasonably
direct.
N. Franchisee shall meet and maintain the highest health
standards and ratings applicable to the operation of the Franchised
Restaurant.
O. 1. Commencing on January 1 of the second calendar year
following the opening of the Franchised Restaurant and continuing
each year throughout the term of this Agreement (including any
renewal terms), Franchisee shall upgrade and refurbish the
Franchised Restaurant at Franchisee's expense, including upgrades
and refurbishment necessary to conform to the building decor,
floor plan, trade dress, exterior signage and decor, color schemes,
rides, amusement games and other attractions, food and beverage
service, and presentation of trademarks and service marks
consistent with the public image then prevailing in the latest of
upgraded System restaurants operated by Franchisor; provided,
however, that Franchisee shall expend in connection with each such
periodic upgrade and refurbishment, at least the lesser of:
(i) Fifty Thousand Dollars ($50,000), or
(ii) four percent (4%) of the gross sales of the
Franchised Restaurant during the prior calendar year.
2. Each such upgrade and refurbishment shall be
completed by Franchisee on or before June 30 of each respective
year. Franchisee shall provide to Franchisor, on or before June 30
of each such year, such reports, records, receipts and other
information as Franchisor may request evidencing Franchisee's
compliance with the requirements of this Paragraph VI.O.
3. Franchisor shall have the right, in its sole
discretion, to defer all or any portion of Franchisee's obligations
to upgrade or refurbish the Franchised Restaurant, as described in
Paragraph VI.O.1. In the event Franchisor defers all or a portion
of such obligations, Franchisor reserves the right to require
Franchisee to expend, in any time period designated by Franchisor
following the deferral period, an amount equal to the deferred
expenditures plus that amount described in Paragraph VI.O.1.
P. Franchisee shall operate the Franchised Restaurant in
conformity with such uniform methods, standards, operational
cornerstones (see Attachment C) and specifications as Franchisor
may from time to time prescribe to ensure that the highest degree
of quality and service is uniformly maintained. Franchisee agrees:
1. To maintain in sufficient supply and use at all
times only such products, materials, ingredients, supplies and
paper goods as conform with Franchisor's standards and
specifications, and to refrain from deviating therefrom by using
nonconforming items without Franchisor's prior written consent.
2. To use at the Franchised Restaurant only such menus
and animated character costumes which comply with the style,
pattern and design prescribed by Franchisor.
3. To sell or offer for sale only such products and
menu items as meet Franchisor's uniform standards of quality and
quantity, as have been expressly approved for sale in writing by
Franchisor, and as have been prepared in accordance with
Franchisor's methods and techniques; to sell or offer for sale all
approved items; to refrain from any deviation from Franchisor's
standards and specifications for serving or selling the same
without Franchisor's prior written consent; and to discontinue
selling and offering for sale any such items as Franchisor may, in
its discretion, disapprove in writing at any time.
4. To permit Franchisor or its agents, at any
reasonable time, to remove from the premises of the Franchised
Restaurant, at Franchisor's option, samples of any inventory items
without payment therefor, in amounts reasonably necessary for
testing by Franchisor or an independent, certified laboratory to
determine whether said samples meet Franchisor's then-current
standards and specifications. In addition to any other remedies it
may have under this Agreement, Franchisor may require Franchisee to
bear the cost of such testing if the supplier of the item has not
previously been approved by Franchisor or if the sample fails to
conform to Franchisor's specifications.
5. To purchase and install, at Franchisee's expense,
all fixtures, furnishings, signs, and equipment (including, without
limitation, video display software which must be updated from time
to time, point-of-sale computer hardware and software control
systems, and a telephone modem) as Franchisor may reasonably direct
from time to time in the Operational Policies or otherwise in
writing; and to refrain from installing or permitting to be
installed on or about the Franchised Restaurant premises, without
Franchisor's prior written consent, any fixtures, furnishings,
signs, equipment or other improvements not previously approved as
meeting Franchisor's standards and specifications.
6. To employ security officers if necessary for secure
operation of the Franchised Restaurant, and take all steps
necessary to assure that such officers conduct themselves at all
times while on duty in a legal and proper manner.
7. To employ at least the minimum number of other
employees as may be prescribed by Franchisor and to comply with all
applicable federal, state and local laws, rules and regulations
with respect to such employees.
8. To cause all employees to wear uniforms of the
color, style, and design prescribed by Franchisor.
9. To make daily and regular use of a Chuck E. Cheese
walk-around character costume and all other animated character
costumes designated by Franchisor and to maintain such costumes in
good condition, as provided in the Operational Policies (defined
below).
Q. Franchisee shall purchase all equipment, supplies and
other products and materials (including animated character
costumes) required for the operation of the Franchised Restaurant
solely from suppliers who demonstrate, to the continuing reasonable
satisfaction of Franchisor, the ability to meet Franchisor's
reasonable standards and specifications for such items; who possess
adequate quality controls and capacity to supply Franchisee's needs
promptly and reliably; and who have been approved in writing by
Franchisor and not thereafter disapproved. If Franchisee desires
to purchase any items from an unapproved supplier, Franchisee shall
submit to Franchisor a written request for such approval or shall
request the supplier itself to do so. Franchisor shall have the
right to require that its representatives be permitted to inspect
the supplier's facilities and that samples from the supplier be
delivered, at Franchisor's option, either to Franchisor or to an
independent, certified laboratory designated by Franchisor for
testing. A charge not to exceed the reasonable cost of the
inspection and the actual cost of the test shall be paid by
Franchisee or the supplier to Franchisor. Franchisor reserves the
right, at its option, to re-inspect the facilities and products of
any such approved supplier and to revoke its approval upon the
supplier's failure to continue to meet any of Franchisor's
criteria.
R. Franchisee shall permit Franchisor or its agents or
representatives to enter upon the Franchised Restaurant premises at
any time for the purpose of conducting inspections; shall cooperate
fully with Franchisor's agents or representatives in such
inspections by rendering such assistance as they may reasonably
request; and, upon notice from Franchisor or its agents or
representatives, and without limiting Franchisor's other rights
under this Agreement, take such steps as may be necessary to
immediately correct any deficiencies detected during such
inspections, including, without limitation, immediately desisting
from the further use of any equipment, advertising materials,
products or supplies that do not conform with Franchisor's then-current
specifications, standards or requirements. In the event
Franchisee fails or refuses to correct such deficiencies,
Franchisor shall have the right to enter upon the Franchised
Restaurant premises, without being guilty of trespass or any other
tort, for the purpose of making or causing to be made such
corrections as may be required, at the expense of Franchisee, which
expense Franchisee agrees to pay upon demand.
S. Upon the execution of this Agreement or at any time
thereafter, Franchisee shall, at the option of Franchisor, execute
such forms and documents as Franchisor deems necessary to appoint
Franchisor its true and lawful attorney-in-fact with full power and
authority for the sole purpose of assigning to Franchisor all
rights to the telephone numbers of the Franchised Restaurant and
any related and other business listings upon the termination or
expiration of this Agreement as required under Paragraph XVII.A.8.
T. Franchisor has established certain "Cornerstones,"
described in more detail in Attachment C to this Agreement attached
hereto and incorporated herein by reference, and with which
Franchisee shall faithfully and continuously comply. Franchisor
reserves the right to amend and modify the Cornerstones from time
to time and, except as otherwise provided herein, Franchisee shall
comply with each such amended or modified Cornerstone within six
(6) months after such amendment or modification.
U. Franchisee shall comply with all other requirements set
forth in this Agreement.
VII. PROPRIETARY MARKS
A. It is understood and agreed that this franchise to use
Franchisor's Proprietary Marks applies only to their use in
connection with the operation of the Franchised Restaurant at the
site approved by Franchisor and includes only such Proprietary
Marks as are now or may hereafter be designated by Franchisor in
writing for use by Franchisee and no other Proprietary Marks of
Franchisor now existing or yet to be developed or acquired by
Franchisor. Franchisee agrees to operate and advertise the
Franchised Restaurant only under the Proprietary Marks designated
by Franchisor in writing for that purpose and to use or display
such Proprietary Marks only in the manner authorized and prescribed
by Franchisor.
B. Franchisee and Franchisee's Principals acknowledge that,
as between (i) Franchisee and Franchisee's Principals and (ii)
Franchisor, Franchisor owns all right, title and interest in and to
the Proprietary Marks, the identification schemes, standards,
specifications, operating procedures and other concepts embodied in
the System. Franchisee and Franchisee's Principals accordingly
agree that any unauthorized use of the System, the Proprietary
Marks and the Animated Entertainment is and shall be deemed an
infringement of Franchisor's rights; that, except as expressly
provided by this Agreement, Franchisee and Franchisee's Principals
acquire no right, title or interest therein, that any and all
goodwill associated with the System, the Proprietary Marks and the
Animated Entertainment as used in the System shall inure
exclusively to Franchisor's benefit; and that, upon the expiration
or termination of this Agreement or otherwise, no monetary amount
shall be assigned as attributable to any goodwill associated with
Franchisee's use of the System, the Proprietary Marks or the
Animated Entertainment.
C. Franchisee and Franchisee's Principals acknowledge that
Franchisee's use of the Proprietary Marks in any manner other than
that expressly authorized and permitted by this Agreement, without
Franchisor's prior written consent, is an infringement of
Franchisor's exclusive right, title and interest in and to the
Proprietary Marks, and expressly covenant that during the term of
this Agreement, and after the expiration or termination hereof,
Franchisee and Franchisee's Principals shall not, directly or
indirectly, commit an act of infringement or contest or aid in
contesting the validity or ownership of the Proprietary Marks, or
take any other action in derogation thereof.
D. Franchisee and Franchisee's Principals shall promptly
notify Franchisor of any use by any person or legal entity other
than Franchisor or another of its franchisees of any Proprietary
Marks licensed hereunder, any colorable variation thereof, or any
other mark in which Franchisor has or claims a proprietary
interest. Franchisor need not initiate any suit against imitators
or infringers of the Proprietary Marks, and Franchisor may settle
any dispute by issuance of a franchise or otherwise in Franchisor's
sole discretion. Franchisee and Franchisee's Principals further
agree to notify Franchisor promptly of any litigation instituted by
any person or legal entity against Franchisor, Franchisee or
Franchisee's Principals involving the Proprietary Marks. In the
event Franchisor, at its option and in its sole discretion,
undertakes the defense or prosecution of any litigation relating to
the Proprietary Marks, Franchisee and Franchisee's Principals agree
to execute any and all documents, and to render such assistance as
may, in the opinion of Franchisor's counsel, be reasonably
requested to carry out such defense or prosecution.
E. Franchisee shall operate, advertise and promote the
Franchised Restaurant under the Proprietary Marks designated by
Franchisor, without prefix or suffix and shall use no other name or
mark; Franchisee shall not use the Proprietary Marks as part of
Franchisee's corporate or other legal name without Franchisor's
prior written consent, nor hold out or otherwise employ the
Proprietary Marks to perform any activity, or to incur any
obligation or indebtedness, in such a manner as could reasonably
result in making Franchisor liable therefor.
F. Franchisee and Franchisee's Principals expressly
acknowledge and agree that this franchise of the Proprietary Marks
is nonexclusive, and that Franchisor has and retains the rights,
among others:
1. To grant other franchises for the Proprietary Marks,
in addition to those franchises already granted to existing
franchisees;
2. To use the Proprietary Marks in connection with the
sale of food and other products at wholesale and retail, and
3. To develop and establish other systems for the same
or similar products and services utilizing the same Proprietary
Marks, or any similar or other proprietary marks, and to grant
licenses thereto without providing Franchisee any right therein.
G. Franchisee and Franchisee's Principals understand and
acknowledge that each and every detail of the System is important
to Franchisee and Franchisor in order to develop and maintain high
standards of quality and service and hence to protect and enhance
the reputation and goodwill of the System. Franchisee and
Franchisee's Principals accordingly agree:
1. To use, promote and offer for sale under the
Proprietary Marks only those products and services which meet
Franchisor's prescribed standards and specifications, as they may
be revised by Franchisor from time to time.
2. To refrain from using any of the Proprietary Marks
in conjunction with any word or symbol without Franchisor's prior
written consent.
3. To adopt and use the Proprietary Marks franchised
hereunder solely in the manner prescribed by Franchisor.
4. To observe all such requirements with respect to
service mark, trademark and copyright notices, fictitious name
registrations, and the display of the legal name or other
identification of Franchisee.
5. To execute all documents requested by Franchisor or
its counsel that are necessary to obtain protection for the
Proprietary Marks or to maintain their continued validity or
enforceability and to take no action that would jeopardize the
validity or enforceability thereof.
VIII. ANIMATED ENTERTAINMENT RIGHTS
AND ENTERTAINMENT FUND
A. Franchisee and Franchisee's Principals acknowledge and
agree that the rights granted to Franchisee under this Agreement to
use Animated Entertainment, including, without limitation,
computer-controlled animated characters, video displays (regardless
of the format of the display, e.g., video tape, video disk, etc.),
computer hardware and software, artistic designs, scripts and
musical scores, staging and lighting techniques and configurations,
and any and all improvements, additions, replacements, patents,
copyrights, trademarks, service marks, technology, and know-how and
all other intellectual and artistic property relating thereto, are
limited solely to using the Animated Entertainment during the term
of this Agreement in the Franchised Restaurant at the site approved
by Franchisor. Franchisee shall use the Animated Entertainment only
in the manner authorized and prescribed by Franchisor. Neither
Franchisee nor Franchisee's Principals shall manufacture or market
any product or service derived from the Animated Entertainment,
including, without limitation, (i) toy versions, games, or anything
of play value related to the Animated Entertainment or (ii)
records, cassettes, audio and video tapes or other recordings of
music or musical scores included in Animated Entertainment, except
on terms, if any, set forth in writing by Franchisor. Franchisee's
right to use the Animated Entertainment shall not survive
termination or expiration hereof, nor shall such right be
transferable by Franchisee except as part of, and in connection
with, the transfer of the franchise granted hereunder, which
transfer is permitted by and subject to the terms and conditions
set forth in Paragraph XIV hereof.
B. Franchisee and Franchisee's Principals acknowledge
superior rights and interest of Franchisor in and to the Animated
Entertainment. Neither Franchisee nor Franchisee's Principals
shall copy or reproduce in any manner and Franchisee and
Franchisee's Principals shall use their best efforts to prevent
others from copying or reproducing in any manner the computer
software, video displays, artistic designs, scripts and musical
scores and all other plans, specifications, documentation and
programming related to the Animated Entertainment and they agree
that any duplication or unauthorized use thereof is and shall be
deemed an infringement of the rights of Franchisor.
C. Franchisee and Franchisee's Principals understand that
Franchisee's right to use certain of the musical compositions
contained in the Animated Entertainment programs is conditioned
upon obtaining licenses from and the payment of fees to performing
rights societies such as the American Society of Composers, Authors
and Publishers, Broadcast Music, Inc. and SESAC, Inc.
("societies"). Franchisor shall have the right to obtain and
maintain on Franchisee's behalf performing rights licenses from the
societies as may be required to authorize Franchisee to use such
music at the Franchised Restaurant, and to forward payment on
behalf of Franchisee (for which Franchisee shall reimburse
Franchisor as described below) for the music performance fees due
to the societies under the licenses. Franchisee shall submit to
Franchisor all information necessary to enable Franchisor to submit
any required reports to the societies and shall promptly reimburse
Franchisor upon demand for all payments which are made on
Franchisee's behalf by Franchisor to the societies and for which
reimbursement is requested by Franchisor. Failure by Franchisee to
comply with the terms of this Paragraph will constitute a default
pursuant to Paragraph XVI.D.1 and will result in Franchisee's loss
of rights to use the musical compositions in Animated Entertainment
programs.
D. Except for the Animated Entertainment initially purchased
for the Franchised Restaurant by Franchisee pursuant to Paragraph
VI.F hereof, the Entertainment Fund ("Entertainment Fund") shall be
used to meet certain costs of purchasing or leasing software
programs and new hardware for Animated Entertainment for all System
restaurants (including those of both Franchisor and Franchisee),
including the cost of shipping and installation. Purchases or
leases by the Entertainment Fund shall include, without limitation,
all software and new hardware for Animated Entertainment, including
retrofitting and replacements, except those replacements
necessitated by defects, casualty losses or ordinary wear and
tear. In addition, the Entertainment Fund may be used to design,
test and implement new entertainment concepts which may not be
directly related to the current Animated Entertainment. Franchisor
shall consult with and obtain the approval of the Entertainment
Committee of the Association as to purchases or leases for all
System restaurants by the Entertainment Fund. Franchisor may enter
into approved purchasing or leasing agreements on behalf of the
Entertainment Fund. All sums paid by Franchisee to the
Entertainment Fund shall be maintained in Association account(s)
separate from funds of Franchisor. The Entertainment Fund shall
not be used to defray any of Franchisor's general operating
expenses, except for such reasonable administrative costs as may be
incurred by Franchisor from time to time and approved by the
Association in negotiating and entering into purchasing and leasing
agreements on behalf of the Entertainment Fund and in collecting
and accounting for contributions to the Entertainment Fund.
E. Neither Franchisee nor Franchisee's Principals shall,
under any circumstances, transfer ownership or possession of any
Animated Entertainment components and software to any third party,
unless (i) the prior written consent of Franchisor is given and
(ii) except if such transfer is to a franchisee of Franchisor, the
masks, costumes, voice characteristics, music and related hardware
and software of the Animated Entertainment have first been modified
or altered by Franchisee as specified in Paragraph XVII.A.4. If
the Franchisee desires to accept any bona fide offer from a third
party to purchase any Animated Entertainment components or
materials, Franchisee shall notify Franchisor in writing of each
such offer, and Franchisor shall have the right and option,
exercisable within twenty-one (21) days after receipt of such
written notice, to send written notice to the seller that
Franchisor or its nominee intends to purchase such components or
materials on the same terms and conditions offered by the third
party and to thereafter consummate such purchase. In the event the
consideration, terms, and/or conditions offered by the third party
are such that Franchisor or its nominee may not reasonably be able
to furnish the same consideration, terms, and/or conditions, then
Franchisor or its nominee, as appropriate, may purchase the
interest proposed to be sold for the reasonable equivalent in
cash. If the parties cannot agree, within a reasonable time, on
the reasonable equivalent in cash of the consideration, terms,
and/or conditions offered by the third party, an independent
appraiser shall be designated by Franchisor, and his determination
shall be binding. Any material change in the terms of any offer
prior to closing shall constitute a new offer subject to the same
rights of first refusal by Franchisor or its nominee as in the case
of an initial offer. Failure of Franchisor to exercise the option
afforded by this Paragraph VIII.E shall not constitute a waiver of
any other provision of this Agreement, including all of the
requirements of this Paragraph VIII, with respect to a proposed
transfer.
IX. OPERATIONAL POLICIES
A. In order to protect the reputation and goodwill of
Franchisor and to maintain uniform standards of operation under the
Proprietary Marks, Franchisee shall conduct Franchisee's business
in compliance with the written standards, procedures, rules,
regulations, and policies (the "Operational Policies") issued from
time to time by Franchisor. Franchisee acknowledges having
received one (1) copy of the Operational Policies on loan from
Franchisor for the term of this Agreement.
B. Franchisee and Franchisee's Principals shall at all times
treat the Operational Policies, and any other manuals created for
or approved for use in the operation of the Franchised Restaurant,
and the information contained therein as confidential, and shall
use all reasonable efforts to maintain such information as secret
and confidential. The Operational Policies shall at all times be
kept in a secure place on the premises of the Franchised
Restaurant. Neither Franchisee nor Franchisee's Principals shall
at any time, without Franchisor's prior written consent, copy,
duplicate, record or otherwise reproduce the foregoing materials,
in whole or in part, nor otherwise make the same available to any
unauthorized person.
C. The Operational Policies shall at all times remain the
sole property of Franchisor.
D. Franchisor may from time to time revise the contents of
the Operational Policies and Franchisee and Franchisee's Principals
expressly agree to comply with each new or changed standard,
procedure, rule, regulation, policy or technique upon receipt
thereof.
E. Franchisee and Franchisee's Principals shall at all times
ensure that Franchisee's copy of the Operational Policies is kept
current and up-to-date, and in the event of any dispute as to the
contents of said Operational Policies, the terms of the version of
the Operational Policies maintained by Franchisor at Franchisor's
home office shall be controlling.
X. CONFIDENTIAL INFORMATION
A. Neither Franchisee nor Franchisee's Principals shall,
during the term of this Agreement or thereafter, communicate,
divulge, or use for the benefit of any other person, persons,
partnership, association or corporation any confidential
information, knowledge, or know-how concerning the construction and
methods of operation of the Franchised Restaurant which may be
communicated to either, or of which either may be apprised, by
virtue of the operation of the Franchised Restaurant under the
terms of this Agreement. Franchisee and Franchisee's Principals
shall divulge such confidential information only to such employees
to whom disclosure is necessary to enable Franchisee to operate the
Franchised Restaurant. Any and all information, trade secrets,
knowledge and know-how, including, without limitation, drawings,
materials, equipment, techniques, products, recipes and other data
of Franchisor shall be deemed confidential for purposes of this
Agreement, except information which Franchisee and Franchisee's
Principals can demonstrate has become a part of the public domain,
through publication or communication by others.
B. At Franchisor's request, Franchisee shall require and
obtain execution of covenants similar to those set forth in this
Paragraph X from any and all of its employees having access to the
confidential information described in Paragraph X.A hereof,
including all employees who receive training from Franchisor as
provided in Paragraph III.D. The covenants required by this
Paragraph X shall be substantially in the form contained in
Attachment D.
XI. ACCOUNTING AND RECORDS
A. During the term of this Agreement, Franchisee shall
maintain and preserve, for at least five (5) years from the dates
of their preparation, full, complete and accurate books, records
and accounts in accordance with generally-accepted accounting
principles and in the form and manner prescribed by Franchisor from
time to time in the Operational Policies or otherwise in writing.
B. Franchisee shall, at Franchisee's expense, submit to
Franchisor on the fifteenth (15) day of each month, a monthly
statement on forms prescribed by Franchisor accurately reflecting
all gross sales, the sources of all gross sales and expenses for
the preceding month and such other data or information as
Franchisor may require.
C. Franchisee shall, at Franchisee's expense, submit to
Franchisor an unaudited quarterly profit and loss statement (in the
form prescribed by Franchisor and showing the sources of all income
and the amount expended each month during the period on local
advertising) and balance sheet within (45) days of the end of each
fiscal quarter during the term hereof. Franchisee shall also, at
Franchisee's expense, submit to Franchisor unaudited annual
statements of the type described above in this Paragraph XI.C, as
well as a schedule of capital expenditures and a schedule of
advertising expenditures, within ninety (90) days of the end of
each fiscal year during the term hereof. Each statement shall be
signed by Franchisee attesting that it is true and correct.
D. Franchisee shall also submit to Franchisor, for review
and auditing, such other forms, periodic reports and other reports,
records, information and data as Franchisor may reasonably
designate, in the form and at the times and places reasonably
required by Franchisor, upon request and as specified from time to
time in the Operational Policies or otherwise in writing.
Franchisor also reserves the right to require Franchisee to submit
certified financial statements.
E. Franchisee, if a partnership, shall submit to Franchisor,
within ninety (90) days after the end of the Franchisee's fiscal
year during the term of this Agreement, a list of all partners and
the respective interest in Franchisee held by each as of the end of
each fiscal year. Franchisee, if a corporation, shall submit to
Franchisor, within ninety (90) days after the end of Franchisee's
fiscal year during the term of this Agreement, a list of all
shareholders and the respective interest in Franchisee held by each
as of the end of each fiscal year; provided, however, if
Franchisee's shares are publicly traded, the list of shareholders
required shall include only those owning five percent (5%) or more
of the shares outstanding.
F. Franchisee shall record all food and beverage sales on
cash registers approved by Franchisor, which shall contain devices
or systems that will record accumulated sales and provide such
other information and reports as Franchisor may prescribe. Within
eighteen (18) months after receipt of written notification from
Franchisor, Franchisee shall install on the premises of the
Franchised Restaurant and utilize in connection with the Franchised
Restaurant as designated by Franchisor, such point-of-sale computer
hardware and software control systems and telephone modem as
prescribed by Franchisor. Franchisee shall enter into such
software license agreements as designated by Franchisor for the
purpose of effectuating the above. Franchisee shall permit
Franchisor to access such systems by telephone at all reasonable
times for the purpose of inspecting, monitoring and retrieving
information concerning the operation of the Franchised Restaurant.
Franchisor shall have telephone access as provided herein at such
times and in such manner as Franchisor shall from time to time
specify. Franchisee shall conduct all transactions involving
tokens in the manner prescribed in the Operational Policies.
G. Franchisor or its designated agents shall have the right
at all reasonable times to examine and copy, at its expense, the
books, records, and tax returns of Franchisee. Franchisor shall
also have the right, at any time, to have an independent audit made
of the books of Franchisee. If an inspection should reveal that
payments have been understated in any report to Franchisor, then
Franchisee shall immediately pay to Franchisor the amount
understated upon demand, in addition to interest from the date such
amount was due until paid, at one and one-half percent (1.5%) per
month or the maximum rate permitted by law, whichever is less. If
an inspection discloses an understatement in any report of two
percent (2%) or more, Franchisee shall, in addition, reimburse
Franchisor for any and all costs and expenses connected with the
inspection (including, without limitation, reasonable accounting
and attorneys' fees). The foregoing remedies shall be in addition
to any other remedies Franchisor may have, including, without
limitation, the remedies for default.
XII. ADVERTISING
Recognizing the value of advertising and the importance of the
standardization of advertising programs to the furtherance of the
goodwill and public image of the System, the parties agree as
follows:
A. All advertising (including but not limited to advertising
required under Paragraph IV.C) by Franchisee in any medium shall be
conducted in a dignified manner and shall conform to such standards
and requirements as Franchisor may specify from time to time in
writing. Franchisee shall submit to Franchisor (through the mail,
return receipt requested), for its prior approval (except with
respect to prices to be charged), samples of all advertising and
promotional plans and materials that Franchisee desires to use and
that have not been prepared or previously approved by Franchisor.
If written disapproval thereof is not received by Franchisee within
fifteen (15) days from the date of receipt by Franchisor of such
materials, Franchisor shall be deemed to have given the required
approval.
B. Franchisor may offer from time to time to provide, upon
Franchisee's request and at Franchisee's expense, approved local
advertising and promotional plans and materials, including, without
limitation, newspaper slicks, promotional leaflets and coupons.
Television commercials and other advertising material are
periodically produced through the Advertising Fund and are
available for use by each Franchisee.
C. Franchisee and Franchisor agree that the Association or
its designee shall maintain and administer an Advertising Fund for
the System (the "Advertising Fund") as follows:
1. The Advertising Committee of the Association shall
consult with and obtain the approval of Franchisor as to
advertising programs and creative concepts, materials and media
used in the programs and the placement and allocation thereof.
Franchisee and Franchisor agree and acknowledge that the
Advertising Fund is intended to maximize general public recognition
and acceptance of the Proprietary Marks for the benefit of the
System and that Franchisor, the Association or their designees
undertake no obligation in administering the Advertising Fund to
make expenditures for Franchisee which are equivalent or
proportionate to Franchisee's contribution, or to ensure that any
particular franchisee benefits directly or pro rata from the
placement of advertising.
2. The Advertising Fund, all contributions thereto, and
any earnings therein, shall be used exclusively to meet any and all
costs of maintaining, administering, directing and preparing
advertising (including, without limitation, the cost of preparing
and conducting television, radio, magazine and newspaper
advertising campaigns and other public relations activities;
employing advertising agencies to assist therein; and providing
television, radio, newspaper, and other advertising materials and
promotional brochures and other marketing materials to franchisees
in the System). Franchisee shall contribute to the Advertising
Fund by separate check made payable to the Advertising Fund. All
sums paid by Franchisee to the Advertising Fund shall be maintained
in Association account(s), separate from funds of Franchisor and
shall not be used to defray any of Franchisor's general operating
expenses, except for such reasonable administrative costs and
overhead, if any, as Franchisor may incur from time to time in
activities approved by the Association and related to the
administration or direction of the Advertising Fund and advertising
programs approved by the Association, including, without
limitation, conducting market research, preparing marketing and
advertising materials, and collecting and accounting for
assessments for the Advertising Fund. The Advertising Fund and its
earnings shall not otherwise inure to the benefit of Franchisor or
Franchisee.
3. It is anticipated that all contributions to and
earnings of the Advertising Fund shall be expended for advertising
and/or promotional purposes as described herein during the taxable
year within which the contributions and earnings are received. If,
however, excess amounts remain in the Advertising Fund at the end
of such taxable year, all expenditures in the following taxable
year(s) shall be made first out of accumulated earnings from
previous years, next out of earnings in the current year, and
finally from contributions.
4. The Advertising Fund shall not be an asset of
Franchisor or its designee. The Advertising Fund is operated
solely as a conduit for the collection and expenditure of
advertising contributions for the purposes stated herein.
5. Although the Advertising Fund is intended to be of
perpetual duration, Franchisor maintains the right to terminate the
Advertising Fund. The Advertising Fund shall not be terminated,
however, until all monies in the Advertising Fund have been
expended for advertising and/or promotional purposes, or returned
to contributing franchised businesses or those operated by
Franchisor or an affiliate, without interest, on the basis of their
respective contributions.
D. Franchisor shall have the right, in its discretion to
designate any geographical area (e.g., an ADI) as a region for
purposes of establishing an advertising and promotion cooperative
("Cooperative") and to determine whether a Cooperative is
applicable to the Franchised Restaurant. A Cooperative shall be
composed of any two or more restaurants, whether such restaurants
are operated by Franchisor, Franchisee or other franchisees. If a
Cooperative has been established for the geographic area in which
the Franchised Restaurant is located at the time Franchisee
commences business hereunder, Franchisee shall immediately become
a member of such Cooperative. If a Cooperative applicable to the
Franchised Restaurant is established at any later time during the
term of this Agreement, Franchisee shall become a member of such
Cooperative no later than thirty (30) days after the date on which
the Cooperative commences operation as provided below. If the
Franchised Restaurant is within the geographic area of more than
one Cooperative, Franchisee shall be required to be a member of
only one such Cooperative as designated by Franchisor. The
following provisions shall apply to each Cooperative:
1. Each Cooperative shall be organized pursuant to an
Advertising Cooperative Agreement in the form and manner attached
hereto as Attachment F, and shall be governed in a form and manner,
and shall commence operation on a date, as designated in advance by
Franchisor in writing.
2. Each Cooperative shall be organized for the
exclusive purposes of funding and administering regional
advertising and promotion programs and developing, subject to
Franchisor's approval, standardized advertising materials for use
by the members in regional advertising.
3. No advertising or promotional plans or materials may
be used by a Cooperative or furnished to its members without the
prior approval of Franchisor. All such plans and materials shall
be submitted to Franchisor in accordance with the procedures set
forth in Paragraph XII.A.
4. Each Cooperative shall have the right to require its
members to make contributions to the Cooperative in such amounts as
are determined by the Cooperative; provided, however, that
Franchisee shall be required to contribute a minimum of three
percent (3%) of its monthly gross sales to the Cooperative
applicable to the Franchised Restaurant.
5. Each member franchisee shall submit to the
Cooperative, no later than the fifteenth (15th) day of each month,
for the preceding calendar month, its contribution as provided in
Paragraph XII.D.4 hereof, together with such other statements or
reports as may be required by Franchisor or by the Cooperative with
Franchisor's prior approval.
XIII. INSURANCE
A. Franchisee shall procure, prior to the commencement of
any operations under this Agreement, and maintain in full force and
effect during the term of this Agreement at Franchisee's expense,
an insurance policy or policies protecting Franchisee, Franchisor,
the Association, and their respective officers, directors,
shareholders, partners and employees, against any demand or claim
with respect to personal injury, death, property damage or any
loss, liability, or expense whatsoever arising or occurring upon or
in connection with the Franchised Restaurant, including, but not
limited to, comprehensive general liability insurance, property and
casualty insurance, statutory workers' compensation insurance,
employer's liability insurance, product liability insurance, liquor
liability insurance, and business interruption insurance. Such
policy or policies shall be written by a responsible carrier or
carriers acceptable to Franchisor, shall name Franchisor and the
Association as additional insureds as specified by Franchisor (with
the exception of workers' compensation insurance), and shall
provide at least the types and minimum amounts of coverage
specified in the Operational Policies. In the event applicable law
does not require such workers' compensation insurance, Franchisee
shall procure and maintain as provided above in this Paragraph
XIII.A., a legally appropriate alternative providing substantially
similar compensation for injured workers satisfactory to
Franchisor, provided that Franchisee (i) maintains an excess
indemnity or "umbrella" policy covering employer's liability and/or
a medical/disability policy covering medical expenses for on-the-job accidents,
which policy or policies shall contain such coverage
amounts as Franchisee and Franchisor shall mutually agree upon and
(ii) conducts and maintains a risk management and safety program
for its employees as the Franchisee and Franchisor shall mutually
agree is appropriate. Such policies shall also include a waiver of
subrogation in favor of Franchisor and its affiliates, their
respective partners, and the officers, directors, shareholders,
partners, agents, representatives, independent contractors,
servants and employees of each of them.
B. No later than fifteen (15) days before the date on which
any construction is commenced by Franchisee and on each policy
renewal date thereafter, Franchisee shall submit evidence of
satisfactory insurance and proof of payment therefor to Franchisor,
together with, upon request, original or duplicate copies of all
policies and policy amendments. The evidence of insurance shall
include a statement by the insurer that the policy or policies will
not be canceled or materially altered without at least thirty (30)
days' prior written notice to Franchisor.
C. Franchisee's obligation to obtain and maintain the
foregoing policy or policies in the amounts specified shall not be
limited in any way by reason of any insurance which may be
maintained by Franchisor, nor shall Franchisee's performance of
that obligation relieve Franchisee of liability under the indemnity
provisions set forth in Paragraph XX.D of this Agreement.
D. Should Franchisee, for any reason, fail to procure or
maintain the insurance required by this Agreement, Franchisor shall
have the right and authority (without, however, any obligation to
do so) immediately to procure such insurance and to charge same to
Franchisee, which charges, together with a reasonable fee for
Franchisor's expenses in so acting, shall be payable by Franchisee
immediately upon notice.
XIV. TRANSFERABILITY OF INTEREST
A. Franchisee and Franchisee's Principals understand and
acknowledge that the rights and duties created by this Agreement
are personal to Franchisee, and that Franchisor has granted this
franchise in reliance on the individual or collective character,
skill, aptitude and business and financial capacity of Franchisee
and Franchisee's Principals. As used in this Agreement,
"Franchisee's Principals" shall include collectively and
individually, Franchisee's spouse, if Franchisee is an individual,
all officers and directors of Franchisee (including the officers
and directors of any general partner of Franchisee) whom Franchisor
designates as Franchisee's Principals and all holders of an
ownership interest in Franchisee and of any entity directly or
indirectly controlling Franchisee. The initial Franchisee's
Principals shall be listed on Attachment A. Neither Franchisee nor
any of Franchisee's Principals shall, without Franchisor's prior
written consent, directly or indirectly, sell, assign, transfer,
convey, give away, pledge, mortgage or otherwise encumber any
interest in this Agreement, in Franchisee or in the assets of the
Franchised Restaurant, or attempt to do so. Any such purported
assignment occurring by operation of law or otherwise, including
any assignment by the trustee in bankruptcy, without Franchisor's
prior written consent shall be a material default of this
Agreement. Franchisor shall not unreasonably withhold its consent
to a transfer of any interest in this Agreement, in Franchisee or
in the assets of the Franchised Restaurant, subject to the
conditions set forth below. Franchisee and Franchisee's Principals
acknowledge and agree that each condition which must be met by the
transferee is necessary for such transferee's full performance of
the obligations hereunder.
B. Prior to any proposed transfer by any of Franchisee's
Principals, and at any other time upon request, Franchisee shall
deliver to Franchisor a list of all general and limited partners or
stockholders of record of Franchisee reflecting their respective
present and/or proposed interest in Franchisee, in such form as
Franchisor may require.
C. Securities or partnership interests in Franchisee and
Franchisee's Principals may be offered, only with the prior written
consent of Franchisor whether or not Franchisor's consent is
required under Paragraph XIV.A hereof, which consent shall not be
unreasonably withheld. All registration materials required for
such offering by federal or state law shall be submitted to
Franchisor for review prior to their being filed with any
government agency, and any materials to be used in any exempt
offering shall be submitted to Franchisor for review prior to their
use. No such offering material (for either a public or private
offering) shall express or imply (by use of the Proprietary Marks
or otherwise) that Franchisor is participating in an underwriting,
issuance or public offering of Franchisee, Franchisee's Principals,
or Franchisor securities, and Franchisor's review of any offering
material shall be limited solely to the subject of the relationship
between Franchisee, Franchisee's Principals, and Franchisor.
Franchisor may, at its option, require such offering materials to
contain a written statement prescribed by Franchisor concerning the
limitations described in the preceding sentence. Franchisee,
Franchisee's Principals and the other participants in the
registration and offering must fully indemnify Franchisor in
connection with the offering. For each proposed public offering,
other than offerings which are exempt from registration under the
state and federal securities laws, Franchisee shall pay to
Franchisor a nonrefundable fee of Ten Thousand Dollars ($10,000) or
such greater amount as is necessary to reimburse Franchisor for its
reasonable costs and expenses associated with reviewing the
proposed offering, including, without limitation, legal and
accounting fees. Franchisee and Franchisee's Principals shall give
Franchisor at least sixty (60) days' prior written notice prior to
the effective date of any offering or other transaction covered by
this Paragraph XIV.C.
D. In addition to the requirements of Paragraphs XIV.B and
C hereof, Franchisor may require as a condition of its approval of
any proposed transfer hereunder by Franchisee or any of
Franchisee's Principals, the following:
1. The transferee shall demonstrate to Franchisor's
satisfaction that the transferee meets or agrees to meet all of
Franchisor's then-current requirements for new franchisees or for
a franchisee's principal, as applicable, (including, without
limitation, professional integrity, business reputation and
financial and managerial requirements);
2. The transferee and the transferee's principals shall
execute a written agreement in form prescribed by Franchisor, by
which they assume the obligations of the transferor under this
Agreement or the Guaranty, as applicable, and agreeing to be bound
by all the terms and conditions of this Agreement, including,
without limitation, the restrictions on transfer in this Paragraph
XIV; and
3. The transferor and transferor's principals shall
execute a general release, in a form prescribed by Franchisor, of
any and all claims against Franchisor, its parent, subsidiaries and
affiliates and the officers, directors, agents and employees of
Franchisor, its subsidiaries and affiliates.
E. In addition to the requirements in Paragraphs XIV.B, C,
and D hereof, Franchisor may require as a condition of its approval
of any proposed transfer satisfaction of the requirements set forth
immediately below in Subparagraphs 1, 2, 3, and 4 of this Paragraph
XIV.E in the event of any one of the following: if Franchisee is
a publicly-held corporation and the proposed transfer, alone or
together with other previous, simultaneous or proposed transfers,
would have the effect of transferring a direct or indirect
controlling interest (as reasonably determined by Franchisor) in
Franchisee; if Franchisee is a partnership or privately-held
corporation and the proposed transfer, alone or together with other
previous, simultaneous or proposed transfers, would have the effect
of reducing to less than fifty percent (50%) the percentage of
equity interest owned in Franchisee by the initial equity owners
identified in Attachment A attached hereto and incorporated herein
by reference; or if Franchisee is a natural person and the proposed
transfer, alone or together with other simultaneous or proposed
transfers, would have the effect of reducing Franchisee's equity
interest in this Agreement, or in Franchisee's assets, to less than
fifty percent (50%). (In computing the percentages of equity
interest owned in Franchisee for purposes of this Paragraph XIV.E,
general partnership interests shall not be distinguished from
limited partnership interests):
1. Franchisee is not in default hereunder, and all of
Franchisee's accrued monetary obligations to Franchisor have been
satisfied;
2. At the transferee's expense, the transferee and any
of the transferee's employees responsible for the operation of the
Franchised Restaurant have satisfactorily completed such training
as Franchisor may then require;
3. The transferee has paid to Franchisor a transfer fee
of one-half (1/2) of the then-current initial franchise fee for a
new franchise to cover the administrative and other expenses of
Franchisor in connection with the transfer;
4. The transferee has complied with Franchisor's then-current
application requirements for a new franchise and the
Franchisee and each of Franchisee's Principals have executed
Franchisor's then- current franchise agreement, if required by
Franchisor, for a term ending on the date of expiration of this
Agreement (and such other ancillary agreements as Franchisor may
then require, which may include, without limitation, an agreement
requiring the transferee to upgrade, at the transferee's expense,
the Franchised Restaurant to conform to the then-current image of
System restaurants, as specified by Franchisor).
F. If Franchisee is a natural person and Franchisee desires
to transfer all of Franchisee's rights to a corporation formed for
the convenience of ownership, Franchisor shall consent to such
transfer provided Franchisee complies with Paragraphs XIV.D and
XIV.E hereof and will be the owner of one hundred percent (100%) of
the securities with voting rights of the transferee corporation,
the Franchisee shall execute the Guaranty, and the transferee shall
execute a copy of this Agreement and any ancillary documents
required by Franchisor in its sole discretion. If Franchisee is a
partnership and the partners in Franchisee desire to transfer all
of their rights in Franchisee to a corporation formed for the
convenience of ownership, Franchisor shall consent to such transfer
provided Franchisee and all the partners in Franchisee comply with
Paragraphs XIV.D and XIV.E.1 hereof; provided the initial equity
owners in Franchisee identified in Attachment A hereto will be the
owners of one hundred percent (100%) of the securities with voting
rights of the transferee corporation, each individual shall have
the same proportionate ownership interest in the corporation as he
had in Franchisee prior to the transfer, the Franchisee's
Principals shall execute the Guaranty, and provided the transferee
shall execute a copy of this Agreement and any required ancillary
documents.
G. The Franchisee and any of Franchisee's Principals who
desire to accept any bona fide offer from a third party to purchase
his or its interest shall notify Franchisor in writing of each such
offer, and Franchisor shall have the right and option, exercisable
within twenty-one (21) days after receipt of such written notice,
to send written notice to the seller that Franchisor or its nominee
intends to purchase seller's interest on the same terms and
conditions offered by the third party. In the event the
consideration, terms, and/or conditions offered by the third party
are such that Franchisor or its nominee may not reasonably be able
to furnish the same consideration, terms, and/or conditions, then
Franchisor or its nominee, as appropriate, may purchase the
interest proposed to be sold for the reasonable equivalent in
cash. If the parties cannot agree, within a reasonable time, on
the reasonable equivalent in cash of the consideration, terms,
and/or conditions offered by the third party, an independent
appraiser shall be designated by Franchisor, and his determination
shall be binding. Any material change in the terms of any offer
prior to closing shall constitute a new offer subject to the same
rights of first refusal by Franchisor or its nominee as in the case
of an initial offer. Failure of Franchisor to exercise the option
afforded by this Paragraph XIV.G shall not constitute a waiver of
any other provision of this Agreement, including all of the
requirements of this Paragraph XIV, with respect to a proposed
transfer. Franchisor shall not have a right of first refusal as
provided in this Paragraph XIV.G for any transfer between or among
the initial equity owners in Franchisee identified in Attachment A
to this Agreement.
H. Transfers upon death or permanent disability shall be
subject to the same conditions as any inter vivos transfer, except
as provided in Paragraph XIV.I. If the heirs or legatees of any
person who held an interest subject to the restrictions of
Paragraph XIV fail to comply with all the requirements of Paragraph
XIV with respect to a transfer of interest which they would
otherwise have received by devise or inheritance, the executor,
administrator, or personal representative of the deceased
Franchisee shall have six (6) months from the date of receipt of
notice of Franchisor's disapproval of the heirs or legatees to
dispose of the deceased Franchisee's interest in the franchise,
which disposition shall be subject to all the terms and conditions
for transfers contained in this Agreement. Nothing in this
Paragraph XIV.H shall relieve any persons or entities who are in
control of the operation of the Franchised Restaurant following
such death or permanent disability from adherence to the terms of
this Agreement. "Permanent disability" shall mean any physical,
emotional or mental injury, illness or incapacity which would
prevent a person from performing the obligations set forth in this
Agreement or in the Guaranty attached to this Agreement for at
least ninety (90) consecutive days and from which condition
recovery within ninety (90) days from the date of determination of
disability is unlikely. Permanent disability shall be determined
by a licensed practicing physician selected by Franchisor upon
examination of the person; or if the person refuses to submit to an
examination, then such person shall be automatically deemed
permanently disabled as of the date of such refusal for the purpose
of this Paragraph XIV. The costs of any examination required by
this Paragraph XIV.H shall be paid by Franchisor.
I. If the interest of the Franchisee or any of Franchisee's
Principals is transferred upon death or permanent disability of
such Franchisee or Franchisee's Principal to the spouse, parents,
siblings, nieces, nephews, descendants or spouse's descendants of
such Franchisee or Franchisee's Principal, the transferee shall
only be required to execute a copy of this Agreement, the Guaranty
and any ancillary documents required by Franchisor in its sole
discretion.
J. Franchisor's consent to a transfer of any interest
subject to the restrictions of this Paragraph XIV shall not
constitute a waiver of any claims it may have against the
transferor, nor shall it be deemed a waiver of Franchisor's right
to demand exact compliance with any of the terms of this Agreement
by the transferee.
K. Franchisor shall have the right to transfer or assign
this Agreement and all or any part of its rights or obligations
herein to any person or legal entity, without the consent of
Franchisee or Franchisee's Principals. Upon notification by
Franchisor of such transfer or assignment, Franchisee and
Franchisee's Principals shall execute a novation agreement in a
form and manner prescribed by Franchisor, pursuant to which any
designated assignee of Franchisor shall become solely responsible
for all obligations of Franchisor under this Agreement from the
date of assignment.
XV. RELOCATION OF FRANCHISED RESTAURANT
Franchisee must obtain Franchisor's prior written consent,
which Franchisor may grant or withhold in its sole discretion, to
any relocation of the Franchised Restaurant for any reason,
including but not limited to, expiration of lease and demographic
changes of the Franchised Restaurant.
As a condition of its approval of any proposed relocation of
the Franchised Restaurant by Franchisee, the Franchisor requires,
among other things, satisfaction of the following:
A. Franchisee has given Franchisor at least 90 days prior to
the proposed date of relocation written notice of Franchisee's
intent to relocate the Franchised Restaurant.
B. Franchisee is not in default under the Franchise
Agreement, and all of the Franchisee's accrued monetary obligations
to the Franchisor have been satisfied.
C. Franchisee has paid a relocation fee in an amount equal
to fifty percent (50%) of the then-current initial franchise fee
for new franchisees.
D. Franchisee has executed Franchisor's then-current form of
franchise agreement for a term (including all renewal terms) equal
to the greater of (i) the unexpired portion of the initial term and
all renewal terms then-remaining on this Agreement, or (ii) such
initial term and all renewal terms contained in Franchisor's then-current
form of franchise agreement, and such other ancillary
agreements as the Franchisor may then require; provided, however,
that Franchisee shall not be required to pay the initial franchise
fee required thereunder.
E. Franchisee has made adequate provisions for the removal
of all signs and other material containing Proprietary Marks from
the existing Franchised Restaurant.
F. The new location shall be within the Protected Territory.
The Franchisee will receive written notification of
Franchisor's decision regarding relocation of the Franchised
Restaurant. Upon approval by Franchisor, Franchisee must relocate
the Franchised Restaurant within 180 days.
XVI. DEFAULT AND TERMINATION
A. Franchisee shall be deemed to be in default under this
Agreement, and all rights granted herein shall automatically
terminate without notice to Franchisee, if Franchisee shall become
insolvent or makes a general assignment for the benefit of
creditors, or if a petition in bankruptcy is filed by Franchisee or
such a petition is filed against and consented to by Franchisee, or
if Franchisee is adjudicated a bankrupt, or if a bill in equity or
other proceeding for the appointment of a receiver of Franchisee or
other custodian for Franchisee's business or assets is filed and
consented to by Franchisee, or if a receiver or other custodian
(permanent or temporary) of Franchisee's assets or property, or any
part thereof, is appointed by any court of competent jurisdiction,
or if proceedings for a composition with creditors under any state
or federal law is instituted by or against Franchisee, or if a
final judgment remains unsatisfied or of record for thirty (30)
days or longer (unless supersedeas bond is filed), or if execution
is levied against Franchisee's property, or suit to foreclose any
lien or mortgage against the premises or equipment is instituted
against Franchisee and not dismissed within thirty (30) days, or if
the real or personal property of Franchisee shall be sold after
levy thereupon by any sheriff, marshal, or constable.
B. In addition to the provisions of Paragraph XVI.A,
Franchisee shall be deemed to be in default and Franchisor may, at
its option, terminate this Agreement and all rights granted
hereunder, without affording Franchisee any opportunity to cure the
default, effective immediately upon receipt of notice by
Franchisee, upon the occurrence of any of the following events:
1. If Franchisee fails to perform its obligations set
forth in Paragraph VI.B or VI.U hereof on a timely basis, ceases to
do business at the Franchised Restaurant, or loses the right to
possession of the premises or otherwise forfeits the right to do or
transact business as a System restaurant where the Franchised
Restaurant is located; provided, however, that this provision shall
not apply in cases of acts of God, strikes, lockouts or other
industrial disturbances, war, riot, epidemic, fire or other
catastrophe or other forces beyond Franchisee's control, if through
no fault of Franchisee, the premises are damaged or destroyed by an
event as described above, provided that Franchisee applies within
thirty (30) days after such event, for Franchisor's approval to
relocate or reconstruct the premises (which approval shall not be
unreasonably withheld) and Franchisee diligently pursues such
reconstruction or relocation; such approval may be conditioned upon
the payment of an agreed minimum royalty to Franchisor during the
period in which the Franchised Restaurant is not in operation;
2. If a threat or danger to public health or safety
results from the construction, maintenance or operation of the
Franchised Restaurant;
3. If Franchisee or any of Franchisee's Principals is
convicted of a felony or any other crime or offense that is
reasonably likely, in the sole opinion of Franchisor, to adversely
affect the System, the Proprietary Marks, the Animated
Entertainment, the goodwill associated therewith, or Franchisor's
interest therein;
4. If Franchisee or any of Franchisee's Principals
copies or duplicates any Animated Entertainment programs or
materials or purports to transfer ownership or possession of any
Animated Entertainment components or materials without the prior
written consent of Franchisor;
5. If Franchisee, Franchisee's Principals, or any
partner or shareholder in Franchisee purports to effect transfer of
any rights, obligations, or interest to any third party without
Franchisor's prior written consent, contrary to the terms of
Paragraph XIV of this Agreement;
6. If Franchisee or any of Franchisee's Principals fail
to comply with the in-term covenants in Paragraph XVIII hereof;
7. If Franchisee or any of Franchisee's Principals
discloses or divulges the contents of the Operational Policies or
other trade secret or confidential information provided Franchisee
by Franchisor contrary to Paragraphs IX and X hereof;
8. If an approved transfer is not effected within a
reasonable time following Franchisee's death or permanent
disability as required by Paragraph XIV.H hereof;
9. If Franchisee fails to procure or maintain in full
force and effect at any time required during the term of this
Agreement and any renewal terms hereof, the insurance policy or
policies described in Paragraph XIII of this Agreement;
10. If Franchisee knowingly maintains false books or
records, or submits any false reports to Franchisor; or
11. If Franchisee causes or allows to be caused events
of default for which Franchisor has given two or more notices of
default pursuant to Paragraph XVI.D below.
C. Franchisee shall have ten (10) days after its receipt
from Franchisor of a written Notice of Termination within which to
remedy Franchisee's failure, refusal, or neglect to pay promptly
any monies owing to Franchisor, its subsidiaries or affiliates, to
the Association, or to a Cooperative, when due, or to submit the
financial information or other reports required by Franchisor under
this Agreement. If any such default is not cured within that time,
or such longer period as applicable law may require, this Agreement
shall terminate without further notice to Franchisee effective
immediately upon the expiration of the ten (10) day period or such
longer period as applicable law may require.
D. Except as provided in Paragraphs XVI.A, XVI.B, and XVI.C
of this Agreement, Franchisee shall have thirty (30) days after its
receipt from Franchisor of a written Notice of Termination within
which to remedy any default hereunder and provide evidence thereof
to Franchisor. If any such default is not cured within that time,
or such longer period as applicable law may require, this Agreement
shall terminate without further notice to Franchisee effective
immediately upon the expiration of the thirty (30) day period or
such longer period as applicable law may require. Franchisee shall
be in default hereunder for any failure to comply substantially
with any of the requirements imposed by this Agreement, as it may
from time to time reasonably be supplemented by the Operational
Policies or otherwise in writing, or to carry out the terms of this
Agreement in good faith. Such defaults shall include, for example,
without limitation, the occurrence of any of the following events:
1. If Franchisee fails to perform any of the duties
required or to maintain any of the standards or procedures
prescribed by Franchisor in this Agreement (including the
operational cornerstones, as such may be amended or revised from
time to time by Franchisor), the Operational Policies or otherwise
in writing.
2. If Franchisee fails, refuses or neglects to obtain
the Franchisor's prior written approval or consent as required by
this Agreement.
3. If Franchisee, by act or omission, suffers a
continued violation, in connection with the operation of the
Franchised Restaurant of any law, ordinance, rule or regulation of
a governmental agency, in the absence of a good faith dispute by
Franchisee over its application or legality and without promptly
resorting to an appropriate administrative or judicial forum for
relief therefrom.
4. If Franchisee or any of Franchisee's Principals
misuse or make any unauthorized use of the Proprietary Marks or the
Animated Entertainment, or otherwise materially impair the goodwill
associated therewith or Franchisor's rights therein.
XVII. OBLIGATIONS UPON TERMINATION
A. Upon termination or expiration, this Agreement and all
rights granted hereunder to Franchisee shall forthwith terminate,
and Franchisee and Franchisee's Principals:
1. shall immediately cease to operate the Franchised
Restaurant and shall not thereafter, directly or indirectly,
represent itself to the public or hold itself out as a franchisee
of Franchisor.
2. shall immediately and permanently cease to use, by
advertising or in any other manner whatsoever, any equipment,
format, confidential methods, procedures and techniques associated
with the System; any Proprietary Marks and distinctive trade dress,
forms, slogans, signs, symbols, devices, or animated character
costumes associated with the System. In particular, Franchisee and
Franchisee's Principals shall cease to use, without limitation, all
signs, fixtures, furniture, equipment, Animated Entertainment
components and materials, advertising materials, stationery, forms
and any other articles which display the Proprietary Marks
associated with the System.
3. shall take such action as may be necessary to cancel
any assumed name or equivalent registration which contains any of
the Proprietary Marks, and Franchisee and Franchisee's Principals
shall furnish Franchisor with evidence satisfactory to Franchisor
of compliance with this obligation within thirty (30) days after
termination or expiration of this Agreement.
4. shall not use, in the event Franchisee or
Franchisee's Principals continue to operate or subsequently begins
to operate any other business (subject also to provisions of
Paragraphs XVIII.B.3 and C.2), any reproduction, counterfeit, copy
or colorable imitation of the Proprietary Marks or the Animated
Entertainment either in connection with such other business or the
promotion thereof, which is likely to cause confusion, mistake or
deception among the public, or which is likely to dilute
Franchisor's exclusive rights in and to the Proprietary Marks and
the Animated Entertainment and further agrees not to utilize any
designation of origin or description or representation which
falsely suggests or represents an association or connection with
Franchisor so as to constitute unfair competition. Franchisee and
Franchisee's Principals shall make such modifications or
alterations to the premises and contents operated hereunder
immediately upon termination or expiration of this Agreement as may
be necessary to prevent the operation of any business thereon by
Franchisee, Franchisee's Principals, or others in derogation of
this Paragraph XVII.4 and shall make such specific additional
changes thereto as Franchisor may reasonably request for that
purpose. Subject also to provisions of Paragraph XVIII B.3 and
C.2, required modifications and alterations to the Animated
Entertainment shall include modifying and altering the masks,
costumes, voice characteristics, scripts, music and related
hardware and software so as to avoid confusion, mistake or
deception among the public and dilution of Franchisor's superior
rights and interest in and to the Animated Entertainment. In the
event Franchisee or Franchisee's Principals fail or refuse to
comply with the requirements of this Paragraph XVII.4, Franchisor
shall have the right to enter upon the premises where Franchisee's
franchised business was conducted, without being guilty of trespass
or any other tort, for the purpose of making or causing to be made
such changes as may be required, at the expense of Franchisee and
Franchisee's Principals, which expense Franchisee and Franchisee's
Principals agree to pay upon demand.
5. shall promptly pay all sums, including interest,
owing to Franchisor, its subsidiaries and affiliates, and to the
Association. In the event of termination for any default of
Franchisee, such sums shall further include all damages, costs and
expenses, including liquidated damages (as set forth in this
Paragraph XVII.A.5) and reasonable attorneys' fees, incurred by
Franchisor as a result of the default, which obligation shall give
rise to and remain, until paid in full, a lien in favor of
Franchisor against any and all of the personal property, machinery,
fixtures, equipment and inventory owned by Franchisee at the
Franchised Restaurant, and against the proceeds and replacements
thereof. Franchisee and Franchisee's Principals hereby irrevocably
appoint Franchisor as their attorney-in-fact (surviving any
termination or expiration hereof) to execute and file in the name
of Franchisee and Franchisee's Principals as debtor such
instruments, including Uniform Commercial Code financing
statements, as may be required by Franchisor from time to time to
evidence such lien. As liquidated damages for the premature
termination hereof only (as a result of termination for default of
Franchisee or Franchisee's Principals), and not as a penalty or as
damages for breaching this Agreement or in lieu of any other
payment or obligation, Franchisee and Franchisee's Principals shall
owe to Franchisor or the Association a lump sum equal to the total
amounts required under Paragraphs IV.A.2 and IV.B of this Agreement
during the twelve (12) calendar months of operation of the
Franchised Restaurant preceding the termination hereof, or for such
shorter period equaling the unexpired term of this Agreement at the
time of such termination. In the event the Franchised Restaurant
was not in operation during the full twelve (12) calendar months
preceding termination hereof, Franchisee shall owe to Franchisor or
the Association a lump sum equal to the total amounts required
under Paragraphs IV.A.2 and IV.B of this Agreement during that
portion of the twelve (12) calendar months during which the
Franchised Restaurant was in operation preceding the termination
hereof, divided by the number of days in that portion of such
period, and multiplied by the average number of days franchised
Chuck E. Cheese restaurants were required by Franchisor to be open
and in operation during the immediately preceding twelve (12)
calendar months.
6. shall pay to Franchisor all damages, costs and
expenses, including reasonable attorneys' fees, incurred by
Franchisor subsequent to the termination or expiration of the
franchise herein granted in obtaining injunctive or other relief
for the enforcement of any provisions of this Paragraph XVII.
7. shall immediately turn over to Franchisor all
manuals, including the Operational Policies, records, files,
instructions, correspondence, all materials related to operating
the Franchised Restaurant including, without limitation, brochures,
agreements, disclosure statements, and any and all other materials
relating to the operation of the Franchised Restaurant in
Franchisee's and Franchisee's Principals' possession, and all
copies thereof (all of which are acknowledged to be Franchisor's
property), and shall retain no copy or record of any of the
foregoing, excepting only Franchisee's copy of this Agreement and
of any correspondence between the parties, and any other documents
which Franchisee and Franchisee's Principals reasonably need for
compliance with any provision of law.
8. shall assign to Franchisor, at the option of
Franchisor, all rights to the telephone numbers of the Franchised
Restaurant and any related Yellow Pages trademark listing or other
business listings and execute all forms and documents required by
Franchisor and any telephone company at any time to transfer such
service and numbers to Franchisor. Notwithstanding any forms and
documents which may have been executed by Franchisor under
Paragraph VI.5, Franchisee hereby appoints Franchisor its true and
lawful agent and attorney-in-fact with full power and authority,
for the sole purpose of taking such action as is necessary to
complete such assignment. This power of attorney shall survive the
expiration or termination of this Agreement. Franchisee shall,
after termination or expiration, use different telephone numbers at
or in connection with any subsequent business conducted by
Franchisee.
9. shall comply with the covenants contained in
Paragraph XVII of this Agreement.
B. Upon termination or expiration of this Agreement:
1. If Franchisee desires to accept any bona fide offer
to purchase any Animated Entertainment components and software,
Franchisee shall comply with the provisions of Paragraph VIII.E of
this Agreement.
2. Franchisor shall have the right, but not the
obligation, to purchase at fair market value (as determined below)
any or all of Franchisee's interest in the Franchised Restaurant,
including but not limited to (1) the Animated Entertainment
components and software, (2) rides, amusement games and other
attractions, (3) the real estate component of the Franchised
Restaurant, (4) furnishings, fixtures and equipment, and (5) signs,
advertising materials and supplies. Regarding the real estate or
any other component of the Franchised Restaurant which is leased,
purchase of Franchisee's interest hereunder shall include
assumption of Franchisee's obligations under such lease.
Franchisor shall initiate its rights under this Paragraph XVII.B.2
by giving written notice thereof to Franchisee within thirty (30)
days after termination or expiration of this Agreement. Within
thirty (30) days after such notice is given by Franchisor,
Franchisee and Franchisor shall each appoint an appraiser who has
at least five (5) years commercial appraisal experience to make an
appraisal of the fair market value of Franchisee's interest in each
component of the Franchised Restaurant as indicated in Franchisor's
initial notice and cause such appraiser to deliver a copy of his
appraisal to the other party. As used herein, "fair market value"
shall be the average of the two appraisals hereunder or, if only
one appraisal is timely delivered, the amount indicated in such
appraisal. Each party shall pay the fees and costs of the
appraiser appointed by such party. Within thirty (30) days after
the delivery date of both appraisals (or, if earlier, the deadline
above for delivery of such appraisals), Franchisor shall deliver to
Franchisee written notice of its election to purchase Franchisee's
interest in any or all of the components of Franchisee's interest
in the Franchised Restaurant specified in the initial notice.
Within thirty (30) days after delivery of such latter notice,
Franchisee shall deliver custody of such components of Franchisee's
interest in the Franchised Restaurant and appropriate bills of sale
or other documents of assignment and Franchisor shall deliver the
consideration determined above. With respect to any purchase by
Franchisor as provided herein, Franchisor shall have the right to
set-off all amounts due from Franchisee under this Agreement.
C. Paragraphs XVI.A.2, 4, 5 and 7 hereof shall not apply to
the operation by Franchisee of any other franchised restaurant
pursuant to any other franchise agreement between Franchisor and
Franchisee.
XVIII. COVENANTS
A. Franchisee covenants that during the term of this
Agreement except as otherwise approved in writing by Franchisor,
Franchisee (or if Franchisee is not an individual, a Principal of
Franchisee satisfactory to Franchisor or Franchisee's restaurant
general manager shall devote requisite time, energy and best
efforts to the management and operation of the Franchised
Restaurant.
B. With respect to Franchisee, during the term of this
Agreement (or, with respect to each of Franchisee's Principals
during the term of this Agreement for so long as such individual or
entity satisfies the definition of "Franchisee's Principals" as
described in Paragraph XIV hereto), except as otherwise approved in
writing by Franchisor, neither Franchisee nor Franchisee's
Principals shall, either directly or indirectly, for themselves, or
through, on behalf of, or in conjunction with any person, persons,
partnership or corporation:
1. Divert or attempt to divert any business or customer
of the Franchised Restaurant to any competitor, by direct or
indirect inducement or otherwise, or do or perform, directly or
indirectly, any other act injurious or prejudicial to the goodwill
associated with Franchisor's Proprietary Marks, the Animated
Entertainment and the System.
2. Employ or seek to employ any person who is at that
time employed by Franchisor or by any other franchisee of
Franchisor, or otherwise directly or indirectly to induce such
person to leave his or her employment.
3. Own, maintain, engage in, or have any interest in
any restaurant business with entertainment by three dimensional
computer-controlled animated characters or video display; provided,
however, that this provision shall not apply to the operation by
Franchisee or Franchisee's Principals of any other franchise which
may be granted by Franchisor to Franchisee or Franchisee's
Principals; and provided, further, that this provision shall not
apply to any ownership by Franchisee or Franchisee's Principals,
individually or collectively, of less than five percent (5%) of the
outstanding equity securities in any publicly-held corporation.
C. With respect to Franchisee, for a continuous
uninterrupted period commencing upon the expiration or termination
of, or the transfer of all of Franchisee's interest in, this
Agreement, regardless of the cause thereof (or, with respect to
each of Franchisee's Principals, commencing upon the earlier of:
(i) the expiration or termination of, or the transfer of all of
Franchisee's interest in, this Agreement or (ii) the time such
individual or entity ceases to satisfy the definition of
"Franchisee's Principals" as described in Paragraph XIV of this
Agreement), and continuing for one (1) year thereafter, except as
otherwise approved in writing by Franchisor, neither Franchisee nor
Franchisee's Principals shall, either directly or indirectly, for
themselves or through, on behalf of, or in conjunction with any
other person, persons, partnership or corporation:
A. do or engage in any act described by Paragraph
XVIII.B.1 and 2 of this Agreement, which is hereby incorporated by
reference as if more fully set forth herein, or
2. own, maintain, engage in, or have any interest in
any restaurant business with entertainment by three dimensional
computer-controlled animated characters or video display within a
radius of twenty-five (25) miles of the location of the Franchised
Restaurant; provided, however, that this provision shall not apply
to the operation by Franchisee or Franchisee's Principals of any
other franchise which may be granted by Franchisor to Franchisee or
Franchisee's Principals; and provided, further, that this provision
shall not apply to any ownership by Franchisee or Franchisee's
Principals, individually or collectively, of less than five percent
(5%) of the outstanding equity securities in any publicly-held
corporation.
D. Franchisee and Franchisee's Principals understand and
acknowledge that Franchisor shall have the right, in its sole
discretion, to reduce the scope of any covenant set forth in
Paragraphs XVIII.B and C of this Agreement, or any portion thereof,
without either's consent, effective immediately upon receipt by
Franchisee and Franchisee's Principals of written notice thereof,
and Franchisee and the Franchisee's Principals agree that they
shall comply forthwith with any covenant as so modified, which
shall be fully enforceable notwithstanding the provisions of
Paragraph XXIII hereof.
E. If Franchisee or Franchisee's Principals develop any new
concept, process or improvement in the operation or promotion of
the Franchised Restaurant, Franchisee shall promptly notify
Franchisor and provide Franchisor with all necessary related
information, without compensation. Franchisee and Franchisee's
Principals acknowledge that any such concept, process or
improvement will become the property of Franchisor, and Franchisor
may use or disclose such information to other franchisees or
developers as it determines to be appropriate.
F. At Franchisor's request, Franchisee shall require and
obtain execution of covenants similar to those set forth in this
Paragraph XVIII from any and all of its employees having access to
the confidential information described in Paragraph X.A hereof,
including all employees who receive training from Franchisor as
provided in Paragraph III.D. The covenants required by this
Paragraph XVIII.F shall be substantially in the form contained in
Attachment D.
XIX. TAXES, PERMITS AND INDEBTEDNESS OF FRANCHISEE
A. Franchisee shall promptly pay when due all taxes levied
or assessed by any federal, state or local tax authority, and any
and all other indebtedness incurred by Franchisee in the conduct of
the business franchised hereunder. Franchisee shall promptly pay
to Franchisor an amount equal to any sales tax, gross receipts tax
or similar tax imposed on Franchisor with respect to any payments
to Franchisor required under this Agreement, except to the extent
the tax is credited against income tax paid by Franchisor for the
same tax period.
B. In the event of any bona fide dispute as to liability for
taxes assessed or other indebtedness, Franchisee may contest the
validity or the amount of the tax or indebtedness in accordance
with procedures of the taxing authority or applicable law; however,
in no event shall Franchisee permit a tax sale or seizure by levy
of execution or similar writ or warrant, or attachment by a
creditor, to occur against the premises of the Franchised
Restaurant or any improvements thereon.
C. Franchisee shall comply with all federal, state, and
local laws, rules and regulations, and shall timely obtain any and
all permits, certificates or licenses necessary for the full and
proper conduct of the business franchised under this Agreement,
including, without limitation, licenses to do business, fictitious
name registration and sales tax permits, health and sanitation
permits and ratings and fire clearances. Copies of all subsequent
inspection reports, warnings, certificates and ratings, issued by
any governmental entity during the term of this Agreement in
connection with the conduct of the Franchised Restaurant which
indicate Franchisee's failure to meet or maintain the highest
governmental standards (such as, without limitation, a Grade A
sanitation rating or its equivalent) or less than full compliance
by Franchisee with any applicable law, rule or regulation, shall be
forwarded to Franchisor by Franchisee within five (5) days of
Franchisee's receipt
thereof.
D. Franchisee shall notify Franchisor in writing within five
(5) days of the commencement of any action, suit or proceeding, and
of the issuance of any order, writ, injunction, award, judgment or
decree of any court, agency or other governmental instrumentality,
which may adversely affect the operation or financial condition of
the Franchised Restaurant or the Franchisee.
XX. INDEPENDENT CONTRACTOR AND INDEMNIFICATION
A. It is understood and agreed by the parties hereto that
this Agreement does not create a fiduciary relationship between
them, that Franchisee shall be an independent contractor, and that
nothing in this Agreement is intended to constitute either party an
agent, legal representative, subsidiary, joint venturer, partner,
employee or servant of the other for any purpose whatsoever.
B. During the term of this Agreement and any extensions
hereof, Franchisee shall hold itself out to the public as an
independent contractor operating the business pursuant to a
franchise from Franchisor and as an authorized user of the
Proprietary Marks which are owned by Franchisor. Franchisee agrees
to take such affirmative action as may be necessary to do so,
including, without limitation, exhibiting a notice of that fact in
a conspicuous place in the Franchised Restaurant premises, the
content of which Franchisor reserves the right to specify or
approve in advance.
C. It is understood and agreed that nothing in this
Agreement authorizes Franchisee or Franchisee's Principals to make
any contract, agreement, warranty or representation on Franchisor's
behalf, or to incur any debt or other obligation in Franchisor's
name, and that Franchisor shall in no event assume liability for,
or be deemed liable hereunder as a result of, any such action, or
by reason of any act or omission of Franchisee or Franchisee's
Principals in the conduct of the Franchised Restaurant or any claim
or judgment arising therefrom against Franchisor.
D. Franchisee and each of Franchisee's Principals shall, at
all times, indemnify and hold harmless to the fullest extent
permitted by law Franchisor, its subsidiaries, affiliates,
successors and assigns and their respective officers, directors,
shareholders, partners, agents, representatives, independent
contractors and employees ("Indemnitees"), from all "losses and
expenses", (as defined in Section XX.G.2 below) incurred in
connection with any action, suit, proceeding, claim, demand,
investigation or inquiry (formal or informal), or any settlement
thereof (whether or not a formal proceeding or action has been
instituted) which arises out of or is based upon any of the
following:
1. The infringement, alleged infringement, or any other
violation or alleged violation by Franchisee or any of Franchisee's
Principals of any patent, mark, copyright or other proprietary
right owned or controlled by third parties;
2. The violation, breach or asserted violation or
breach by Franchisee or any of Franchisee's Principals of any
federal, state or local law, regulation, ruling, standard or
directive or any industry standard;
3. Libel, slander or any other form of defamation of
Franchisor, the System or any developer or franchisee operating
under the System, by Franchisee or by any of Franchisee's
Principals;
4. The violation or breach by Franchisee or by any of
Franchisee's Principals of any warranty, representation, agreement
or obligation in this Agreement or in any other agreement between
Franchisee, its subsidiaries and affiliates and Franchisor, its
subsidiaries and affiliates or the officers, directors,
shareholders, partners, agents, representatives, independent
contractors and employees thereof; and
5. Acts, errors, or omissions of Franchisee, any of
Franchisee's subsidiaries or affiliates or any of Franchisee's
Principals and the officers, directors, shareholders, partners,
agents, representatives, independent contractors and employees of
Franchisee and its subsidiaries and affiliates in connection with
the establishment and operation of the Franchised Restaurant.
E. Franchisee and each of Franchisee's Principals agree to
give Franchisor immediate notice of any such action, suit,
proceeding, claim, demand, inquiry, or investigation. At the
expense and risk of Franchisee and each of Franchisee's Principals,
Franchisor may elect to assume (but under no circumstance is
obligated to undertake) or associate counsel of its own choosing
with respect to, the defense and/or settlement of any such action,
suit, proceeding, claim, demand, inquiry or investigation. Such an
undertaking by Franchisor shall, in no manner or form, diminish the
obligation of Franchisee and each of Franchisee's Principals to
indemnify the Indemnitees and to hold them harmless.
F. In order to protect persons or property, or its reputation
or goodwill, or the reputation or goodwill of others, Franchisor
may, at any time and without notice, as it, in its sole judgment
deems appropriate, consent or agree to settlements or take such
other remedial or corrective actions it deems expedient with respect
to the action, suit, proceeding, claim, demand, inquiry or
investigation if, in Franchisor's sole judgment, there are
reasonable grounds to believe that:
1. any of the acts or circumstances enumerated in
Paragraphs XX.D.1-4 above have occurred;
2. any act, error, or omission as described in Paragraph
XX.D.5 may result directly or indirectly in damage, injury, or harm
to any person or any property.
G. 1. All losses and expenses incurred under this Paragraph
XX shall be chargeable to and paid by Franchisee or any of
Franchisee's Principals pursuant to its obligations of indemnity
under this paragraph regardless of any actions, activity or defense
undertaken by Franchisor or the subsequent success or failure of
such actions, activity, or defense.
2. As used in this Paragraph XX, the phrase "losses and
expenses," shall include, without limitation, all losses,
compensatory, exemplary or punitive damages, fines, charges, costs,
expenses, lost profits, reasonable attorney's fees, court costs,
settlement amounts, judgments, compensation for damages to the
Franchisor's reputation and goodwill, costs of changing,
substituting or replacing the same, and any and all expenses of
recall, refunds, compensation, public notices and other such amounts
incurred in connection with the matters described.
H. The Indemnitees do not assume any liability whatsoever for
acts, errors, or omissions of those with whom Franchisee, any of
Franchisee's Principals, Franchisee's subsidiaries and affiliates or
any of the officers, directors, shareholders, partners, agents,
representatives, independent contractors and, employees of
Franchisee, its subsidiaries or affiliates may contract, regardless
of the purpose. Franchisee, and each of Franchisee's Principals
shall hold harmless and indemnify the Indemnitees for all losses and
expenses which may arise out of any acts, errors or omissions of
Franchisee, Franchisee's Principals, Franchisee's subsidiaries and
affiliates, the officers, directors, shareholders, partners, agents,
representatives, independent contractors and employees of Franchisee
and its subsidiaries and affiliates and any such other third parties
without limitation and without regard to the cause or causes thereof
or negligence of Franchisor or any other party or parties arising in
connection therewith, and whether such negligence be sole, joint or
concurrent, or active or passive. Franchisee and Franchisee's
Principals acknowledge that this Paragraph XX.H clearly and
unequivocally meets the requirements of the express negligence rule
of the Texas Supreme Court and irrevocably waives any claim to the
contrary.
I. Under no circumstances shall the Indemnitees be required
or obligated to seek recovery from third parties or otherwise
mitigate their losses in order to maintain a claim against
Franchisee or any of Franchisee's Principals. Franchisee and each
of Franchisee's Principals agree that the failure to pursue such
recovery or mitigate loss will in no way reduce the amounts
recoverable from Franchisee or any of Franchisee's Principals by the
Indemnitees.
J. Franchisee and Franchisee's Principals expressly agree
that the terms of this Section XX shall survive the termination,
expiration or transfer of this Agreement or any interest herein.
XXI. APPROVALS AND WAIVERS
A. Whenever this Agreement requires the prior approval or
consent of Franchisor, Franchisee or Franchisee's Principals, as the
case may be, shall make a timely written request to Franchisor
therefor, and such approval or consent shall (if given by
Franchisor) be binding only if obtained in writing.
B. Franchisor makes no warranties or guarantees upon which
Franchisee or Franchisee's Principals may rely, and assumes no
liability or obligation to Franchisee or Franchisee's Principals, by
providing any waiver, approval, consent or suggestion to Franchisee
and Franchisee's Principals in connection with this Agreement, or by
reason of any neglect, delay or denial of any request therefor.
C. No delay, waiver, omission or forbearance on the part of
Franchisor to exercise any right, option, duty or power arising out
of this Agreement or out of any breach or default thereof by
Franchisee or Franchisee's Principals, or by any other franchisee,
shall constitute a waiver by Franchisor to enforce any such right,
option, duty or power as against Franchisee or Franchisee's
Principals, or as to subsequent breach or default by Franchisee or
Franchisee's Principals. Subsequent acceptance by Franchisor of any
payments due to it hereunder shall not be deemed to be a waiver by
Franchisor of any preceding breach by Franchisee of any terms,
covenants or conditions of this Agreement.
XXII. NOTICES
Any and all notices required or permitted under this Agreement
shall be in writing and shall be personally delivered or mailed by
certified mail, return receipt requested, to the respective parties
at the following addresses unless and until a different address has
been designated by written notice to the other party:
Notices to FRANCHISOR: Director of Franchising
ShowBiz Pizza Time, Inc.
4441 W. Airport Freeway
Post Office Box 152077
Irving, Texas 75062
Notices to FRANCHISEE:
Notice to Franchisee shall constitute notice to Franchisee's
Principals. Any notice by certified mail shall be deemed to have
been given at the date and time of mailing.
XXIII. ENTIRE AGREEMENT
This Agreement, the documents referred to herein, and the
Attachments attached hereto and incorporated by reference herein, if
any, constitute the entire, full and complete agreement between the
parties hereto concerning the subject matter hereof, and supersede
all prior agreements, no other representations having induced
Franchisee or Franchisee's Principals to execute this Agreement. No
amendment, change or variance from this Agreement shall be binding
on any party unless mutually agreed to by the parties and executed
by their authorized officers or agents in writing.
XXIV. SEVERABILITY AND CONSTRUCTION
A. Except as expressly provided to the contrary herein, each
section, part, term and/or provision of this Agreement shall be
considered severable; and if, for any reason, any section, part,
term and/or provision herein is determined to be invalid and
contrary to, or in conflict with, any existing or future law or
regulation by a court or agency having valid jurisdiction, such
shall not impair the operation of, or have any other effect upon,
such other sections, parts, terms and/or provisions of this
Agreement as may remain otherwise intelligible, and the latter shall
continue to be given full force and effect and bind the parties
hereto; and said invalid sections, parts, terms and/or provisions
shall be deemed not to be a part of this Agreement.
B. Anything to the contrary herein notwithstanding, nothing
in this Agreement is intended, nor shall be deemed, to confer upon
any person or legal entity other than Franchisor or Franchisee and
such of their respective successors and assigns as may be
contemplated by Paragraph XIV hereof, any rights or remedies under
or by reason of this Agreement.
C. Franchisee and Franchisee's Principals expressly agree to
be bound by any promise or covenant imposing the maximum duty
permitted by law which is subsumed within the terms of any provision
hereof, as though it were separately articulated in and made a part
of this Agreement, that may result from striking from any of the
provisions hereof any portion or portions which a court may hold to
be unreasonable and unenforceable in a final decision to which
Franchisor is a party, or from reducing the scope of any promise or
covenant to the extent required to comply with such a court order.
D. All captions in this Agreement are intended solely for the
convenience of the parties, and none shall be deemed to affect the
meaning or construction of any provision hereof.
E. All references herein to the masculine, neuter or singular
shall be construed to include the masculine, feminine, neuter or
plural, where applicable, and all acknowledgements, promises,
covenants, agreements and obligations herein made or undertaken by
Franchisee shall be deemed jointly and severally undertaken by all
the parties hereto on behalf of Franchisee.
F. This Agreement may be executed in two (2) or more
counterparts, each of which will be deemed an original, but all of
which together shall constitute one (1) in the same instrument.
XXV. CURRENCY REQUIREMENT
All fees and payments required by this Agreement shall be paid
in U.S. currency.
XXVI. MEDIATION AND APPLICABLE LAW
A. THE PARTIES AGREE TO SUBMIT ANY CLAIM, CONTROVERSY OR
DISPUTE ARISING OUT OF OR RELATING TO THIS AGREEMENT (AND
ATTACHMENTS) OR THE RELATIONSHIP CREATED BY THIS AGREEMENT TO NON-BINDING
MEDIATION PRIOR TO BRINGING SUCH CLAIM, CONTROVERSY OR
DISPUTE IN A COURT. THE MEDIATION SHALL BE CONDUCTED THROUGH EITHER
AN INDIVIDUAL MEDIATOR OR A MEDIATOR APPOINTED BY A MEDIATION
SERVICES ORGANIZATION OR BODY, EXPERIENCED IN THE MEDIATION OF FOOD
SERVICE BUSINESS DISPUTES, AGREED UPON BY THE PARTIES AND, FAILING
SUCH AGREEMENT WITHIN A REASONABLE PERIOD OF TIME AFTER EITHER PARTY
HAS NOTIFIED THE OTHER OF ITS DESIRE TO SEEK MEDIATION OF ANY CLAIM,
CONTROVERSY OR DISPUTE (NOT TO EXCEED FIFTEEN (15) DAYS), BY THE
AMERICAN ARBITRATION ASSOCIATION IN ACCORDANCE WITH ITS RULES
GOVERNING MEDIATION, AT FRANCHISOR'S CORPORATE HEADQUARTERS IN
IRVING, TEXAS. THE COSTS AND EXPENSES OF MEDIATION, INCLUDING
COMPENSATION OF THE MEDIATOR, SHALL BE BORNE BY THE PARTIES EQUALLY.
IF THE PARTIES ARE UNABLE TO RESOLVE THE CLAIM, CONTROVERSY OR
DISPUTE WITHIN NINETY (90) DAYS AFTER THE MEDIATOR HAS BEEN
APPOINTED, THEN EITHER PARTY MAY BRING A LEGAL PROCEEDING UNDER
PARAGRAPH XXVI.B BELOW TO RESOLVE SUCH CLAIM, CONTROVERSY OR DISPUTE
UNLESS SUCH TIME PERIOD IS EXTENDED BY WRITTEN AGREEMENT OF THE
PARTIES. NOTWITHSTANDING THE FOREGOING, FRANCHISOR MAY BRING AN
ACTION (1) FOR MONIES OWED, (2) FOR INJUNCTIVE OR OTHER
EXTRAORDINARY RELIEF, OR (3) INVOLVING OWNERSHIP OR USE OF THE
PROPRIETARY MARKS OR THE ANIMATED ENTERTAINMENT, IN A COURT HAVING
JURISDICTION AND IN ACCORDANCE WITH PARAGRAPH XXVI.B BELOW, WITHOUT
SUBMITTING SUCH ACTION TO MEDIATION.
B. WITH RESPECT TO ANY CLAIMS, CONTROVERSIES OR DISPUTES
WHICH ARE NOT FINALLY RESOLVED THROUGH MEDIATION OR AS OTHERWISE
PROVIDED ABOVE, FRANCHISOR AND FRANCHISOR'S PRINCIPALS HEREBY
IRREVOCABLY SUBMIT THEMSELVES TO THE JURISDICTION OF THE STATE
COURTS OF DALLAS COUNTY, TEXAS AND THE FEDERAL DISTRICT COURT FOR
THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION. FRANCHISOR AND
FRANCHISOR'S PRINCIPALS HEREBY WAIVE ALL QUESTIONS OF PERSONAL
JURISDICTION FOR THE PURPOSE OF CARRYING OUT THIS PROVISION.
FRANCHISOR AND FRANCHISOR'S PRINCIPALS HEREBY IRREVOCABLY AGREE THAT
SERVICE OF PROCESS MAY BE MADE UPON ANY OF THEM IN ANY PROCEEDING
RELATING TO OR ARISING OUT OF THIS AGREEMENT OR THE RELATIONSHIP
CREATED BY THIS AGREEMENT BY ANY MEANS ALLOWED BY TEXAS OR FEDERAL
LAW. FRANCHISEE AND FRANCHISEE'S PRINCIPALS AGREE THAT VENUE FOR
ANY PROCEEDING RELATING TO OR ARISING OUT OF THIS AGREEMENT SHALL BE
IN DALLAS COUNTY, TEXAS; PROVIDED, HOWEVER, WITH RESPECT TO ANY
ACTION (1) FOR MONIES OWED, (2) FOR INJUNCTIVE OR OTHER
EXTRAORDINARY RELIEF OR (3) INVOLVING OWNERSHIP OR USE OF THE
PROPRIETARY MARKS OR THE ANIMATED ENTERTAINMENT, FRANCHISOR MAY
BRING SUCH ACTION IN ANY STATE OR FEDERAL DISTRICT COURT WHICH HAS
JURISDICTION. WITH RESPECT TO ALL CLAIMS, CONTROVERSIES, DISPUTES OR
ACTIONS, THIS AGREEMENT SHALL BE INTERPRETED AND CONSTRUED UNDER
TEXAS LAW (WITHOUT REGARD TO TEXAS CHOICE OF LAW RULES).
C. FRANCHISEE AND FRANCHISOR ACKNOWLEDGE THAT THE PARTIES'
AGREEMENT REGARDING CHOICE OF APPLICABLE STATE LAW AND FORUM SET
FORTH IN PARAGRAPH XXVI.B ABOVE PROVIDE EACH OF THE PARTIES WITH THE
MUTUAL BENEFIT OF UNIFORM INTERPRETATION OF THIS AGREEMENT AND ANY
DISPUTE ARISING OUT OF THE PARTIES' RELATIONSHIP CREATED BY THIS
AGREEMENT. EACH OF FRANCHISEE AND FRANCHISOR FURTHER ACKNOWLEDGE
THE RECEIPT AND SUFFICIENCY OF MUTUAL CONSIDERATION FOR SUCH
BENEFIT.
D. FRANCHISEE AND FRANCHISOR ACKNOWLEDGE THAT THE EXECUTION
OF THIS AGREEMENT BY FRANCHISOR OCCURRED IN DALLAS COUNTY, TEXAS AND
FURTHER ACKNOWLEDGE THAT THE PERFORMANCE OF CERTAIN OBLIGATIONS OF
FRANCHISEE ARISING UNDER THIS AGREEMENT, INCLUDING BUT NOT LIMITED
TO THE PAYMENT OF MONIES DUE HEREUNDER, SHALL OCCUR IN DALLAS
COUNTY, TEXAS.
E. NO RIGHT OR REMEDY CONFERRED UPON OR RESERVED BY THIS
AGREEMENT TO ANY PARTY HERETO IS INTENDED TO BE, NOR SHALL BE
DEEMED, EXCLUSIVE OF ANY OTHER RIGHT OR REMEDY HEREIN OR BY LAW OR
EQUITY PROVIDED OR PERMITTED, BUT EACH SHALL BE CUMULATIVE OF EVERY
OTHER RIGHT OR REMEDY.
XXVII. ACKNOWLEDGEMENTS
A. Franchisee and Franchisee's Principals acknowledge that
they have conducted an independent investigation of the business
franchised hereunder, and recognize that the business venture
contemplated by this Agreement involves business risks and that its
success will be largely dependent upon the ability of Franchisee and
Franchisee's Principals as independent businessmen. Franchisor
expressly disclaims the making of, and Franchisee and Franchisee's
Principals acknowledge they have not received any representation,
warranty or guarantee, express or implied, as to the potential
volume, profits, costs or success of the business venture
contemplated by this Agreement. Franchisee and Franchisee's
Principals acknowledge that they have received, read and understood
this Agreement, the attachments hereto, if any, and the agreements
relating thereto, if any, and that Franchisor has accorded
Franchisee and Franchisee's Principals ample time and opportunity to
consult with advisors of their own choosing about the potential
benefits and risks of entering into this Agreement.
B. Franchisee and Franchisee's Principals acknowledge that
they received a copy of this Agreement, the attachments thereto, if
any, and agreements relating thereto, if any, at least five (5)
business days prior to the date on which this Agreement is
executed. Franchisee and Franchisee's Principals further
acknowledge that they have received the disclosure document required
by the Federal Trade Commission trade regulation rule entitled
Disclosure Requirements and Prohibitions Concerning Franchising and
Business Opportunity Ventures, at least ten (10) business days prior
to the date on which this Agreement was executed.
XXVIII. GUARANTY
A. Franchisee represents that, as of the execution of this
Agreement, Franchisee's Principals and all the initial beneficial
owners of the Franchisee are as shown in Attachment A hereto. As a
condition to its execution and acceptance of this Agreement,
Franchisor may require any or all of the initial beneficial owners
of Franchisee to execute a Guaranty in the form of Attachment B
hereto.
B. If, after the execution of this Agreement, any person or
entity ceases to qualify as one of Franchisee's Principals or if any
person or entity succeeds to or otherwise comes to occupy a position
which could qualify it as one of the Franchisee's Principals,
Franchisee shall notify Franchisor within ten (10) days after any
such change and, upon designation of such person or entity of
Franchisor as one of Franchisee's Principals, such person or entity
shall execute such documents and instruments (including, as
applicable, this Agreement) as may be required by Franchisor to be
executed by others in such position.
C. By executing this Agreement, Franchisee's Principals
hereby jointly and severally, irrevocably and unconditionally,
guarantee to Franchisor, its successors and assigns, Franchisee's
performance of all of Franchisee's obligations, covenants and
agreements hereunder and otherwise bind themselves to the terms of
this Agreement as stated herein. Each of Franchisee's Principals
represents and warrants that he has read the terms and conditions of
this Agreement and acknowledges that (1) the execution of this
Agreement and the undertakings of the Franchisee's Principals in
this Agreement are in partial consideration for, and a condition to,
the granting of the license evidenced by this Agreement, and (2)
Franchisor would not have granted the license evidenced by this
Agreement without the execution of this Agreement and such
undertakings by each of Franchisee's Principals. Each of
Franchisee's Principals waives all demands and notices of every kind
with respect to the enforcement of this guaranty, including, without
limitation, notice of presentment, demand for payment or performance
by Franchisee, notice of any default by Franchisee or any guarantor,
notice of any release of any of Franchisee's Principals from this
guaranty or the obligations of Franchisee and notice of any waiver,
renewal, extension, modification or amendment to this Agreement.
Franchisor may pursue its rights against any or all of Franchisee's
Principals without first exhausting its remedies against Franchisee
and without joining any other guarantor hereto. No delay on the
part of Franchisor in the exercise of any right or remedy <PAGE>
shall operate
as a waiver of such right or remedy, and no single or
partial exercise by Franchisor of any right or remedy shall preclude
the further exercise of such right or remedy.
IN WITNESS WHEREOF, the parties hereto have duly executed,
sealed and delivered this Agreement in duplicate on the day and year
first above written.
FRANCHISOR
SHOWBIZ PIZZA TIME, INC.
By:
Name:
Title:
STATE OF TEXAS
COUNTY OF DALLAS
Before me personally appeared ------------------- who, after
being duly sworn, says that he is the-------------of ShowBiz Pizza
Time, Inc., a corporation, organized and existing under the laws of
Kansas, and that he has authority to execute under oath and has so
executed the above Agreement for and on behalf of such corporation
for such purposes therein contained.
WITNESS my hand and official seal this ----- day of ------,
199---.
Notary Public
FRANCHISEE
By:
Name:
Title:
STATE OF ------------
COUNTY OF ------------
Before me personally appeared
who, after being duly sworn, says that he is the ---------- of ------------,
a (corporation) (partnership), organized and existing under
the laws of --------------, and that he has authority to execute
under oath and has so executed the above Agreement for and on behalf
of such (corporation) (partnership) for the purposes therein
contained.
WITNESS my hand and official seal this------ day of----------,
19--.
Notary Public
Each of the undersigned acknowledges and agrees as follows:
(1) Each is included in the term "Franchisee's Principals" as
described in Paragraph XIII of this Franchise Agreement;
(2) Each has read the terms and conditions of this Franchise
Agreement. Each acknowledges that the undertakings by Franchisee's
Principals hereunder and as stated below, and the execution of the
guaranty described in Paragraph XXVIII of this Franchise Agreement
are made and given in partial consideration of, and as a condition
to, the Franchisor's grant of rights to Franchisee as described
herein; and
(3) Each individually, jointly and severally makes all of the
covenants, representations and agreements of Franchisee's Principals
set forth in this Franchise Agreement and is obligated to perform
thereunder.
FRANCHISEE'S PRINCIPALS
Name: ---------------------------------------
Name: ---------------------------------------
Name: ---------------------------------------
STATE OF ---------
COUNTY OF ----------
Before me personally appeared the following persons, ----------------, and
------------------, who are know to me to be the persons
who executed the foregoing and each acknowledged the same to be his
or her free act and deed for the purposes therein contained.
WITNESS my hand and official seal this -----day of ------------, 19--.
Notary Public
ATTACHMENT A
FRANCHISEE'S PRINCIPALS AND INITIAL EQUITY OWNERS
LOCATION:
DATTE:
Franchisee hereby represents and warrants that Franchisee's
Principals (as defined in the Franchise Agreement) and the initial
beneficial owners of Franchise are as follows:
Position with Percentage
Name Address Franchisee Ownership
----- ------- ------------- ------------
(Interests must total 100%)
FRANCHISEE
-----------------------------------
By: ------------------------------
Name: ------------------------------
Title: -----------------------------
STATE OF ----------
COUNTY OF ---------
Before me personally appeared the following persons,-------------,---
- -------------------,-----------------------are known to me
to be the persons who executed the foregoing and each acknowledged
the same to be his or her free act and deed for the purposes
therein contained.
WITNESS my hand and official seal this --- day of -------,
199---.
Notary Public
ATTACHMENT B
GUARANTY
As an inducement to ShowBiz Pizza Time, Inc. ("Franchisor")
to execute the foregoing Franchise Agreement and the Attachments
thereto of even date hereto, the undersigned, jointly and
severally, hereby agree to be individually bound by all the terms
and conditions of the above Franchise Agreement including any
amendments or modifications thereto whenever made (hereinafter the
"Agreement") and unconditionally and irrevocably guarantee to
Franchisor and its successors and assigns that all of Franchisee's
obligations under the Agreement will be punctually paid and
performed.
Upon default by Franchisee or notice from Franchisor, the
undersigned will immediately make each payment and perform each
obligation required of Franchisee under the Agreement. Without
affecting the obligations of the undersigned under this Guaranty,
Franchisor may, without notice to the undersigned, renew, extend,
modify, amend or release any indebtedness or obligation of
Franchisee, or settle, adjust, or compromise any claims against
Franchisee.
The undersigned waive all demands and notices of every kind
with respect to this Guaranty and the Agreement, including, without
limitation, notice of: the amendment or modification of this
Guaranty or the Agreement, the demand for payment or performance by
Franchisee, any default by Franchisee or any guarantor, and any
release of any guarantor or other security for the Agreement or the
obligations of Franchisee.
Franchisor may pursue its rights against the undersigned
without first exhausting its remedies against Franchisee and
without joining any other guarantor hereto and no delay on the part
of Franchisor in the exercise of any right or remedy shall operate
as a waiver of such right or remedy, and no single or partial
exercise by Franchisor of any right or remedy shall preclude the
further exercise of such right or remedy.
Upon receipt by Franchisor of notice of the death of an
individual guarantor, the estate of such guarantor will be bound by
this Guaranty but only for defaults and obligations <PAGE>
hereunder existing
at the time of death, and the obligations of the
other guarantors hereunder will continue in full force and effect.
IN WITNESS WHEREOF, each of the undersigned has signed this
Guaranty as of the date of the Agreement.
Witnesses: Guarantors:
- -------------- --------------------------
- -------------- --------------------------
- -------------- --------------------------
STATE OF-------------------
COUNTY OF -----------------
Before me personally appeared the following persons,--------------,--
- --------------------,-----------------, who are known to me
to be the persons who executed the foregoing Guaranty and each
acknowledged the same to be his or her free act and deed for the
purposes therein contained.
WITNESS my hand and official seal this -- day of ------,199- .
Notary Public in and for
the State of ------------
ATTACHMENT C
CORNERSTONES
ATTACHMENT D
CONFIDENTIALITY AND NONCOMPETITION AGREEMENT
ATTACHMENT E
LEASE RIDER
This Lease Rider is made and entered into ------------, 19--
by and between ShowBiz Pizza Time, Inc., a Kansas corporation
("Franchisor"),---------------------- ("Franchisee") and ---------------
("Landlord").
WHEREAS, Franchisor and Franchisee are parties to that certain
Franchise Agreement dated ------------, 19-- ("Franchise
Agreement");
WHEREAS, Franchisee and Landlord desire to enter into a lease
(the "Lease") pursuant to which Franchisee will occupy the premises
located at---------------------------------- (the "Premises") for
a family-oriented pizza restaurant (hereinafter "Restaurant")
licensed under the Franchise Agreement; and
WHEREAS, as a condition to entering into the Lease, the
Franchisee is required under the Franchise Agreement to execute
this Lease Rider along with the Landlord and Franchisor;
NOW, THEREFORE, the parties in consideration of the mutual
undertakings and commitments of each party to the other party set
forth herein and in the Franchise Agreement, mutually agree as
follows:
1. During the term of the Franchise Agreement, the
Premises shall be used only for the operation of the Restaurant.
2. Landlord consents to Franchisee's use of such marks
and signs, decor items, color schemes and related components of the
Chuck E. Cheese system as Franchisor may prescribe for the
Restaurant.
3. Landlord agrees to furnish Franchisor with copies
of any and all letters and notices sent to Franchisee pertaining to
the Lease and the Premises, at the same time that such letters and
notices are sent to Franchisee.
4. Franchisor shall have the right to enter the
Premises to make any modification or alteration necessary to
protect the Chuck E. Cheese system and marks or to cure any default
under the Franchise Agreement or any development agreement entered
into between Franchisor and Franchisee or under the Lease, without
being guilty of trespass or any other crime or tort, and Landlord
shall not be responsible for any expenses or damages arising from
Franchisor's action in connection therewith.
5. Franchisee shall not assign the Lease or renew or
extend the term thereof without the prior written consent of
Franchisor.
6. Landlord and Franchisee shall not amend or otherwise
modify the Lease in any manner that could materially affect any of
the foregoing requirements without the prior written consent of
Franchisor.
7. The terms of this Lease Rider will supersede any
conflicting terms of the Lease.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Lease Rider as of the date first above written.
FRANCHISOR:
SHOWBIZ PIZZA TIME, INC.
a Kansas corporation
By:
Name:
Title:
FRANCHISEE:
By:
Name:
Title:
LANDLORD:
By:
Name:
Title:
ATTACHMENT F
ADVERTISING COOPERATIVE AGREEMENT
SHOWBIZ PIZZA TIME, INC.
DEVELOPMENT AGREEMENT - Exhibit 10(g)
4441 West Airport Freeway
P.O. Box 152077
Irving, TX 75062
SHOWBIZ PIZZA TIME, INC. DEVELOPMENT AGREEMENT
PAGE
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
I. GRANT . . . . . . . . . . . . . . . . . . . . . . . . . 2
II. DEVELOPMENT FEE . . . . . . . . . . . . . . . . . . . . 2
III. DEVELOPMENT SCHEDULE AND MANNER OF EXERCISING
RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . . 3
IV. TERM AND TERRITORIAL RIGHTS OF DEVELOPER. . . . . . . . 4
V. DUTIES OF DEVELOPER . . . . . . . . . . . . . . . . . . 4
VI. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . 5
VII. TRANSFERABILITY . . . . . . . . . . . . . . . . . . . . 6
VIII. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 8
IX. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . 9
X. INDEPENDENT CONTRACTOR AND INDEMNIFICATION. . . . . . . 10
XI. APPROVALS . . . . . . . . . . . . . . . . . . . . . . . 12
XII. WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . 13
XIII. SEVERABILITY AND CONSTRUCTION . . . . . . . . . . . . . 13
XIV. ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . 14
XV. CURRENCY REQUIREMENT. . . . . . . . . . . . . . . . . . 14
XVI. MEDIATION AND APPLICABLE LAW . . . . . . . . . . . . . 14
XVII. DISCLAIMER. . . . . . . . . . . . . . . . . . . . . . . 16
XVIII. GUARANTY. . . . . . . . . . . . . . . . . . . . . . . . 16
ATTACHMENT A - Franchise Agreement
ATTACHMENT B - Development Schedule
ATTACHMENT C - Guaranty
ATTACHMENT D - Developer's Principals and Initial Equity Owners
ATTACHMENT E - Confidentiality and Noncompetition Agreement
SHOWBIZ PIZZA TIME, INC.
DEVELOPMENT AGREEMENT
This Development Agreement is entered into this --- day of
- --, 19-- by and between ShowBiz Pizza Time, Inc., a Kansas
corporation (hereinafter "Franchisor"), and --------------------------
- -------------------------------------------------------------------------
- ---------------------------------------------------------(hereinafter
"Developer").
WITNESSETH:
WHEREAS, Franchisor owns and franchises a distinctive
system (hereinafter "System") relating to the establishment,
development, and operation of family-oriented pizza restaurants,
the distinguishing characteristics of which System include, without
limitation, entertainment at the restaurant by video display and/or
three-dimensional computer- controlled animated characters which
play or appear to play instruments, sing and talk; separate areas
with a variety of rides, amusement games and other attractions;
characteristic decorations, furnishings and materials; specially-designed
equipment and equipment layouts; trade secret food
products and other special recipes, menus and food and beverage
designations; food and beverage preparation and service procedures
and techniques; operating procedures for sanitation and
maintenance; methods and techniques for inventory and cost
controls, record keeping and reporting, personnel training and
management, and advertising and promotional programs; cornerstones
of operation; and operational policies; all of which may be
changed, improved or further developed by Franchisor from time to
time;
WHEREAS, Franchisor is the owner of the entire right, title
and interest in the trade names, trademarks and service marks,
"ShowBiz Pizza" and "Chuck E. Cheese", and owns and/or has the
right to use and license others to use such other trade names,
trademarks and service marks, as are now designated (and may
hereinafter be designated by Franchisor in writing) as part of the
System (hereinafter "Proprietary Marks"), and Franchisor continues
to develop, use and control the Proprietary Marks for the benefit
and exclusive use of itself and its franchisees in order to
identify for the public the source of products and services
marketed thereunder and to represent the System's high standards of
quality and service;
WHEREAS, Franchisor owns and/or has the right to use and
license others to use certain unique technology, computer hardware
and software, artistic designs, scripts and musical scores, staging
and lighting techniques and configurations, manufacturing know-how
and other intellectual property relating to video display
entertainment and to three- dimensional computer-controlled
animated characters, including, present and future improvements,
additions, replacements, patents, trademarks, service marks,
copyrights, and other intellectual and artistic property related
thereto, and all plans, specifications and written documents
necessary for the operation, maintenance and repair thereof (all of
which is hereinafter "Animated Entertainment");
WHEREAS, Franchisor has used and licensed others to use
Animated Entertainment as an integral and central feature of the
System restaurants, including certain three-dimensional computer-controlled
animated characters which have become identified by the
public with System restaurants, and Franchisor will continue to use
and license others to use as an integral and central feature of the
System such animated characters as Franchisor may designate;
WHEREAS, Developer wishes to obtain certain development
rights to use the System and be identified with the Proprietary
Marks in the territory described in this Development Agreement and
to be trained by Franchisor to establish and operate restaurants
using Franchisor's System.
NOW, THEREFORE, the parties, in consideration of the
undertakings and commitments of each party to the other party set
forth herein, hereby mutually agree as follows:
I. GRANT
A. Franchisor hereby grants to Developer the right, and
Developer undertakes the obligation, pursuant to the terms and
conditions of this Development Agreement, to establish and operate
- ------------------(---------) restaurants under the Proprietary
Marks designated by Franchisor, and to use solely in connection
therewith Franchisor's System, within the following territory
(hereinafter "Assigned Area"):
B. Each System restaurant described in Paragraph I.A
hereof shall be established and operated pursuant to a franchise
agreement ("Franchise Agreement") to be entered into by Developer
and Franchisor pursuant to Paragraph III.A hereof.
C. This Agreement is not a Franchise Agreement, and
Developer shall have no right to use in any manner Franchisor's
Proprietary Marks, the Animated Entertainment or the System by
virtue hereof.
D. Developer shall have no right under this Agreement
to license others to use the Proprietary Marks, Animated
Entertainment or the System.
II. DEVELOPMENT FEE
A. Franchisor acknowledges having received from
Developer a nonrefundable development fee of ----------------------------
- ---------------Dollars ($-----------), which fee was paid by
Developer to Franchisor in consideration for the administrative and
other expenses incurred by Franchisor and for the development
opportunities lost or deferred as a result of Franchisor's entering
into this Agreement with Developer.
B. Franchisor also acknowledges having received from
Developer:
1. The initial franchise fee of Fifty Thousand
Dollars ($50,000) for the first Franchise Agreement to be executed
pursuant hereto.
2. Twelve Thousand Five Hundred Dollars ($12,500)
for each additional Franchise Agreement to be executed pursuant
hereto. This amount ($12,500) shall be credited toward the initial
franchise fee for each additional Franchise Agreement executed
pursuant hereto.
3. Ten Thousand Dollars ($10,000) for each
Franchise Agreement to be executed pursuant hereto.
All payments required by this Paragraph II.B are
nonrefundable and are made in consideration for the administrative
and other expenses incurred by Franchisor and for the development
opportunities lost or deferred as a result of Franchisor's entering
into this Agreement with Developer.
III. DEVELOPMENT SCHEDULE AND MANNER OF EXERCISING RIGHTS
A. Developer shall exercise each right granted in
Paragraph I.A hereof only by executing a Franchise Agreement for
each System restaurant at a site to be approved by Franchisor in
the Assigned Area as hereinafter provided. The Franchise Agreement
for the first such restaurant shall be in the form of the Franchise
Agreement attached hereto as Attachment A. The Franchise Agreement
for each additional restaurant established pursuant hereto shall be
the then-current form of Franchise Agreement being offered by
Franchisor at the time each additional Franchise Agreement is
signed, the terms of which may differ from the terms of the
Franchise Agreement attached hereto as Attachment A, including,
without limitation, higher royalty and other fees and
contributions; provided, however, that the initial franchise fee to
be paid under each such Franchise Agreement by Developer shall be
Fifty Thousand Dollars ($50,000.00).
B. Recognizing that time is of the essence, Developer
agrees to exercise each of the rights granted in Paragraph I.A
hereof in the manner specified in Paragraph III.A, pursuant to the
development schedule set forth in Attachment B (the "Development
Schedule"), which is attached hereto and incorporated herein by
reference. Failure by Developer to comply with the Development
Schedule shall constitute a default under this Agreement as
provided in Paragraph VI.C hereof. Upon Developer's written
request, Franchisor may, in its sole discretion, extend for a
period of thirty (30) days any date described in the Development
Schedule. Such extension(s) shall not extend any other dates
described in the Development Schedule. Developer shall pay to
Franchisor an extension fee of Two Thousand Five Hundred Dollars
($2,500) for the first and each subsequent thirty (30) days
extension which Franchisor grants to Developer. The extension fee
shall be paid to Franchisor with each written request for an
extension and shall be fully refunded in the event Franchisor, in
its sole discretion, declines to grant the requested extension.
The extension fee shall not be refunded under any other
circumstances.
IV. TERM AND TERRITORIAL RIGHTS OF DEVELOPER
A. Unless sooner terminated in accordance with the
terms of this Agreement, the term of this Agreement and all rights
granted hereunder shall expire on the date on which Developer
successfully and in a timely manner has completed the Development
Schedule.
B. So long as Developer complies with the Development
Schedule and the other terms and conditions of this Agreement and
all Franchise Agreements between Developer and Franchisor,
Franchisor shall not, during the term of this Agreement, establish
nor grant anyone other than Developer the right to establish any
restaurants under the System in the Assigned Area. Franchisor
retains all other rights. Except as described in this Paragraph
IV, Franchisor shall at all times have the right to offer and sell,
and license others to offer and sell, any goods or services under
any marks (including the Proprietary Marks) at and from any
location (regardless of whether within or outside the Assigned
Area, or proximity to the Assigned Area) to any customers.
C. If, at any time during the two (2) year period
immediately following Developer's successful completion of the
Development Schedule, Franchisor proposes to franchise or to
establish an additional restaurant or restaurants under the System
in the Assigned Area, and Developer is then in compliance with all
terms and conditions of all Franchise Agreements between Developer
and Franchisor, Developer shall have a right of first refusal to
enter into a Development Agreement and/or Franchise Agreement to
establish such additional System restaurant or restaurants as
Franchisor proposes from time to time for such further
development. In that event, Franchisor shall submit Franchisor's
then-current form of Development Agreement and/or Franchise
Agreement to Developer and Developer shall have thirty (30) days
after receipt to execute and return such agreement to Franchisor.
In the event that Developer does not timely exercise such right of
first refusal, Franchisor may thereafter elect to (and shall be
entitled, permitted and authorized to) establish additional System
restaurants itself or franchise others to do so in the Assigned
Area.
V. DUTIES OF DEVELOPER
Developer and Developer's Principals (as hereinafter
defined) shall:
A. comply with all terms and conditions set forth in
this Agreement.
B. at all times preserve in confidence any and all
materials and information furnished or disclosed to Developer or
Developer's Principals by Franchisor and shall disclose such
information or materials only to such of Developer's employees,
agents, or independent contractors who must have access to it in
connection with their employment. At Franchisor's request,
Developer shall require and obtain execution of covenants from any
and all of its employees having access to such materials and
information, that they will preserve in confidence all such
materials and information. Such covenants shall be in
substantially the form contained in Attachment E hereto. Neither
Developer nor Developer's Principal's shall at any time, without
Franchisor's prior written consent, copy, duplicate, record or
otherwise reproduce such materials or information, in whole or in
part, nor otherwise make the same available to any unauthorized
person.
C. comply with all requirements of federal, state and
local laws, rules and regulations.
VI. DEFAULT
A. The rights and territorial exclusivity granted to
Developer in this Agreement have been granted in reliance on
Developer's representations and assurances, among others, that the
conditions set forth in Paragraphs I and III of this Development
Agreement will be met by Developer in a timely manner.
B. Developer shall be deemed to be in default under
this Agreement, and all rights granted herein shall automatically
terminate without notice to Developer, if Developer shall become
insolvent or makes a general assignment for the benefit of
creditors, or if a petition in bankruptcy is filed by Developer or
such a petition is filed against and consented to by Developer, or
if Developer is adjudicated a bankrupt, or if a bill in equity or
other proceeding for the appointment of a receiver of Developer or
other custodian for Developer's business or assets is filed and
consented to by Developer, of if a receiver or other custodian
(permanent or temporary) of Developer's assets or property, or any
part thereof, is appointed by any court of competent jurisdiction,
or if proceedings for a composition with creditors under any state
or federal law is instituted by or against Developer, or if a final
judgment remains unsatisfied or of record for thirty (30) days or
longer (unless supersedeas bond is filed), or if execution is
levied against Developer's assets or property, or suit to foreclose
any lien or mortgage against the premises or equipment of any
restaurant established pursuant hereto is instituted against
Developer and not dismissed within thirty (30) days, or if the real
or personal property of Developer's business shall be sold after
levy thereupon by any sheriff, marshall, or constable.
C. Except as described in Paragraph VI.B hereof, if
Developer fails to comply with or any other terms and conditions of
this Agreement, including the Development Schedule, or fails to
comply with any other terms and conditions of any individual
Franchise Agreement between Developer and Franchisor, such action
shall constitute a default under this Development Agreement. Upon
such default, Franchisor, in its discretion, may do any one or more
of the following:
1. Terminate this Development Agreement and all
rights granted hereunder without affording Developer any
opportunity to cure the default, effective immediately upon
Developer's receipt of written notice from Franchisor;
2. Reduce the number of units granted Developer in
Paragraph I.A of this Agreement; or
3. Terminate the territorial exclusivity granted
Developer in Paragraph IV.B hereof or reduce the area of
territorial exclusivity granted Developer hereunder.
D. Upon termination of this Agreement by Developer's
default, Developer shall have no right to establish or operate any
System restaurant(s) for which a Franchise Agreement has not been
executed by Franchisor. Franchisor shall be entitled to establish,
and to franchise others to establish, restaurants under the System
in the Assigned Area except as may be otherwise provided under any
Franchise Agreement which has been executed and remains in full
force and effect between Franchisor and Developer. No default
under this Development Agreement shall constitute a default under
any Franchise Agreement or any other Development Agreement between
the parties hereto.
E. If Franchisor elects to reduce the number of units
granted Developer in Paragraph I.A hereof, terminate the
territorial exclusivity granted Developer in Paragraph IV.B hereof,
or reduce the area of territory exclusivity granted Developer
hereunder, Developer shall continue to execute Franchise Agreements
in accordance with the Development Schedule, except insofar as the
number of Franchise Agreements which Developer is required to
execute is reduced by Franchisor pursuant to Paragraph VI.C.
F. If Franchisor exercises any of its rights in
Paragraphs VI.C.2 or 3 above, Franchisor shall be entitled to
established, and to franchise others to establish, restaurants
under the System in the Assigned Area or in the portion thereof no
longer part of the Assigned Area or pursuant to any other
modifications of Developer's territorial exclusivity, except as may
be otherwise provided under any Franchise Agreement which has been
executed and remains in full force and effect between Franchisor
and Developer.
G. No right or remedy herein conferred upon or reserved
to Franchisor is exclusive of any other right or remedy provided or
permitted by law or equity.
VII. TRANSFERABILITY
A. Franchisor shall have the right to transfer or
assign this Agreement and all or any part of its rights or
obligations herein to any person or legal entity, without the
consent of Developer or Developer's Principals. Upon such transfer
or assignment, any designated assignee of Franchisor shall become
solely responsible for all obligations of Franchisor under this
Agreement from the date of assignment.
B. Developer and Developer's Principal's understand and
acknowledge that the rights and duties set forth in this
Development Agreement are personal to Developer and are granted in
reliance upon the individual or collective character, skill,
aptitude and business and financial capacity of Developer and
Developer's Principals. Developer has represented to Franchisor
that Developer is entering into this Development Agreement with the
intention of complying with its terms and conditions and not for
the purpose of resale of the developmental rights hereunder.
C. The term "Developer's Principals" shall include,
collectively and individually, Developer's spouse, if Developer is
an individual, all officers and directors of Developer (including
the officers and directors of any general partner of Developer)
whom Franchisor designates as Developer's Principals and all
holders of an ownership interest in Developer and of any entity
directly or indirectly controlling Developer. The initial
Developer's Principals shall be listed on Attachment D. Neither
Developer nor any of Developer's Principals shall, without
Franchisor's prior written consent, directly or indirectly, sell,
assign, transfer, convey, give away, pledge, mortgage or otherwise
encumber any interest in this Agreement, in Developer, or in the
assets of Developer, or attempt to do so. Any such proposed
assignment occurring by operation of law or otherwise, including
any assignment by the trustee in bankruptcy, without Franchisor's
prior written consent, shall be a material default of this
Agreement.
D. Franchisor's consent, which shall not be
unreasonably withheld, to a transfer of any interest in this
Development Agreement, in Developer, or in the assets of
Developer's business shall be subject to the terms and conditions
set forth in Paragraph XIV of the Franchise Agreement (Attachment
A hereto); provided, however, if Developer is a publicly-held
corporation and the proposed transfer, alone or together with other
previous, simultaneous or proposed transfers, would have the effect
of transferring a direct or indirect controlling interest (as
reasonably determined by Franchisor) in Developer; if Developer is
a partnership or privately-held corporation and the proposed
transfer, alone or together with other previous, simultaneous or
proposed transfers, would have the effect of reducing to less than
fifty percent (50%) the percentage of equity interest owned in
Developer by the initial beneficial owners identified in Attachment
D hereto and incorporated by reference herein; or if Developer is
a natural person and the proposed transfer, alone or together with
other simultaneous or proposed transfers, would have the effect of
reducing Developer's equity interest in this Agreement, or in the
assets of Developer's business, to less than fifty percent (50%),
the transferee shall pay to Franchisor a transfer fee equal to one-half (1/2)
of the development fee specified in Paragraph II hereof
as well as comply with Franchisor's then-current application
requirements for a new developer. In computing the percentages of
equity interest for purposes of this Paragraph VII.D, general
partnership interests shall not be distinguished from limited
partnership interests.
VIII. COVENANTS
A. With respect to Developer, during the term of this
Agreement (or, with respect to each of Developer's Principals,
during the term of this Agreement for so long as such individual or
entity satisfies the definition of "Developer's Principals" as
described in Paragraph VII.C hereof), except as otherwise approved
in writing by Franchisor, Developer and Developer's Principals
shall not, either directly or indirectly, for themselves, or
through, on behalf of, or in conjunction with any person, persons,
partnership or corporation:
1. Divert or attempt to divert any business or
customer of any restaurant established pursuant to a Franchise
Agreement executed hereunder to any competitor, by direct or
indirect inducement or otherwise, or do or perform, directly or
indirectly, any other act injurious or prejudicial to the goodwill
associated with Franchisor's Proprietary Marks, the Animated
Entertainment and the System.
2. Employ or seek to employ any person who is at
that time employed by Franchisor or by any other franchisee or
developer of Franchisor, or otherwise directly or indirectly to
induce such person to leave his or her employment.
3. Own, maintain, engage in, or have any interest
in any restaurant business with entertainment by three dimensional
computer-controlled animated characters or video display provided,
however, that this provision shall not apply to the operation by
Developer and Developer's Principals of any franchise which may be
granted by Franchisor to Developer or Developer's Principals; and
provided, further, that this provision shall not apply to any
ownership by Developer or Developer's Principals of less than five
percent (5%) of the outstanding equity securities in any publicly-held
corporation.
B. With respect to Developer, for a continuous
uninterrupted period commencing upon the expiration or termination
of, or the transfer of all of Developer's interest in, the
Agreement, regardless of the cause thereof (or, with respect to
each of Developer's Principals, commencing upon the earlier of:
(i) the expiration or termination of, or the transfer of all of
Franchisee's interest in, this Agreement or (ii) the time such
individual or entity ceases to satisfy the definition of
"Franchisee's Principals" as described in Paragraph VII.C of this
Agreement), and continuing for one (1) year thereafter, except as
otherwise approved in writing by Franchisor, neither Developer nor
Developer's Principals shall, either directly or indirectly, for
themselves or through, on behalf of, or in conjunction with any
other person, persons, partnership or corporation:
1. Do or engage in any act described by Paragraph
VIII.A.1 and 2 of this Agreement, which is hereby incorporated by
reference as if more fully set forth herein, or
2. Own, maintain, engage in, or have any interest
in any restaurant business with entertainment by three dimensional
computer-controlled animated characters or video display within a
radius of twenty-five (25) miles of the Assigned Area; provided,
however, that this provision shall not apply to the operation by
Developer and Developer's Principals of any franchise which may be
granted by Developer or Developer's Principals; and provided,
further, that this provision shall not apply to any ownership by
Developer or Developer's Principals of less than five percent (5%)
of the outstanding equity securities in any publicly held
corporation.
C. Developer and Developer's Principals understand and
acknowledge that Franchisor shall have the right, in its sole
discretion, to reduce the scope of any covenant set forth in
Paragraphs VIII.A and B of this Agreement, or any portion thereof,
without their consent, effective immediately upon receipt by
Developer and Developer's Principals of written notice thereof, and
Developer and Developer's Principals agree that they shall comply
forthwith with any covenant as so modified, which shall be fully
enforceable notwithstanding the provisions of Paragraph XIV
hereof.
D. At Franchisor's request, Developer shall require and
obtain execution of covenants similar to those set forth in this
Paragraph X from any and all of its employees having access to
materials or information furnished or disclosed to Developer by
Franchisor. The covenants required by this Paragraph X.D shall be
substantially in the form contained in Attachment E.
IX. NOTICES
Any and all notices required or permitted under this
Agreement shall be in writing and shall be personally delivered or
mailed by certified mail, return receipt requested, to the
respective parties at the following addresses unless and until a
different address has been designated by written notice to the
other party:
Notices to FRANCHISOR: Director of Franchising
ShowBiz Pizza Time, Inc.
4441 W. Airport Freeway
Post Office Box 152077
Irving, Texas 75062
Notices to DEVELOPER:
-----------------------
-----------------------
-----------------------
Notice to Developer shall constitute notice to Developer's
Principals. Any notice by certified mail shall be deemed to have
been given at the date and time of mailing.
X. INDEPENDENT CONTRACTOR AND INDEMNIFICATION
A. It is understood and agreed by the parties hereto
that this Agreement does not create a fiduciary relationship
between them, that nothing in this Development Agreement is
intended to constitute either party an agent, legal representative,
subsidiary, joint venturer, partner, employee or servant of the
other for any purpose whatsoever. Each party to this Agreement is
an independent contractor, and neither shall be responsible for the
debts or liabilities incurred by the other.
B. Developer shall hold itself out to the public to be
an independent contractor operating pursuant to this Agreement.
Developer agrees to take such actions as shall be necessary to that
end.
C. Developer and Developer's Principals understand and
agree that nothing in this Development Agreement authorizes either
to make any contract, agreement, warranty or representation on
Franchisor's behalf, or to incur any debt or other obligation in
Franchisor's name, and that Franchisor assumes no liability for,
nor shall be deemed liable by reason of, any act or omission of
Developer or Developer's Principals in the conduct of the business
licensed by this Development Agreement, or any claim or judgment
arising therefrom.
D. Developer and each of Developer's Principals shall,
at all times, indemnify and hold harmless to the fullest extent
permitted by law Franchisor, its subsidiaries, affiliates,
successors and assigns and their respective officers, directors,
shareholders, partners, agents, representatives, independent
contractors and employees ("Indemnitees"), from all "losses and
expenses", (as defined in Section X.G.2 below) incurred in
connection with any action, suit, proceeding, claim, demand,
investigation or inquiry (formal or informal), or any settlement
thereof (whether or not a formal proceeding or action has been
instituted) which arises out of or is based upon any of the
following:
1. The infringement, alleged infringement, or any
other violation or alleged violation by Developer or any of
Developer's Principals of any patent, mark, copyright or other
proprietary right owned or controlled by third parties;
2. The violation, breach or asserted violation or
breach by Developer or any of Developer's Principals of any
federal, state or local law, regulation, ruling, standard or
directive or any industry standard;
3. Libel, slander or any other form of defamation
of Franchisor, the System or any developer or franchisee operating
under the System, by Developer or by any of Developer's Principals;
4. The violation or breach by Developer or by any
of Developer's Principals of any warranty, representation,
agreement or obligation in this Agreement or in any other agreement
between Developer, its subsidiaries and affiliates and Franchisor,
its subsidiaries and affiliates or the officers, directors,
shareholders, partners, agents, representatives, independent
contractors and employees thereof; and
5. Acts, errors, or omissions of Developer, any of
Developer's subsidiaries or affiliates or any of Developer's
Principals and the officers, directors, shareholders, partners,
agents, representatives, independent contractors and employees of
Developer and its subsidiaries and affiliates in connection with
the development activities contemplated under this Agreement or the
establishment and operation of any restaurant described in
Paragraph I.A hereof.
E. Developer and each of Developer's Principals agree to
give Franchisor immediate notice of any such action, suit,
proceeding, claim, demand, inquiry, or investigation. At the
expense and risk of Developer and each of Developer's Principals,
Franchisor may elect to assume (but under no circumstance is
obligated to undertake) or associate counsel of its own choosing
with respect to, the defense and/or settlement of any such action,
suit, proceeding, claim, demand, inquiry or investigation. Such an
undertaking by Franchisor shall, in no manner or form, diminish the
obligation of Developer and each of Developer's Principals to
indemnify the Indemnitees and to hold them harmless.
F. In order to protect persons or property, or its
reputation or goodwill, or the reputation or goodwill of others,
Franchisor may, at any time and without notice, as it, in its sole
judgment deems appropriate, consent or agree to settlements or take
such other remedial or corrective actions it deems expedient with
respect to the action, suit, proceeding, claim, demand, inquiry or
investigation if, in Franchisor's sole judgment, there are
reasonable grounds to believe that:
1. any of the acts or circumstances enumerated in
Paragraphs X.D.1-4 above have occurred;
2. any act, error, or omission as described in
Paragraph X.D.5 may result directly or indirectly in damage,
injury, or harm to any person or any property.
G. 1. All losses and expenses incurred under this
Paragraph X shall be chargeable to and paid by Developer or any of
Developer's Principals pursuant to its obligations of indemnity
under this paragraph regardless of any actions, activity or defense
undertaken by Franchisor or the subsequent success or failure of
such actions, activity, or defense.
2. As used in this Paragraph X, the phrase "losses
and expenses," shall include, without limitation, all losses,
compensatory, exemplary or punitive damages, fines, charges, costs,
expenses, lost profits, reasonable attorney's fees, court costs,
settlement amounts, judgments, compensation for damages to the
Franchisor's reputation and goodwill, costs of changing,
substituting or replacing the same, and any and all expenses of
recall, refunds, compensation, public notices and other such amounts
incurred in connection with the matters described.
H. The Indemnitees do not assume any liability
whatsoever for acts, errors, or omissions of those with whom
Developer, any of Developer's Principals, Developer's subsidiaries
and affiliates or any of the officers, directors, shareholders,
partners, agents, representatives, independent contractors and,
employees of Developer, its subsidiaries or affiliates may contract,
regardless of the purpose. Developer, and each of Developer's
Principals shall hold harmless and indemnity the Indemnitees for all
losses and expenses which may arise out of any acts, errors or
omissions of Developer, Developer's Principals, Developer's
subsidiaries and affiliates, the officers, directors, shareholders,
partners, agents, representatives, independent contractors and
employees of Developer and its subsidiaries and affiliates and any
such other third parties without limitation and without regard to
the cause or causes thereof or negligence of Franchisor or any other
party or parties arising in connection therewith, and whether such
negligence be sole, joint or concurrent, or active or passive.
Developer and Developer's Principals acknowledge that this Paragraph
X.H clearly and unequivocally meets the requirements of the express
negligence rule of the Texas Supreme Court and irrevocably waives
any claim to the contrary.
I. Under no circumstances shall the Indemnitees be
required or obligated to seek recovery from third parties or
otherwise mitigate their losses in order to maintain a claim against
Developer or any of Developer's Principals. Developer and each of
Developer's Principals agree that the failure to pursue such
recovery or mitigate loss will in no way reduce the amounts
recoverable from Developer or any of Developer's Principals by the
Indemnitees.
J. Developer and Developer's Principals expressly agree
that the terms of this Paragraph X shall survive the termination,
expiration or transfer of this Agreement or any interest herein.
XI. APPROVALS
A. Whenever this Development Agreement requires the
prior approval or consent of Franchisor, Developer or Developer's
Principals as the case may be, shall make a timely written request
to Franchisor therefor, and, except as otherwise provided herein,
such approval or consent (if granted) shall be binding only if
obtained in writing.
B. Franchisor makes no warranties or guarantees upon
which Developer or Developer's Principals may rely and assumes no
liability or obligation to Developer, Developer's Principals or any
third party to which it would not otherwise be subject, by providing
any waiver, approval, advice, consent or services to Developer or
Developer's Principals in connection with this Development
Agreement, or by reason of any neglect, delay or denial of any
request therefor.
XII. WAIVER
No delay, waiver, omission or forbearance on the part of
Franchisor to exercise any right, option, duty or power arising out
of any breach or default by Developer or Developer's Principals, or
by any other developer, of any of the terms, provisions or covenants
hereof, shall constitute a waiver by Franchisor to enforce any such
right, option or power as against Developer or Developer's
Principals, or as to subsequent breach or default by Developer or
Developer's Principals. Subsequent acceptance by Franchisor of any
payments due to it hereunder shall not be deemed to be a waiver by
Franchisor of any preceding breach by Developer or Developer's
Principals of any terms, covenants or conditions of this Agreement.
XIII. SEVERABILITY AND CONSTRUCTION
A. Except as expressly provided to the contrary herein,
each section, part, term and/or provision of this Agreement shall be
considered severable; and if, for any reason, any section, part,
term and/or provision herein is determined to be invalid and
contrary to, or in conflict with, any existing or future law or
regulation by a court or agency having valid jurisdiction, such
shall not impair the operation of, or have any other effect upon,
such other sections, parts, terms and/or provisions of this
Agreement as may remain otherwise intelligible, and the latter shall
continue to be given full force and effect and bind the parties
hereto; and said invalid sections, parts, terms and/or provisions
shall be deemed not to be a part of this Agreement.
B. Anything to the contrary herein notwithstanding,
nothing in this Agreement is intended, nor shall be deemed, to
confer upon any person or legal entity other than Franchisor or
Developer and such of their respective successors and assigns as may
be contemplated by Paragraph VII hereof, any rights or remedies
under or by reason of this Agreement.
C. Developer and Developer's Principals expressly agree
to be bound by any promise or covenant imposing the maximum duty
permitted by law which is subsumed within the terms of any provision
hereof, as though it were separately articulated in and made a part
of this Agreement, that may result from striking from any of the
provisions hereof any portion or portions which a court may hold to
be unreasonable and unenforceable in a final decision to which
Franchisor is a party, or from reducing the scope of any promise or
covenant to the extent required to comply with such a court order.
D. All references herein to gender and number shall be
construed to include such other gender and number as the context may
require, and all acknowledgments, promises, covenants, agreements
and obligations herein made or undertaken by Developer shall be
deemed jointly and severally undertaken by all the parties hereto on
behalf of Developer.
E. This Agreement may be executed in two (2) or more
counterparts, each of which will be deemed an original, but all of
which together shall constitute one and the same instrument.
XIV. ENTIRE AGREEMENT
This Agreement, the documents referred to herein, and the
Attachments attached hereto and incorporated by reference herein, if
any, constitute the entire, full and complete agreement between the
parties hereto concerning the subject matter hereof, and supersede
all prior agreements, no other representations having induced
Developer or Developer's Principals to execute this Agreement. No
amendment, change or variance from this Agreement shall be binding
on either party unless mutually agreed to by the parties and
executed by their authorized officers or agents writing.
XV. CURRENCY REQUIREMENT
All fees and payments required by this Agreement shall be paid
in U.S. currency.
XVI. MEDIATION AND APPLICABLE LAW
A. THE PARTIES AGREE TO SUBMIT ANY CLAIM, CONTROVERSY OR
DISPUTE ARISING OUT OF OR RELATING TO THIS AGREEMENT (AND
ATTACHMENTS) OR THE RELATIONSHIP CREATED BY THIS AGREEMENT TO NON-BINDING
MEDIATION PRIOR TO BRINGING SUCH CLAIM, CONTROVERSY OR
DISPUTE IN A COURT. THE MEDIATION SHALL BE CONDUCTED THROUGH EITHER
AN INDIVIDUAL MEDIATOR OR A MEDIATOR APPOINTED BY A MEDIATION
SERVICES ORGANIZATION OR BODY, EXPERIENCED IN THE MEDIATION OF FOOD
SERVICE BUSINESS DISPUTES, AGREED UPON BY THE PARTIES AND, FAILING
SUCH AGREEMENT WITHIN A REASONABLE PERIOD OF TIME AFTER EITHER PARTY
HAS NOTIFIED THE OTHER OF ITS DESIRE TO SEEK MEDIATION OF ANY CLAIM,
CONTROVERSY OR DISPUTE (NOT TO EXCEED FIFTEEN (15) DAYS), BY THE
AMERICAN ARBITRATION ASSOCIATION IN ACCORDANCE WITH ITS RULES
GOVERNING MEDIATION, AT FRANCHISOR'S CORPORATE HEADQUARTERS IN
IRVING, TEXAS. THE COSTS AND EXPENSES OF MEDIATION, INCLUDING
COMPENSATION OF THE MEDIATOR, SHALL BE BORNE BY THE PARTIES EQUALLY.
IF THE PARTIES ARE UNABLE TO RESOLVE THE CLAIM, CONTROVERSY OR
DISPUTE WITHIN NINETY (90) DAYS AFTER THE MEDIATOR HAS BEEN
APPOINTED, THEN EITHER PARTY MAY BRING A LEGAL PROCEEDING UNDER
PARAGRAPH XVI.B BELOW TO RESOLVE SUCH CLAIM, CONTROVERSY OR DISPUTE
UNLESS SUCH TIME PERIOD IS EXTENDED BY WRITTEN AGREEMENT OF THE
PARTIES. NOTWITHSTANDING THE FOREGOING, FRANCHISOR MAY BRING AN
ACTION (1) FOR MONIES OWED, (2) FOR INJUNCTIVE OR OTHER
EXTRAORDINARY RELIEF, OR (3) INVOLVING OWNERSHIP OR USE OF THE
PROPRIETARY MARKS OR THE ANIMATED ENTERTAINMENT, IN A COURT HAVING
JURISDICTION AND IN ACCORDANCE WITH PARAGRAPH XVI.B BELOW, WITHOUT
SUBMITTING SUCH ACTION TO MEDIATION.
B. WITH RESPECT TO ANY CLAIMS, CONTROVERSIES OR
DISPUTES WHICH ARE NOT FINALLY RESOLVED THROUGH MEDIATION OR AS
OTHERWISE PROVIDED ABOVE, DEVELOPER AND DEVELOPER'S PRINCIPALS
HEREBY IRREVOCABLY SUBMIT THEMSELVES TO THE JURISDICTION OF THE
STATE COURTS OF DALLAS COUNTY, TEXAS AND THE FEDERAL DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION. DEVELOPER AND
DEVELOPER'S PRINCIPALS HEREBY WAIVE ALL QUESTIONS OF PERSONAL
JURISDICTION FOR THE PURPOSE OF CARRYING OUT THIS PROVISION.
DEVELOPER AND DEVELOPER'S PRINCIPALS HEREBY IRREVOCABLY AGREE THAT
SERVICE OF PROCESS MAY BE MADE UPON ANY OF THEM IN ANY PROCEEDING
RELATING TO OR ARISING OUT OF THIS AGREEMENT OR THE RELATIONSHIP
CREATED BY THIS AGREEMENT BY ANY MEANS ALLOWED BY TEXAS OR FEDERAL
LAW. DEVELOPER AND DEVELOPER'S PRINCIPALS AGREE THAT VENUE FOR ANY
PROCEEDING RELATING TO OR ARISING OUT OF THIS AGREEMENT SHALL BE IN
DALLAS COUNTY, TEXAS; PROVIDED, HOWEVER, WITH RESPECT TO ANY ACTION
(1) FOR MONIES OWED, (2) FOR INJUNCTIVE OR OTHER EXTRAORDINARY
RELIEF OR (3) INVOLVING OWNERSHIP OR USE OF THE PROPRIETARY MARKS OR
THE ANIMATED ENTERTAINMENT, FRANCHISOR MAY BRING SUCH ACTION IN ANY
STATE OR FEDERAL DISTRICT COURT WHICH HAS JURISDICTION. WITH RESPECT
TO ALL CLAIMS, CONTROVERSIES, DISPUTES OR ACTIONS, THIS AGREEMENT
SHALL BE INTERPRETED AND CONSTRUED UNDER TEXAS LAW (WITHOUT REGARD
TO TEXAS CHOICE OF LAW RULES).
D. DEVELOPER AND FRANCHISOR ACKNOWLEDGE THAT THE
PARTIES' AGREEMENT REGARDING CHOICE OF APPLICABLE STATE LAW AND
FORUM SET FORTH IN PARAGRAPH XVI.B ABOVE PROVIDE EACH OF THE PARTIES
WITH THE MUTUAL BENEFIT OF UNIFORM INTERPRETATION OF THIS AGREEMENT
AND ANY DISPUTE ARISING OUT OF THE PARTIES' RELATIONSHIP CREATED BY
THIS AGREEMENT. EACH OF DEVELOPER AND FRANCHISOR FURTHER
ACKNOWLEDGE THE RECEIPT AND SUFFICIENCY OF MUTUAL CONSIDERATION FOR
SUCH BENEFIT.
D. DEVELOPER AND FRANCHISOR ACKNOWLEDGE THAT THE
EXECUTION OF THIS AGREEMENT BY FRANCHISOR OCCURRED IN DALLAS COUNTY,
TEXAS AND FURTHER ACKNOWLEDGE THAT THE PERFORMANCE OF CERTAIN
OBLIGATIONS OF DEVELOPER ARISING UNDER THIS AGREEMENT, INCLUDING BUT
NOT LIMITED TO THE PAYMENT OF MONIES DUE HEREUNDER, SHALL OCCUR IN
DALLAS COUNTY, TEXAS.
E. NO RIGHT OR REMEDY CONFERRED UPON OR RESERVED BY THIS
AGREEMENT TO ANY PARTY HERETO IS INTENDED TO BE, NOR SHALL BE
DEEMED, EXCLUSIVE OF ANY OTHER RIGHT OR REMEDY HEREIN OR BY LAW OR
EQUITY PROVIDED OR PERMITTED, BUT EACH SHALL BE CUMULATIVE OF EVERY
OTHER RIGHT OR REMEDY.
XVII. DISCLAIMER
A. Developer and Developer's Principals acknowledge that
the success of the business venture contemplated by this Agreement
involves substantial business risks and will be largely dependent
upon the ability of Developer and Developer's Principals as
independent businessmen. Franchisor expressly disclaims the making
of, and Developer and Developer's Principals acknowledge they have
not received, any representation, warranty or guarantee, express or
implied, as to the potential volume, profits, costs or success of
the business venture contemplated by this Agreement. Developer and
Developer's Principals acknowledge that they have received, read and
understood this Agreement, the attachments hereto, if any, and the
agreements relating hereto, if any, and that Franchisor has accorded
Developer and Developer's Principals ample time and opportunity to
consult with advisors of their own choosing about the potential
benefits and risks of entering into this Agreement.
B. Developer and Developer's Principals acknowledge that
they received a copy of this Agreement, the attachments hereto, if
any, and agreements relating hereto, if any, at least five (5)
business days prior to the date on which this Agreement was
executed. Developer and Developer's Principals further acknowledge
that they have received the disclosure documents required by the
Federal Trade Commission trade regulation rule entitled Disclosure
Requirements and Prohibitions Concerning Franchising and Business
Opportunity Ventures, at least ten (10) business days prior to the
date on which this Agreement was executed.
C. Developer and Developer's Principals acknowledge that
they have read and understood this Agreement, the attachments
hereto, if any, and agreements relating hereto, if any, and that
Franchisor has accorded them ample time and opportunity to consult
with advisors of their own choosing about the potential benefits and
risks of entering into this Agreement.
XVII. GUARANTY
A. Developer represents that, as of the execution of
this Agreement, Developer's Principals and all the initial
beneficial owners of the Developer are as shown in Attachment D
hereto. As a condition to its execution and acceptance of this
Agreement, Franchisor may require any or all of the initial
beneficial owners of Developer described in Attachment D to execute
a Guaranty in the form of Attachment C hereto.
B. If after the execution of this Agreement, any person
or entity ceases to qualify as one of Developer's Principals or if
any person or entity succeeds to or otherwise comes to occupy a
position which could qualify it as one of Developer's Principals,
Developer shall notify Franchisor within ten (10) days after any
such change and, upon designation of such person or entity by
Franchisor as one of Developer's Principals, such person or entity
shall execute such documents and instruments (including, as
applicable, this Agreement) as may be required by Franchisor to be
executed by others in such positions.
C. By executing this Agreement, the Developer's
Principals hereby jointly and severally, irrevocably and
unconditionally, guarantee to Franchisor, its successors and
assigns, Developer's performance of all of Developer's obligations,
covenants and agreements hereunder and otherwise bind themselves to
the terms of this Agreement as stated herein. Each of Developer's
Principals represents and warrants that he has read the terms and
conditions of this Agreement and acknowledges that (1) the execution
of this Agreement and the undertakings of the Developer's Principals
in this Agreement are in partial consideration for, and a condition
to, the granting of the license evidenced by this Agreement, and (2)
Franchisor would not have granted the license evidenced by this
Agreement without the execution of this Agreement and such
undertakings by each of the Developer's Principals. Each of
Developer's Principals waives all demands and notices of every kind
with respect to the enforcement of this guaranty, including, without
limitation, notice of presentment, demand for payment or performance
by Developer, notice of any default by Developer or any guarantor,
notice of any release of any of Developer's Principals from this
guaranty or the obligations of Developer and notice of any waiver,
renewal, extension, modification or amendment to this Agreement.
Franchisor may pursue its rights against any or all of Developer's
Principals without first exhausting its remedies against Developer
and without joining any other guarantor hereto. No delay on the
part of Franchisor in the exercise of any right or remedy shall
operate as a waiver of such right or remedy, and no single or
partial exercise by Franchisor of any right or remedy shall preclude
the further exercise of such right or remedy.
IN WITNESS WHEREOF, the parties hereto have fully executed,
sealed and delivered this Agreement in duplicate on the day and year
first above written.
SHOWBIZ PIZZA TIME, INC.
FRANCHISOR
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By:
Name:
Title:
STATE OF TEXAS
COUNTY OF DALLAS
Before me personally appeared -------------------------------
- ---------------after being duly sworn, says that he is the ------------
- ---------------of ShowBiz Pizza Time, Inc., a corporation,
organized and existing under the laws of Kansas, and that he has
authority to execute under oath and has so executed the above
Agreement for and on behalf of such corporation for such purposes
therein contained.
WITNESS my hand and official seal this ----- day of -----------19---.
----------------------
(SEAL) Notary Public
DEVELOPER
-----------------------------
By:
Name:
Title:
STATE OF --------------
COUNTY OF -------------
Before me personally appeared ------------------------------------
- ------- who, after being duly sworn, says that he is the -------------
- ------------ of ----------------------, a (corporation)
(partnership), organized and existing under the laws of ---------------
- -------------------, and that he has authority to execute under
oath and has so executed the above Agreement for and on behalf of
such (corporation) (partnership) for the purposes therein contained.
WITNESS my hand and official seal this ------ day of ---------------
- --, 199----.
---------------------------
(seal) Notary Public
Each of the undersigned acknowledges and agrees as follows:
(1) Each is included in the term "Developer's Principals" as
described in Paragraph VII.C of this Development Agreement;
(2) Each has read the terms and conditions of this Development
Agreement. Each acknowledges that the undertakings by Developer's
Principals hereunder and as stated below, and the execution of the
guaranty described in Paragraph XVIII of this Development Agreement
are made and given in partial consideration of, and as a condition
to, the Franchisor's grant of developer rights to Developer as
described herein; and
(3) Each individually, jointly and severally makes all of the
covenants, representations and agreements of Developer's Principals
set forth in this Development Agreement and is obligated to perform
thereunder.
DEVELOPER'S PRINCIPALS
Name:
Name:
Name:
STATE OF-------------
COUNTY OF------------
Before me personally appeared the following persons, --------------- ,
- ----------------,and --------------- who are know to me to
be the person who executed the foregoing and each acknowledged the
same to be his or her free act and deed for the purposes therein
contained.
WITNESS my hand and official seal this----- day of------------
- -----, 199--.
(S E A L) ----------------------------
Notary Public
ATTACHMENT A
FRANCHISE AGREEMENT
ATTACHMENT B
DEVELOPMENT SCHEDULE
(To be completed at time of execution of Development Agreement)
Cumulative Total Number
of Franchise Agreements
Which Developer Shall
By (Date) Have Executed
--------------- ----------------------------
--------------- ----------------------------
--------------- ----------------------------
ATTACHMENT C
GUARANTY
As an inducement to ShowBiz Pizza Time, Inc. ("Franchisor") to execute
the foregoing Development Agreement and the Attachments thereto of even
date hereto, the undersigned, jointly and severally, hereby agree to be
individually bound by all the terms and conditions of the above Development
Agreement including any amendments or modifications thereto whenever made
(hereinafter the "Agreement") and unconditionally and irrevocably guarantee
to Franchisor and its successors and assigns that all of Developer's
obligations under the Agreement will be punctually paid and performed.
Upon default by Developer or notice from Franchisor,
the undersigned
will immediately make each payment and perform each obligation required of
Developer under the Agreement. Without affecting the obligations of the
undersigned under this Guaranty, Franchisor may, without notice to the
undersigned, renew, extend, modify, amend or release any indebtedness or
obligation of Developer, or settle, adjust, or compromise any claims
against Developer.
The undersigned waive all demands and notices of every kind with
respect to this Guaranty and the Agreement, including, without limitation,
notice of: the amendment or modification of this Guaranty or the Agreement,
the demand for payment or performance by Developer, any default by
Developer or any guarantor, and any release of any guarantor or other
security for the Agreement or the obligations of Developer.
Franchisor may pursue its rights against the undersigned
without first
exhausting its remedies against Developer and without joining any other
guarantor hereto and no delay on the part of Franchisor in the exercise of
any right or remedy shall operate as a waiver of such right or remedy, and
no single or partial exercise by Franchisor of any right or remedy shall
preclude the further exercise of such right or remedy.
Upon receipt by Franchisor of notice of the death of an individual
guarantor, the estate of such guarantor will be bound by this Guaranty but
only for defaults and obligations hereunder existing at the time of death,
and the obligations of the other guarantors hereunder will continue in full
force and effect.
IN WITNESS WHEREOF, each of the undersigned has signed this
Guaranty as of the date of the Agreement.
Witnesses: Guarantors:
------------- ------------------------
------------- ------------------------
------------- -----------------------
STATE OF ------------------
COUNTY OF -----------------
Before me personally appeared the following persons,---------
- --------------------------------- who are known to me to be the persons who
executed the foregoing Guaranty and each acknowledged the same to be his or
her free act and deed for the purposes therein contained.
WITNESS my hand and official seal this --- day of -----------
--------------------------
Notary Public in and for
the State of -------------
ATTACHMENT D
DEVELOPER'S PRINCIPALS AND INITIAL EQUITY OWNERS
LOCATION: ------------------------------------------------------------
- ----------------------------- Developer hereby represents and warrants that
Developer's Principals (as defined in the Development Agreement) and the
initial beneficial owners of Developer are as follows:
Position with Percentage
Name Address Developer Ownership
----- ------- -------------- ----------
(Interests must total 100%)
DEVELOPER
----------------------------------------
By: -----------------------------------
Name: ----------------------------------
Title: ---------------------------------
STATE OF------------
COUNTY OF-----------
Before me personally appeared the following persons, ------
- -----------,------------------who are known to me to be the persons who
executed the foregoing and each acknowledged the same to be his or her free
act and deed for the purposes therein contained.
WITNESS my hand and official seal this ---- day of ------, 199--.
------------------------------
Notary Public
ATTACHMENT E
CONFIDENTIALITY AND NONCOMPETITION AGREEMENT
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-27-1996
<PERIOD-END> JUN-28-1996
<CASH> 10,006
<SECURITIES> 0
<RECEIVABLES> 3,077
<ALLOWANCES> 82
<INVENTORY> 3,808
<CURRENT-ASSETS> 29,479
<PP&E> 245,221
<DEPRECIATION> 98,940
<TOTAL-ASSETS> 207,146
<CURRENT-LIABILITIES> 31,567
<BONDS> 33,997
<COMMON> 2,146
2,056
0
<OTHER-SE> 132,334
<TOTAL-LIABILITY-AND-EQUITY> 207,146
<SALES> 145,672
<TOTAL-REVENUES> 148,300
<CGS> 72,160
<TOTAL-COSTS> 135,689
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,753
<INCOME-PRETAX> 12,611
<INCOME-TAX> 5,171
<INCOME-CONTINUING> 7,440
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,440
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
</TABLE>
