SHOWBIZ PIZZA TIME, INC.
4441 West Airport Freeway
Irving, Texas 75062
(972) 258-8507
May 22, 1997
Dear Stockholder:
You are cordially invited to attend the annual meeting of
stockholders of the Company to be held at 9:00 a.m. local time,
Thursday, June 26, 1997, at the Sheraton Grand Hotel located at
4440 West John Carpenter Freeway, Irving, Texas.
At the meeting you will be asked to re-elect one current
director, to authorize the amendment of the 1988 Non-Statutory
Stock Option Plan, and to transact such other business as may
properly come before the meeting.
The formal Notice of the Annual Meeting of Stockholders and Proxy
Statement accompanying this letter provide detailed information
concerning matters to be considered and acted upon at the meeting.
It is important that your shares be represented at the meeting,
whether or not you attend personally. I urge you to sign, date and
return the enclosed proxy at your earliest convenience.
Sincerely,
RICHARD M. FRANK
Chairman and Chief
Executive Officer
SHOWBIZ PIZZA TIME, INC.
4441 West Airport Freeway
Irving, Texas 75062
(972) 258-8507
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 26, 1997
To the Stockholders of
ShowBiz Pizza Time, Inc.:
Notice is hereby given that the annual meeting of stockholders of
ShowBiz Pizza Time, Inc., a Kansas corporation, will be held at the
Sheraton Grand Hotel located at 4440 West John Carpenter Freeway,
Irving, Texas on June 26, 1997, at 9:00 a.m. local time, for the
following purposes:
1. To re-elect one Class III director to serve for a term
of three years until his successoris elected and qualified
or until their earlier resignation or removal;
2. To authorize the amendment of the 1988 Non-Statutory
Stock Option Plan; and
3. To transact such other business as may properly come
before the meeting.
It is desirable that as large a proportion as possible of the
stockholders' interests be represented at the meeting. Whether or
not you plan to be present at the meeting, you are requested to
sign and return the enclosed proxy in the envelope provided so that
your stock will be represented. The giving of such proxy will not
affect your right to vote in person, should you later decide to
attend the meeting. Please date and sign the enclosed proxy and
return it promptly in the enclosed envelope.
Only stockholders of record at the close of business on May 8, 1997
are entitled to notice of, and to vote at, the meeting or any
adjournment thereof.
By Order of the Board of Directors,
MARSHALL R. FISCO, JR.
Secretary
Irving, Texas
May 22, 1997
SHOWBIZ PIZZA TIME, INC.
4441 WEST AIRPORT FREEWAY
IRVING, TEXAS 75062
(972) 258-8507
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 26, 1997
This proxy statement is furnished to stockholders of ShowBiz Pizza
Time, Inc., a Kansas corporation (the "Company"), in connection
with the solicitation of proxies by the Board of Directors of the
Company (the "Board of Directors") for use at the annual meeting of
stockholders (the "Annual Meeting") to be held at 9:00 a.m. local
time, on June 26, 1997 at the Sheraton Grand Hotel located at 4440
West John Carpenter Freeway, Irving, Texas. Proxies in the form
enclosed will be voted at the Annual Meeting, if properly executed,
returned to the Company prior to the Annual Meeting and not
revoked. A proxy may be revoked at any time before it is voted
either in person at the Annual Meeting or by giving prior written
notice to the Secretary of the Company. This proxy statement was
first sent or given to the Company's stockholders on or about May
22, 1997.
OUTSTANDING CAPITAL STOCK
The record date for stockholders entitled to notice of, and to vote
at, the Annual Meeting is May 8, 1997. At the close of business on
that date, the Company had issued and outstanding and entitled to
receive notice of and vote at the Annual Meeting 18,545,375 shares of
Common Stock, $0.10 par value (the "Common Stock"), and 49,570
shares of Class A Preferred Stock, $60 par value (the "Preferred
Stock"). No other class of securities of the Company is entitled
to notice of, or to vote at, the Annual Meeting of stockholders.
ACTION TO BE TAKEN AT THE ANNUAL MEETING
The accompanying proxy, unless the stockholder otherwise specifies
in the proxy, will be voted:
1. For the re-election of the one Class III director
nominee named herein, to serve for a term of three years or
until his respective successor shall be elected and qualified or
until his earlier resignation or removal;
2. To authorize the amendment of the 1988 Non-Statutory
Stock Option Plan; and
3. In the discretion of the proxyholders, as to the
transaction of such other business as may properly come before the
Annual Meeting.
Where stockholders have appropriately specified how their proxies
are to be voted, they will be voted accordingly. If any other
matter or business is brought before the Annual Meeting, the
proxyholders may vote the proxies in their discretion. The Board
of Directors is not presently aware of any other matters or
business to be brought before the Annual Meeting.
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of a majority
of the aggregate outstanding shares of Common Stock and Preferred
Stock is necessary to constitute a quorum at the Annual Meeting.
The affirmative vote of the holders of a majority of the
outstanding shares of Common Stock and Preferred Stock, voting
together as one class, represented in person or by proxy at the
Annual Meeting, is necessary to approve all matters to be submitted
to the stockholders other than the election of directors. In
deciding all questions, a holder is entitled to one vote, in person
or by proxy, for each share of Common Stock or Preferred Stock held
in his name on the record date. Solely with respect to the
election of directors, the Bylaws of the Company provide that a
stockholder shall have that number of votes equal to the number of
shares held by him as of the record date multiplied by the number
of directors being elected and is entitled to cumulate his votes
and cast them all for any single nominee or to spread his votes, so
cumulated, among as many nominees and in such manner as he sees
fit. Directors must be elected by a plurality of the votes cast.
A stockholder who is present, in person or by proxy, and who
withholds his vote in the election of directors will be counted for
purposes of determining whether a quorum exists, but the
withholding of his vote will not affect the election of directors.
A stockholder who is present, in person or by proxy, and who
abstains from voting on other proposals, will be counted for
purposes of a quorum, and the abstention will have the same effect
as a vote against the proposals. Brokers' "non-votes" are treated
the same as votes withheld or abstained.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the
power to revoke it at any time before it is voted at the Annual
Meeting. It may be revoked by filing with the Secretary of the
Company, Marshall R. Fisco, Jr., 4441 West Airport Freeway, Irving,
Texas 75062, a written notice of revocation or duly executed proxy
bearing a later date, or it may be revoked by attending the Annual
Meeting and voting in person. Attendance at the Annual Meeting
will not, by itself, revoke a proxy.
PRINCIPAL HOLDERS OF CAPITAL STOCK
The following page sets forth information, as of May 8, 1997,
relating to the beneficial ownership of the Company's Common
Stock and Preferred Stock by: (i) each director and
executive officer (as hereinafter defined) of the Company as of
such date, (ii) the directors and the executive officers of the
Company as a group (11 persons) as of such date, and (iii) each
person, as that term is used in the Securities Exchange Act of
1934, as amended (the "Exchange Act") known to the Company to own
beneficially 5% or more of the outstanding shares of Common Stock
or Preferred Stock. Except as otherwise indicated, each of the
persons named in the table is believed by the Company to possess
sole voting and investment power with respect to the shares of
Common Stock or Preferred Stock beneficially owned by such person.
Information as to the beneficial ownership of Common Stock and
Preferred Stock by directors and executive officers of the Company
has been furnished by the respective directors and executive
officers.
Percentage of Class Outstanding
-------------------------------
Name (and address for Number of Number of
5% beneficial owners) Shares of Shares of
Common Preferred Common Preferred
Stock Stock Stock Stock
------------ --------- ----- ---------
Richard M. Frank 1,050,036 (A) 0 5.7% 0.0%
Richard T. Huston 84,618 (B) 0 (C) 0.0%
Michael H. Magusiak 165,521 (D) 0 (C) 0.0%
Louis P. Neeb 7,500 (E) 0 (C) 0.0%
Larry G. Page 11,496 (F) 0 (C) 0.0%
Cynthia I. Pharr 7,500 (E) 0 (C) 0.0%
Directors and Executive Officers
as a Group 1,326,671 0 7.2% 0.0%
FMR Corp.
82 Devonshire Street
Boston, MA 02109-3614 1,492,000(G) 0 8.0% 0.0%
Massachusetts Financial Services
Company
500 Boylston Street
Boston, MA 02116-0741
1,280,500 (H) 0 6.9% 0.0%
Time Warner, Inc.
75 Rockefeller Plaza
New York, NY 10019
0 16,011(I) 0.0% 32.3%
River Forest State Bank & Trust Co.
7727 West Lake Street
River Forest, IL 60305
0 3,139(J) 0.0% 6.3%
(Footnotes appear on the following page)
- -----------
(A) Includes 670,774 shares which are subject to forfeiture
pursuant to the terms of Mr. Frank's employment agreement. See
"Employment Agreements." Includes 15,000 shares purchasable
pursuant to options issued under the Company's 1988 Non-Statutory
Stock Option Plan which are exercisable within 60
days of the date hereof, but excludes 400,000 shares
purchasable pursuant to options issued under the Company's
1988 Non-Statutory Stock Option Plan which are not exercisable
within 60 days of the date hereof and 105,000 shares granted
to Mr. Frank as of January 6, 1997, pursuant to his new
employment agreement, which shall not begin to vest until the
1998 calendar year.
(B) Includes 56,700 shares purchasable pursuant to options issued
under the Company's 1988 Non-Statutory Stock Option Plan which
are exercisable within 60 days of the date hereof, but
excludes 65,850 shares purchasable pursuant to options issued
under the Company's 1988 Non-Statutory Stock Option Plan which
are not exercisable within 60 days of the date hereof.
(C) Constitutes less than 1% of the Company's outstanding Common
Stock.
(D) Includes 102,240 shares purchasable pursuant to options issued
under the Company's 1988 Non-Statutory Stock Option Plan which
are exercisable within 60 days of the date hereof, but
excludes 161,560 shares purchasable pursuant to options issued
under the Company's 1988 Non-Statutory Stock Option Plan which
are not exercisable within 60 days of the date hereof.
(E) Includes 7,500 shares purchasable pursuant to options issued
under the Company's 1988 Non-Statutory Stock Option Plan which
are exercisable within 60 days of the date hereof, but
excludes 3,750 shares purchasable pursuant to options issued
under the Company's 1988 Non-Statutory Stock Option Plan, and
6,250 shares purchaseable pursuant to options issued under the
Company's Non-Employee Directors Stock Option Plan which are
not exerciseable within 60 days of the date hereof.
(F) Includes 11,250 shares purchasable pursuant to options issued
under the Company's 1988 Non-Statutory Stock Option Plan which
are exercisable within 60 days of the date hereof, but
excludes 39,233 shares purchasable pursuant to options issued
under the Company's 1988 Non-Statutory Stock Option Plan which
are not exercisable within 60 days of the date hereof.
(G) Based upon information obtained from FMR Corp. on April 29, 1997.
This number includes 1,441,600 shares beneficially owned by Fidelity
Management and Research Company, as an investment advisor to various
investment commpanies and certain other funds; 47,400 shares beneficially
owned by Fidelity Management Trust Company, as a trustee or managing agent
for various private investment accounts; and 3,000 shares beneficially
owned by Fidelity International Limited, as an investment advisor to non-
U.S. investment companies. Of its total shaes, FMR Copr. has sole voting
power over 1,489,000 shares. Fidelity International Limited has sole
voting and dispositive power over 3,000 shares.
(H) Based on information obtained from Massachusetts Financial
Services Company on April 24, 1997.
(I) Based on information in Amendment No. 2 to Schedule 13D dated
July 1, 1994. Of its total shares, Time Warner, Inc. has
shared voting power over 16,011 shares and shared dispositive
power over 16,011 shares.
(J) Based on information obtained from Transfer Agent on May 8,
1997.
PROPOSAL 1:
ELECTION OF DIRECTORS
The term of the Class III director expires at the Annual
Meeting of the stockholders in 1997. The Board of Directors has
nominated Louis P. Neeb for re-election at the Annual Meeting,
to serve for a term of three years. Mr. Neeb has expressed his
intention to serve for the entire term for which re-election is sought.
Directors will be elected by cumulative voting. To be elected as
a director, a candidate must be among the three candidates who
receive the most votes out of all votes cast at the Annual Meeting
for the election of directors. See "Quorum and Voting."
On February 24, 1997, the Company filed a Registration Statement
on Form S-3 (Registration No. 333-22229) with the Securities and
Exchange Commission relating to an offering (the "Offering") of all
the shares of its Common Stock (the "Shares") owned by The Hallwood
Group Incorporated, a diversified holding company, and its affilitates
("Hallwood"). In connection with the sale of the Shares by Hallwood,
Charles A. Crocco, Jr., Anthony J. Gumbiner, Robert L. Lynch, J. Thomas
Talbot and Brian M. Troup, each of whom is affiliated with Hallwood,
resigned from the Company's Board of Directors upon the closing of the
Offering on March 26, 1997. The Board of Directors is currently composed
of four directors and has five vacancies.
The following table lists the names and ages (as of May 8, 1997) of
the three director nominees and the six directors whose terms of
office will continue after the Annual Meeting, the year in which
each director was first elected as a director of the Company, the
class to which each director has been or will be elected, and the
Annual Meeting at which the term of each director will expire.
Director Term
Nominee Director Age Since Class Expires
- ----------------- ----- --------- ----- -------
Louis P. Neeb............58 1994 III 1997
Continuing Directors
- --------------------
Richard M. Frank.........49 1985 I 1998
Michael H. Magusiak......41 1988 I 1998
Cynthia I. Pharr.........48 1994 II 1999
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THE NAMED NOMINEE.
ADDITIONAL INFORMATION ABOUT THE EXECUTIVE OFFICERS, BOARD OF
DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS
EXECUTIVE OFFICERS
The following table sets forth the names and certain other
information regarding the executive officers of the Company as of
May 8, 1997.
Year First Elected
Name Age Position as Executive Officer
- ---- --- -------- --------------------
Richard M. Frank
............ 49 Chairman of the Board and 1985
Chief Executive Officer
Michael H. Magusiak
................ 41 President 1988
Richard T. Huston
................ 51 Executive Vice President-- 1986
Marketing and Entertainment
Larry G. Page
................ 53 Executive Vice President, Chief 1994
Financial Officer and Treasurer
BUSINESS HISTORY OF EXECUTIVE OFFICERS AND DIRECTORS
A brief description of the business history of the directors and
executive officers of the Company is provided below.
RICHARD M. FRANK has been Chairman of the Board and Chief Executive
Officer of the Company since March 1986 and has been a director of
the Company since June 1985. He served as President and Chief
Operating Officer from June 1985 until October 1988. He joined the
Company in 1985. He has served as a director for Monterey
Acquisition Corp. since May 1994.
MICHAEL H. MAGUSIAK was elected President of the Company in June
1994. He had previously served as Executive Vice President, Chief
Financial Officer and Treasurer since June 1988. He has also
served as a director of the Company since 1988. He was Vice
President of the Company from October 1987 to June 1988 and
Controller of the Company from October 1987 to January 1989. He
joined the Company in July 1987. He has served as a director for
Monterey Acquisition Corp. since May 1994.
RICHARD T. HUSTON has served as Executive Vice President of the
Company since July 1986 and as Director of Marketing and Strategic
Development since January 1993. His responsibilities were expanded
from June 1994 to March 1997 to include entertainment as well as
marketing. He served as Director of Marketing and Development from
October 1988 to January 1993. He served as Vice President from
October 1985 to July 1986, as Director of Marketing from October
1985 to October 1988, and as a director from July 1986 to September
1988. He joined the Company in 1985.
LARRY G. PAGE has served as Executive Vice President, Chief
Financial Officer and Treasurer of the Company since October 1994.
Prior to joining the Company, Mr. Page served as Vice President and
Regional General Manager in the retail services division of Comdata
Holdings Corporation, a publicly-held financial services company,
from July 1985 to October 1994. Mr. Page is a Certified Public
Accountant and was a partner in various national and regional
public accounting firms, including Arthur Andersen LLP, from August
1978 through July 1985.
LOUIS P. NEEB was elected as a director in August 1994. Mr. Neeb
has served as Chairman of the Board and Chief Executive Officer of
Casa Ole' Restaurants, Inc. from October 1995 to the present. From
August 1982 to present, Mr. Neeb has been President of Neeb
Enterprises, Inc., a management consulting firm specializing in
consulting to restaurant companies. From July 1991 through January
1994, Mr. Neeb was President and Chief Executive Officer of
Spaghetti Warehouse, Inc. Mr. Neeb has also had other extensive
experience in the restaurant industry including serving as Chairman
of the Board of Burger King Corporation. Mr. Neeb is a member of
the Board of Directors of the Franchise Finance Corporation of
America, a publicly-traded real estate trust which provides real
estate for restaurants, and Silver Diner, Inc., a publicly-traded
restaurant company.
CYNTHIA I. PHARR was elected as a director of the Company in August
1994. She is currently President and owner of C. Pharr & Company,
a communications management consulting firm. She has served in that
position since March 1993. From May 1989 through February 1993,
Ms. Pharr was President and Chief Executive Officer of Tracy -
Locke/Pharr P R, a public relations firm. From August 1986 through
April 1989, she was President and owner of C. Pharr & Company, Inc.
a public relations agency. Ms. Pharr has served as a member of the
Board of Directors of Spaghetti Warehouse, Inc. since August 1991,
as well as Chairman of the Board of GuestCare, Inc., a privately
held technology company, from February 1994 to present.
Except as set forth above, none of the directors of the Company
hold directorships in any company with a class of securities
registered pursuant to Section 12 of the Securities Exchange Act of
1934 (the "Exchange Act") or subject to the requirements of Section
15(d) of the Exchange Act or any company registered as an
investment company under the Investment Company Act of 1940.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
Four regularly scheduled and eight special meetings of the Board of
Directors were held during 1996. Each of the directors attended at
least 75% of the meetings held by the Board of Directors, and by
each committee on which he or she served, in 1996.
The Board of Directors has established an Executive Committee, an
Audit Committee, a Compensation Committee, a Stock Option Committee
and a Stock Grant Committee. The responsibilities and composition
of each of these committees are described below.
The Executive Committee consists of four directors. The Executive
Committee is responsible for assisting the Board of Directors in
carrying out its duties and acts in the place of the Board of
Directors when the Board of Directors is not in session and may
exercise substantially all of the powers of the Board of Directors
other than those powers specifically required by law or by the
Company's Bylaws to be exercised by the full Board of Directors.
The Executive Committee (comprised of Messrs. Frank, Gumbiner,
Magusiak and Troup in 1996) held a number of informal meetings in
person and by telephone in 1996.
The Audit Committee consists of four directors. The Audit
Committee is responsible for (i) considering the Company's system
of internal controls, (ii) reviewing the performance and findings
of the Company's Internal Audit Department, and (iii) reviewing
services provided by the Company's independent auditors. The Audit
Committee (comprised of Messrs. Crocco, Lynch, Talbot and Troup in
1996) held two meetings in 1996.
The Compensation Committee consists of three directors. The
Compensation Committee is responsible for (i) recommending the
compensation, including performance bonuses, payable to the
Company's executive officers (excluding Mr. Frank), and (ii)
recommending the performance bonuses for other employees of the
Company. The Compensation Committee (comprised of Messrs. Frank,
Gumbiner and Troup in 1996) held one meeting in 1996.
The Stock Option Committee and a Stock Grant Committee each consist
of two directors who are responsible for administering
the 1988 Non-Statutory Stock Option Plan and the Company's Stock
Grant Plan, respectively. The Stock Option Committee and a Stock
Grant Committee were each comprised of Messrs. Gumbiner and Troup
in 1996. The Stock Option Committee held three meetings in 1996.
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid to the Chief
Executive Officer and to each of the other most highly paid
executive officers of the Company (the "Named Executive Officers")
for the fiscal years ended December 30, 1994, December 29, 1995,
and December 27, 1996 (designated herein as fiscal years 1994, 1995
and 1996, respectively.)
Long Term
Annual Compensation Compensation Awards
------------------- ---------------------
Securities
Name and Other Annual Stock Underlying
Principal Fiscal Compensation Awards Options
Position Year Salary($) Bonus($) ($)(A) ($) (#)(B)
- -------- ------ -------- ------ ----------- ------ ---------
Richard M. Frank
(Chief Executive Officer)
1996 1,000,000 $-- 27,333 $-- --
1995 1,000,000 -- 23,656 -- 15,000
1994 1,000,000 -- 25,005 -- --
Richard T. Huston
(Executive Vice President)
1996 150,000 60,930(C) 15,869 $-- 15,750
1995 149,807 -- 13,384 -- 31,500
1994(D) 145,000 -- 12,602 -- 90,000
Michael H. Magusiak
(President)
1996 240,000 113,736(C) 15,846 $-- 28,800
1995 240,000 -- 14,917 -- 28,800
1994(E) 193,096 -- 12,467 -- 135,000
Larry G. Page
(Executive Vice President
and Chief Financial Officer)
1996 132,000 53,618(C) 14,176 $-- 13,860
1995 127,000 3,500 13,753 -- --
1994(F) 31,250 -- 11,578 -- 22,500
- ---------
(A) Includes car allowance of $15,600 per year for Mr. Frank in
1994 and 1995 and $13,600 per year for Mr. Frank in 1996, and
$9,000 per year for Messrs. Huston, Magusiak, and Page.
Relocation expense is included for Mr. Page in 1994.
(B) On May 22, 1996, the Common Stock of the Company split 3-for-2,
resulting in an acquisition of additional shares of Common
Stock by the Named Executive Officers. The amounts listed
above have been adjusted to reflect the stock split.
(C) Includes bonus compensation earned in 1996 and paid in 1997.
(D) Includes options for 31,500 shares of Common Stock issued to
Mr. Huston on January 11, 1994, that were surrendered in
connection with the granting on January 6, 1995 of options to
acquire 31,500 shares of Common Stock.
(E) Includes options for 28,800 shares of Common Stock issued to
Mr. Magusiak on January 11, 1994, that were surrendered in
connection with the granting on January 6, 1995 of options to
acquire 28,800 shares of Common Stock.
(F) The amount indicated is Mr. Page's actual salary received
during fiscal 1994 which is less than his annualized salary of
$127,000 because his employment with the Company did not
commence until October 1994.
EMPLOYMENT AGREEMENTS
Richard M. Frank has entered into an employment agreement with the
Company expiring on December 31, 1997. Mr. Frank's employment
agreement provides for an annual base salary of $1,000,000, with
such additional benefits and/or compensation as may be determined
by the Board of Directors. Pursuant to his employment agreement,
Mr. Frank was issued 621,762 restricted shares of the Company's
Common Stock on April 1993 under the Stock Grant Plan, of which
31,088 shares would vest at the end of each fiscal quarter of the
Company during the term of his Employment Agreement, other than the
last of such fiscal quarters at the end of which 31,100 shares vest
(the number of shares underlying the grant have been adjusted to
reflect the occurrence of a 3-for-2 stock split in the Common Stock
of the Company). Effective March 31, 1995, Mr. Frank forfeited
90,000 of the unvested restricted shares previously awarded to him,
which forfeiture is applied in equal annual increments of 30,000
shares, applied quarterly to the shares otherwise scheduled to vest
for that particular quarter. As of May 8, 1997, 460,986 of such
shares had vested. On March 3, 1997, Mr. Frank entered into a new
employment agreement with the Company providing for a three-year
term commencing on January 1, 1998. Mr. Frank's new employment
agreement provides for an annual base salary of $1,000,000, 400,000
shares of the Company's Common Stock issued under the Company's
1988 Non-Statutory Stock Option Plan, 105,000 shares of the Company's
Common Stock issued under the Company's Stock Grant Plan, a cash bonus,
payable annually, if earned, based on the achievement of targets for
corporate revenue and profitability, with such additional benefits
and/or compensation as may be determined by the Compensation Committee
or the Board of Directors.
On January 3, 1997, Michael H. Magusiak entered into an employment
agreement with the Company providing for a three-year term
commencing on January 6, 1997. Mr. Magusiak's employment agreement
provides for an annual base salary of $250,000, 100,000 shares of
the Company's Common Stock issued under the Company's 1988 Non-Statutory
Stock Option Plan, a cash bonus, payable annually, if earned, based on
the achievement of targets for corporate revenue and profitabilty, with
such additional benefits and/or compensation as may be determined by the
Compensation Committee or the Board of Directors
Under the terms of the respective employment agreements (the
"Employment Agreements"), if the covered executive's employment
with the Company is terminated by the Company (other than as a
result of death or "permanent disability" (as defined in the
Employment Agreements)) Mr. Frank will be entitled to receive a
severance amount equal to $3,000,000, and Mr. Magusiak will be
entitled to receive a severance amount equal to twice his then
current annual base salary (together, the "Severance Amounts").
In the event of the executive's death, his estate is entitled to
receive his base salary through the date of his death.
The Employment Agreements also provide that each of Messrs. Frank
and Magusiak will receive his respective Severance Amount in the
event there is a Change of Control (as defined below) of the
Company and the covered executive voluntarily terminates his
employment within one year after such a Change of Control. A
"Change of Control" is deemed to have occurred with respect to the
Company if (i) any person or group of persons acting in concert
(other than Hallwood or its affiliates) in which the covered
executive is not an investor, partner, officer, director or member,
shall acquire, directly or indirectly, the power to vote, or direct
the voting of, more than 33% of the then outstanding voting
securities of the Company or (ii) during any consecutive 18 month
period a majority of the Board of Directors is elected or appointed
and consists of persons who were not directors of the Company as of
the date of the respective Employment Agreement and whose election
or appointment as directors of the Company is actively opposed by
the covered executive.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding stock options
granted to each of the Named Executive Officers in the fiscal year
ended December 27, 1996.
Richard M. Frank
0 0% N/A N/A $0 $0
Richard T. Huston
15,750 6.29% $8.283 01/08/01 $36,006 $ 79,661
Michael H. Magusiak
28,800 11.50% $8.283 01/08/01 $65,840 $145,666
Larry G. Page
13,860 5.53% $8.283 01/08/01 $31,685 $ 70,102
- -----------
(A) The number of shares underlying these options, which were
granted prior to May 22, 1996, have been adjusted to reflect
the occurrence of a 3-for-2 stock split in the Common Stock of
the Company.
(B) Options to acquire these shares are exercisable as follows:
(i) fifty percent (50%) of the option after January 8, 1998,
and (ii) an aggregate of one hundred percent (100%) of the
option after January 8, 1999.
(C) The exercise price for these options, which were granted prior
to May 22, 1996, has been adjusted to reflect the occurrence
of a 3-for-2 stock split in the Common Stock of the Company.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth, for each of the Named Executive
Officers, information regarding his exercise of stock options
during the fiscal year ended December 27, 1996 and the value of his
unexercised stock options as of December 27, 1996. The closing
price for the Company's Common Stock, as reported by the Nasdaq
National Market, on December 27, 1996 (the last trading day of the
fiscal year) was $18.25.
Shares No. of Unexercised Value of Unexercised In-
Acquired Options at the-Money Options at
on Value December 27, 1996 December 27, 1996
Exercise Realized (exercisable/ (exercisable/
(#) (A) (#) ($)(B)
-------- -------- ----------------- ------------------
Richard M. Frank 0 -- 15,000 (E) 154,995 (E)
0 (U) 0 (U)
Richard T. Huston 0 -- 45,900 (E) 265,710 (E)
82,350 (U) 872,158 (U)
Michael H. Magusiak 0 -- 91,980 (E) 853,004 (E)
94,320 (U) 982,968 (U)
Larry G. Page 0 -- 11,250 (E) 145,178 (E)
25,110 (U) 283,920 (U)
- ------------
(A) Calculated by determining the difference between the fair
market value of the securities underlying the options and the
exercise price of the options at the time of exercise.
(B) Calculated by determining the difference between the exercise
price of the options and the fair market value of the
securities underlying the options at fiscal year-end.
(E) Options which are exercisable at December 27, 1996.
(U) Options which are not exercisable at December 27, 1996.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The executive compensation program of the Company is designed as a
tool to reinforce the Company's strategic principles to be a
premier and progressive growth company, with an objective of
enhancing long term shareholder value. To this end, the following
principles have guided the development of the executive
compensation program:
* Provide competitive levels of compensation to attract and
retain the best qualified executive talent. The
Compensation Committee strongly believes that the caliber
of the Company's management group makes a significant
difference in the Company's success over the long term.
* Embrace a "pay-for-performance" philosophy by placing
significant amounts of compensation "at risk" that is, a
significant component of the compensation payouts to
executives must vary according to the overall performance
of the Company.
* Directly link executives' interests with those of
stockholders by providing opportunities for long term
incentive compensation based on changes in shareholder
value.
The executive compensation program is intended to appropriately
balance the Company's short term operating goals with its long term
strategy through a careful mix of base salary, annual bonuses
(payable upon satisfaction by the Company of established revenue
and profitability objectives) and long term performance
compensation through the issuance of stock options under the 1988
Option Plan.
The compensation of the executive officers of the Company
(excluding Messrs. Frank and Magusiak) is reviewed and determined
annually by the Compensation Committee. The compensation of such
executive officers in 1996 was based on individual and corporate
performances as well as assigned responsibilities. In establishing
and reviewing executive compensation, consideration is also given
to executive salary ranges of comparable companies. Individual
performance is reflected in the executive officer's salary.
Corporate performance is reflected in a bonus, payable annually, if
earned, to each executive officer, based on the achievement of
targets for corporate revenue and profitability. Although no bonus
compensation was actually paid in 1996, Messrs. Huston, Magusiak
and Page and all executive officers as a group (3) persons,
excluding Mr. Frank, who receives a bonus compensation
pursuant to the terms of his employment agreement, as described
above) received $60,930, $113,736, $53,618, respectively, and
$228,284 (collectively) in 1997, in bonus compensation pursuant
to such plan for services rendered in 1996.
The Stock Option Committee and the Stock Grant Committee are made
up of the non-employee director members of the Compensation
Committee. The Stock Option Committee and Stock Grant Committee
ratify and approve option and grant recommendations, respectively,
made by the Compensation Committee. In 1996, the Compensation
Committee determined the number of options to issue in accordance
with the 1988 Option Plan based upon base salaries and levels of
responsibility. No stock grants were awarded in 1996.
CEO Performance Evaluation
Although Mr. Frank's salary is established by the terms of his
Employment Agreement (see "Employment Agreements"), the
Compensation Committee, excluding Mr. Frank, nevertheless annually
evaluates his performance based on the same criteria as is applied
to the other executive officers of the Company. Stock option
issuances, restricted stock grants to Mr. Frank, and any increase
in his annual base salary or the granting of a bonus, are based on
individual and corporate performance, applying the same factors for
him as described above for the Company's other executives. The
Compensation Committee also considers the number of unvested shares
available to Mr. Frank under his current Employment Agreement and
the Stock Grant Plan at such time.
The Compensation Committee has also considered the potential impact
of Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), adopted under the Omnibus Budget Reconciliation Act
of 1993. This section disallows a tax deduction for any
publicly-held corporation for individual compensation to certain
executives of such corporation exceeding $1,000,000 in any taxable
year, unless compensation is performance-based. As discussed
above, Mr. Frank's annual base salary is $1,000,000. It is the
intent of the Company and the Compensation Committee to qualify to
the maximum extent possible its executives' compensation for
deductibility under applicable tax laws. The Compensation
Committee will continue to monitor the impact of such limitations
on tax deductions and will take other appropriate actions if
warranted in the future.
The Compensation Committee was comprised of Messrs. Frank, Gumbiner
and Troup in 1996. The Stock Option Committee and the Stock Grant
Committee were both comprised of Messrs. Gumbiner and Troup in 1996.
Richard M. Frank
Anthony J. Gumbiner *
Brian M. Troup *
* Messrs. Gumbiner and Troup resigned from the Board of Directors
and its Committees on March 26, 1997.
COMPENSATION OF DIRECTORS
Non-employee directors of the Company or its affiliates,
receive a retainer from the Company at the rate of
$10,000 per year, plus $750 for each meeting of the Board of
Directors attended. In addition thereto, 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 the Common Stock of the company. Each January thereafter, a Non-
Employee Director who was previously elected to the Board and
who continues to serve in such capacity shall be granted an option
to purchase 2,500 shares of the Common Stock of the Company. Other
directors, who are either officers or employees of the Company or its
affiliates, do not receive separate compensation for their services
as directors of the Company.
PROPOSAL 2:
AMENDMENT OF THE 1988 NON-STATUTORY STOCK OPTION PLAN
The 1988 Non-Statutory Stock Option Plan ("Employee Plan")
became effective in December, 1988. The purpose of the Employee
Plan is to secure for the Company and its stockholders the benefits
of the incentives inherent in stock ownership by certain directors
and key employees of the Company and its subsidiaries. The
Employee Plan terminates on December 31, 1998, and no option may be
granted after such date pursuant to the Employee Plan. The
Employee Plan is currently administered by the Stock Option
Committee. The Stock Option Committee has the power to determine,
in its discretion but subject to the limitations set forth in the Employee
Plan, the persons to whom options are granted, the number of shares
covered by options and the exercise price of options. The Stock Option
Committee also determines the conditions, if any, imposed upon the
granting of options under the Employee Plan. To date, the Stock Option
Committee has issued options under the Employee Plan to eligible
directors (who are not members of the Stock Option Committee) and
eligible employees in proportion to their respective
responsibilities to the Company. The Stock Option Committee
provides for various periods of time to pass before options become
exercisable according to the Company's long term strategic plans.
In May 1997, the Board of Directors adopted, subject to the
approval of the Company's stockholders, amendments to the Employee
Plan providing that (1) the number of shares of Common Stock which
may be issued under the Employee Plan would be increased from
2,772,038 to 3,772,038, (2) the period during which each option
shall expire under the Employee Plan shall be extended from no
later than five (5) years from the date on which the option is
granted to no later than seven (7) years from the date on which the
option is granted, and (3) the date on which the Employee Plan
shall expire except as to options then outstanding under the
Employee Plan, which options shall remain in effect until they have
been exercised or have expired, shall be extended from December 31,
1998 to December 31, 2008. A copy of the amended Employee Plan, as
proposed, is attached hereto as Exhibit "A."
The Board of Directors believes that the proposed amendments
to the Employee Plan will enable the Company and its stockholders,
through future stock options, to continue to secure the benefits of
the incentive inherent in stock ownership by certain of its
employees.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
ABOVE DESCRIBED AMENDMENT TO THE 1988 NON-STATUTORY STOCK OPTION
PLAN.
INDEMNIFICATION
The Bylaws of the Company provide for each director and officer of
the Company to be indemnified by the Company, as of right, to the
full extent permitted or authorized by the laws of the State of
Kansas against any liability, judgment, fine, amount paid in
settlement, cost and expense asserted or threatened against or
incurred by such person in his capacity, or arising out of his
status, as a director or officer. The Company's Restated Articles
of Incorporation include a provision which eliminates director
liability for monetary damages for breach of the director's duty of
due care, as permitted under Kansas law.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION;
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective January 1989, the Company agreed to pay to Hallwood
$125,000 per year, in consideration for financial and management
consulting services being rendered to the Company by Hallwood in
the ordinary course of business. In consideration for rent reductions
resulting from Hallwood's negotiation of the Company's home office
lease agreement in December 1990, the Company assigned to Hallwood its
sublease interest in the portion of the home office building subleased to
Integra, with a fair value of approximately $120,000 per year. Effective
March 26, 1997, the management consulting services agreement was terminated.
In connection with the sale of the Shares by Hallwood, all of the
directors of the Company who were also directors of Hallwood
resigned from the Company's Board of Directors and from all
committees thereof, and the Company's financial and management
consulting services agreement with Hallwood terminated upon the
closing of the Offering on March 26, 1997 (See "Business History Of
Executive Officers And Directors").
The Board of Directors intends that transactions with officers,
directors and affiliates will be entered into on terms no less
favorable to the Company than could be obtained from unrelated
third parties and will be approved by at least a simple majority of
the uninterested directors of the Company.
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative yearly total
stockholder return (change in share price plus reinvestment of any
dividends) on the Company's Common Stock since January 3, 1989
(the date the Company's Common Stock first traded on the NASDAQ
system), versus two indexes. The graph assumes $100 was invested
on January 3, 1989. The Company has not paid any cash dividends on
its Common Stock during the applicable period. The share price of
the Company's Common Stock has been adjusted for three-for-two
stock splits in the form of stock dividends distributed on March
26, 1991, March 20, 1992 and May 22, 1996.
The Company's Common Stock is labeled on the graph as "SHBZ." The
index labeled "Restaurants," which was prepared by the Center for
Research in Securities Prices ("CRSP") at The University of
Chicago, Graduate School of Business, 1101 East 58th Street,
Chicago, Illinois 60637 (telephone 312-702-7467) measures the total
return (weighted for the market capitalization of the component
companies) on the approximately 144 domestic and foreign companies
which operate restaurants or other eating and drinking places (SIC
Code 58) and whose equity securities are traded on the Nasdaq
National Market or the NASDAQ Small-Cap Market. The identities of
the companies included in the "Restaurant" index will be made
available in a prompt manner to any shareholder upon written
request addressed to Investor Relations at the Company's Irving
address. The index labeled "NASDAQ," also prepared by
CRSP, measures the total return on the approximately 4,000 United
States companies whose common stock is traded on the Nasdaq
National Market or the NASDAQ Small-Cap Market.
CRSP Total Returns
Index for: 01/03/89 12/29/89 12/27/91 12/31/93 12/29/95 12/27/96
- ----------------- ------- -------- -------- -------- -------- --------
ShowBiz Pizza
Time, Inc. 100.00 300.00 872.7 542.0 496.0 1119.9
Nasdaq Stock Mkt.
(US Companies) 100.00 121.6 159.9 221.4 306.1 376.9
NASDAQ Stocks
(SIC 5800-5899 US+ 100.00 130.4 169.1 250.8 220.7 214.5
Foreign Eating and
Drinking Places)
The lines reprsent monthly index levels derived from compounded daily
returns that include all dividends.
The lines are reweighted daily, using the market capitalization on the
previous trading day.
If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
The index level for all series was set to $100.00 on 01/03/89.
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors and the persons who own
more than ten percent of the Company's Common Stock to file initial
reports of ownership of Common Stock and reports of changes of
ownership with the Securities and Exchange Commission and the
National Association of Securities Dealers, Inc. and to furnish the
Company with copies of such reports. Based on review of such
copies and other records of the Company, the Company has no reason
to believe that any reports were untimely filed or that any Form 5
filings were made by any executive officers, directors or persons
owning more than ten percent of the Company's Common Stock.
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Deloitte & Touche LLP served as the Company's
independent public accountants for the fiscal year ending December
27, 1996. A representative of Deloitte & Touche LLP is expected to
be present and available at the Annual Meeting of stockholders to
respond to appropriate questions and will be given an opportunity
to make a statement, if desired.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any stockholder who wishes to present a proposal for action at the
1998 annual meeting of stockholders and who wishes to have it set
forth in the proxy statement and identified in the form of proxy
prepared by the Company, must deliver such proposal to the Company
at its principal executive offices, not less than 60 days nor more
than 90 days prior to the date of the applicable annual meeting of
stockholders; provided, however, that in the event that less than
70 days' notice or prior public disclosure of the date of the
meeting is given or made, notice by the stockholder to be timely
must be so received not later than the close of business on the
tenth (10th) day following the day on which such notice of the date
of the applicable annual meeting was mailed or such public
disclosure of the date of such annual meeting was made, whichever
first occurs. For purposes of this section, the date of a public
disclosure shall include, but not be limited to, the date on which
such disclosure is made in a press release reported by the Dow
Jones News Services, the Associated Press or any comparable
national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to
Sections 13, 14, or 15(d) (or the rules and regulations thereunder)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
To be in proper written form, a stockholder's notice to the
Secretary of the Company must set forth (a) as to each person whom
the stockholder proposes to nominate for election as a director (i)
the name, age, business address and residence address of the
person, (ii) the principal occupation or employment of the person,
(iii) the class or series and number of shares of capital stock of
the corporation that are owned beneficially or of record by the
person and (iv) any other information relating to the person that
would be required to be disclosed in a proxy statement or other
filing required to be made in connection with solicitations of
proxies for election of directors pursuant to Section 14 of the
Exchange Act and (b) as to the stockholder giving the notice (i)
the name and record address of such stockholder, (ii) the class or
series and number of shares of capital stock of the corporation
that are owned beneficially or of record by such stockholder, (iii)
a description of all arrangements or understandings between such
stockholder and each proposed nominee and any other person or
persons (including their names) pursuant to which the nomination(s)
are to be made by such stockholders, (iv) a representation that
such stockholder intends to appear in person or by proxy at the
meeting to nominate the persons named in its notice and (v) any
other information relating to such stockholder that would be
required to be disclosed in a proxy statement or other filing
required to be made in connection with solicitations of proxies for
election of directors pursuant to Section 14 of the Exchange Act
and the rules and regulations promulgated thereunder. Such notice
must be accompanied by a written consent of each proposed nominee
to being named as a nominee and to serve as a director if elected.
MISCELLANEOUS
The accompanying proxy is being solicited on behalf of the Board of
Directors of the Company. The expense of preparing, printing and
mailing the proxy and the material used in the solicitation thereof
will be borne by the Company. In addition to the use of the mails,
proxies may be solicited by directors and regular officers and
employees of the Company by means of personal interview, telephone
or telegram. Arrangements may also be made with brokerage houses
and other custodians, nominees and fiduciaries for the forwarding
of solicitation materials to the beneficial owners of stock held of
record by such persons, and the Company may reimburse them for
reasonable out-of-pocket expenses of such solicitation.
By Order of the Board of Directors,
MARSHALL R. FISCO, JR.
Secretary
Irving, Texas
May 22, 1997
Exhibit A
SHOWBIZ PIZZA TIME, INC.
NON-STATUTORY STOCK OPTION PLAN
SHOWBIZ PIZZA TIME, INC., a corporation organized and existing
under the laws of the state of Kansas (the "Company"), hereby
formulates and adopts, with respect to the shares of common stock
of the Company ("Common Stock"), a non-statutory stock option plan
for certain individuals who are directors or key employees of the
Company or its subsidiaries, as follows:
1. Purpose of Plan. The purpose of this Non-Statutory
Option Plan (the "Plan") is to encourage certain individuals who
are directors or key employees to participate in the ownership of
the Company, and to provide additional incentive for such
individuals to promote the success of its business through sharing
in the future growth of such business.
2. Effectiveness of Plan. The provisions of this Plan
became effective on December 30, 1988.
3. Administration. This Plan shall be administered by the
Stock Option Committee of the Board of Directors of the Company
(the "Committee"), which shall be comprised of two (2) or more
directors, each of whom shall be "disinterested persons," as
defined in Rule 16b-3(c)(2)(i), promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The
Committee shall have full power and authority to construe,
interpret and administer the Plan, and may from time to time adopt
such rules and regulations for carrying out this Plan as it may
deem proper and in the best interests of the Company. Subject to
the terms, provisions and conditions of the Plan, the Committee
shall have the authority to select the individuals to whom options
shall be granted, to determine the number of shares subject to each
option, to determine the time or times when options will be
granted, to determine the option price of the shares subject to
each option, to determine the time when each option may be
exercised, to fix such other provisions of each option agreement as
the Committee may deem necessary or desirable, consistent with the
terms of this Plan, and to determine all other questions relating
to the administration of this Plan. The interpretation and
construction of this Plan by the Committee shall be final,
conclusive and binding upon all persons.
4. Eligibility. Options to purchase shares of Common Stock
shall be granted under this Plan only to those individuals selected
by the Committee from time to time who, in the sole discretion of
the Committee, are currently directors or key employees and who
have made material contributions in the past, or who are expected
to make material contributions in the future, to the successful
performance of the Company. Options shall not be granted to any
individual while he is a member of the Committee.
5. Shares Subject to the Plan. Options granted under this
Plan shall be granted solely with respect to shares of Common
Stock. Subject to any adjustments made pursuant to the provisions
of Section 12, the aggregate number of shares of Common Stock which
may be issued upon exercise of all the options which may be granted
under this Plan shall not exceed 3,772,038. 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 seven (7) 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, 2008, 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.
