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Exhibit 10.40
CONSULTING AGREEMENT
This Consulting Agreement (this "Agreement") is made as of
February 9, 1996, by and between CinemaStar Luxury Theaters, Inc., a California
corporation, having its business address at 431 College Boulevard, Oceanside,
California 92057 (referred to herein as the "Company"), and The Boston Group,
L.P., having its principal place of business at 1999 Avenue of the Stars, Los
Angeles, California 90067 (hereinafter "Consultant").
In consideration of the mutual promises contained herein and
on the terms and conditions hereinafter set forth, the Company and Consultant
agree as follows:
1. PROVISION OF SERVICES.
(a) Consultant agrees, to the extent reasonably
required in the conduct of the business of the Company, to place at the disposal
of the Company its judgment and experience and to provide business development
services to the Company including the following:
(i) evaluate the Company's managerial and
financial requirements;
(ii) assist when requested by the Company in
recruiting, screening, evaluating and
recommending key personnel, directors,
accountants, commercial and investment
bankers, underwriters, attorneys, other
professional consultants;
(iii) assist in preparation of budgets and
business plans;
(iv) advise with regard to theater development
activities
(v) evaluate financial requirements and assist
in financial arrangements; and
(vi) advise with regard to shareholder relations
and public relations matters.
All such services shall at all times be at the request of the
Company.
(b) Consultant agrees to use its best efforts in the
furnishing of advice and recommendations, and for this purpose Consultant shall
at all times maintain or keep available an adequate organization of personnel or
a network of outside professionals for the performance of its obligations under
this Agreement.
2. COMPENSATION. In consideration of Consultant's services,
the Company agrees to pay Consultant the compensation described below:
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(a) Cash Fee. Simultaneously with the execution of
this Agreement, the Company shall pay Consultant an advance of fees in the sum
of $100,000 for services to be rendered during fiscal 1997 and 1998. In
addition, within sixty (60) days following the date of execution of this
Agreement the Company shall pay the Consultant an additional $150,000 in cash.
(b) Warrants. In addition to the cash fee described
in Section 2(a) above, promptly following the date of execution of this
Agreement, the Company shall issue to Consultant Warrants (the "Warrant") to
purchase up to 400,000 shares of Common Stock at $6.50 per share (the closing
price of the Company's Common Stock as of February 9, 1996). The form of Warrant
shall be substantially identical to the form of Warrant attached hereto as
Exhibit A.
3. LIABILITY OF CONSULTANT. In furnishing the Company with
management advice and other services as herein provided, neither Consultant nor
any officer, director or agent thereof shall be liable to the Company or its
creditors for errors of judgment or for anything except willful malfeasance, bad
faith or gross negligence in the performance of its duties or reckless disregard
of its obligations and duties under the terms of this Agreement.
It is further understood and agreed that Consultant
may rely upon information furnished to it reasonably believed to be accurate and
reliable and that, except as herein provided, Consultant shall not be
accountable for any loss suffered by the Company by reason of the Company's
action or non-action on the basis of any advice, recommendation or approval of
Consultant, its partners, employees or agents.
4. STATUS OF CONSULTANT. Consultant shall be deemed to be an
independent contractor and, except as expressly provided or authorized in this
Agreement, shall have no authority to act or represent the Company.
5. OTHER ACTIVITIES OF CONSULTANT. The Company recognizes that
Consultant now renders and may continue to render consulting, financial and
other services to other companies which may or may not have policies and conduct
activities similar to those of the Company. Consultant shall be free to render
such advice and other services and the Company hereby consents thereto.
Consultant shall not be required to devote its full time and attention to the
performance of its duties under this Agreement, but shall devote only so much of
its time and attention as it deems reasonable or necessary for such purposes.
6. CONTROL. Nothing contained herein shall be deemed to
require the Company to take any action contrary to its Articles of Incorporation
or By-Laws, or any applicable statute or regulation, or to deprive its Board of
Directors of their
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responsibility for any control of the conduct or the affairs of
the Company.
7. TERM. Consultant's retention hereunder shall be for a term
of two years commencing on April 1, 1996; provided, however, that the provisions
of Sections 3 and 8 shall survive the termination of this Agreement.
8. REGISTRATION RIGHTS. Consultant will have the following
registration rights with respect to the Warrant and shares of Common Stock
underlying the Warrant (the "Warrant Shares"):
(a) Demand Registration. At any time commencing on
six months from the date of issuance of the Warrant, and expiring four (4) years
thereafter, Consultant shall have the right (which right is in addition to the
registration rights under Section 8(b) hereof), exercisable by written notice to
the Company, to have the Company prepare, file and use its best efforts to have
declared effective by the Securities and Exchange Commission (the "Commission"),
on one occasion, a registration statement and such other documents, including a
prospectus, as may be necessary in the opinion of both counsel for the Company
and counsel for the Consultant, if any, in order to comply with the provisions
of the Securities Act of 1933, as amended (the "Securities Act"), so as to
permit a public offering and sale by Consultant of the Warrants and Warrant
Shares owned and held of record by the Consultant at the time of exercise of
such registration rights, for a period of twenty-four (24) consecutive months.
(b) Piggy-Back Registration. If at any time the
Company proposes to register any of its securities under the Securities Act
(other than in connection with a merger, acquisition, exchange offer, redemption
or pursuant to Form S-8 or successor form) it will give written notice by
registered mail, at least twenty (20) days prior to the filing of each such
registration statement to the Consultant of its intention to do so. Upon the
written request of Consultant given within ten (10) days after receipt of any
such notice of Consultant's desire to include any Warrants or Warrant Shares
owned by Consultant in such proposed registration statement, the Company shall
afford Consultant the opportunity to have such Warrants or Warrant Shares
registered under such registration; provided, however, the Consultant shall not
have the right to include any Warrants or Warrant Shares in the event that the
registration relates to solely to the registration of (or updating of an
existing registration relating to) Redeemable Warrants and underlying shares of
Common Stock registered in connection with the Company's initial public
offering. The "piggy-back" registration rights described in this Section 8(b)
shall terminate on the earlier to occur of (i) five (5) years from the date
hereof or (ii) at such time as the Warrants or Warrant Shares, as the case
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may be, are saleable in one or more transactions pursuant to Rule 144(k) of the
Securities Act.
Notwithstanding anything to the contrary contained
in the provisions of this Section 8(b) the Company shall have the right at any
time after it shall have given written notice pursuant to this Section 8(b)
(irrespective of whether a written request for inclusion of any such securities
shall have been made) to elect not to file any such proposed registration
statement, or to withdraw the same after the filing but prior to the effective
date thereof.
(c) Limitation on Registration Rights.
Notwithstanding anything to the contrary contained in this Agreement, (i) the
Company shall not be obligated to effect a registration pursuant to Section 8 of
this Agreement during the period starting with the date ninety (90) days prior
to the Company's estimated date of filing of, and ending on a date ninety (90)
days following the effective date of, a registration statement pertaining to an
underwritten public offering of the Company's securities, provided that the
Company is actively employing in good faith all reasonable efforts to cause such
registration statement to become effective and that the Company's estimate of
the date of filing such registration statement is made in good faith; and (ii)
if the Company shall furnish Consultant a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors it
would be seriously detrimental to the Company or its shareholders for a
registration statement to be filed in the near future, then the Company's
obligations to use its best efforts to file a registration statement on demand
by the Consultant shall be deferred for a period not to exceed ninety (90) days;
provided, however, that the Company shall not obtain such a deferral more than
once in any twelve (12) month period.
(d) Indemnification.
(i) The Company shall indemnify and hold
harmless the Consultant from and against any and all losses, claims, damages and
liabilities caused by any untrue statement of a material fact contained in any
registration statement filed by the Company under the Securities Act by reason
of this Agreement, any post-effective amendment to such registration statements,
or any prospectus included therein, or caused by any omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission based upon
information furnished or required to be furnished in writing to the Company by
the Consultant (or the authorized representatives or agents of the Consultant)
expressly for use therein, which indemnification shall include each person, if
any, who controls the Consultant within the meaning of the Securities Act and
each officer, director, employee and agent of the Consultant; provided,
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however, that the indemnification in this Section 8(d) with respect to any
prospectus shall not inure to the benefit of the Consultant (or to the benefit
of any person controlling the Consultant) on account of any such loss, claim,
damage or liability arising from the sale of Shares, Warrants or Warrant Shares
by the Consultant, if a copy of a subsequent prospectus correcting the untrue
statement or omission in such earlier prospectus was provided to the Consultant
by the Company prior to the subject sale and the subsequent prospectus was not
delivered or sent by the Consultant to the purchaser of such securities prior to
such sale; and provided further, that the Company shall not be obligated to so
indemnify the Consultant or any other person referred to above unless the
Consultant or other person, as the case may be, shall at the same time indemnify
the Company, its directors, each officer signing the Registration Statement and
each person, if any, who controls the Company within the meaning of the
Securities Act, from and against any and all losses, claims, damages and
liabilities caused by any untrue statement of a material fact contained in any
registration statement or any prospectus required to be filed or furnished by
reason of this Agreement or caused by any omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, insofar as such losses, claims, damages or liabilities are
caused by any untrue statement or omission based upon information furnished in
writing to the Company by the Consultant expressly for use therein.
(ii) If for any reason the indemnification
provided for in the preceding subparagraph is held by a court of competent
jurisdiction to be unavailable to an indemnified party with respect to any loss,
claim, damage, liability or expense referred to therein, then the indemnifying
party, in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by the indemnified party as a result of
such loss, claim, damage or liability in such proportion as is appropriate to
reflect not only the relative benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable considerations.
9. MISCELLANEOUS. This Agreement sets forth the entire
agreement and understanding between the parties and supersedes all prior
discussions, agreements and understandings of every nature between them with
respect to the subject matter hereof. This Agreement is executed in and shall be
construed and interpreted according to the laws of the State of California.
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IN WITNESS WHEREOF, the parties have caused this Agreement and
by their respective officers or representatives to be signed duly authorized the
day and year first above written.
CINEMASTAR LUXURY THEATERS, INC.
By:____________________________
John Ellison, Jr.
THE BOSTON GROUP, L.P.
By:____________________________
Robert DiMinico
Chairman