<PAGE>
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __)
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[_] Preliminary proxy statement
[X] Definitive proxy statement
[_] Definitive additional materials
[_] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
TAM Restaurants, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Board of Directors of TAM Restaurants, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined).
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total Fee Paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE>
TAM Restaurants, Inc.
1163 Forest Avenue
Staten Island, New York 10310
April 26, 1999
Dear Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders
of TAM Restaurants, Inc. (the "Company") which will be held on Friday, May 28,
1999 at 10:00 A.M. local time at The Manor East, 201 Jerusalem Avenue,
Massapequa, New York 11758.
The Notice of Annual Meeting and Proxy Statement which follow describe
the business to be conducted at the meeting.
Your Board of Directors unanimously believes that (i) the election of
the nominees as directors and (ii) the approval of an amendment to the Company's
1997 Stock Option Plan are in the best interests of the Company and its
stockholders and, accordingly, recommends a vote "FOR" the foregoing proposals
on the enclosed proxy card.
Whether or not you plan to attend the meeting in person, it is
important that your shares be represented and voted. After reading the enclosed
Notice of Annual Meeting and Proxy Statement, may I urge you to complete, sign,
date and return the enclosed proxy card in the envelope provided. If the address
on the accompanying material is incorrect, please advise our Transfer Agent,
Continental Stock Transfer & Trust Company, in writing, at 2 Broadway, New York,
New York 10004.
Your vote is very important, and we will appreciate a prompt return of
your signed proxy card. We hope to see you at the meeting and appreciate your
continued support.
Sincerely yours,
Frank Cretella
President and Chief Executive Officer
<PAGE>
TAM RESTAURANTS, INC.
1163 Forest Avenue
Staten Island, New York 10310
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FRIDAY, MAY 28, 1999
--------------------
To the Stockholders of TAM RESTAURANTS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting ("Annual Meeting") of
Stockholders of TAM Restaurants, Inc. (the "Company") will be held on Friday,
May 28, 1999, at 10:00 A.M. local time at The Manor East, 201 Jerusalem Avenue,
Massapequa, New York 11758, for the following purposes:
1. To elect six directors to hold office until the next Annual Meeting
of Stockholders and until their respective successors have been duly elected and
qualified;
2. To consider and vote on a proposal to approve an amendment to the
Company's 1997 Stock Option Plan to increase the number of shares of Common
Stock reserved for issuance thereunder from 525,000 to 1,250,000; and
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment or adjournments thereof.
Only stockholders of record at the close of business on April 19, 1999
are entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof.
By Order of the Board of Directors,
Frank Cretella
President and Chief Executive Officer
April 26, 1999
- ---------------------------------------------------
IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING:
PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE
PROVIDED FOR THAT PURPOSE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO EXERCISE, AND IF YOU ARE
PRESENT AT THE MEETING YOU MAY, IF YOU WISH, REVOKE YOUR PROXY AT THAT TIME AND
EXERCISE THE RIGHT TO VOTE YOUR SHARES PERSONALLY.
<PAGE>
TAM RESTAURANTS, INC.
1163 Forest Avenue
Staten Island, New York 10310
------------
PROXY STATEMENT
------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY, MAY 28, 1999
This proxy statement (the "Proxy Statement") is furnished in connection
with the solicitation of proxies by the Board of Directors of TAM Restaurants,
Inc. (the "Company") for use at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held on Friday, May 28, 1999, including any adjournment or
adjournments thereof, for the purposes set forth in the accompanying Notice of
Meeting.
Management intends to mail this proxy statement and the accompanying
form of proxy to stockholders on or about April 26, 1999.
Proxies in the accompanying form, duly executed and returned to the
management of the Company and not revoked, will be voted at the Annual Meeting.
Any proxy given pursuant to such solicitation may be revoked by the stockholder
at any time prior to the voting of the proxy by a subsequently dated proxy, by
written notification to the Secretary of the Company, or by personally
withdrawing the proxy at the Annual Meeting and voting in person.
The address and telephone number of the principal executive offices of
the Company are: 1163 Forest Avenue, Staten Island, New York 10310, Telephone
No.: (718) 720-5959.
OUTSTANDING SHARES AND VOTING RIGHTS
Only stockholders of record at the close of business on April 19, 1999
(the "Record Date") are entitled to notice of and to vote at the Annual Meeting.
As of the Record Date, there were issued and outstanding 3,503,000 shares of the
Company's Common Stock, par value $.0001 per share (the "Common Stock"). Each
share of Common Stock entitles the holder to one vote on each matter submitted
to a vote at the Annual Meeting. Officers and directors of the Company who
together maintain voting rights to approximately 56.3% of the Company's voting
securities have indicated an intention to vote for the election of the directors
and for the proposal to amend the Company's 1997 Stock Option Plan. See "Voting
Security Ownership of Certain Beneficial Owners and Management."
- 1 -
<PAGE>
VOTING PROCEDURES AND PROXY INFORMATION
The directors will be elected by the affirmative vote of a plurality of
the shares of Common Stock present in person or represented by proxy at the
Annual Meeting voting as a single class, provided a quorum exists. A quorum is
established if, as of the Record Date, at least a majority of the outstanding
shares of Common Stock are present in person or represented by proxy at the
Annual Meeting. Adoption of the amendment to the Company's 1997 Stock Option
Plan requires the affirmative vote of a majority of the shares of Common Stock
present in person or represented by proxy at the Annual Meeting, provided a
quorum exists. All other matters at the meeting will be decided by the
affirmative vote of a majority of the shares of Common Stock present in person
or represented by proxy at the meeting and entitled to vote on the subject
matter, provided a quorum exists. Votes will be counted and certified by one or
more Inspectors of Election who are expected to be employees of the Company or
Continental Stock Transfer & Trust Company, the Company's transfer agent.
In accordance with Delaware law, abstentions and "broker non-votes"
(i.e., proxies from brokers or nominees indicating that such persons have not
received instructions from the beneficial owner or other persons entitled to
vote shares as to a matter with respect to which the brokers or nominees do not
have discretionary power to vote) will be treated as present for purposes of
determining the presence of a quorum. For purposes of determining approval of a
matter presented at the meeting, abstentions will be deemed present and entitled
to vote and will, therefore, have the same legal effect as a vote "against" a
matter presented at the meeting. Broker non-votes will be deemed not entitled to
vote on the subject matter as to which the non-vote is indicated. Abstentions
and broker non-votes will have no effect on the election of directors or the
vote to amend the Company's 1997 Stock Option Plan.
The enclosed proxies will be voted in accordance with the instructions
thereon. Unless otherwise stated, all shares represented by such proxy will be
voted as instructed. Proxies may be revoked as noted above.
The entire cost of soliciting proxies, including the costs of
preparing, assembling, printing and mailing this Proxy Statement, the proxy and
any additional soliciting material furnished to stockholders, will be borne by
the Company. Arrangements will be made with brokerage houses and other
custodians, nominees and fiduciaries to send proxies and proxy materials to the
beneficial owners of stock, and such persons may be reimbursed for their
expenses by the Company. Proxies may also be solicited by directors, officers or
employees of the Company in person or by telephone, telegram or other means. No
additional compensation will be paid to such individuals for these services.
ELECTION OF DIRECTORS
At this year's Annual Meeting of Stockholders, six directors will be
elected to hold office for a term expiring at the Annual Meeting of Stockholders
to be held in 2000. It is the intention of the Board of Directors to nominate
Frank Cretella, Jeanne Cretella, Kenneth L. Harris, Peter J. Salvatore, Barry E.
Krantz and Frank Argenziano as directors. Each director will be elected to serve
until a successor is elected and qualified or until the director's earlier
resignation or removal.
At this year's Annual Meeting of Stockholders, the proxies granted by
stockholders will be voted individually for the election, as directors of the
Company, of the persons listed below, unless a
- 2 -
<PAGE>
proxy specifies that it is not to be voted in favor of a nominee for director.
In the event any of the nominees listed below shall be unable to serve, it is
intended that the proxy will be voted for such other nominees as are designated
by the Board of Directors. Each of the persons named below has indicated to the
Board of Directors that he or she will be available to serve.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
FOR THE ELECTION OF THE NOMINEES.
The following is information with respect to the nominees for election
at this Annual Meeting of Stockholders:
Frank Cretella, 40, co-founded the Company's predecessor in 1981 and
has been President, Chief Executive Officer and a director of the Company since
inception.
Jeanne Cretella, 40, co-founded the Company's predecessor in 1981, and
has been Vice President, Secretary and a director of the Company since
inception. Ms. Cretella is the wife of Frank Cretella.
Kenneth L. Harris, 56, has been Chairman of the Board of the Company
since June 1997. Since March 1998, Mr. Harris has been a Senior Vice President
and Managing Director of Kayne Anderson Investment Management, Inc. Since
January 1995, Mr. Harris has been President and Chief Executive Officer of
Platinum Restaurant Group, a management consulting firm. From February 1994
through January 1995, Mr. Harris was Chief Operating Officer of HOB
Entertainment, Inc., a theme restaurant company. From January 1975 through
January 1994, Mr. Harris was employed by W.R. Grace & Co. ("Grace") and its
subsidiary, Restaurant Enterprises Group, Inc. ("REGI"), most recently as
President and Chief Executive Officer of REGI's Dinnerhouse division.
Peter J. Salvatore, 61, has been a director of the Company since
February, 1998. Mr. Salvatore has been Managing Director of Spear Leeds &
Kellogg, an NASD member firm, since March 1991.
Barry E. Krantz, 54, has been a director of the Company Since February,
1998. Mr. Krantz has been an independent restaurant industry consultant since
August 1995. Mr. Krantz was Chief Operating Officer and a director of REGI from
January 1989 through January 1994 when it was sold by Grace to an investor
group. From January 1994 to August 1995, Mr. Krantz was President, Chief
Operating Officer of Family Restaurants, Inc., the successor of REGI. Mr. Krantz
is currently a director of Sizzler International, Inc. and Fresh Choice, Inc.,
both publicly traded companies in the restaurant industry.
Frank Argenziano, 51, became a director of the Company on November 19,
1998. Since February 1989, Mr. Argenziano has been Chief Financial Officer of
Paragon Capital Corporation, a member of the NASD. From 1970 to 1989, Mr.
Argenziano was employed at Schroder & Co. Inc., formerly Wertheim & Co. Inc.
The Company agreed that it would, upon the request of Paragon Capital
Corporation, the underwriter of the Company's initial public offering
("Paragon"), nominate and use its best efforts to elect a designee of Paragon
(which designee may change from time to time) as a director of the Company or,
at Paragon's option, appoint such designee as a non-voting advisor to the
Company's
- 3 -
<PAGE>
Board of Directors for the period ending February 10, 2001. Frank Argenziano
currently serves as Paragon's designee to the Company's Board of Directors.
The following is information with respect to the Company's other
officers:
Anthony B. Golio, 38, has been Vice President of the Company since
October 1997. In June 1996, Mr. Golio founded The Pineapple Group Inc., a
consulting company to the restaurant industry. From February 1994 until October
1996, Mr. Golio was director of operations of Whiskey River Restaurant Group, a
restaurant holding company. From January 1991 through February 1994, Mr. Golio
was Vice President - Operations and Marketing of HMG, Inc., a restaurant holding
company. From 1988 to 1991, Mr. Golio was manager of guest services of the New
York Zoological Society. From 1984 to 1988, Mr. Golio was area manager of
Chi-Chi's Restaurants, Inc.
During the fiscal year ended September 27, 1998, the Board of Directors
held three meetings. The meetings were attended by all of the directors, either
in person or by telephone. The Board also took actions by unanimous written
consents in lieu of meetings.
Audit Committee
The Board of Directors has established an audit committee comprised of
Kenneth Harris and Peter Salvatore. The audit committee is responsible for
making recommendations concerning the engagement of independent public
accountants, reviewing the plans and results of the audit engagement with the
independent public accounts, approving professional services provided by the
independent public accounts and reviewing the adequacy of the Company's internal
accounting contracts. During the fiscal year ended September 27, 1998, the Audit
Committee held one meeting.
Executive Committee
The Board of Directors has established an executive committee comprised
of Kenneth Harris, Frank Cretella and Jeanne Cretella. The executive committee
meets informally on a monthly basis to review the Company's operating results
pursuant to directives of the Board of Directors and to make operating and
strategic decisions on items authorized by the Board. The Executive Committee
did not meet during the fiscal year ended September 27, 1998.
Real Estate Committee
The Board of Directors has established a real estate committee
comprised of Kenneth Harris, Barry Krantz and Peter Salvatore. The real estate
committee is responsible for reviewing proposed real estate transactions and
making recommendations to the Board of Directors with respect to specific
transactions. During the fiscal year ended September 27, 1998, the Real Estate
Committee held three meetings.
Compensation Committee
The Board of Directors has established a compensation committee
comprised of Kenneth Harris, Barry Krantz and Peter Salvatore. The compensation
committee is responsible for determining compensation for executive officers of
the Company, and for reviewing and presenting the Board of Directors with
proposed bonus grants, stock option grants and employment contracts. During the
fiscal year ended September 27, 1998, the Compensation Committee held one
meeting.
- 4 -
<PAGE>
Compliance with Section 16(a) of the Securities Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Securities Exchange Act"), requires the Company's officers and directors, and
persons who own more than 10% of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC"). Officers, directors and greater than
10% stockholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on the Company's review of the copies of such forms received
by the Company, the Company believes that, during the year ended September 27,
1998, all filing requirements applicable to its officers, directors and greater
than 10% beneficial owners were complied with, except that (i) a Form 3 for
Peter J. Salvatore was filed late, (ii) a Form 3 for Barry E. Krantz was filed
late and (iii) a Form 4 for Peter J. Salvatore reporting one transaction in
February 1998 was filed late.
- 5 -
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain compensation paid by the Company
during the fiscal years ended September 27, 1998, September 28, 1997 and
September 29, 1996 to Frank Cretella, its President and Chief Executive Officer,
and certain compensation paid by the Company to Anthony B. Golio, its Vice
President, for the fiscal year ended September 27, 1998. No other officer of the
Company received compensation in excess of $100,000 for any such fiscal year.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
-------------------------------------------------------
Other Annual
Name and Principal Position Year Salary Bonus Compensation
- ------------------------------------------------- --------- -------------- ---------- --------------------
<S> <C> <C> <C> <C>
Frank Cretella
President and Chief Executive Officer............ 1998 $175,000 $0 $2,000
1997 175,000(1) 0 2,000
1996 168,000 0 2,000
Anthony B. Golio
Vice President.................................... 1998 102,445 0 0
</TABLE>
- --------------
(1) Mr. Cretella deferred approximately $25,000 of his salary from fiscal 1997
and such payment was made in fiscal 1998.
The following table provides information relating to stock options
awarded to each of the above-named executive officers during the year ended
September 27, 1998. All such options were awarded under the 1997 Stock Option
Plan.
<TABLE>
<CAPTION>
Option Grants in Fiscal 1998
------------------------------------------------------------------------------
Number of % of Total
Shares Options Granted Exercise
Underlying to Employees in Price Per Expiration
Name and Principal Position Options Granted Fiscal 1998(1) Share (2) Date
- ---------------------------------------------- --------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
Frank Cretella
President and Chief Executive Officer.......... 37,500 15% $5.00 2/10/2003
18,750 (3) 8% 5.00 2/10/2004
18,750 (4) 8% 5.00 2/10/2005
Anthony B. Golio
Vice President.................................. 12,500 5% 5.00 2/10/2003
6,250 (3) 3% 5.00 2/10/2004
6,250 (4) 3% 5.00 2/10/2005
</TABLE>
- -----------------------
(1) The number of options granted to employees during fiscal 1998 used to
compute this percentage excludes options to purchase 48,625 shares of
Common Stock due the termination of such options pursuant to their terms.
(2) Options were granted at an exercise price equal to the fair market value of
the Company's Common Stock on the date of grant, as determined by the Board
of Directors.
(3) These options vest on the first anniversary of the date of grant provided
that the optionee is then employed by the Company.
(4) These options vest on the second anniversary of the date of grant provided
that the optionee is then employed by the Company.
- 6 -
<PAGE>
Director Compensation
The Company reimburses directors for reasonable travel expenses
incurred in connection with their activities on behalf of the Company. Each
outside director receives options to purchase 5,000 shares of the Company's
Common Stock for each year of service rendered as a member of the Board of
Directors. On November 19, 1998 the Board authorized the grant of 5,000 options
under the 1997 Stock Option Plan to each of Messrs, Harris, Salvatore and
Krantz, effective January 17, 1999 (five days after the date on which the
Company filed its Form 10-KSB for fiscal 1998) for services rendered during
fiscal 1998. On November 19, 1998, the Board authorized the grant of 5,000
options under the 1997 Stock Option Plan to each of Messrs. Harris, Salvatore,
Krantz and Argenziano, to be effective on the date of the Annual Meeting, for
services to be rendered during fiscal 1999. All options are non-qualified stock
options, vest in full on the date of grant and expire five years from date of
grant.
Mr. Harris provided consulting services to the Company under the terms
of his consulting agreement, as described below. In fiscal 1998 he received
compensation of $97,500, including $50,000 for services rendered prior to fiscal
1998.
Mr. Krantz provided consulting services to the Company and received
compensation of $1,360 in fiscal 1998.
Employment Agreements
Effective February 10, 1998, the Company entered into three-year
employment agreements with Frank Cretella and Jeanne Cretella, which are
automatically renewable and provide for an annual base compensation of $175,000
and $75,000, respectively, and such bonuses as the Board of Directors may from
time to time determine. Each of the employment agreements requires the officer
to devote a majority of such officer's business time to the Company's business
and affairs and contains a provision that such officer will not compete or
engage in a business competitive with the current or anticipated business of the
Company during the term of the employment agreement and for a period of one year
thereafter. Each of the agreements also provides that if the officer is
terminated without cause (including as a result of a change in control), such
officer will be entitled to receive severance pay equal to the base compensation
through the term of the agreement, provided that if such officer is terminated
during the third year or the last year of any renewal term, such officer will be
entitled to receive additional compensation equal to the base compensation
received from the Company during the one-year period prior to the date of
termination.
Consulting Agreement
In July 1996, the Company entered into a two-year consulting agreement
with Kenneth L. Harris, Chairman of the Board of the Company, pursuant to which
Mr. Harris (through Platinum Restaurant Group, a company wholly owned by Mr.
Harris) has provided strategic planning, restaurant operations, marketing and
site evaluation consulting services for a fee equal to $2,500 per month through
December 1997 and $5,000 per month thereafter. The agreement is automatically
renewable for successive one-year periods, unless either party gives written
notice of its intention not to renew the agreement at least 30 days prior to the
end of the term or renewal term. In addition, pursuant to the consulting
agreement, in March 1998, the Company paid Mr. Harris $50,000 as payment for
consulting services rendered to the Company prior to entering into the
consulting agreement.
- 7 -
<PAGE>
VOTING SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of April 19,
1999 (based on information obtained from the persons named below), relating to
the beneficial ownership of shares of Common Stock by (i) each person or entity
who is known by the Company to own beneficially 5% or more of the outstanding
Common Stock, (ii) each of the Company's directors and nominees for director,
and (iii) all directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
Number of Shares Percentage of Shares
Name and Address of Beneficial Owners(1) Beneficially Owned Beneficially Owned(2)
- --------------------------------------------------------- ----------------------- -------------------------
<S> <C> <C>
Frank Cretella............................................. 1,989,106(3) 52.2%
Jeanne Cretella............................................ 1,246,459(4) 34.9
Richard A. Kayne (5)....................................... 740,724(6) 19.4
KAIM Non-Traditional, L.P.
Offense Group Associates, L.P. (7)......................... 370,497(8) 10.4
Peter J. Salvatore(9)...................................... 277,563(10) 7.7
Kenneth L. Harris.......................................... 162,782(11) 4.6
Frank Argenziano (12)...................................... 18,500(13) *
Barry Krantz............................................... 10,000(14) *
All directors and executive officers as a group
(seven persons)........................................... 2,563,960(15) 62.9%
</TABLE>
- ----------------
* Less than 1 %
(1) Unless otherwise indicated, the address for each named individual or
group is in care of TAM Restaurants, Inc., 1163 Forest Avenue, Staten
Island, New York 10310.
(2) Unless otherwise indicated, the Company believes that all persons
named in the table have sole voting and investment power with respect
to all shares of Common Stock beneficially owned by them. A person is
deemed to be the beneficial owner of securities that can be acquired
by such person within 60 days from the date of this Prospectus upon
the exercise of options, warrants or convertible securities. Each
beneficial owner's percentage ownership is determined by assuming that
options, warrants or convertible securities that are held by such
person (but not those held by any other person) and which are
exercisable within 60 days of the date of this Prospectus have been
exercised and converted. Assumes a base of approximately 3,503,000
shares of Common Stock outstanding, before any consideration is given
to other outstanding options or warrants.
(3) Represents (i) 1,179,235 shares held jointly by Frank Cretella and
Jeanne Cretella, (ii) 500,000 shares held by trusts of which Mr. and
Ms. Cretella's daughter is the beneficiary and of which Mr. Cretella
is a co-trustee with sole voting and dispositive power over the shares
held in the trusts, (iii) 93,750 shares of Common Stock issuable upon
exercise of options held by Frank Cretella, (iv) 144,081 shares of
Common Stock issuable upon conversion of Series A Preferred Stock held
by Frank Cretella and (v) 72,040 shares of Common Stock issuable upon
exercise of a warrant held by Frank Cretella. Does not include 56,250
shares of Common Stock issuable upon exercise of options held by Frank
Cretella.
(4) Represents (i) 1,179,235 shares held jointly by Frank Cretella and
Jeanne Cretella, (ii) 62,500 shares of Common Stock issuable upon
exercise of options held by Jeanne Cretella and (iii) warrants to
purchase 4,724
- 8 -
<PAGE>
shares of Common Stock held by Jeanne Cretella Does not include 37,500
shares of Common Stock issuable upon exercise of options held by Jeanne
Cretella
(5) The address for Richard A. Kayne and KAIM Non-Traditional, L.P.
("KAIM N-T") is 1800 Avenue of the Stars, Second Floor, Los Angeles,
California 90067.
(6) Based solely on a Schedule 13D, and amendments thereto, jointly filed with
the Securities and Exchange Commission by Mr. Kayne and KAIM N-T for which
each party reports shared voting and dispositive power over securities held
by several investment funds, including Offense Group Associates, L.P. (see
footnote (8) below), for which KAIM N-T acts as general partner and
investment advisor, except for other entities for which KAIM N-T acts
solely as investment advisor. Both parties report shared voting and
dispositive powers over a portion of the securities held under a 401(K)
plan of an affiliated entity. Mr. Kayne is an officer, director and
controlling stockholder of the company that acts as the general partner of
KAIM N-T. Includes 320,141 shares of Common Stock issuable upon exercise of
warrants held by two investment funds.
(7) The address for Offense Group Associates, L.P. ("OGALP") is 1800 Avenue of
the Stars, Second Floor, Los Angeles, California 90067.
(8) Based solely on a Schedule 13D, filed with the Securities and Exchange
Commission by OGALP, reporting shared voting and dispositive powers over
the securities held by OGALP, an investment fund, together with KAIM N-T,
its general partner and investment advisor and Mr. Kayne, the officer,
director and controlling stockholder of the company that acts as the
general partner of KAIM N-T. Includes 53,599 shares of Common Stock
issuable upon exercise of warrants held OGALP.
(9) The address for Mr. Salvatore is 35 Seagate Road, Staten Island, New York
10310.
(10) Includes (i) 9,082 shares of Common Stock held by Peter and Gail Salvatore
Foundation, Inc., a trust of which by Mr. and Mrs. Salvatore are the
beneficiaries, (ii) 5,000 shares of Common Stock issuable upon exercise of
options held by Mr. Salvatore, (iii) 5,000 shares of Common Stock issuable
upon exercise of options to be granted to Mr. Salvatore, (iv) 85,145 shares
of Common Stock issuable upon exercise of warrants held by Mr. Salvatore
and (v) 3,047 shares of Common Stock issuable upon exercise of warrants
held by Peter and Gail Salvatore Foundation, Inc.
(11) Includes (i) 110,282 shares owned jointly by Kenneth and Maureen Harris,
(ii) 5,000 shares owned by Maureen Harris, (iii) 40,000 shares of Common
Stock issuable upon exercise of options held by Mr. Harris, (iv) 5,000
shares of Common Stock issuable upon options to be granted to Mr. Harris
and (v) 2,500 shares of Common Stock issuable upon exercise of warrants
held by Mrs. Harris. Does not include 17,500 shares of Common Stock
issuable upon exercise of options held by Mr. Harris. Mr. Harris is an
officer of an affiliate of KAIM N-T but does not have voting or dispositive
power over the Company's securities reported by KAIM N-T (see footnote (6)
above), and therefore disclaims any beneficial ownership of such
securities.
(12) The address for Mr. Argenziano is 7 Hanover Square, New York, New York
10004.
(13) Includes (i) 13,500 shares of Common Stock issuable upon exercise of
warrants held by Mr. Argenziano and (ii) 5,000 shares of Common Stock
issuable upon exercise of options to be granted to Mr. Argenziano.
(14) Includes (i) 5,000 shares of Common Stock issuable upon exercise of options
held by Mr. Krantz and (ii) 5,000 shares of Common Stock issuable upon
exercise of options to be granted to Mr. Krantz.
(15) Includes an aggregate of 576,287 shares of Common Stock issuable upon the
exercise of options, warrants and Preferred Stock. Does not include an
aggregate of 123,750 shares of Common Stock issuable upon exercise of
options and warrants.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to January 1994, Ernest Cretella, father of Frank Cretella,
President, Chief Executive Officer, a director and a principal stockholder of
the Company, loaned the Company $100,000. In January 1994, Ernest Cretella
borrowed $125,000 from a bank, which was then loaned to the Company, and secured
the loan by mortgaging his personal residence. The Company repaid $50,000 of the
outstanding indebtedness owed to Ernest Cretella and the Company agreed to make
Ernest Cretella's mortgage payments to the bank. In September 1995, Ernest
Cretella converted the additional $50,000 principal amount of indebtedness owed
to him into 25,000 shares of Common Stock and 2,500 warrants. The Company
remains obligated to make Ernest Cretella's mortgage payments. In July 1996,
Ernest Cretella, loaned the Company an additional $55,000. Such loan bears
interest at the rate of 10% per annum, payable quarterly, and is due June 30,
2000.
In March 1994, the Company entered into a lease agreement to sublease
the space where Lundy's is located. Frank Cretella personally guaranteed the
Company's obligations to pay rent during the time which it occupies the leased
premises.
During 1994, Frank Cretella loaned the Company $12,500. In September
1996, Mr. Cretella borrowed $65,000 from the Company. During the year ended
September 28, 1997, Mr. Cretella repaid the $52,500 owed to the Company.
During 1995 and 1996, the Company borrowed an aggregate of $840,000
from Fleet Bank, N.A. Such loans were collateralized by the Company's principal
executive offices, which are owned by Mr. Cretella, the warehouse leased by the
Company and owned by Leisure Time Services, Inc. ("Leisure Time"), a company
owned by Jeanne Cretella, Vice President, director and a principal stockholder
of the Company, and Mr. and Ms. Cretella's personal residence, and guaranteed by
Mr. and Ms. Cretella and Leisure Time. In June 1997, Mr. Cretella agreed to pay
to Fleet $640,000 as payment for the amount owed by the Company (approximately
$720,000 as of October 15, 1997). In August 1997, Mr. Cretella paid to Fleet
$140,000 as part of the settlement. Mr. Cretella paid the balance of the
principal owed to Fleet and the Company paid accrued interest of approximately
$39,000 owed to Fleet in October 1997. As consideration for repaying the loan,
the Company issued to Mr. Cretella a promissory note in the original principal
amount of $720,405 which bears interest at the rate of 10% per annum. Interest
is payable in monthly installments of $6,003, with the outstanding principal
balance payable in November 2002 upon maturity of the note. In December 1998,
Mr. Cretella converted $720,405 of indebtedness owed to him by the Company into
144,081 shares of Series A Preferred Stock. As further inducement to Mr.
Cretella to convert the debt to equity the Company also issued to Mr. Cretella
72,040 warrants to purchase the Company's Common Stock at $6.00 per share. The
Company received a fairness opinion with respect to this transaction.
Prior to his employment by the Company, from October 1996 through
September 1997, Anthony Golio, Vice President of the Company, provided
consulting services to the Company through The Pineapple Group, Inc., a
restaurant consulting firm, wholly-owned by Mr. Golio, for which he was paid an
aggregate of $88,000. Such consulting services included organizational and
managerial training, labor and cost management, negotiating with vendors and
creating and restructuring management programs.
In June 1996, the Company borrowed $88,000 from Joseph De Giulio,
father of Jeanne Cretella. The loan bears interest at the rate of 10% per annum.
Interest is payable in monthly installments of $733 and the principal is due on
June 22, 2001.
In October 1996, the Company entered into a 10-year operating
agreement with American Leisure, a company wholly-owned by Frank Cretella, to
manage the food concessions at the Central Park Zoo and the Staten Island Zoo in
New York City for which the Company receives a management fee equal to 5% of
gross sales. During the year ended September 27, 1998, the Company received
$81,895 in fees from American Leisure. At September 27, 1998, American Leisure
owed the Company $78,107, which has no specified
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<PAGE>
repayment terms. Effective November 1998, American Leisure no longer operated
the food concession at the Central Park Zoo, accordingly, the operating
agreement is no longer in effect with respect to such concession.
In October 1996, the Company loaned to Leisure Time $153,863, pursuant
to a note which is payable in monthly installments of $1,996.01, that bears
interest at a rate of 9.56% per annum and expires on October 1, 2006. At
September 27, 1998, Leisure Time owed the Company an additional $24,155,
representing advances made during such fiscal year. The advances have no
specified repayment terms.
In October 1996, the Company entered into a lease agreement with Mr.
Cretella, pursuant to which the Company leases its executive offices in Staten
Island, New York. Annual rent under the lease was $37,500 during 1998,
increasing by 1.5% commencing in January of each subsequent year. The lease
expires on December 31, 2001. The Company believes that this lease is on
commercially reasonable terms.
In October 1996, the Company entered into a lease agreement with
Leisure Time, pursuant to which the Company leases a warehouse in Bayonne, New
Jersey. Annual rent under the lease was $30,000, during 1998, increasing by 1.5%
commencing in January of each subsequent year. The lease expires on December 31,
2001. The Company believes that this lease is on commercially reasonable terms.
In October 1997, Kayne Anderson Non-Traditional Investments, L.P. and
ARBCO Associates, L.P. affiliates of Kayne Anderson, loaned the Company an
aggregate of $1,000,000. The loans bear interest at the rate of 10% per annum
and are due May 31, 1999. The loan is guaranteed by Frank Cretella, President,
Chief Executive Officer, a director and a principal stockholder of the Company,
and the guarantee is secured by a pledge of 200,000 shares of Common Stock owned
by Frank Cretella and Jeanne Cretella, Vice President, a director and principal
stockholder of the Company. As partial consideration for the loans, the Company
issued to Kayne Anderson warrants (the "KA Warrants") to purchase 200,000 shares
of Common Stock. The KA Warrants are exercisable at a price of $5.00 per share
(subject to adjustment under certain circumstances) and are exercisable at any
time until October 31, 2002. In August, 1998 the Company and Kayne Anderson
agreed to amend the loan agreement whereby the maturity date of the loans was
extended to September 30, 1999. Kayne Anderson is an affiliate of KAIM
Non-Traditional, LP, a principal stockholder of the Company.
In December 1998, the Company entered into a licensing agreement with
KA Industries, a wholly owned subsidiary of Kayne Anderson, to market products
bearing the names Lundy's, The Boathouse, and Stork Club through KA Industries'
"Mrs. Beasley's" mail order catalog and retail outlets. Pursuant to the
agreement the Company is to receive a royalty on products sold.
In December 1998, the Company agreed to sublease 1,000 square feet of
its 6,000 square feet Bayonne warehouse to KA Industries, a wholly owned
subsidiary of Kayne Anderson, to operate a bakery. The sublease is a month to
month lease at a rent of $740.83 per month terminable upon 120 days notice by
either party. In conjunction with this transaction, KA Industries advanced
$30,000 to the Company to make modifications the Bayonne warehouse to
accommodate the bakery as well as an in-house laundry and a lobster pound with
such advance recaptured from rent and other charges due the Company from KA
Industries.
From time to time the Company has entered into equipment financing
leases which have been guaranteed by Mr. Cretella and/or Leisure Time.
Any future transactions with affiliates will be on terms no less
favorable to the Company than could be obtained from unaffiliated parties and
will be approved by a majority of the independent and disinterested members of
the Board of Directors, outside the presence of any interested directors and, to
the extent deemed appropriate by the Board of Directors, the Company will obtain
stockholder approval or fairness opinions in connection with any such
transaction.
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<PAGE>
PROPOSAL I
AMENDMENT OF 1997 STOCK OPTION PLAN TO INCREASE
THE NUMBER OF SHARES RESERVED FOR
ISSUANCE THEREUNDER FROM 525,000 TO 1,250,000
---------------------------------------------
At the Annual Meeting, the Company's stockholders will be asked to
approve an amendment to the Company's 1997 Stock Option Plan to increase the
number of shares of Common Stock reserved for issuance under the Plan from
525,000 to 1,250,000.
The Board believes that in order to enable the Company to continue to
attract and retain personnel of the highest caliber, provide incentive for
officers, directors, key employees and other key persons and continue to promote
the well-being of the Company, it is in the best interest of the Company and its
stockholders to provide to officers, directors, key employees, consultants and
other independent contractors who perform services for the Company, through the
granting of stock options, the opportunity to participate in the value and/or
appreciation in value of the Company's Common Stock. The Board has found that
the grant of options under the 1997 Stock Option Plan has proven to be a
valuable tool in attracting and retaining key personnel. It believes that the
authority to grant options, in view of the substantial growth of the Company and
need to continue to grow, should be expanded to increase the number of options
which may be granted under the 1997 Stock Option Plan. The Board believes that
such authority will provide the Company with significant means to attract and
retain talented personnel.
Summary of the 1997 Stock Option Plan
In October 1997, the Company's stockholders approved a stock option
plan (the "Option Plan") pursuant to which 525,000 shares of Common Stock have
been reserved for issuance upon the exercise of options designated as either (i)
incentive stock options ("ISOs") under the Internal Revenue Code of 1986, as
amended (the "Code") or (ii) nonqualified options. ISOs may be granted under the
Option Plan to officers and employees of the Company. Non-qualified options may
be granted to consultants, directors (whether or not they are employees),
employees or officers of the Company.
The purpose of the Option Plan is to encourage stock ownership by
certain directors, officers and employees of the Company and other persons
instrumental to the success of the Company. The Option Plan is intended to
qualify under Rule 16b-3 under the Exchange Act, and is administered by the
Board of Directors. The Board, within the limitations of the Option Plan,
determines the persons to whom options will be granted, the number of shares to
be covered by each option, whether the options granted are intended to be ISOs,
the duration and rate of exercise of each option, the option purchase price per
share and the manner of exercise, and the time, manner and form of payment upon
exercise of an option.
ISOs granted under the Option Plan may not be granted at a price less
than the fair market value of the Common Stock on the date of grant (or 110% of
fair market value in the case of persons holding 10% or more of the voting stock
of the Company). The aggregate fair market value of shares for which ISOs
granted to any employee are exercisable for the first time by such employee
during any calendar year (under all stock option plans of the Company and any
related corporation) may not exceed $100,000. Non-qualified options granted
under the Option Plan may not be granted at a price less than the fair market
value of the Common Stock on the date of grant. Options granted under the Option
Plan will expire not more than ten years from the date of grant (five years in
the case of ISOs granted to persons holding 10% or more of the voting stock of
the Company). All options granted under the Option Plan are not transferable
during an optionee's lifetime but are transferable at death by will or by the
laws of descent and distribution. In general, upon termination of employment of
an optionee other than by death or disability, all options granted to such
person which are not exercisable on the date of such termination immediately
terminate, and any options that are exercisable terminate three months following
termination of employment.
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<PAGE>
Effective as of February 10, 1998 the Company granted options under
the Option Plan to purchase an aggregate of 293,250 shares. Of such options,
options to purchase 75,000, 50,000, 35,000, and 25,000 shares were granted to
Mr. Cretella, Ms. Cretella, Mr. Harris and Mr. Golio, respectively, at an
exercise price of $5.00 per share. Of the options granted to each of Mr.
Cretella, Ms. Cretella, Mr. Harris and Mr. Golio, 50% vested immediately and the
balance will vest in increments of 25% of the shares covered thereby on each of
the first and second anniversaries of the date of grant, respectively. On
November 19, 1998 the Board authorized the grant of 204,000 options under the
Option Plan. Of such options, options to purchase 75,000, 50,000, 17,500 and
12,500 were authorized for granting to each of Mr. Cretella, Ms. Cretella, Mr.
Harris and Mr. Golio, respectively, no earlier than five days after the date on
which the Company files its Form 10-KSB for fiscal 1998. All of such options
vest in increments of 50% on the date of grant and 25% on each of the first and
second anniversaries of the date of grant and are exercisable upon vesting at a
price that is equal to the closing bid price of the Company's Common Stock on
the date of grant. The options expire five years from the date of vesting,
subject to earlier termination.
Certain Federal Income Tax Consequences of the 1997 Stock Option Plan
The following is a brief summary of the Federal income tax aspects of
grants made under the 1997 Stock Option Plan based upon statutes, regulations
and interpretations in effect on the date hereof. This summary is not intended
to be exhaustive, and does not describe state or local tax consequences.
1. Incentive Stock Options. The participant will recognize no taxable
income upon the grant or exercise of an Incentive Stock Option. Upon a
disposition of the shares after the later of two years from the date of grant
and one year after the transfer of the shares to the participant, (i) the
participant will recognize the difference, if any, between the amount realized
and the exercise price as long-term capital gain or long-term capital loss (as
the case may be) if the shares are capital assets in his or her hands; and (ii)
the Company will not qualify for any deduction in connection with the grant or
exercise of the options. The excess, if any, of the fair market value of the
shares on the date of exercise of an Incentive Stock Option over the exercise
price will be treated as an item of adjustment for his or her taxable year in
which the exercise occurs and may result in an alternative minimum tax liability
for the participant. In the case of a disposition of shares in the same taxable
year as the exercise where the amount realized on the disposition is less than
the fair market value of the shares on the date of exercise, there will be no
adjustment since the amount treated as an item of adjustment, for alternative
minimum tax purposes, is limited to the excess of the amount realized on such
disposition over the exercise price which is the same amount included in regular
taxable income.
If Common Stock acquired upon the exercise of an Incentive Stock
Option is disposed of prior to the expiration of the holding periods described
above, (i) the participant will recognize ordinary compensation income in the
taxable year of disposition in an amount equal to the excess, if any, of the
lesser of the fair market value of the shares on the date of exercise or the
amount realized on the disposition of the shares, over the exercise price paid
for such shares; and (ii) the Company will qualify for a deduction equal to any
such amount recognized, subject to the requirements of Section 162(m) of the
Code and that the compensation be reasonable. The participant will recognize the
excess, if any, of the amount realized over the fair market value of the shares
on the date of exercise, if the shares are capital assets in his or her hands,
as short-term or long-term capital gain, depending on the length of time that
the participant held the shares, and the Company will not qualify for a
deduction with respect to such excess.
Subject to certain exceptions for disability or death, Incentive Stock
Options not otherwise terminated and exercised more than three months following
the termination of the participant's employment will generally be taxed as a
Non-Qualified Stock Option.
2. Non-Qualified Stock Options. With respect to Non-Qualified Stock
Options (i) upon grant of the option, the participant will recognize no income;
(ii) upon exercise of the option (if the shares are not subject to a substantial
risk of forfeiture), the participant will recognize ordinary compensation income
in an amount equal to the excess, if any, of the fair market value of the shares
on the date of exercise over the exercise price, and
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<PAGE>
the Company will qualify for a deduction in the same amount, subject to the
requirements of Section 162(m) of the Code and that the compensation be
reasonable; (iii) the Company will be required to comply with applicable Federal
income tax withholding requirements with respect to the amount of ordinary
compensation income recognized by the participant; and (iv) on a sale of the
shares, the participant will recognize gain or loss equal to the difference, if
any, between the amount realized and the sum of the exercise price and the
ordinary compensation income recognized. Such gain or loss will be treated as
short-term or long-term capital gain or loss if the shares are capital assets in
the participant's hands depending upon the length of time that the participant
held the shares.
The approval of the proposed amendment to the Company's 1997 Stock
Option Plan requires the affirmative vote of a majority of the shares of Common
Stock present in person or represented by proxy at the Annual Meeting, provided
a quorum exists.
The Board believes that the Proposed Amendment to the 1997 Stock
Option Plan will help the Company attract and retain qualified officers,
directors and key employees. Accordingly, the Board believes that the Amendment
to the 1997 Stock Option Plan is in the best interest of the Company and
unanimously recommends a vote FOR its approval.
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<PAGE>
INDEPENDENT AUDITORS
BDO Seidman, LLP are the Company's independent auditors who reported
on the financial statements of the Company for the fiscal years ended September
28, 1997 and September 27, 1998. It is currently anticipated that BDO Seidman,
LLP will be selected by the Board of Directors to examine and report on the
financial statements of the Company for the year ending September 29, 1999. A
representative of BDO Seidman, LLP is expected to be present at the Annual
Meeting, will have the opportunity to make a statement if the representative
desires to do so, and is expected to be available to respond to appropriate
questions.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Stockholders who wish to present proposals appropriate for
consideration at the Company's Annual Meeting of Stockholders to be held in 2000
must submit the proposal in proper form to the Company at its address set forth
on the first page of this Proxy Statement not later than February 1, 2000 in
order for the proposition to be considered for inclusion in the Company's proxy
statement and form of proxy relating to such annual meeting. Any such proposals,
as well as any questions related thereto, should be directed to the President of
the Company.
OTHER INFORMATION
A COPY OF THE COMPANY'S ANNUAL REPORT FOR THE YEAR ENDED SEPTEMBER 27,
1998 IS BEING FURNISHED HEREWITH TO EACH STOCKHOLDER OF RECORD AS OF THE CLOSE
OF BUSINESS ON APRIL 19, 1999.
The Board of Directors is aware of no other matters, except for those
incident to the conduct of the Annual Meeting, that are to be presented to
stockholders for formal action at the Annual Meeting. If, however, any other
matters properly come before the Annual Meeting or any adjournments thereof, it
is the intention of the persons named in the proxy to vote the proxy in
accordance with their judgment.
By order of the Board
of Directors,
Frank Cretella
President and Chief Executive Officer
April 26, 1999
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<PAGE>
TAM RESTAURANTS, INC.
1163 Forest Avenue
Staten Island, New York 10310
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 28, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints FRANK CRETELLA and ANTHONY B. GOLIO and
each of them, Proxies, with full power of substitution in each of them, in the
name, place and stead of the undersigned, to vote at the Annual Meeting of
Stockholders of TAM Restaurants, Inc. (the "Company") on Friday, May 28, 1999,
at The Manor East, 201 Jerusalem Avenue, Massapequa, New York 11758, or at any
adjournment or adjournments thereof, according to the number of votes that the
undersigned would be entitled to vote if personally present, upon the following
matters:
ELECTION OF DIRECTORS:
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below). to vote for all nominees
listed below.
Frank Cretella, Jeanne Cretella, Kenneth L. Harris
Peter J. Salvatore, Barry E. Krantz and Frank Argenziano
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space below.)
- --------------------------------------------------------------------------------
(Continued and to be signed on reverse side)
1. Approval of Amendment to the Company's 1997 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ABOVE. IF NO
INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR THOSE NOMINEES AND THE
PROPOSALS LISTED ABOVE.
DATED: ____________________,1999
________________________________
Signature
________________________________
Signature if held jointly
Please sign exactly as name
appears hereon. When shares are
held by joint tenants, both
should sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give full title
as such. If a corporation,
please sign in full corporate
name by President or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
Please mark, sign, date and return this proxy card using the enclosed envelope.
