<PAGE>
SCHEDULE 14A INFORMATION
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
EASYRIDERS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
EASYRIDERS, INC.
28210 Dorothy Drive
Agoura Hills, California 91301
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Easyriders, Inc., which will be held this year on Thursday, June 22, 2000. The
meeting starts at 1:00 p.m., local time, at the Radisson Hotel, 30100 Agoura
Road, Agoura Hills, California.
The business we'll discuss at the Annual Meeting is described in the
enclosed Proxy Statement and formal Notice of Meeting.
1999 was a difficult year for the Company, but the prospects for the year
2000 and beyond are encouraging. I look forward to explaining our recent
operating results and the strategies we are employing to increase the value of
and return on your investment in Easyriders, Inc.
Hope to see you on June 22.
Sincerely,
/s/ William E. Prather
William E. Prather
Chief Executive Officer
and President
May 19, 2000
<PAGE>
EASYRIDERS, INC.
28210 Dorothy Drive
Agoura Hills, California 91301
__________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on Thursday, June 22, 2000
____________________
To Our Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders of
Easyriders, Inc. (the "Company") will be held on Thursday, June 22, 2000 at the
Radisson Hotel, 30100 Agoura Road, Agoura Hills, California at 1:00 p.m., local
time, for the following purposes:
1. To elect Directors of the Company for the ensuing year;
2. To ratify the appointment of Deloitte & Touche LLP ("Deloitte &
Touche") as independent auditors of the Company for its fiscal year
ending December 31, 2000;
3. To ratify the issuance of 4,253,434 common shares to two directors of
the Company pursuant to private placements consummated in April 1999;
July 1999 and February 2000 (the "Private Placements");
4. To approve an amendment to the Company's 1998 Executive Incentive
Compensation Plan; and
5. To consider and transact such other business as may properly come
before the Annual Meeting or any adjournments thereof.
The close of business on May 11, 2000 is the record date for determining
stockholders entitled to notice of and to vote at the Annual Meeting and any
adjournments thereof. A list of such stockholders will be available for a
period of 10 days prior to the Annual Meeting for examination by any
stockholder, for any purpose germane to the meeting, during normal business
hours at the corporate offices of the Company.
We encourage you to attend the Annual Meeting in person or to vote your
shares by proxy. REGARDLESS OF WHETHER YOU EXPECT TO ATTEND THE ANNUAL MEETING
IN PERSON, PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY IN THE
ACCOMPANYING ENVELOPE AT YOUR EARLIEST CONVENIENCE. The proxy is revocable at
any time before it is voted. Returning the proxy will in no way limit your right
to vote at the Annual Meeting if you later decide to attend in person.
By Order of the Board of Directors,
/s/ J. Robert Fabregas
J. Robert Fabregas
Executive Vice President,
Chief Financial Officer and Secretary
Agoura Hills, California
May 19, 2000
<PAGE>
EASYRIDERS, INC.
28210 Dorothy Drive
Agoura Hills, California 91301
___________________
PROXY STATEMENT
________________
GENERAL INFORMATION
The enclosed proxy is being solicited by the Board of Directors (the
"Board") of Easyriders, Inc., a Delaware corporation (the "Company"), for use at
the Company's Annual Meeting of Stockholders (the "Annual Meeting") to be held
on Thursday, June 22, 2000, at 1:00 p.m. local time at the Radisson Hotel, 30100
Agoura Road, Agoura Hills, California and any adjournment thereof. Holders of
record of the Company's common stock, $.001 par value (the "Common Stock"), at
the close of business on May 11, 2000 (the "Record Date") are entitled to vote
at the Annual Meeting. As of April 17, 2000, there were 29,058,544 shares of
Common Stock outstanding. Each share of Common Stock entitles the holder to one
vote.
Four matters are scheduled for stockholder consideration at the Annual
Meeting: (i) election of the Directors of the Company to hold office until the
annual meeting of stockholders of the Company to be held in 2001 or until
successors are duly elected and qualified, (ii) ratification of the appointment
of Deloitte & Touche as independent auditors of the Company for its fiscal year
ending December 31, 2000, (iii) ratification of the Private Placements, and (iv)
approval of an amendment to the Company's 1998 Executive Incentive Compensation
Plan.
In accordance with the Company's by-laws, the Company's eight Directors
will be elected and the appointment of Deloitte & Touche will be ratified by a
majority of the votes of the shares of Common Stock present (or represented by
proxy) at the Annual Meeting and entitled to vote on the election of Directors.
Ratification of the Private Placements will require approval of the majority of
disinterested votes cast on the proposal. The Board knows of no matters, other
than those previously mentioned, to be presented for consideration at the Annual
Meeting. The persons named in the proxy may also, at their discretion, vote the
proxy to adjourn the Annual Meeting from time to time.
With respect to the election of the Company's eight Directors, you may vote
for the nominees as listed herein, or withhold authority to vote for the
nominees. A direction to withhold authority to vote will have the effect of an
abstention. You may vote for, against or abstain from voting with respect to
the ratification of the appointment of Deloitte & Touche as independent auditors
of the Company for its fiscal year ending December 31, 2000.
All properly executed, unrevoked proxies received pursuant to this
solicitation prior to the close of voting will be voted as directed therein.
You may revoke your proxy delivered pursuant to this solicitation at any time
prior to its use by executing and delivering a later proxy, by giving written
notice of the revocation to the Corporate Secretary of the Company at or before
the Annual Meeting, or by attending the Annual Meeting and voting in person.
If a properly executed, unrevoked proxy which has been delivered pursuant
to this solicitation does not specifically direct the voting of the shares
covered thereby, the shares represented by the proxy will be voted (1)
1
<PAGE>
FOR the election of the nominees for the Company's eight Directors, (2) FOR
ratification of the appointment of Deloitte & Touche as independent auditors of
the Company for its fiscal year ending December 31, 2000, (3) FOR ratification
of the Private Placements, (4) FOR approval of an amendment to the Company's
1998 Executive Incentive Compensation Plan and (5) in accordance with the
judgment of the persons named in the proxy as to such other matters as may
properly come before the Annual Meeting.
The holders of a majority of the outstanding shares of Common Stock present
at the Annual Meeting in person or by proxy will constitute a quorum for the
transaction of business at the Annual Meeting. Abstentions and broker non-votes
will count in determining whether a quorum is present at the Annual Meeting.
However, abstentions and broker non-votes with respect to any specific matter
will be treated as shares not voted for purposes of determining whether the
requisite vote has been obtained. If a quorum is not present, a majority of the
stockholders entitled to vote who are present in person or by proxy at the
Annual Meeting will have the power to adjourn the Annual Meeting from time to
time, without notice other than an announcement at the Annual Meeting, until a
quorum is present. At any reconvened Annual Meeting at which a quorum is
present, any business may be transacted that might have been transacted at the
Annual Meeting as originally notified.
The Company's Annual Report to Stockholders, including its Form 10-K for
the fiscal year ended December 31, 1999 with certified financial statements, and
the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 2000, are enclosed with this Proxy mailed to the Stockholders on or about
May 19, 2000.
The cost of preparing, assembling and mailing this proxy solicitation
material and Notice of Annual Meeting will be paid by the Company. Additional
solicitation by mail, telephone, telegraph or by personal solicitation may be
done by directors, officers and regular employees of the Company for which they
will receive no additional compensation. Brokerage houses and other nominees,
fiduciaries and custodians nominally holding shares of Common Stock as of the
Record Date will be requested to forward proxy solicitation material to the
beneficial owners of such shares, and will be reimbursed by the Company for
their reasonable expenses.
Proposal 1
ELECTION OF DIRECTORS
All Directors of the Company are elected to one term and serve until the
next annual meeting of stockholders and until their successors are duly elected
and qualified, or until their earlier resignation or removal. The current term
of Directors will expire at the Annual Meeting of Stockholders to be held on
Thursday, June 22, 2000.
The Board has nominated the eight incumbent Directors, John E. Martin,
William E. Prather, Wayne L. Knyal, Daniel J. Gallery, Joseph Teresi, Stewart G.
Gordon, John P. Corrigan and Joseph J. Jacobs, for re-election, each to hold
office until the annual meeting of stockholders held in 2001 or until a
successor is duly elected and qualified, subject to prior termination of service
in accordance with the Company's certificate of incorporation, by-laws and
applicable law. In the event a candidate is unable to serve, the persons listed
in the enclosed proxy will vote for a replacement nominee recommended by the
Board. The number of members of the Board is currently set at eight. Certain
information concerning the individuals nominated by the Board, is set forth
below.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RE-ELECTION OF ALL
EIGHT DIRECTORS OF THE COMPANY.
2
<PAGE>
Directors -- Term Expiring 2000
Mr. John E. Martin, age 54, has been Chairman of the Easyriders Inc.
("Easyriders" or the "Company") Board of Directors since June 1998 and was the
Chairman of the Newriders, Inc. ("Newriders") Board of Directors from July 1997
until September 1998. He served as Chief Executive Officer of Newriders from
July 1997 until October 1997. From October 1996 until June 1997, Mr. Martin was
Chairman and Chief Executive officer of PepsiCo. Casual Dining International, a
division of PepsiCo. In October 1995, Mr. Martin became Chairman of Taco Bell
Corp. where he also served as Chief Executive Officer from August 1983 until his
departure in October 1996. Mr. Martin is a member of the Educational Foundation
of the National Restaurant Association's Board of Trustees, and is a founding
member of the Chief Executive Round Table at the University of California,
Irvine. Mr. Martin is a director of The Good Guys, Inc. (NASDAQ:GGY), Williams-
Sonoma, Inc. (NYSE:WSM), Diedrich Coffee, Inc. (NASDAQ:DDRX), and privately held
GO2 Systems, Inc.
Mr. William E. Prather, age 52, has been the President and Chief Executive
Officer of Easyriders since September 1998 and was the President and Chief
Executive Officer of Newriders from October 1997 until September 1998. Mr.
Prather has served as a director of Easyriders since June 1998. Mr. Prather is
the founder and President of M & B Restaurants, L.C. and was the Chief Executive
Officer of Furr's Bishop's Cafeteria, Inc. from February 1992 to October 1994.
Mr. Prather has served as Chief Executive officer of Hardee's and has been
employed by Burger King in various capacities including Regional Manager, Head
of European Operations and Executive Vice President of Worldwide Operations.
Mr. Wayne L. "Buz" Knyal, age 53, has served as a director and Chairman of
the Compensation Committee of Easyriders since September 1998 and was a director
of Newriders from August 1997 until September 1998. Mr. Knyal is President of
Bay View FMAC, which has operated as a subsidiary of Bay View Bank, NA since
November, 1999 when FMAC merged with Bay View Capital Corporation (NYSE:BVC)
Mr. Knyal is a major shareholder and director of BVC. Prior to founding FMAC's
predecessor in 1991, Mr. Knyal founded and owned CBI Insurance Services, Inc.
and concurrently served as President of CBI Mortgage Company, a residential
mortgage banker.
Mr. Daniel J. Gallery, age 45, has served as a director of Easyriders since
September 1998 and was a director of Newriders from August 1997 until September
1998. Mr. Gallery is a co-founder of Carts of Colorado, Inc., which is engaged
in mobile and modular merchandising and the utilization of non-traditional
locations for food service operations, including airports, stadiums and arenas,
convenience stores, and golf courses. Mr. Gallery continues as Executive Vice
President for Carts of Colorado, Inc., a position he has held for a period of
more than five years. He is a member of the Board of Directors of Cohabaco Cigar
Company, a private venture engaged in cigar marketing, and the National
Association of Concessionaires.
Mr. Joseph Teresi, age 59, has served as a director of Easyriders since
September 1998. He founded Paisano Publications, Inc ("Paisano Publications")
in 1970 and since 1986 has been the sole shareholder of Paisano Publications.
He has served as Chairman of the Board of Directors of Paisano Publications and
certain other companies affiliated with Paisano Publications (the "Paisano
Companies") for more than the past five years.
Mr. Stewart G. Gordon, age 63, has served as a director of Easyriders since
August 1999. Mr. Gordon has been an independent management consultant since
1992. Between 1989 and 1991, he was the Chief Executive Officer of Pratt
Industries of Melbourne, Australia, a paper and packaging manufacturer. Prior
to that, he held various executive positions at ITT, including Executive Vice
President - Operations, ITT Rayonier; President, ITT Communications Services
Group; and Vice President, ITT Corporation.
3
<PAGE>
Mr. John P. Corrigan, age 40, has served as a director of Easyriders since
October 1999. Mr. Corrigan has been a principal of the Breakwater Group, a
business consulting practice, since 1996. From 1993 to 1996, Mr. Corrigan was
Vice President, Corporate Secretary and Tax Counsel of White River Corporation,
an investment holding company. Mr. Corrigan is a Certified Public Accountant, a
Certified Financial Planner, a Certified Valuation Analyst, and an attorney
admitted to practice in New York, Connecticut and the U.S. Tax Court.
Mr. Joseph J. Jacobs, age 75, has served as a director of Easyriders since
September 1998 and has been an independent legal counsel on merger and
acquisition matters for the Paisano Companies since 1992. Mr. Jacobs has served
as General Counsel of Graphic Scanning Corp. and Ram/BSE LP and has served in
various legal positions with American Broadcasting Company, Metromedia, Inc.,
United Artists Broadcasting, ITT Corporation's Communications Operations Group,
ITT World Communications, Inc. and United States Transmission Systems, Inc.
Composition and Meetings of the Board of Directors and Committees
During the fiscal year ended December 31, 1999, the Board met eight times.
The standing committees of the Board are the Compensation Committee and the
Audit Committee.
The Compensation Committee currently consists of Messrs. Knyal (Chairman),
Gallery and Jacobs. The Compensation Committee reviews and makes
recommendations regarding the salary, bonus and other benefits, direct and
indirect, of the Chairman of the Board of Directors, the President and Chief
Executive Officer, other management directors, and other members of senior
management designated by the Board. In 1999, the Compensation Committee met one
time.
The Audit Committee currently consists of Messrs. Jacobs (Chairman),
Gallery, Knyal and Corrigan. It is responsible for retaining the Company's
independent accountants and consulting with them regarding the scope and timing
of their audit, the accountant's report concerning the Company's audited
financial statements and the Company's internal accounting controls. The Audit
Committee met one time in 1999.
Directors' Compensation
Except for annual Formula Grants of 15,000 shares under option for each
non-employee director of the Company, the Company's directors do not receive any
compensation for service on the Company's Board of Directors or any committee
thereof but are reimbursed for expenses incurred in connection with attending
meetings of the Company's Board of Directors and any committee thereof.
Stockholders' Voting Agreement.
John Martin and Joseph Teresi entered into a Stockholders' Voting Agreement
which provides that Mr. Martin and Mr. Teresi shall each be entitled to
designate four individuals to serve on the Board of Directors of Easyriders, and
that they each agree to vote their shares for the persons designated by the
other to so serve. One of the persons designated by Mr. Teresi is required to
be a non-employee director within the meaning of Rule 16b-3 under the Securities
and Exchange Act of 1934, as amended (the "Exchange Act"), and Section 162(m) of
the Internal Revenue Code (the "Code"). Mr. Martin has designated himself and
Messrs. Prather, Knyal and Gallery to serve on the Board of Directors, and Mr.
Teresi has designated himself and Messrs. Gordon, Corrigan and Jacobs to serve
on the Board of Directors. Mr. Jacobs is a non-employee director within the
meaning of Rule 16b-3 under the Exchange Act and Section 162(m) of the Code.
4
<PAGE>
Proposal 2
INDEPENDENT ACCOUNTANTS
Subject to stockholder ratification, the Board of Directors, on the
recommendation of the Audit Committee, has appointed the firm of Deloitte &
Touche, independent accountants, as the Company's independent accountants to
audit the Company's consolidated financial statements for the fiscal year ending
December 31, 2000. Deloitte & Touche has served as the Company's independent
accountants since 1998 and as Newriders independent accountants since January
1998. Representatives of Deloitte & Touche are expected to be present at the
Annual Meeting and will have an opportunity to make a statement on behalf of
their firm if they wish. They will also be available to respond to any
appropriate questions of any stockholder of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE AS THE COMPANY'S INDEPENDENT AUDITOR.
Proposal 3
ISSUANCE OF COMMON STOCK PURSUANT TO PRIVATE PLACEMENTS
On two occasions during 1999 and once in the year 2000, the Company's
liquidity was jeopardized to the extent that it was unable to meet current
obligations except by raising cash through the issuance of shares to John Martin
and Joe Teresi pursuant to the Private Placements, the details of which are as
follows:
<TABLE>
<CAPTION>
Date Issuee No. of Shares Consideration Paid
---- ------ -------------- ------------------
<S> <C> <C> <C>
April 1999 John Martin 1,397,950 $1,500,000 in cash
April 1999 Joe Teresi 1,397,950 $1,500,000 in forgiveness of debt and interest on debt/1/
July 1999 John Martin 234,940 $ 250,000 in cash
July 1999 Joe Teresi 234,940 $ 250,000 in cash
February 2000 John Martin 493,827 $ 250,000 in cash
February 2000 Joe Teresi 493,827 $ 250,000 in cash
</TABLE>
Each of these transactions was authorized by the Board of Directors (with
Messrs. Martin and Teresi not voting), and documented by the execution of a
Stock Purchase Agreement between the issuee and the Company. The Private
Placements were exempt from registration pursuant to section 4 (2) of the
Securities Act of 1933 as amended (the "Securities Act"). The consideration
paid was based on a 25% discount from the market price of the Company's common
shares, "market price" being determined as the average daily closing price of
the Company's common stock on the American Stock Exchange over ten consecutive
trading days ending on and including the date of sale. Issuance of the shares at
a discount to market price was deemed by the Board of Directors to be in the
best interests of the Company, as an inducement to secure the purchase thereof
by the issuees in question, and deemed by the Board to be fair to all
shareholders from a financial point of view. In this
___________________________
/1/ As described in full in the Company's Proxy Statement dated May 14, 1999
under "Certain Transactions with Interested Parties," which Proxy Statement is
hereby incorporated herein by reference.
5
<PAGE>
regard, the Board of Directors relied upon a fairness opinion which was issued
by Imperial Capital, LLC on April 8, 1999.
Ratification of the Private Placements by a majority of the disinterested
shareholders voting on this issue is required so that the shares in question may
be listed on the American Stock Exchange ("AMEX"), as required by Section 711 of
the Listing Standards, Policies and Requirements of AMEX.
If the Private Placements are ratified and the shares issued in the Private
Placements are listed on AMEX, the sale thereof by Messrs. Martin and Teresi are
subject to certain restrictions under various provisions of the Securities Act,
the Securities Exchange Act of 1934 as amended (the "Exchange Act"), including
Rule 144 promulgated under the Securities Act, and Section 16 of the Exchange
Act. In general terms, Rule 144 defines certain holding periods for shares
acquired in private placements and by officers, directors and certain other
individuals; and Section 16 of the Exchange Act regulates the sale of shares by
officers and directors with respect to timing and volume.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF THE
PRIVATE PLACEMENTS AND ISSUANCE OF THE SHARES PURSUANT THERETO.
Proposal 4
AMENDMENT TO COMPANY'S 1998 EXECUTIVE INCENTIVE COMPENSATION PLAN
Subject to stockholder approval, the Board of Directors has approved an
amendment to section (d) of the Company's 1998 Executive Incentive Compensation
Plan. (the "Compensation Plan"). The amended section would read as follows:
d. Long-Term Incentive Target -
(i) Subject to the provisions of subsection (ii) below, Easyriders'
generation of cash from any source (which may include operating profits,
completion of a public or private offering of debt and/or equity
securities, sale of assets, merger or other business transaction or series
of transactions) adequate to enable Easyriders to either (a) pay in full
(irrespective of the source of payment) all amounts due under the [Nomura
Note] and the [Contributor Notes], or (b) arrange for or cause the [Nomura
Note and the [Contributor Note] to be assumed by a third party, provided
that as to the [Contributor Note], such assumption shall not be deemed to
satisfy the Long-Term Incentive Target of John Martin without the express
written consent of Joseph Teresi.
(ii) Successful completion of any of the foregoing after January 1,
2000 shall constitute satisfaction of the Long Term Incentive Target only
if at least 80% of the EBITDA Target with respect to the Annual Incentive
Award for the year immediately preceding the year in which the conditions
of (i) above are satisfied has been met, or at least 80% of the EBITDA with
respect to the Annual Incentive Award for each of the second and third
calendar years preceding the year in which such conditions have been
satisfied has been met. For example, if the EBITDA Target for the year 2001
is $10,000,000 and EBITDA for 2001 $8,000,000, then the proviso to the
foregoing sentence shall have been satisfied for any date in the year 2002;
and if the EBITDA Target for the years 2001, 2000 and 1999 is $10,000,000,
$9,000,000 and $8,000,000
6
<PAGE>
respectively, and EBIDTA for such years is $7,000,000, $7,200,000 and
$6,400,000 respectively, then the proviso to the foregoing sentence shall
have been satisfied for any date in the year 2002.
The foregoing amendment does not affect the earnings results which must be
achieved by the Company in order for the Long Term Bonus ("Bonus") to be
awarded, rather it only revises the criteria for determining if an event
triggering payment of the Bonus has occurred (each a "Triggering Event").
Currently, the only Triggering Event is generation of sufficient funds to retire
the Nomura Note and Contributor Notes through a public or private debt or equity
securities offering. This language would deny Mr. Martin the Bonus if such debt
were retired through other events and/or transactions generating sufficient
funds to retire the applicable debt, such as a sale of assets, merger,
acquisition or re-structuring. An affirmative vote on this Proposal No. 4 would
amend the Compensation Plan to permit payment of the Bonus on the basis of these
other types of Triggering Events, so long as the existing EBIDA standards are
met. This revision is consistent with Mr. Martin's understanding of the terms
of his initial investment in the Company, and subject to shareholder approval
has been endorsed by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE
AMENDMENT TO THE COMPANY'S 1998 EXECUTIVE INCENTIVE COMPENSATION PLAN
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of April 14, 2000, regarding
the beneficial ownership of Common Stock by (1) each stockholder known by the
Company to be the beneficial owner of more than 5% of the Common Stock; (2) by
each Director of the Company; (3) by each Named Officer; and (4) by all
executive officers and directors of the Company as a group. Except as indicated
in the footnotes hereto, each person named in the table has (or could have upon
exercise of an option vested or vesting within 60 days after April 14, 2000)
sole voting and investment power (or such power together with any spouse of such
person, if they are joint tenants) with respect to securities beneficially owned
by such person as set forth opposite such person's name.
Common Stock Beneficially Owned On April 14, 2000
<TABLE>
<CAPTION>
Amount and Nature Percentage of
of Beneficial Outstanding
Ownership of Common Stock of
Name of Beneficial Owner Easyriders /1/ Easyriders /1/
- ------------------------ -------------- --------------
<S> <C> <C>
Directors
John E. Martin/2/................ 7,271,214 22.9%
Wayne L. Knyal/3//9/............... 1,630,006 5.1%
Daniel J. Gallery/4/............... 55,500 *
Joseph Teresi/5/................... 12,812,061 40.3%
Stewart Gordon..................... 0 *
John Corrigan...................... 0 *
Joseph J. Jacobs/6/................ 23,000 *
Executive Officers
William E. Prather/7/.............. 1,500,100 4.7%
J. Robert Fabregas/8/.............. 55,000 *
</TABLE>
7
<PAGE>
<TABLE>
<S> <C> <C>
All Executive Officers and
Directors of Easyriders as a
group (9 persons)............. 23,346,881 73.4%
</TABLE>
* Indicates less than 1% ownership.
Unless otherwise indicated, the address of each beneficial owner listed
above is c/o Easyriders, Inc., 28210 Dorothy Drive, Agoura Hills, California
91301.
/1/ Assumes that the shares of Newriders common stock held in the name of Rick
Pierce are returned and canceled (See "Certain Transactions With Related
Parties")
/2/ Easyriders shares for Mr. Martin include 96,150 shares held through the
John E. Martin Revocable Trust dated June 16, 1992, of which Mr. Martin is
trustee and beneficiary.
/3/ Mr. Knyal holds options to purchase (i) up to 15,000 shares of Common Stock
at $5.00 per share, of which 10,000 shares are beneficially owned, (ii) up
to 15,000 shares of Common Stock at $2.84 per share, of which 10,000 shares
are beneficially owned, and (iii) up to 15,000 shares of Common Stock at
$1.625 per share, of which 5,000 are beneficially owned. He also holds
warrants to purchase up to 12,500 shares of Common Stock at $5.96 per
share.
/4/ Mr. Gallery holds options to purchase (i) up to 15,000 shares of Common
Stock at $5.00 per share, of which 10,000 shares are beneficially owned,
(ii) up to 15,000 shares of Common Stock at $2.84 per share, of which
10,000 shares are beneficially owned, and (iii) up to 15,000 shares of
Common Stock at $1.625 per share, of which 5,000 are beneficially owned.
The Easyriders share total for Mr. Gallery also includes 20,000 shares held
of record by G3 Holdings, LLC, a limited liability company in which Mr.
Gallery, his brother and his sister are co-managers and owners.
/5/ Mr. Teresi holds an option to purchase up to 500,000 shares of Common Stock
at $1.75 per share, of which 166,667 shares are beneficially owned.
/6/ Mr. Jacobs hold options to purchase (i) up to 15,000 shares of Common Stock
at $2.00 per share, of which 5,000 shares are beneficially owned, (ii) up
to 5,000 shares of Common Stock at $5.00 per share, (iii) up to 5,000
shares of Common Stock at $1.75 per share, and (iv) up to 15,000 shares of
Common Stock at $ 1.625 per share, of which 5,000 are beneficially owned.
The Easyriders share total for Mr. Jacobs also includes 2,000 shares held
of record by his wife.
/7/ Mr. Prather holds an option to purchase up to 750,000 shares of Common
Stock at $1.75 per share, of which 500,000 shares are beneficially owned.
/8/ Mr. Fabregas holds an option to purchase (i) up to 75,000 shares of Common
Stock at $2.0625 per share, of which 25,000 shares are beneficially owned,
and (ii) up to 90,000 shares of Common Stock at $1.375 per share, of which
30,000 shares are beneficially owned.
/9/ Includes 1,333,333 shares beneficially owned by Mr. Knyal based on the
assumed conversion of a $1,000,000 convertible debenture, and 259,173
shares issued to Mr. Knyal in payment of accrued interest on such
debenture.
8
<PAGE>
EXECUTIVE OFFICERS
The executive officers of the Company are its senior elected officers and
serve for terms of office determined by the Board. Biographical summaries of the
business experience of Mr. Martin, Chairman of the Board, Mr. Prather, President
and Chief Executive Officer, and Joseph Teresi, Director, are included above.
The name, age, and biographical information with respect to the other executive
officer is as follows:
J. Robert Fabregas, Executive Vice President, Chief Financial Officer and
Secretary, age 55, was appointed the Executive Vice President, Chief Financial
Officer and Secretary of the Company in January 1999. Mr. Fabregas was the
President, CEO and major shareholder of Stonepine Holdings, Limited from June
1988 to December 1998. Mr. Fabregas served as a director of Numex Corporation
(BB:NUMX) from March 1998 through December 1998.
EXECUTIVE COMPENSATION
The following table summarizes all compensation for services to the Company
and its subsidiaries for the fiscal years ended December 31, 1999, 1998 and 1997
earned by or awarded or paid to the persons who were the chief executive officer
and the other officers of the Company whose compensation exceeded $100,000
during 1999 (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
================================================================================================================================
Long Term
Compensation
Annual Compensation Awards
------------------------------------------------------
Securities
Underlying All Other
Name Options/ Compensation
and Principal Position Year Salary ($) Bonus ($) SARs (#) ($)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
John E. Martin, 1999 $150,000 $813,214/6/ -- --
Chairman of the Board 1998 $222,917/1/ $212,143/6/ -- --
of Directors 1997 $114,583/1/ -- 2,000,000/4/ $75,000/5/
- --------------------------------------------------------------------------------------------------------------------------------
William E. Prather, 1999 $200,000 -- 750,000/7/ --
President, Chief Executive Officer and 1998 $200,000/2/ -- -- --
Director 1997 $ 41,667/2/ -- 750,000/4/ --
- --------------------------------------------------------------------------------------------------------------------------------
J. Robert Fabregas, 1999 $185,000/3/ -- 75,000/8/ --
Executive Vice President of Finance, 1998 -- -- -- --
Chief Financial Officer and Secretary 1997 -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Joseph Teresi, 1999 $150,000/9/ -- 500,000/7/ --
Chairman and Publisher of Subsidiary 1998 $ 40,685/9/ -- -- --
1997 -- -- -- --
==========================================================================================================================
</TABLE>
/1/ In July 1997, Mr. Martin became Chairman of the Board of Directors of
Newriders and the interim Chief Executive Officer (a position he held until
October 1997) at an annual base salary of $250,000. Mr. Martin's
9
<PAGE>
salary for 1997 accrued during the year, and was paid in January 1998. Mr.
Martin agreed to a reduction of his salary to $150,000 per year which became
effective on September 23, 1998.
/2/ In October 1997, Mr. Prather became the President and Chief Executive
Officer of Newriders at an annual base salary of $200,000. Mr. Prather's
salary for 1997 accrued during the year, and was paid in January 1998.
/3/ In January 1999, Mr. Fabregas became the Executive Vice President of
Finance and Chief Financial Officer of Easyriders at an annual base salary
of $185,000.
/4/ These options held by Messrs. Martin and Prather were relinquished on
September 23, 1998.
/5/ Fair market value of 50,000 shares of Newriders Common Stock at the time of
issuance.
/6/ Annual Incentive Award for under the Company's 1998 Executive Incentive
Compensation Plan. See "Long Term Incentive Awards" below.
/7/ These options were granted in March 1999 at an exercise price of $1.75 per
share.
/8/ This option was granted in January 1999 at an exercise price of $2.0625 per
share.
/9/ In September 1998, Mr. Teresi became the Chairman and Publisher of Paisano
Publications, a wholly-owned subsidiary of the Company, at an annual base
salary of $150,000.
OPTION/STOCK APPRECIATION RIGHT ("SAR") GRANTS DURING THE
MOST RECENTLY COMPLETED FINANCIAL YEAR
The following table (presented in accordance with the Exchange Act) and the
Regulations thereunder, sets forth stock options granted under the Company's
Stock Option Plan ("the Stock Option Plan") during the most recently completed
financial year to each of the Named Executive Officers:
<TABLE>
<CAPTION>
====================================================================================================================================
Alternative
Potential Realizable to
Value at Assumed Realizable
Annual Rates of Stock Value:
Price Appreciation for Grant Date
Individual Grants Option Term Value
- --------------------------------------------------------------------------------------------
% of Total Market Value
Options/ of Securities
Securities SARs Underlying
Under Granted to Options/SARs
Options/ Employees Exercise or on Date of
SARs in Fiscal Base Price Grant Expiration
Name Granted Year ($/Security) ($/Security) Date
- ------------------------------------------------------------------------------------------------------------------------------------
Grant Date
Present
Value
5% ($) 10% ($) ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John E. Martin N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
William E. Prather 750,000 40.2% $1.75/share $1.75/share 3/19/09 $65,625 $131,250 $ 0
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. Robert Fabregas 75,000 4.0% $2.063/share $2.063/share 1/04/09 $ 7,734 $ 15,469 $ 0
- -----------------------------------------------------------------------------------------------------------------------------------
Joseph Teresi 500,000 26.8% $1.75/share $1.75/share 3/19/09 $43,750 $ 87,500 $ 0
====================================================================================================================================
</TABLE>
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FINANCIAL YEAR
AND FINANCIAL YEAR-END OPTION/SAR VALUES
The following table (presented in accordance with the Exchange Act and the
Regulations) sets forth details of all exercises of stock options/SARs during
the most recently completed financial year by each of the Named Executive
Officers and the financial year-end value of unexercised options/SARs on an
aggregated basis:
<TABLE>
<CAPTION>
====================================================================================================================================
Securities
Acquired Aggregate Unexercised Value of Unexercised In-the-Money
on Value Options/SARs at Options/SARs at Fiscal Year End ($)
Name Exercise Realized Fiscal Year-End Exercisable/Unexercisable
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John E. Martin N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
William E. Prather N/A N/A 750,000 $0/$0
- ------------------------------------------------------------------------------------------------------------------------------------
J. Robert Fabregas N/A N/A 75,000 $0/$0
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph Teresi N/A N/A 500,000 $0/$0
====================================================================================================================================
</TABLE>
LONG TERM INCENTIVE PLAN AWARDS
The following table and related footnotes set forth certain information for
the year ended December 31, 1999 concerning the grant of bonuses to John Martin,
the Chairman of the Board, under the Company's 1998 Executive Incentive
Compensation Plan.
<TABLE>
<CAPTION>
====================================================================================================================================
Performance or
Number of Other Period
Shares, Units Until
or Other Maturation or Estimated Future Payouts under Non-Stock Price-
Name Rights (#) Payout Based Plans
- ------------------------------------------------------------------------------------------------------------------------------------
Threshold Target Maximum
($ or #) ($ or #) ($ or #)
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
John E. Martin/1/ N/A 1/1/00 - 9/23/03 $0 $ 4,162,857/3/ $ 4,162,857/3/
- ------------------------------------------------------------------------------------------------------------------------------------
John E. Martin/2/ N/A 9/23/98 - 9/23/03 $0 $13,000,000 $13,000,000
====================================================================================================================================
</TABLE>
/1/ Mr. Martin has the ability to earn annual cash bonuses under the Company's
1998 Executive Incentive Compensation Plan (the "Annual Incentive Awards"),
if the Company achieves specified EBITDA Targets. The amount of the Annual
Incentive Award is equal to (1) the total amount of interest that Mr.
Martin is obligated to pay in cash to the Company for such year on two
promissory notes in the total amount of $7,300,000 (the "Martin Notes"),
multiplied by (2) a fraction, the numerator of which is one and the
11
<PAGE>
denominator of which is one minus the highest marginal rate for federal,
state and local income taxes applicable to Mr. Martin in the year that the
bonus is paid. For the 2000 calendar year, the EBITDA Target is 125% of the
average EBITDA for the two calendar years immediately prior to the 2000
calendar year.
/2/ Mr. Martin also has the ability to earn a one-time bonus under the
Company's 1998 Executive Incentive Compensation Plan equal to (1) the
amount of principal and accrued interest then remaining on the Martin
Notes, multiplied by (2) a fraction, the numerator of which is one and the
denominator of which is one minus the highest marginal rate for federal,
state and local income taxes applicable to Martin in the year the bonus is
paid, up to a maximum of $13,000,000, if and when as the result of a public
or private offering of debt or equity securities, the proceeds thereof are
applied to payment in full of (a) all amounts due pursuant to the Credit
Agreement, and (b) the Contributor Notes (as defined below under "Certain
Relationships and Related Transactions"), provided the Company has achieved
certain predetermined levels of earnings during the prior year (generally,
for 2000, and for each year thereafter, at least 80% of the Annual EBITDA
Target for the prior year or for each of the second and third years
preceding such year). This bonus is the subject of Proposal 4 above.
/3/ Assumes that no principal payments will be made during the term of the
Martin Notes, and a blended tax rate of 44%. Based on these assumptions,
the potential annual cash bonuses would be $945,357, $1,072,500, $1,202,143
and $942,857 for the years 2000 to 2003, respectively.
Employment Agreements
The Company entered into an employment agreement with John Martin dated
July 2, 1997, which provides that Mr. Martin will serve as Chairman of the Board
for an initial term of three years. Mr. Martin is entitled to a base salary of
$150,000, plus an office reimbursement expense allowance of $84,000 per year in
addition to reimbursement of specific business expenses reasonably incurred on
behalf of Easyriders.
The Company entered into an employment agreement with William Prather dated
as of September 23, 1998, which provides that he will serve as President and
Chief Executive Officer of the Company for an initial term of five years, such
term of employment to continue thereafter unless and until terminated by either
party upon no less than sixty days written notice. Mr. Prather is entitled to
an annual salary of $200,000, subject to an annual review, plus a discretionary
incentive bonus on a yearly basis to be determined in the sole discretion of the
Company's Board of Directors. In addition, Mr. Prather shall be entitled to
receive certain other benefits, including four weeks of vacation, participation
in the Company's stock option plan, profit sharing plans, annual physical
examinations, dental and medical plans, personal catastrophe and disability
insurance, financial planning, retirement plans and supplementary executive
retirement plans, if any. The Company shall at its expense procure and keep in
effect a $1,000,000 term life insurance policy payable to Mr. Prather's
beneficiaries. Effective March 22, 2000, Mr. Prather's annual salary was
increased to $300,000, and the Board of Directors granted Mr. Prather bonuses
contingent upon achievement of certain objectives related to El Paso Bar-B-Que
Company and certain Easyrider business segments.
The Company entered into an employment agreement with J. Robert Fabregas
dated January 4, 1999, which provides that he will serve as Executive Vice
President of Finance and Chief Financial Officer for an initial term of three
years, such term of employment to continue thereafter unless and until
terminated by either party upon no less than sixty days written notice. Mr.
Fabregas' annual salary is $185,000. Mr. Fabregas' employment agreement
provides Mr. Fabregas the same benefits package as made available to other
executive officers.
The Company entered into an employment agreement with Joseph Teresi dated
September 23, 1998, which provides that he will serve as Chairman and Publisher
of Paisano Publications for an initial term of the earlier of (a) five years, or
(b) the date on which the principal and interest is paid in full on the
Contributor Notes. Mr.
12
<PAGE>
Teresi's term of employment is to continue thereafter unless and until
terminated by either party upon no less than sixty days written notice. Mr.
Teresi's annual salary is $150,000. Effective April 3, 2000 the Board of
Directors approved the appointment of Mr. Teresi as Chief Executive Officer of
Paisano Publications.
REPORT OF THE COMPENSATION COMMITTEE AND
THE BOARD OF DIRECTORS REGARDING EXECUTIVE COMPENSATION
The Compensation Committee (the "Compensation Committee") of the Board of
Directors reviews and recommends to the Board of Directors matters relating to
the compensation of the Company's executive officers. The Compensation
Committee is comprised of three outside directors, none of whom is an employee
or former employee of the Company.
Compensation Philosophy
The Company's executive compensation philosophy has the following
objectives:
(1) To provide a total compensation opportunity that is consistent with
competitive practices, enabling the Company to attract and retain qualified
executives;
(2) To create a direct link between the compensation payable to each
executive officer and the financial performance both of the Company generally
and of the specific business unit or units for which the executive is
responsible; and
(3) To create a common interest between executive officers and the
Company's stockholders through the use of stock options and other stock awards
that link a portion of each executive officer's compensation opportunity
directly to the value of the Company's common stock.
Base Salary
Except for J. Robert Fabregas, the base salaries for each of the Named
Officers and most of the Company's other executive officers for 1999 were
established prior to the Reorganization pursuant to the terms of each
executive's respective employment arrangements with Newriders. The Compensation
Committee was established after the Reorganization and therefore, except for Mr.
Fabregas, did not review any of such employment agreements prior to the time
they were entered into by Newriders and such executives. The Compensation
Committee will make recommendations to the Board with respect to the base salary
of executives whose employment with the Company or a subsidiary thereof begins
after the Reorganization and, as to executives whose employment with the Company
or a subsidiary thereof began prior to the Reorganization, with respect to the
base salary of such executives pursuant to any new employment arrangement
entered into after the Reorganization, in each case by comparison to competitive
market levels for the executive's job function. In this regard, the Compensation
Committee reviewed the employment agreement of Mr. Fabregas and made the
appropriate recommendations to the Board. At the Company's current performance
level, base salaries will generally be targeted at the middle of the range of
comparable companies in the magazine publishing business and comparable
companies in the restaurant business. However, if performance improves, the
Compensation Committee will seek to elevate such target base salaries. Salaries
will be reviewed at regular intervals, approximately annually, depending on job
classification and competitive market levels.
Annual Bonus
13
<PAGE>
Under the terms of their respective employment agreements, most executive
officers are entitled to a discretionary bonus based upon the Compensation
Committee's recommendation and the full Board's approval. Except for the bonus
paid to John Martin as set forth under "Summary Compensation Table", no bonuses
were paid to any executive officers with respect to the fiscal year ended
December 31, 1999. In order to tie compensation to performance, future bonuses
are likely to be based upon EBITDA and earnings per share targets recommended by
the Compensation Committee and approved by the Board of Directors.
At the time of the consummation of the Reorganization, the stockholders of
the Company and the Compensation Committee and the Board of Directors approved
an Annual Incentive Award/Long-Term Incentive Performance Award to John Martin
under the Company's 1998 Executive Incentive Compensation Plan (the "Plan"), the
terms of which Award are described under "Long Term Incentive Awards".
Equity Incentives
The Plan, which was approved by the Company's stockholders in September of
1998, is administered by the Compensation Committee and its stated purpose is to
secure for the Company the benefits arising from capital stock ownership and the
receipt of capital stock-based incentives by those employees, directors,
officers and consultants of the Company who will be responsible for the
Company's future growth and continued success. Under the Plan, equity
incentives, primarily in the form of grants to executives of stock options, will
be considered in order to tie compensation of executives to performance by the
Company.
Compensation of Chief Executive Officer
Mr. Prather's base salary of $200,000 for 1999 was established pursuant to
an employment agreement with Newriders that was the result of bilateral
negotiations between Mr. Prather and Newriders. No specific formula was used in
determining or agreeing to Mr. Prather's compensation at the time his employment
agreement was entered into. Mr. Prather's employment agreement provides for a
discretionary incentive bonus on a yearly basis to be determined in the sole
discretion of the Company's Board of Directors. Mr. Prather was not awarded a
bonus in 1999.
Policy as to Section 162(m) of the Code
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
denies a publicly traded company a Federal income tax deduction for compensation
in excess of $1 million paid to certain of its executive officers unless the
amount of such excess is payable based solely upon the attainment of objective
performance criteria. The Company has undertaken to qualify substantial
components of the incentive compensation it makes available to its executive
officers for the performance exception to nondeductibility. However, in
appropriate circumstances, such as the hiring of a new executive officer, it may
be necessary or appropriate to pay compensation or make incentive awards that do
not meet the performance based exception and therefore may not be deductible by
reason of Section 162(m).
The foregoing report has been approved by all members of the Compensation
Committee.
Wayne L. Knyal, Chairman
Daniel J. Gallery
Joseph J. Jacobs
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
14
<PAGE>
Wayne L. Knyal, Daniel J. Gallery and Joseph J. Jacobs serve as the members
of the Compensation Committee of the Company's Board of Directors, and Mr. Knyal
is the Chairman of the Compensation Committee. None of such persons is an
officer, employee, or former officer or employee, of the Company or any of its
subsidiaries. Except as set forth in the paragraph below, no interlocking
relationship exists between the members of the Company's Board of Directors or
Compensation Committee and the board of director's or compensation committee of
any other company, nor has any such interlocking relationship existed in the
past.
Prior to November 1999, Mr. Knyal was the Chairman and Chief Executive
Officer of Franchise Mortgage Acceptance Company ("FMAC"), and indirect owner of
19% of the equity interests thereof. At that time, Imperial Credit Industries
owned approximately 38% of the equity interests of FMAC, and approximately 60%
of the equity interests of Imperial Capital, LLC ("Imperial Capital"). In
September, 1998 Imperial Capital received a fee of $1,485,000 and warrants to
purchase 592,184 shares of Company's common stock, at an exercise price of
$4.3125 per share (the "Warrants") as payment for its investment banking
services in the Reorganization, and concurrently therewith paid FMAC a finder's
fee of $148,500. In April, 1999, Imperial Capital provided the Company with a
fairness opinion in connection with a proposed private placement of shares to
two directors, and received a fee of $55,000, plus an adjustment of the exercise
price of the Warrants to $1.75 per share.
15
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Newriders
Common Stock and the Easyriders Common Stock from the date on which Newriders
Common Stock began trading on the OTC Bulletin Board (July 23, 1996) through
September 23, 1998 and then the date the Easyriders Common Stock began trading
on the American Stock Exchange (September 24, 1998) through December 31, 1999,
with the Broad Market American Stock Exchange Index (the "AMEX Market Index")
and Media General Industry Group Index for publishing and periodicals (the "Peer
Group Index"). The cumulative total return assumes that $100 was invested in
each of the Newriders Common Stock/Easyriders Common Stock and the AMEX Market
Index and Peer Group Index on July 23, 1996 (the date the Newriders' stock began
trading on the OTC Bulletin Board) and also assumes the reinvestment of any
dividends. Past financial performance should not be considered a reliable
indicator of future performance, and investors should not use historical trends
to anticipate results or trends in future periods.
- --------------------------------------------------------------------------------
07/23/96 12/31/96 12/31/97 12/31/98 12/31/99
- --------------------------------------------------------------------------------
EASYRIDERS INC. 100.00 32.61 52.17 30.43 14.09
- --------------------------------------------------------------------------------
PEER GROUP INDEX 100.00 103.17 136.83 119.86 118.54
- --------------------------------------------------------------------------------
AMEX MARKET INDEX 100.00 107.36 129.19 127.44 158.88
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
16
<PAGE>
CERTAIN TRANSACTIONS WITH RELATED PARTIES
Joseph Teresi Transactions
In accordance with the agreement pursuant to which the Company acquired the
Paisano Companies from Joseph Teresi, a post-closing adjustment was to be made
based upon the amount by which working capital of the Paisano Companies as of
the closing of the acquisition exceeded or was less than $4,537,000. Based upon
a closing date balance sheet prepared by the Company, the Company determined
that the working capital of the Paisano Companies as of the closing was less
than $4,537,000. Mr. Teresi disputed that determination. After protracted
negotiations, the Board of Directors of the Company agreed on March 19,1999 to
accept a note from Mr. Teresi (the "Teresi Payable") in the amount of $398,085
in satisfaction of the working capital adjustment. The Teresi Payable does not
bear interest and, subject to prior payment in the circumstances described
below, is due when the entire principal and interest on the $13,000,000 of
promissory notes issued by the Company to Mr. Teresi as partial consideration
for the acquisition of the Paisano Companies has been paid in full. Certain
aged receivables of the Company which have been fully reserved by the Company
have been identified (the "Receivables") and to the extent collections are
received on the Receivables, a percentage of such collections will be credited
against the Teresi Payable. In addition, if the Company determines that the
amount of a pension accrual with respect to pre-Reorganization operations of the
Paisano Companies should be decreased, the Teresi Payable will be reduced by the
amount of such decrease. Furthermore, to the extent that certain fully reserved
inventory of the Company is sold or used by the Company for promotional
purposes, the Teresi Payable will be reduced by the amount of sale proceeds or
value assigned by the Company to such promotional use. Also, if the Company
receives a refund of any portion of a specified foreign tax payable by the
Company, the Teresi Payable will be reduced by the amount of such refund. From
and after the time the Teresi Payable has been reduced to zero, Mr. Teresi will
be entitled to receive (in cash, or if any of the Nomura Indebtedness is
outstanding, in the form of a non-interest bearing receivable from the Company)
the applicable percentage of collections on the Receivables and all amounts, if
any, attributable to a reduction in such pension accrual and the sale or
promotional use of such inventory. Since becoming established, the Teresi
Payable has been reduced to a current balance of $299,099 by the collection of
Receivables in the amount of $98,986.
Mr. Teresi, sole stockholder of Paisano Publications prior to the
Reorganization, was issued 6,493,507 shares of the Company's common stock in the
Reorganization. In addition, Mr. Teresi received promissory notes aggregating
$13,000,000 (the "Contributor Notes"). The Contributor Notes consist of a
subordinated promissory note in the amount of $5,000,000, a limited recourse
subordinated promissory note in the amount of $5,000,000 secured by the Martin
Mirror Note (as defined in the applicable instruments) and a subordinated
promissory note in the amount of $3,000,000.
As of April 1 2000, the Company's promissory note obligations to Mr. Teresi
were as follows:
<TABLE>
<CAPTION>
Note Original Principal Current Principal Maturity Accrued Interest
- ---- ------------------ ----------------- -------- ----------------
<S> <C> <C> <C> <C>
Subordinated $ 3,000,000 $ 3,000,000 3-31-00 $ 456,497
Short Term 10%
Subordinated 7% $ 5,000,000 $ 3,575,000 9-23-03 $ 335,875
Mirror 7% $ 5,000,000 $ 5,000,000 9-23-03 $ 482,676
Totals $13,000,000 $11,575,000 $1,275,048
</TABLE>
17
<PAGE>
Effective April 3, 2000 the Company's Board of Directors accepted a
proposal advanced by Mr. Teresi (the "Teresi Agreement"), pursuant to which:
. Mr. Teresi agreed to forgive $3,446,787 of principal owed on the
Subordinated 7% note, leaving a principal balance of $128,213, in
exchange for 3,356,170 shares of the Company's Common Stock. This
transaction is valued at full market price without discount, market
price being determined as the average daily closing price of the Common
Stock on the American Stock Exchange over 30 consecutive trading days
ending on and including March 22, 2000, the date of the Company's last
meeting of its Board of Directors.
. Mr. Teresi agreed to forgive (a) the residual balance due under the
Subordinated 7% note of $128,213, (b) $96,739 of other obligations owed
to Mr. Teresi by the Company in connection with rent and consulting
fees, and (c) accrued interest on the Contributor Notes of $525,040, in
exchange for the undertakings of Paisano Publications pursuant to an
agreement involving the Company's events division.
. Mr. Teresi agreed to waive the default in payment of the Subordinated
Short Term Note and to extend the maturity of that note until March 31,
2002, and to defer payment of interest accruing on such note until March
31, 2001.
. Assets of the Company's Easyriders of Columbus store will be conveyed to
Mr. Teresi in exchange for forgiveness of obligations owed to Mr. Teresi
by Paisano Publications pertaining to accrued but unpaid consulting fees
and rent.
The Teresi Agreement is described in full in the Company's Annual Report on
Form 10-K, filed with the Securities and Exchange Commission on April 14, 2000,
which report is hereby incorporated by reference.
The Company's subsidiaries, Paisano Publications and Teresi, Inc. dba
Easyriders Events, recently entered into a long-term licensing agreement with
Action Promotions, Inc. ("API") pursuant to which API has been granted the
exclusive right for a ten year period (with options to extend) to produce and
manage events and to sell event-specific merchandise under the Easyriders brand.
The principals of API are Melissa Penland, an apparel manufacturer with
extensive event-merchandise experience, and John Green, a current licensee of
Easyriders Licensing and owner of the Daytona Easyriders Store. In addition,
Mr. Teresi has loaned API the sum of $750,000. Under this new arrangement, all
responsibilities for production, scheduling, staffing, management, purchasing
and promotion have been shifted to API, under an arrangement that guarantees the
Company a minimum level of royalties, plus a percentage of gross revenues from
gate and merchandise sales. Under the agreement, API has also committed to a
significant purchase of Easyriders merchandise, to be paid for in advance, but
fulfilled over the term of the license agreement. In exchange, Paisano
Publications has agreed to provide a significant level of advertising support at
no additional cost to the licensee. In exchange for a merchandise credit in the
total sum of $1,500,000, the Company received (a) $750,000 in cash from API, and
(b) forgiveness by Mr. Teresi of obligations owed to him by the Company in the
amount of $750,000 pursuant to the Teresi Agreement.
Pursuant to the Teresi Agreement, the assets of the Company's subsidiary,
Easyriders of Columbus, will be sold to Mr. Teresi (the "Columbus Transaction"),
in exchange for forgiveness by Mr. Teresi of certain financial obligations owed
to him by Paisano Publications and/or the Company.
Pursuant to the Columbus Transaction:
. All inventory, motorcycles, equipment, tools, parts, racks, shelves and
other tangible property will be conveyed to Mr. Teresi, subject to
certain adjustments and exclusions.
18
<PAGE>
. The liquor license applicable to the site will be conveyed to Mr.
Teresi.
. The corporation will retain all cash on hand and accounts receivable,
and responsibility for all trade payables.
. The corporation will be relieved of all liability under the lease with
Mr. Teresi for the premises in question.
The total amount of forgiveness is currently estimated at $565,840, but is
subject to adjustment based on levels of inventory, cash, receivable and
payables at closing. Upon closing of the Columbus Transaction, which is
anticipated to occur in April 2000, Mr. Teresi will continue operating the
business as "Easyriders of Columbus" pursuant to a licensing agreement with
Easyriders. The Company anticipates recording a loss associated with the sale
of Easyriders of Columbus upon its consummation of approximately $1,400,000,
including a goodwill write-off of approximately $879,000.
In connection with the Reorganization, Mr. Teresi entered into a contract
with Paisano Publications, Inc. (the "Consulting Agreement"), pursuant to which
Mr. Teresi agreed to provide certain consulting services to Paisano Publications
in addition to the services required to be performed by Mr. Teresi under his
employment agreement with Paisano Publications. The Consulting Agreement is for
an indefinite term, in the discretion of the Board of Directors. Effective June
1, 1999 Mr. Teresi assigned his obligations and rights under the Consulting
Agreement to Teresi Publishing, Inc., a Florida corporation ("TPI"). In exchange
for the services performed under the Consulting Agreement, Mr. Teresi (or his
assignee) became entitled to receive monthly payments of $5,000 per month for
October, November and December, 1998, $7,500 for January, 1999, increasing by
$2,500 per month for each month thereafter through July, 1999, and $25,000 per
month commencing August, 1999 and thereafter for so long as the Consulting
Agreement is in effect. All required payments through May 1999, in the
aggregate sum of $97,500 were timely paid. None of the payments required to be
made, i.e. $22,500 in July, 1999, and $25,000 per month thereafter, were made,
as a consequence of which Paisano Publications owed TPI the aggregate sum of
$197,500 as of April 1, 2000. Settlement of this balance was resolved pursuant
to the Teresi Agreement.
Subsidiaries of the Company lease space from Mr. Teresi at two adjacent
locations in Agoura Hills, California. In connection with these leases, as of
April 1, 2000, Mr. Teresi was owed by the Company and its Subsidiaries accrued
and unpaid rent in the aggregate sum of $326,112. In addition, in connection
with his services to the Company and its Subsidiaries, Mr. Teresi from time to
time incurs expenses for travel and professional services. As of April 1, 2000,
the Company owed Mr. Teresi the sum of $6,065 in connection with such
reimbursable expenses. Settlement of the amounts due in connection with the
foregoing obligations for interest, accrued rent and expense reimbursement was
resolved pursuant to the Teresi Agreement.
Prior to December 15, 1999, Paisano Publications operated a retail store in
Daytona Beach, Florida engaged in the sale of motorcycles, "Easyriders"
merchandise, and other goods (the "Daytona Store"). For purposes of operating
the Daytona Store, Paisano Publications leased space from Mr. Teresi pursuant to
a lease due to expire on December 30, 2004. As of December 15, 1999, Paisano
Publications sold the assets of the Daytona Store to an unrelated third party,
who continues to operate the store as a licensee of Easyriders Licensing, Inc.,
a Subsidiary of the Company. At the time of this transaction, there remained a
future rent obligation of approximately $120,000 under the lease with Mr.
Teresi. Pursuant to such transaction, Paisano Publications was relieved from
all future liability under the real property lease, but as of April 1, 2000
remained obligated to Mr. Teresi to pay accrued rent in the sum of $10,815. The
account was settled pursuant to the Teresi Agreement.
19
<PAGE>
John Martin Transactions
In connection with the Reorganization, John Martin, Chairman of the
Company, purchased 4,036,797 shares of Easyriders' common stock at $3.05 per
share. Aggregate consideration of $12,300,000 was paid, $5,000,000 in cash and
the balance by delivery of two promissory notes (the "Martin Mirror Note" and
the "Other Martin Note"). The Martin Mirror Note is in the amount of $5,000,000
and has been pledged by Easyriders to secure a note payable to Mr. Teresi. The
Other Martin Note has a face amount of $2,300,000. The Martin Mirror Note has a
term of five years, may be extended by Mr. Martin for an additional period of
five years, and bears interest at an annual rate beginning at 6% and increasing
to 10% over its life. The Other Martin Note has a term of five years, and may be
extended for an additional five years and bears interest at an annual rate
between 6% and 10%. These promissory notes have been recorded as an offset to
stockholders' equity. As of December 31, 1999 interest on these notes was due to
the Company in the aggregate amount of $455,400, provided, however, that Mr.
Martin is entitled to a compensation bonus equal to this sum, plus the sum of
$357,814 to cover the tax effects of such bonus (See, "Long Term Incentive
Plans," above). Effective April 3, 2000 the Board of Directors adopted a
resolution acknowledging that Mr. Martin was entitled to receive this bonus,
provided that the same shall accrue as an obligation of the Company until such
time as cash resources permit it to be paid.
In addition, pursuant to the employment agreement between the Company
(originally Newriders) and Mr. Martin, the Company is obligated to pay Mr.
Martin $7,000 per month for office expenses. The Company uses certain equipment
and support services under this arrangement, and occasionally uses the office
space leased by Mr. Martin in Newport Beach, California. At present, the
Company is current in its obligations to Mr. Martin.
El Paso Bar-B-Que Guarantees
The Company's Subsidiary, M & B Restaurants, L.C. dba El Paso Bar-B-Que
Company ("El Paso"), is obligated under a number of loan and capital lease
agreements, incurred by El Paso primarily to finance restaurant development and
equipment acquisitions. El Paso is also obligated under a number of space
leases in connection with its restaurant operations. With respect to
substantially all of such obligations, William Prather, the Company's Chief
Executive Officer and a co-founder of El Paso, his wife, Marna Prather, an
officer and co-founder of El Paso, and/or John Martin have executed personal
guarantees in support of the leases and notes in question. Such obligations and
guarantees are itemized in the following table (for purposes of which William
Prather, Marna Prather and John Martin are referred to as WP, MP and JM,
respectively):
<TABLE>
<CAPTION>
Face Current
---- -------
Lender Start Date Amount Balance/1/ Maturity Collateral Guarantors
- ------ ---------- ------ ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Plains National Bank 5-1-96 218,232 48,416 1-1-01 Equipment WP-MP
Plains National Bank 5-1-96 799,000 542,347 1-1-01 Equipment WP-MP
Village at Hayden 5-15-95 250,000 178,365 2-1-06 Equipment WP-MP
BankOne 9-6-97 19,422 7,572 8-1-01 GMC Van None
Newcourt Small Business Lending 6-30-97 1,500,000 1,243,965 7-1-07 Equipment WP-MP
Imperial Bank 3-17-99 500,000 483,333 11-01-02 Personal Property WP-MP-JM
FFCA 4-30-99 475,000 457,074 11-1-08 Equipment WP-MP-JM
Total 2,961,072
Capital Leases
- --------------
Lease Acceptance Corp. 9-13-97 5,200 1,255 8-13-00 CCTV System/2/ WP-MP
Lease Acceptance Corp. 11-9-98 6,444 3,802 11-1-01 CCTV System WP-MP
First Sierra Financial 4-14-97 43,205 22,584 5-1-02 POS System/3/ WP-MP
First Sierra Financial 3-29-99 389,091 367,545 3-1-06 POS Equipment WP-JM
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Face Current
---- -------
Lender Start Date Amount Balance/1/ Maturity Collateral Guarantors
- ------ ---------- ------ ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
First Sierra Financial 11-4-99 194,736 193,469 11-1-03 Equipment WP-JM
First Sierra Financial 12-1-99 14,375 13,919 11-1-04 Equipment WP-JM
Norwest Financial Leasing, Inc. 8-3-98 18,728 8,843 6-1-01 Ice Machines None
Advanta Leasing Services 9-15-99 66,035 63,187 11-1-04 POS Equipment None
Imperial Bank Equipment Leasing 2-19-99 335,309 320,211 11-01-04 Equipment WP-JM
Total 994,815
</TABLE>
<TABLE>
<CAPTION>
Current Term
------- ----
Real Property Leases Date Rent Payable Expires Location Guarantor(s)
- --------------------- ---- ---- ------- ------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Cafeteria Operators 9-30-94 50,000 Quarterly 12-30-04 Glendale, AZ WP
Village at Hayden 5-15-95 13,166 Monthly 10 years Scottsdale, AZ None
Developers Diversified 9-1-96 14,314 Monthly 10 years Ahwatukee, AZ WP-MP
Jerry Gordon Development 5-14-99 12,180 Monthly 10 years Tulsa, OK None
Vestar 5-5-99 12,042 Monthly 10 years Mesa, AZ WP-MP
</TABLE>
/1/As of 2-29-00.
/2/Closed-Circuit TV
/3/Point-of-Sale
The agreements pursuant to which El Paso was acquired by Newriders, Inc.,
and became a Subsidiary of the Company in the Reorganization contemplated that
prior to closing of the Reorganization, with respect to the then-existing
obligations of El Paso up to an aggregate sum of $2,500,000 (a) such obligations
would be assumed by the Company, and (b) all guarantors would be relieved of
their obligations in connection therewith. However, the Company's financial
condition at the time was not sufficient to permit it to satisfy these
conditions, as a consequence of which all parties agreed to close the
Reorganization upon the understanding that as soon as the Company was
financially able to satisfy these conditions, it would do so. Thereafter, and
for all of 1999, the Company's financial condition worsened, making it
impossible for these conditions to be satisfied. Further, in order to continue
operations and the growth of El Paso, Mr. Prather, Ms. Prather and Mr. Martin
have continued to provide personal guarantees as to subsequently-incurred
obligations, as noted in the above table. Recently, the board of directors
acknowledged that it was in the Company's best interests to assume all such
obligations, and to cause the guarantors to be relieved from personal liability
in connection therewith as soon as its financial condition would permit the same
to occur.
Wayne Knyal Matters
On August 12, 1997 the board of directors of Newriders, Inc. authorized
Newriders to obtain a secured equipment financing facility from Franchise
Mortgage Acceptance Company L.L.C., ("FMAC"). Wayne Knyal, now a director of
the Company and chairman of its Compensation Committee was then a member of the
Newriders board of directors and President, and Chief Executive Officer, of
FMAC. Subsequently, in furtherance thereof, on October 21, 1997 Newriders
simultaneously executed three separate promissory notes pursuant to which it
borrowed a total of $1,050,000 from FMAC (collectively, the "FMAC Loan"). Each
note was secured by a different collection of restaurant equipment, but
otherwise carried the same terms, i.e. (a) 60 month term, fully amortizing, (b)
interest rate of 13.5%, and (c) personally guaranteed by the following officers
and/or directors of Newriders: William E. Prather, C.W. Doyle, Leon Hatcher,
William R. Nordstrom, John E. Martin, Michael Purcell and Daniel Gallery.
In November 1997 FMAC became a public Delaware corporation (NASDAQ:FMAX)
and Mr. Knyal was named President, Chief Executive Officer and Director. After
the September, 1998 Reorganization,
21
<PAGE>
Newriders became a subsidiary of Easyriders. In November 1999 FMAC merged with
Bay View Capital Corporation (NYSE:BVC) and operates as Bay View Franchise
Mortgage Acceptance Company ("BV FMAC"), a subsidiary of Bay View Bank, NA. Mr.
Knyal is the President of BV FMAC and, as a major shareholder, is a "control
person" of Bay View Capital Corporation as well as a Director of that company.
The FMAC Loan is current, with a pay-off balance of $795,095 as of March 3,
2000, excluding accrued but unpaid late fees of $41,073.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
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
(the "SEC") and the American Stock Exchange. Officers, directors and greater
than ten-percent stockholders are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no forms were
required for those persons, the Company believes that, during fiscal 1999, the
following forms were not filed on a timely basis: Form 3 for the month ended
January 31, 1999 for J. Robert Fabregas, the Chief Financial Officer of the
Company; Form 3 for the month ended August 31, 1999 for Stewart G. Gordon, a
director of the Company; and Form 4 for the month ended December 31, 1999 for
Joseph Teresi, a director of the Company.
OTHER BUSINESS
The Board of Directors does not know of any business to be brought before
the Annual Meeting other than the matters described in the Notice of Annual
Meeting. However, if any other matters are properly presented for action, it is
the intention of each person named in the accompanying proxy to vote said proxy
in accordance with his judgment on such matters.
By Order of the Board of Directors
Agoura Hills, California /s/ J. Robert Fabregas
May 19, 2000
J. Robert Fabregas
Executive Vice President,
Chief Financial Officer and Secretary
22
<PAGE>
PROXY PROXY
EASYRIDERS, INC.
Annual Meeting of Stockholders--June 22, 2000
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned stockholder(s) of Easyriders, Inc. ("Easyriders") hereby
nominates, constitutes and appoints William E. Prather and J. Robert Fabregas,
and each of them, the attorney, agent and proxy of the undersigned, with full
power of substitution, to vote all stock of Easyriders which the undersigned is
entitled to vote at the Annual Meeting of Stockholders of Easyriders (the
"Annual Meeting") to be held at the Radisson Hotel, 30100 Agoura Road, Agoura
Hills, California on Thursday, June 22, 2000 at 1:00 p.m. and any adjournments
thereof, as fully and with the same force and effect as the undersigned might or
could do if personally present thereat, as follows:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES LISTED ON THE REVERSE SIDE, A VOTE "FOR" THE RATIFICATION OF
EASYRIDERS' INDEPENDENT AUDITORS, A VOTE "FOR" THE RATIFICATION OF THE PRIVATE
PLACEMENTS AND ISSUANCE OF THE SHARES PURSUANT THERETO, AND A VOTE "FOR" THE
AMENDMENT TO THE COMPANY'S 1998 EXECUTIVE INCENTIVE COMPENSATION PLAN. IF ANY
OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING, THIS PROXY SHALL BE VOTED BY
THE PROXYHOLDERS IN ACCORDANCE WITH THE JUDGEMENT OF THE ATTORNEYS AND
PROXYHOLDERS NAMED ON THE REVERSE SIDE.
The undersigned hereby ratifies and confirms all that said attorneys and
proxyholders, or either of them, or their substitutes, shall lawfully do or
cause to be done by virtue thereof, and hereby revokes any and all proxies
heretofore given by the undersigned to vote at the Annual Meeting. The
undersigned hereby acknowledges receipt of the Notice of Annual Meeting and the
Proxy Statement accompanying said notice.
PLEASE SIGN AND DATE ON REVERSE SIDE
[X] Please mark your votes as in this example.
This Proxy will be voted "FOR" the election of all nominees unless authority to
do so is withheld for all nominees or for any individual nominee.
1. ELECTION OF DIRECTORS
[_] FOR all nominees listed below [_] WITHHOLD AUTHORITY
(except as marked to the contrary below)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
(Terms Expire 2001) John E. Martin Wayne L. Knyal Joseph Teresi Stewart G. Gordon
William E. Prather Daniel J. Gallery Joseph J. Jacobs John P. Corrigan
</TABLE>
(INSTRUCTIONS: To withhold authority to vote for any one or more nominees,
check the box opposite "WITHHOLD AUTHORITY" and write that
nominee's or those nominees' name(s) in the space provided
below.)
- --------------------------------------------------------------------------------
2. RATIFICATION OF DELOITTE & TOUCHE LLP AS EASYRIDERS' INDEPENDENT AUDITORS.
[_] FOR [_] AGAINST [_] ABSTAIN
3. RATIFICATION OF THE PRIVATE PLACEMENT AND ISSUANCE OF THE SHARES PURSUANT
THERETO.
4. AMENDMENT TO THE COMPANY'S 1998 EXECUTIVE INCENTIVE COMPENSATION PLAN.
5. OTHER BUSINESS. In their discretion, the proxyholders are authorized to
transact such other business as may properly come before the Annual Meeting
and any adjournments thereof.
I (We) do [_] do not [_] expect to
attend the Annual Meeting.
PLEASE SIGN, DATE AND RETURN THIS
PROXY AS PROMPTLY AS POSSIBLE IN
THE POSTAGE PREPAID ENVELOPE
PROVIDED.
SIGNATURE(S)_________________________________________________ DATE _____________
(Please date this Proxy and sign your name as it appears on your stock
certificates. Executors, administrators, trustees, etc. should give their full
titles. All joint owners should sign.)
