ELXSI CORP /DE//, DEF 14A, 1998-04-17

ELXSI CORP /DE//
DEF 14A, 1998-04-17
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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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 |_|

ELXSI Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:

- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions 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:

- --------------------------------------------------------------------------------

<PAGE>

|_| 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>

ELXSI CORPORATION
3600 Rio Vista Avenue, Suite A
Orlando, Florida 32805

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 19, 1998

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of ELXSI
Corporation, a Delaware corporation (the "Company"), will be held at the
Company's headquarters offices, located at 3600 Rio Vista Avenue, Suite A,
Orlando, Florida 32805, on Tuesday, May 19, 1998, at 9:00 a.m. (local time), for
the following purposes:

1. To elect a Board of Directors.

2. To approve the ELXSI Corporation 1998 Incentive Stock Option Plan.

3. To amend the Company's charter to reduce the number of authorized
shares for the purpose of reducing Delaware franchise taxes.

4. To ratify the appointment of Price Waterhouse LLP as the Company's
independent accountants for the current fiscal year.

5. To transact such other and further business as may properly come
before the meeting or any adjournment or adjournments thereof.

Common stockholders of record at the close of business on March 31,
1998 are entitled to notice of and to vote at the meeting. A complete list of
such stockholders is open to the examination of any stockholder for any purpose
germane to the meeting, during ordinary business hours, at the offices of the
Company, located at 3600 Rio Vista Avenue, Suite A, Orlando, Florida 32805.

A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997 is enclosed herewith.

By Order of the Board of Directors,

Thomas R. Druggish, Secretary

Dated: April 17, 1998

You are urged to fill in, sign, date and mail the enclosed Proxy card.
If you attend the meeting and vote in person, the Proxy card will not be used.
If the Proxy card is mailed in the United States in the enclosed envelope, no
postage is required. The prompt return of your Proxy card will save the expense
involved in further communication.

<PAGE>

ELXSI CORPORATION
3600 Rio Vista Avenue, Suite A
Orlando, Florida 32805

PROXY STATEMENT

For Annual Meeting of Stockholders
to be held on May 19, 1998

April 17, 1998

To the Stockholders:

This Proxy Statement is furnished to you in connection with the
solicitation by the Board of Directors of ELXSI Corporation, a Delaware
corporation (the "Company"), of Proxies in the accompanying form to be used at
the Annual Meeting of Stockholders to be held at the Company's headquarters
offices, located at 3600 Rio Vista Avenue, Suite A, Orlando, Florida 32805, on
Tuesday, May 19, 1998, at 9:00 a.m. (local time), and at any subsequent time
which may be necessary by the adjournment thereof.

If you were a holder of record of Common Stock, par value $.001 per
share, of the Company (the "Common Stock") at the close of business on March 31,
1998, you are entitled to vote at the meeting, and your presence is desired. If,
however, you cannot be present in person, a form of Proxy (Proxy card) is
enclosed, which the Board of Directors of the Company requests that you execute
and return as soon as possible. You can, of course, revoke your Proxy at any
time before it is voted if you so desire, either in person at the meeting or by
delivery of a duly executed written statement to that effect to the Secretary of
the Company or of a later-dated Proxy.

The Company is paying all costs of the solicitation of Proxies,
including the expenses of printing and mailing to its stockholders this Proxy
Statement, the accompanying Notice of Annual Meeting of Stockholders, the form
of Proxy, and the Annual Report on Form 10-K. The Company has engaged
Continental Stock Transfer & Trust Company to assist the Company in the
distribution and solicitation of Proxies and has agreed to pay Continental Stock
Transfer & Trust Company a fee of $3,000 plus expenses for its services. The
Company will also reimburse brokerage houses and other custodians, nominees and
fiduciaries for their expenses, in accordance with the regulations of the
Securities and Exchange Commission (the "Commission"), in sending Proxies and
proxy materials to the beneficial owners of the Common Stock. Officers or
employees of the Company may also solicit Proxies in person, or by mail, E-mail,
facsimile or telephone, but such persons will receive no compensation for such
work, other than their normal compensation as such officers or employees.

At the close of business on March 31, 1998, 4,660,980 shares of Common
Stock were outstanding and are entitled to vote at the Annual Meeting. Each
outstanding share of Common Stock is entitled to one vote. This Proxy Statement
and the enclosed form of Proxy are first being mailed to the stockholders of the
Company on or about April 17, 1998.

PROXIES AND VOTE REQUIRED

The persons named in the accompanying form of Proxy intend to vote
Proxies FOR the election of the nominees for director named herein, except to
the extent authority to vote for any such nominee is withheld. In the event that
any nominee at the time of election shall be unable or unwilling to serve or is
otherwise unavailable for election (which contingency is not now contemplated or
foreseen), and in consequence thereof another individual shall be nominated, the
persons named in the form of Proxy shall have the discretion and authority to
vote or to refrain from voting in accordance with their judgment on such other
nominations. The persons named in the accompanying form of Proxy also intend to
vote Proxies FOR the approval of the ELXSI Corporation 1998 Incentive Stock
Option Plan (Proposal No. 2 herein), FOR the amendment of the Company's charter
to reduce the number of authorized shares for the purpose of reducing Delaware
franchise taxes (Proposal No. 3 herein) and FOR the ratification of the
appointment of Price Waterhouse LLP as the Company's independent accountants
(Proposal No. 4 herein), unless (in each case) contrary voting instructions are
indicated on such Proxies.

<PAGE>

The presence in person or by proxy of a majority of the shares of
Common Stock outstanding and entitled to vote at the meeting is required for a
quorum. If a quorum is present, those nominees receiving a plurality of the
votes cast will be elected. Accordingly, shares not voted in the election of
directors (including shares covered by a Proxy as to which authority is withheld
to vote for all nominees) and shares not voted for any particular nominee
(including shares covered by a Proxy as to which authority is withheld to vote
for only one or less than all of the nominees) will not prevent the election of
any of the nominees for director. Approval of Proposal No. 3 requires the
affirmative vote of a majority of the outstanding shares of Common Stock. For
all other matters submitted to stockholders at the meeting, including Proposal
Nos. 2 and 4, if a quorum is present the affirmative vote of a majority of the
shares voted is required for approval. As a result, abstention votes with
respect to Proposal No. 2, 3 or 4 will have the effect of a vote against such
Proposal.

Shares of Common Stock held by brokers and other stockholder nominees
are sometimes voted on certain matters but not others. This can occur, for
example, when a broker is instructed by the beneficial owner, or has
discretionary authority, to vote on a particular matter or matters (such as the
election of directors and appointment of accountants) but is not instructed, and
does not have such authority, to vote on others. These are known as "non-voted"
shares. Non-voted shares will be counted for purposes of determining whether
there is a quorum at the meeting, but will have no effect upon the outcome of
the vote on any matter (other than Proposal No. 3) as to which they are
"non-voted." Shares that are "non-voted" with respect to Proposal No. 3 will
have the effect of a vote against such proposal.

PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
(Item 1 on Proxy Card)

The Board of Directors of the Company currently consists of five
individuals, each of whom has been nominated for election at the meeting.
Directors are to be elected to hold office until the next Annual Meeting of
Stockholders and until their respective successors shall have been elected and
qualified, or until their resignation, removal or death or otherwise as provided
in the Bylaws of the Company. The names of the five nominees for director, and
certain information regarding the Common Stock holdings of each such individual
and the executive officers of the Company, which such persons have furnished to
the Company, are set forth below.

Common Stock of the
Company Beneficially Owned
as of March 31, 1998(1)
Director Number of Percent
Name Since Shares of Class
- ---- ------ ------------- --------
<S> <C> <C> <C>

Farrokh K. Kavarana................. 1989 49,100(2) 1.0%
Kevin P. Lynch...................... 1989 112,697 2.4%
Alexander M. Milley................. 1989 1,251,863(3) 25.2%
Robert C. Shaw...................... 1989 76,478 1.6%
Denis M. O'Donnell.................. 1996 29,900 0.6%
All executive officers and
directors as a group (7 persons) 1,587,295(2)(3) 30.2%

</TABLE>

- ---------------

(1) Numbers and percents are calculated in accordance with Rule 13d-3 under
the Securities Exchange Act of 1934, as amended ("Rule 13d-3"). Each of
the named persons and group has sole voting and dispositive power with
respect to the shares shown. Includes shares issuable upon exercise of
stock options granted by the Company that are exercisable currently or
within 60 days, as follows: Farrokh K. Kavarana: 47,500 shares, Kevin
P. Lynch: 106,500 shares, Alexander M. Milley: 190,000 shares, Robert
C. Shaw: 65,000 shares,

<PAGE>

Denis M. O'Donnell: 15,000 shares, and all executive officers and
directors as a group: 476,935 shares. Excludes shares issuable upon
exercise of stock options granted by the Company that become
exercisable in more than 60 days, as follows: Kevin P. Lynch: 10,000
shares, Alexander M. Milley: 7,500 shares, and all executive officers
and directors as a group: 27,500 shares.

(2) Excludes an aggregate of 325,940 shares of Common Stock held by Aggel
Enterprises, Ltd. and certain affiliated entities. Mr. Kavarana is
affiliated with the controlling shareholders of Aggel Enterprises, Ltd.
and its affiliates. See "Security Ownership of Certain Beneficial
Owners." Also excludes 3,334 shares of Common Stock issuable upon
exercise of stock options held by Tata International A.G., with which
Mr. Kavarana is affiliated. Mr. Kavarana disclaims beneficial ownership
of all of the foregoing shares.

(3) Includes: (i) 112,347 outstanding shares and 118,762 shares of Common
Stock issuable upon the exercise of currently exercisable warrants held
by Eliot Kirkland L.L.C., of which Mr. Milley is the sole manager, the
President and a member; (ii) 194,354 shares held by Cadmus Corporation,
of which Mr. Milley is the Chairman, President and controlling
shareholder; (iii) 590,200 shares held by ELX Limited Partnership, of
which Mr. Milley is the sole general partner; and (iv) 21,200 shares
held by Azimuth Corporation, of which Mr. Milley is the Chairman,
President and a controlling shareholder. Excludes 60,004 shares of
Common Stock held by The Alexander M. Milley Irrevocable Trust I (the
"Milley Trust"), a trust for the benefit of certain members of Mr.
Milley's immediate family, and 150,500 shares of Common Stock issuable
upon the exercise of currently exercisable warrants held by the Milley
Trust. Under Rule 13d-3, shares beneficially owned by the Milley Trust
as determined thereunder are deemed not to be beneficially owned by Mr.
Milley. Also includes and excludes shares issuable upon exercise of
stock options granted by the Company to Mr. Milley as indicated in
footnote 1 above.

<PAGE>

Directors and Executive Officers of the Company

Set forth below is certain biographical information regarding the
directors and executive officers of the Company, some of whom hold positions
with the Company's wholly-owned subsidiary, ELXSI ("ELXSI"), ELXSI's Bickford's
Family Restaurants Division ("Bickford's") and/or ELXSI's Cues Division
("Cues"). Each individual's biographical information was furnished by him to the
Company.

Name Age Position
<S> <C> <C>
Alexander M. Milley(1)(2) 45 Chairman, President and Chief Executive
Officer of the Company and ELXSI, President of Cues

Farrokh K. Kavarana(2)(3) 53 Director

Kevin P. Lynch(1)(3) 39 Director, Vice President of the Company
and ELXSI

Denis M. O'Donnell(2)(3) 44 Director

Robert C. Shaw(1) 45 Director, Vice President of the Company
and ELXSI

Thomas R. Druggish 42 Vice President of the Company,
Treasurer and Secretary of the Company
and ELXSI

Daniel E. Bloodwell 47 Vice President of ELXSI, President of
Bickford's
</TABLE>

(1) Member of the Executive Committee of the Board.
(2) Member of the Compensation Committee of the Board.
(3) Member of the Audit Committee of the Board.

Alexander M. Milley became Chairman of the Board of Directors and Chief
Executive Officer of the Company on September 25, 1989 and was elected President
of the Company in August 1990. He serves in the same positions for ELXSI and is
also President and Chief Executive Officer of Cues. Mr. Milley is the founder,
President, sole director and majority shareholder of Milley Management
Incorporated ("MMI"), a private investment and management consulting firm. Mr.
Milley is also the President of Cadmus Corporation ("Cadmus"), another private
investment and management consulting firm that is the former owner of Cues and
with which ELXSI has a management agreement. See "Certain Transactions -
Management Agreement." From August 1985 to May 1986, Mr. Milley was Chairman of
Neoax, Inc., now an environmental services company known as EnviroSource, Inc.
and then a diversified custom vehicle and precision metal manufacturing company.
Mr. Milley was Senior Vice President-Acquisitions from December 1983 until July
1986 of The Dyson-Kissner-Moran Corporation ("DKM"), a private investment
company. Mr. Milley is also Chairman of the Board of Bell National Corporation
("Bell National"), formerly a distributor of high quality fabrics used in
draperies and furniture, and Chairman of the Board of Azimuth Corporation
("Azimuth"). See "Certain Transactions - Azimuth Transactions." Cadmus and
Azimuth are significant stockholders of the Company. See "Security Ownership of
Certain Beneficial Owners."

Farrokh K. Kavarana became a director of the Company on September 25,
1989. Since April 1975 he has been a Executive Director of the Tata Group of
India. Prior to that he had been Vice-Chairman and Managing Director of Tata
International AG, an international holding company, which owns the Tata Group's
overseas holdings

<PAGE>

and investments. Mr. Kavarana is a director of numerous non-U.S. companies,
including Tata Industries Ltd., Tata Sons Ltd. of India, Tata International AG,
Switzerland, and Tata Technologies, Ptc. Ltd, Singapore (formerly Tata-ELXSI).
Mr. Kavarana is affiliated with the Tata Group, whose overseas affiliates are
controlling shareholders of Aggel Enterprises, Ltd., an investment holding
company. See "Security Ownership of Certain Beneficial Owners."

Kevin P. Lynch became a director of the Company on September 25, 1989
and has served as Vice President of the Company since September 24, 1991 and
Vice President of ELXSI since June 25, 1991. He has served as a Vice President
of MMI since September 1988 and of Cadmus since January 1994. See "Certain
Transactions - Management Agreement." From October 1986 until September 1988,
Mr. Lynch was an executive on the Corporate Development staff at Macmillan,
Inc., a publishing company.

Denis M. O'Donnell became a director of the Company on May 23, 1996. He
has been President of Novavax, Inc., a company engaged in the development of
pharmaceutical products, since 1995. Prior to that he had been Corporate Vice
President of Medical Affairs of IGI Inc., a company engaged in the development
of human and animal pharmaceutical products, since 1991. Mr. O'Donnell has been
a director of Biocybernetics, Inc., a bioengineering research and development
firm, since 1992.

Robert C. Shaw became Vice President and a director of the Company on
September 25, 1989 and Executive Vice President on December 19, 1989. He also
served as Treasurer of the Company from September 1989 to January 1990. Mr. Shaw
has been a Vice President of MMI since March 1989, an officer and/or director of
Azimuth and/or certain subsidiaries thereof since November 1990, a director of
Cadmus since January 1992 and President and a director of Bell National since
November 1989. See "Certain Transactions - Management Agreement" and " - Azimuth
Transactions." Prior to March 1989, he was Vice President of Berkeley Softworks
Incorporated ("Berkeley") from September 1987 until March 1989. From January
1987 until September 1987 he was Vice President, and from July 1985 until
January 1987 he was Director of Finance and Operations, of Ansa Software
Incorporated ("Ansa"). Berkeley and Ansa developed and produced personal
computer software. Mr. Shaw has served as a director and President of Bell
National since November 1989.

Thomas R. Druggish became Vice President of the Company on January 2,
1990 and was elected Secretary of the Company on September 11, 1990. He
currently serves as Chief Financial Officer of Bell National and has been
Secretary and Treasurer of MMI since September 1990. He also has served as Vice
President and Secretary of Cadmus since November 1992 and an officer and/or
director of Azimuth Corporation and/or certain subsidiaries thereof since
November 1990. See "Certain Transactions - Management Agreement," and " -
Azimuth Transactions." Mr. Druggish was Assistant Controller at Borland
International from April 1987 to December 1989.

Daniel E. Bloodwell became a Vice President of ELXSI on September 24,
1991, and has served as President of Bickford's since July 1, 1991. From July
1987 to June 1991 Mr. Bloodwell was Vice President of Operations for Marriott
Family Restaurants Inc., which then owned the Bickford's operations. From July
1985 to June 1987, Mr. Bloodwell was Vice President of Operations of Sizzler
Restaurants, Inc.

Committees; Board and Committee Meetings

The Board of Directors has an Executive Committee, a Compensation
Committee and an Audit Committee, whose members are elected each year by the
entire Board.

The Executive Committee's function is to act in place of the Board
between meetings of the full Board. During the year ended December 31, 1997 the
Executive Committee did not meet. The members of the Committee are Messrs.
Milley, Lynch, and Shaw.

The Compensation Committee's function is to administer the Company's
stock option and other compensation plans and to act upon such other
compensation matters as may be referred to it by the Board. The

<PAGE>

current members of the Committee are Messrs. Milley, Kavarana, and O'Donnell.
During the year ended December 31, 1997, the Compensation Committee met one
time.

The Audit Committee oversees the Company's internal accounting
procedures and consults with, and reviews the reports of, the Company's
independent accountants. The current members of the Committee are Messrs.
Kavarana, Lynch, and O'Donnell. During the year ended December 31, 1997, the
Audit Committee met one time. At such meeting, the Company's auditors presented
a report to the Audit Committee indicating (among other things) there were no
irregularities involving the Company's accounting.

During the year ended December 31, 1997 the Board of Directors of the
Company met six times. All directors attended all of the meetings.

From time to time the Board of Directors is asked to consider and vote
upon matters which may present a conflict of interest for certain members. It is
the Company's practice to not disqualify any Board member from voting with
respect to such matters. In bringing conflict-of-interest (as well as other)
matters before the Board, management generally seeks to secure the unanimous
approval of directors; such unanimous approval has been obtained on virtually
all matters heretofore voted upon by present Board members.

Compensation of Directors

Cash Compensation. Since 1989 the directors of the Company have
received no cash compensation for their services as such, except for
reimbursement of reasonable expenses of attending meetings. There are currently
no plans to begin paying cash compensation to directors.

Other Compensation. During 1997 each director of the Company received
as compensation for his services as such options to purchase 7,500 shares
granted under the Company's 1996 Incentive Stock Option Plan. Each such option
is exercisable at a price of $6.00 per share, the market price of the Common
Stock on the date of the grant, and expires on May 22, 2007.

Report of the Compensation Committee

The Compensation Committee believes that offering its executive
officers a compensation package consisting of a balanced combination of fixed,
formula-based, long-term and discretionary components is the best way of
ensuring that (a) executive compensation is appropriately linked to the creation
of shareholder value, and (b) the Company will be able to attract, motivate and
retain executives of outstanding abilities. Fixed compensation is paid through
base salaries, which the Committee believes should be and are maintained at
levels comparable to those generally paid to executives with similar
responsibilities at similarly-sized companies. The other parts of total
compensation are realized through the Company's bonus arrangements, its stock
option plans and its Bickford's Division Phantom Stock Option Plan (the "Phantom
Stock Option Plan"). The Committee also is of the view that its executives'
compensation should be tied both directly and materially to the actual operating
performance.

Since the acquisition of Cues in October 1992, Mr. Milley has received
salary compensation from the Company for his services as President of Cues of
$120,000 per year. During 1997, Mr. Milley and ELXSI, with the approval of the
full Board of the Company, entered into an employment agreement that increased
his annual salary to $150,000 plus an additional 5% per year and secures his
services through at least June 2005. See "Executive Compensation Employment
Agreement". The Compensation Committee feels that this increased salary level
and long-term commitment is justified, given that Mr. Milley's devotion of
substantial time and efforts to the Cues operations has led to a significant,
continued improvement in that division's operations and that the Company overall
has experienced continued and steady growth since 1989 under Mr. Milley's
leadership. The Company pays management fees to Cadmus, a company controlled by
Mr. Milley, pursuant to a written agreement approved by the Board of Directors
of the Company. These fees are based on the achievement of certain minimum
levels of operating

6
<PAGE>

income, which have been achieved, and the fees will be discontinued if operating
targets cease to be met. See "Certain Transactions - Management Agreement."

Mr. Milley's employment agreement allows for ELXSI to pay compensation
over and above the amounts committed to thereunder. It is the present intention
of the Compensation Committee to evaluate the compensation of Mr. Milley for his
services as an officer of the Company on an annual basis. Additional
compensation may be awarded to Mr. Milley in the form of stock options, cash
bonuses or other incentives. Any such payments would be at the discretion of the
Board rather than through a formula-based plan.

The 1997 compensation of Daniel E. Bloodwell, President of the
Bickford's Division of ELXSI, consisted primarily of base salary and
compensation related to the Phantom Stock Option Plan. The Committee believes
that Mr. Bloodwell's compensation should be heavily weighted toward increasing
shareholder value and, accordingly, a significant portion of his compensation is
in the form of Phantom Stock Options, as described below.

Through his participation in the Phantom Stock Option Plan, which was
put into effect in connection with the Company's 1991 acquisition of Bickford's,
Mr. Bloodwell has the opportunity to earn compensation equal to a specified
maximum percentage of a certain measure of the value of this division (less an
exercise price). The maximum percentage, 4.9%, was earned by Mr. Bloodwell
because Bickford's achieved targeted levels of earnings before interest, taxes
and depreciation during the two-year period from July 1, 1991 through June 30,
1993 and because Mr. Bloodwell remained with the Company through June 30, 1996.
Mr. Bloodwell received 1.0% of the 4.9% maximum amount at the inception of the
Phantom Stock Option Plan in 1991 in consideration of his payment of $40,833
(which is non-refundable and will be credited against any future exercise price
payment), and he earned an additional 1.0% in each of 1992 and 1993 due to the
achievement of the targeted results for applicable periods. The remaining 1.9%
was earned by Mr. Bloodwell upon his remaining with the Company through June 30,
1996. The percentage earned by Mr. Bloodwell will be multiplied by the fair
market value of Bickford's assets on the measure date less certain liabilities
of or related to that division. The result of this calculation, less an exercise
price, will represent the payment to be received by Mr. Bloodwell on or after
July 1, 2001. During and after the measurement period, Mr. Bloodwell will
benefit from increases in the value of the Bickford's division, as this is the
fundamental component used to determine the value of Phantom Stock Options.

THE COMPENSATION COMMITTEE
Alexander M. Milley
Farrokh K. Kavarana
Denis M. O'Donnell

Executive Compensation

The following table summarizes the total compensation of the executive
officers of the Company who earned in excess of $100,000 for the year ended
December 31, 1997.

<PAGE>

Summary Compensation Table
--------------------------

Long-Term
Annual Compensation Compensation
------------------------------------------- -------------------------
No. of
Shares of
Fiscal Common
Year Stock All Other
Name and Ended Underlying Compen-
Principal Position Dec. 31 Salary Bonus Options sation
- ------------------ ------- --------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C>

Alexander M. Milley 1997 $120,000 - 72,500 -
President & Chief 1996 120,000 - 25,000 -
Executive Officer 1995 120,000 - 22,500 -

Daniel E. Bloodwell 1997 $122,692 $ 0 2,150 $264,388(1)
Vice President of ELXSI, 1996 120,000 15,000 2,100 193,885(1)
President of Bickford's 1995 115,000 15,000 2,080 211,511(1)
Division

</TABLE>

(1) Represents an estimate by the Company of the increase during the
applicable year in the value of the Phantom Stock Options held at the
end of such year. See " --Phantom Stock Option Plan" below.

Phantom Stock Option Plan

The following table sets forth information with respect to the Phantom
Stock Option Plan (the Company's only long-term incentive plan) and the
executive officers named in the table above.

Long-Term Incentive Plan Awards in Last Fiscal Year
---------------------------------------------------

Number of Estimated Future Payout Under
Phantom Stock Phantom Stock Option Plan
Option Rights Payout ----------------------------------------------
Name ("PSOR's") Date Threshold Target Maximum
---- ---------- ---- --------- ------ -------
<S> <C> <C> <C> <C> <C>

Alexander M.
Milley - - - - -

Daniel E.
Bloodwell - - 4.9 4.9 4.9

</TABLE>

The Phantom Stock Option Plan was implemented by the Company in 1991.
Its only participants are Mr. Bloodwell and three other Bickford's division
employees. At the inception of this Plan, ELXSI granted to these

<PAGE>

individuals PSOR's (each representing one percentage point) for an initial
investment ranging from $25,000 to $40,833 (in the case of Mr. Bloodwell). Each
holder of a Phantom Stock Option is entitled to receive, upon exercise, a cash
payment equal to (a) the product of (i) the sum of the appraised value of
Bickford's assets at the time of exercise less (x) all then existing liabilities
of the Company or ELXSI related to Bickford's and less any then existing debt of
the Company including debt incurred to acquire Bickford's, debt incurred for
Bickford's-related acquisitions, or debt used for working capital needs, and
(ii) a percentage equal to the PSOR's then held by the holder, minus (b) an
exercise price of approximately $74,000 per PSOR less such holder's initial
investment. No Phantom Stock Option may be exercised until the earliest to occur
of (1) July 1, 2001, (2) the termination of the holder's employment, or (3) the
sale (if any) of the Bickford's division. All increases in value of the Phantom
Stock Options are treated as compensation expense by the Company in the year in
which the increase occurs.

At December 31, 1997, Mr. Bloodwell held 4.9 PSOR's. He earned his
final 0.9 PSOR's on June 30, 1996.

Common Stock Options

The following table sets forth the number of shares of Common Stock
subject to options granted by the Company in 1997 to each executive officer
named in the table above, and certain other relevant information.

Option Grants in the Last Fiscal Year
-------------------------------------

Potential Realizable
No. of Percent of Value at Assumed
Shares of Total Annual Rates of
Common Options Stock Price
Stock Granted Appreciation for
Underlying to Option Term
Options Employees Exercise Expiration -------------------------
Name Granted in 1997 Price Date 5% 10%
------- ------- ----- ---- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Alexander M. Milley 42,500(1) 19.5% $6.00(3) 5/22/07 $160,368 $406,404
Alexander M. Milley 30,000(2) 13.8% $9.00(3) 10/08/07 $169,802 $430,310
--------- --------
Total 72,500 33.3% $330,170 $837,715

Daniel E. Bloodwell 2,150(2) 1.0% $9.00(3) 10/08/07 $12,169 $30,839

</TABLE>

(1) Options were granted on May 22, 1997. Options to purchase 32,500
shares were immediately exercisable from the date of grant, and
options to purchase 10,000 shares become 20% exercisable on each May
22 from 1998 through 2002.

(2) Options were granted on October 8, 1997. Mr. Milley's options were
all immediately exercisable from the date of grant. Mr. Bloodwell's
options become exercisable as to 25% on each October 8 from 1998
through 2001.

(3) The market value of the Common Stock on the date of grant.

<PAGE>

The following table presents information as to the value of unexercised
in-the-money options granted under the Company's incentive stock option plans
and held at year-end by the executive officers named in the above table.

Aggregated Option Exercises in Last Fiscal
Year and Fiscal Year-End Option Values
------------------------------------------

Value of Unexercised In-
Shares Number of Unexercised the-Money Options at
Acquired Options at Fiscal Year-End Fiscal Year-End (1)
on Value ------------------------------ ------------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alexander M. Milley - - 187,500 10,000 $984,688 $ 55,000

Daniel E. Bloodwell - - 4,835 5,295 28,045 22,278

</TABLE>

----------

(1) Assumes a fair market value per share of Common Stock of $11.500,
the December 31, 1997 closing price.

Employment Agreement

In mid-1997 ELXSI and Mr. Milley entered into an Employment Agreement,
dated as of June 30, 1998 (the "Employment Agreement"), which, in the main: (i)
provides for the employment of Mr. Milley as the Chairman of the Board,
President and Chief Executive Officer of both the Company and ELXSI and as
President and Chief Executive Officer of Cues, (ii) requires Mr. Milley to
devote substantially his entire professional time, attention and energies
(reasonable vacation, periods of illness and the like excepted) to the
performance of all the duties, responsibilities and functions incident to those
offices, and (iii) accordingly, places on Mr. Milley primary executive
responsibility for each of the Company, ELXSI and Cues. Prior to the time that
the Employment Agreement became effective, there was no formal employment or
similar agreement between the Company, any of its subsidiaries and Mr. Milley.
The term of the Employment Agreement commenced on June 30, 1997 and extends
until June 30, 2005 (the "Initial Term"), and this term may be renewed or
extended with the approval of the Board of Directors of the Company and the
consent of Mr. Milley, on such terms and conditions as they may agree.

Since October 1992, Mr. Milley had been receiving a base salary from
ELXSI in the amount of $120,000 per annum. Pursuant to the Employment Agreement,
this base salary compensation was increased to (i) $150,000 per annum plus (ii)
an additional, cumulative 5% increase that becomes effective on each subsequent
June 30 during its term. Notwithstanding the foregoing, Mr. Milley agreed to
defer the effectiveness and payment of this salary increase until January 1,
1998. The Employment Agreement also entitles Mr. Milley: (a) to participate in
such stock option, profit sharing and bonus plans as are made available to other
senior executives of ELXSI, (b) to be covered (together with his spouse and
minor children) by any and all group health, dental, life insurance and
disability plans made available to senior executives of ELXSI, the Company or
any of its subsidiaries or divisions generally, (c) to the use of a suitable
executive company car, (d) to take four weeks of paid vacation during each year,
and (e) to reimbursement for his reasonable travel, lodging, entertainment,
professional promotion and other appropriate business expenses incurred in the
course of his duties on behalf of ELXSI, the Company or any of its subsidiaries
or divisions. The Employment Agreement does not limit or restrict the right or
ability of ELXSI (acting with the authorization of the Board of Directors of the
Company or the Compensation Committee thereof) to grant or award

<PAGE>

other or additional compensation to Mr. Milley, in whatever form at any time, or
to limit or restrict the right or ability of ELXSI to prospectively or
conditionally grant or award any such other or additional compensation.

The Employment Agreement also provides that if Mr. Milley's employment
thereunder is terminated at any time for any reason (including by reason of a
failure to renew or extend prior to the expiration of the Initial Term), then
prior to (and as a condition to) such termination, ELXSI must pay to Mr. Milley
a lump-sum amount equal to: (i) the amount of base salary compensation that
would have been (but for such termination) paid over the one-year period
commencing with the effective date of such termination, plus (ii) if such
termination is to take effect prior to the expiration of the Initial Term, the
amount of base salary compensation that would have been (but for such
termination) paid over the remaining Initial Term, less (iii) a present value
discount calculated at an annual rate of 6% and taking into account the timing
of the base salary payments that would have been made to Mr. Milley during the
remaining term of the Employment Agreement (and, in the case of the foregoing
clause (i), during the one-year period commencing with the effective date of the
termination) assuming (for this purpose) that the employment of Mr. Milley under
the Employment Agreement had not been terminated.

Also in the event that Mr. Milley's employment under the Employment
Agreement is terminated at any time for any reason, Mr. Milley (if he is alive)
and his spouse and minor children shall continue, for the period of time from
and after the effective date of such termination until the date specified
hereinbelow, to be covered, at ELXSI's expense, by any and all insurance plans
made available to senior executives of the ELXSI, the Company or any of its
subsidiaries or divisions generally. Such period of time shall end: (i) in the
case of a termination on or after the expiration of the Initial Term, on the
earlier to occur of (x) the first anniversary of such termination and (y) the
date that Mr. Milley shall have obtained other employment with insurance
benefits equivalent to (or in excess of) those provided for under the Employment
Agreement; and (ii) in the case of a termination prior to the expiration of the
Initial Term, on the earlier to occur of (x) the June 30, 2006 and (y) the date
that Mr. Milley shall have obtained other employment with such equivalent (or
excess) insurance benefits.

Under the Employment Agreement, Mr. Milley agreed that during the term
thereof and for a period of one year thereafter he will not engage in, or be
employed or retained by or have certain other proscribed connections with, any
business or enterprise that competes with any business or enterprise being
pursued by the Company or any subsidiary or divisions thereof; provided that the
foregoing will not apply if Mr. Milley's employment is terminated by him with
good legal reason, by ELXSI without good legal cause or due to the expiration of
the term. The Employment Agreement also contains provisions prohibiting the
disclosure or use by Mr. Milley of non-public information confidential and/or
proprietary to the Company or any of its subsidiaries or divisions.

<PAGE>

Security Ownership of Certain Beneficial Owners

As of March 31, 1998, the Company had outstanding 4,660,980 shares of
Common Stock. The following table sets forth certain information regarding the
ownership of the Company's Common Stock as of that date by all those known by
the Company to be beneficial owners of more than five percent (5%) of the Common
Stock. Ownership information is based upon information furnished by the
respective beneficial owners.

Common Stock of the
Company Beneficially Owned
as of March 31, 1998(1)
-----------------------------------------
Number of Percent
Name Shares of Class
------------------------------ ---------------- ---------
<S> <C> <C>

Alexander M. Milley
3600 Rio Vista Avenue, Suite A
Orlando, FL 32805 1,251,863(2)(3) 25.2%

ELX Limited Partnership
3600 Rio Vista Avenue, Suite A
Orlando, FL 32805 590,200(3) 12.7%

Grandview Partners, L.P./Svenvest
Partners, L.P.
One Financial Center, Suite 1600
Boston, MA 02111 439,500 9.4%

Peter R. Kellogg(4)
Spear, Leeds & Kellogg
120 Broadway
New York, NY 10271 430,500 9.2%

Aggel Enterprises, Ltd.
11 Duddell Street
12th Floor
Hong Kong 325,940(5) 7.0%

Fidelity Management & Research
Company/FMR Corp.(6)
82 Devonshire Street
Boston, MA 02109 286,000 6.1%

</TABLE>

- ------------------------

(1) To the best of the Company's knowledge, except as otherwise
indicated the persons and entities named in this table have sole
voting and dispositive power with respect to all shares of the
Company's Common Stock shown as beneficially owned by them.
Numbers and percents are calculated in accordance with Rule 13d-3.

(2) Includes: (i) 112,347 outstanding shares and 118,762 shares of
Common Stock issuable upon the exercise of currently exercisable
warrants held by Eliot Kirkland L.L.C., of which Mr. Milley is the
sole manager, the President and a member; (ii) 194,354 shares held
by Cadmus Corporation, of which Mr. Milley is the Chairman,
President and controlling

<PAGE>

shareholder; (iii) 590,200 shares held by ELX Limited Partnership,
of which Mr. Milley is the sole general partner; and (iv) 21,200
shares held by Azimuth Corporation, of which Mr. Milley is the
Chairman, President and a controlling shareholder. Excludes 60,004
shares of Common Stock held by The Alexander M. Milley Irrevocable
Trust I (the "Milley Trust"), a trust for the benefit of certain
members of Mr. Milley's immediate family, and 150,500 shares of
Common Stock issuable upon the exercise of currently exercisable
warrants held by the Milley Trust. Under Rule 13d-3, shares
beneficially owned by the Milley Trust as determined thereunder
are deemed not to be beneficially owned by Mr. Milley. Also
includes 190,000 shares issuable upon exercise of stock options
granted by the Company that are exercisable currently or within 60
days and excludes 7,500 shares issuable upon exercise of stock
options granted by the Company that become exercisable in more
than 60 days.

(3) Shares shown above as being beneficially owned by ELX Limited
Partnership are also included herein under the beneficial
ownership of Alexander M. Milley, shown separately.

(4) Shares reported herein as held by Peter R. Kellogg are shares
owned by: Cynthia Kellogg, Mr. Kellogg's wife; I.A.T. Reinsurance
Syndicate Ltd. ("IAT"), of which Mr. Kellogg is the sole holder of
voting stock; the Peter R. Kellogg & Cynthia Kellogg Foundation
(the "Kellogg Foundation"), of which Mr. Kellogg is a trustee; and
NOM Trust U/W/O James C. Kellogg III (the "Kellogg Trust"), of
which Mr. Kellogg is a trustee. Mr. Kellogg has sole voting and
dispositive power with respect to shares owned by IAT and has
shared voting and dispositive power with respect to shares owned
by Mrs. Kellogg, the Kellogg Foundation and the Kellogg Trust.

(5) Includes 69,784 shares owned of record or beneficially by other
entities under common control with Aggel Enterprises, Ltd. Mr.
Kavarana, a director of the Company, is affiliated with the
controlling shareholders of Aggel Enterprises, Ltd. and its
affiliates. Mr. Kavarana disclaims beneficial ownership of all
shares beneficially owned by Aggel Enterprises, Inc.

(6) Shares reported herein as held by Fidelity Management & Research
Company ("FMRC")/FMR Corp. are owned by the Fidelity Low-Priced
Stock Fund (the "Fund"), of which FMRC, a wholly-owned subsidiary
of FMR Corp., is investment advisor. FMRC/FMR Corp. have sole
dispositive power with respect to the shares reported; the Board
of Trustees of the Fund has sole voting power with respect to such
shares.

Certain Transactions

Management Agreement

In connection with its 1989 restructuring, the Company entered into a
Management Agreement, dated September 25, 1989 (as amended, the "Management
Agreement"), with Winchester National, Inc. ("Winchester"), a private investment
and management consulting firm owned by Mr. Milley. In July 1991 the Company
transferred its rights and duties under the Management Agreement to ELXSI, its
wholly-owned subsidiary, and Winchester transferred its rights and duties under
the Management Agreement to MMI, of which Mr. Milley is the President and the
sole director and of which Mr. Milley and The Alexander M. Milley Irrevocable
Trust I (the "Milley Trust"), a trust for the benefit of certain members of Mr.
Milley's immediate family, are the only stockholders. The Management Agreement
initially was scheduled to expire on September 30 1992; in that year MMI and
ELXSI agreed to an extension of its term (i) through September 30, 1995 (the
"Initial Term") and (ii) thereafter, until terminated by either party with the
approval of a majority of its Board of Directors on not less than 90 days prior
written notice

<PAGE>

to the other party. Effective January 1, 1994, MMI transferred its rights and
obligations under the Management Agreement to Cadmus, of which Mr. Milley is the
Chairman, President and controlling shareholder. Under an amendment entered by
ELXSI and Cadmus in 1997 (the "1997 Amendment"), the date for the earliest
expiration of the Initial Term was extended from September 30, 1995 to June 30,
2005.

The terms of the Management Agreement provide for ELXSI to be provided
with advice and services with respect to ELXSI's business and financial
management and long-range planning, including: (i) furnishing the services of
certain executive officers and other employees of Cadmus; (ii) advising and
assisting in connection with financing arrangements; (iii) assisting management
in preparing and submitting to the Board of Directors analyses of the business
and operations of ELXSI; (iv) assisting management in the preparation of
financial and operating records; and (v) assisting in the retention of other
persons, firms and corporations to render professional and technical services to
ELXSI. Specific examples of services historically rendered to under the
Management Agreement include: (a) ongoing evaluation of division management; (b)
preparing and reviewing division operating budgets and plans; (c) evaluating new
restaurant locations and menu changes; (d) identifying, and assisting in the
divestiture of, under-performing assets; (e) evaluating financing options and
negotiating with lenders; (f) assisting in the compliance with securities laws
and other public reporting requirements; (g) communicating with stockholders;
(h) negotiating and arranging insurance programs; (i) monitoring tax compliance;
(j) evaluating capital spending; (k) cash management services; (l) preparing
market research; (m) developing and improving management reporting systems; and
(n) identifying and evaluating acquisition candidates and investment
opportunities. In addition, Cadmus provides the Company with general
administrative services, at a charge that was approximately $27,000 in 1997.

Under the Management Agreement, the management services provider became
entitled to receive, in addition to reimbursement for reasonable expenses, fee
compensation commencing upon ELXSI's having first achieved operating income (as
defined) of $1,250,000 for a fiscal quarter. Those fees may be discontinued
following any fiscal year in which such operating income is less than
$4,000,000, but shall be reinstated following the first fiscal quarter
thereafter in which ELXSI again attains quarterly operating income of at least
$1,250,000. Under these terms, the Management Agreement counterparty
(Winchester, MMI or Cadmus) has been receiving Management Agreement fees
continuously since October 1991.

Prior to the 1997 Amendment, the fee compensation payable by ELXSI
under the Management Agreement was $500,000 per annum. Pursuant to the 1997
Amendment, this compensation was increased, effective April 1, 1997, to (i)
$600,000 per annum plus (ii) an additional, cumulative 5% increase that becomes
effective on each April 1 during its term. Cadmus may request an increase in
such fee or escalator, but any such increase must be approved by a majority of
the independent directors of the Company.

The 1997 Amendment also provides that if Cadmus's services under the
Management Agreement are terminated at any time for any reason (including by
reason of a failure to renew or extend prior to the expiration of the Initial
Term), then prior to (and as a condition to) such termination, ELXSI must pay to
Cadmus a lump-sum amount equal to: (i) the amount of fees that would have been
(but for such termination) paid over the one-year period commencing with the
effective date of such termination, plus (ii) if such termination is to take
effect prior to the expiration of the Initial Term, the amount of fees that
would have been (but for such termination) paid over the remaining Initial Term,
less (iii) a present value discount calculated at an annual rate of 6% and
taking into account the timing of the fee payments that would have been made to
Cadmus during the remaining Initial Term (and, in the case of the foregoing
clause (i), during the one-year period commencing with the effective date of the
termination) assuming (for this purpose) that the services of Cadmus under the
Management Agreement had not been terminated. For purposes of the foregoing,
ELXSI's operating income for all relevant periods will be deemed to be in excess
of $4,000,000 if operating income for the full fiscal year most recently
completed prior to the relevant termination was equal to or in excess of such
amount.

<PAGE>

It is through the Management Agreement that the Company is provided the
services of Thomas R. Druggish, the Company's Vice President, Treasurer and
Secretary, and the non-director services of Kevin P. Lynch, a Vice President and
director of the Company. See "Directors and Executive Officers of the Company."

Azimuth Transactions

On December 30, 1996, ELXSI entered into and consummated the
transactions contemplated by a Recapitalization Agreement, dated as of December
30, 1996 (the "Azimuth Recapitalization Agreement"), among Azimuth Corporation
("Azimuth"), three subsidiaries thereof (the "Azimuth Subsidiaries"), ELXSI and
the Bank of America National Trust and Savings Association (then named Bank of
America Illinois; hereinafter "BAI"). Azimuth is a holding company of the
Azimuth Subsidiaries, two of which produce trade show exhibits and one of which
is a distributor of fuses and aerospace fasteners. Each of Messrs. Milley, Shaw
and Druggish is an officer and/or director of Azimuth and/or one or more of the
Azimuth Subsidiaries; Messrs. Shaw and Druggish are stockholders of Azimuth; and
Mr. Milley is a controlling stockholder of Azimuth. BAI is ELXSI's senior bank
lender.

Under the Azimuth Recapitalization Agreement (among other things):
(1)(A) BAI sold to ELXSI all of BAI's rights, title and interest in, to and
under the $6,650,000 outstanding principal amount of the revolving credit loans
previously made by BAI to the Azimuth Subsidiaries (the "Azimuth Subsidiary
Loans"), and all related collateral security interests, loan documentation,
claims and proceeds, and, in consideration thereof: (B) ELXSI assumed the
obligations of BAI under such loan documentation, and (C) ELXSI paid to BAI an
amount equal to $5,850,000; (2) the terms and conditions of the Azimuth
Subsidiary Loans were amended as follows: (A) the interest rate applicable to
the Azimuth Subsidiary Loans was increased to 15% per annum, (B) the maturity
date of the Azimuth Subsidiary Loans was extended from December 31, 1996 to June
30, 1998, (C) the Azimuth Subsidiaries were granted the collective right and
option to purchase from ELXSI for cash all (but not less than all) of the
Azimuth Subsidiary Loans, or otherwise pay-off in full the Azimuth Subsidiary
Loans, at a price (or for a payment) equal to (i) the combined principal amount
thereof outstanding on the date of purchase plus (ii) all accrued but unpaid
interest thereon to the date of purchase less (iii) if purchased during any of
the following calendar months, the following amounts: (a) January 1997:
$575,000; (b) February 1997: $475,000; (c) March 1997: $375,000; (d) April 1997:
$275,000; (e) May 1997: $175,000, and (f) and June 1997: $75,000, and plus (iv)
if not previously paid, the $225,000 closing fee to ELXSI hereinafter described,
(D) the maximum amount of Azimuth Subsidiary Loans that may be outstanding at
any one time was increased from its then-current $6,650,000 to $9,650,000, (E)
the "lock-box" provisions of the relevant loan documentation were waived, and
(F) the capital expenditure and restricted payments covenants of the relevant
loan documentation were modified so as to put Azimuth and the Azimuth
Subsidiaries in compliance therewith; and (3) Azimuth and the Azimuth
Subsidiaries agreed to pay ELXSI a $225,000 closing fee on the demand of ELXSI
(or such earlier date that the Azimuth Subsidiary Loans are repurchased or
paid-off in full).

As a result of the Azimuth Recapitalization Agreement transactions
hereinabove described, ELXSI became the senior revolving credit lender to the
Azimuth Subsidiaries. Funding for ELXSI's purchase of the Azimuth Subsidiary
Loans, as well as for the further revolving credit loans made by ELXSI to the
Azimuth Subsidiaries, was provided by BAI, under an amendment and restatement of
ELXSI's credit agreement.

The purpose of the above transactions was to provide an up-to-18-month
revolving credit line to the Azimuth Subsidiaries on terms that were intended to
earn the Company a return on its investment not generally available in the
marketplace for the commensurate risk. The Company's return on investment was in
the form of net interest (i.e., the difference between the Azimuth Subsidiaries'
15% interest rate and ELXSI's cost of borrowing) and the discount and closing
fee earned by ELXSI as described above.

On June 16, 1997, the Azimuth Subsidiaries prepaid in full the Azimuth
Subsidiary Loans with the proceeds of a new line of credit obtained from a third
party lender. Upon such prepayment, the revolving line of credit provided by
ELXSI to the Azimuth Subsidiaries, and all related collateral security interests
and documentation, were

<PAGE>

terminated. As a result of the Azimuth Recapitalization Agreement transactions
hereinabove described, ELXSI earned approximately $938,000 of pre-tax income.

Loans to Cadmus, ELX and Azimuth

Under the Azimuth Recapitalization Agreement, Azimuth issued to BAI
6,517 shares of its Series AAA 5% Cumulative Redeemable Preferred Stock (the
"Azimuth AAA Preferred"), having an aggregate liquidation preference of
$6,517,000, in exchange for BAI's surrender and cancellation of a like amount of
term loan principal and interest obligations owed by Azimuth to BAI. The terms
of the Azimuth AAA Preferred: (i) required quarterly dividends payable in cash
at a rate of 5% of liquidation preference, (ii) provided for "contingent
dividends" payable in cash based on the "net worth increase" (as defined) of
Azimuth in years five through 10, subject to cap of $240,000 per year, and (iii)
required Azimuth to redeem, at 100% of liquidation preference plus accrued
dividends, at least one-fifth of the shares of the Azimuth AAA Preferred
originally issued after the end of each of year five through 10. On June 30,
1997, BAI sold all of its Azimuth AAA Preferred shares to Cadmus for $2,000,000.
These funds were obtained by Cadmus through a loan made by ELXSI. This loan
matures on the second anniversary of its origination (i.e., June 30, 1999),
requires quarterly payments of interest at a rate of 15% per annum and is
secured by a pledge of the purchased shares of Azimuth AAA Preferred. The funds
for ELXSI's loan to Cadmus was provided by BAI, under ELXSI's credit agreement.
In December 1997, at the request of Cadmus and Azimuth, ELXSI consented to an
amendment of the terms of the Azimuth AAA Preferred in order to (among other
things): (a) increase the periodic dividend rate from 5% to 17.5% of liquidation
preference, (b) permit both periodic and contingent dividends to be paid in cash
or in additional shares of Azimuth AAA Preferred, and (c) change Azimuth's
mandatory redemption obligations from a five-year sinking fund requirement to a
single, end-of-year-10 requirement.

In December 1994, the Company made a three-year loan of $1,155,625 to
ELX Limited Partnership ("ELX"), of which Mr. Milley is the sole general partner
and Messrs. Lynch, Shaw and Druggish are limited partners, to finance ELX's
exercise of an option to purchase 369,800 shares of Common Stock from The Airlie
Group, L.P. In December 1996, the Company made another three-year loan to ELX,
of $909,150, utilized by it to exercise an option to purchase 110,200 shares of
Common Stock held by BankAmerica Capital Corporation ("BACC") and to purchase
from BACC an additional 110,200 shares of Common Stock. Funding for these loans
were obtained by the Company through ELXSI's credit agreement with BAI. Both
Company loans to ELX require no principal or interest payments until their
respective maturity dates and bear interest at a rate equal to the Company's
cost of funds (under ELXSI's BAI credit agreement) plus 0.5%. In December 1997,
the Company agreed to a three-year extension of the maturity date of its
December 1994 loan to ELX, and ELX paid in full all interest accrued on such
loan through the original maturity date, totalling approximately $330,000.

In March 1998, an individual stockholder of the Company sold to the
Company and Azimuth 90,000 and 10,000 shares, respectively, of Common Stock at a
price of $13.50 per share. The funds for these purchases were obtained by the
Company through ELXSI's credit agreement with BAI. The Company loaned to Azimuth
the amount required to complete its 10,000 shares purchase, or $135,000. This
loan will mature on the third anniversary of its origination (i.e., in March
2001), with no principal or interest payments being required to be earlier made,
and bears interest at a rate equal to the Company's cost of funds (under ELXSI's
BAI credit agreement) plus 0.5%.

Odd-Lot Offers

In October 1997, Cadmus began a process of making formal offers
("Odd-Lot Offers") to purchase shares of Common Stock, at prevailing market
prices, to stockholders of the Company that own 100 shares or less of Common
Stock (after giving effect to the Company's May 1992 1-for-25 reverse split of
outstanding shares) ("Odd-Lot Holders"). The Company has in excess of 5,000
record Odd-Lot Holders (out of a total of approximately 5,600 record holders),
and together they own approximately 120,000 shares of Common Stock. Odd-Lot
Holders benefit from the Odd-Lot Offer by being given the opportunity to sell
their shares at market prices free of brokerage commissions and special charges
that may apply for the handling of odd-lot holdings. The Company benefits from

<PAGE>

acceptances of Odd-Lot Offers through reductions in the burden and expense of
communicating with Odd-Lot Holders who may (in any event) wish to sell their
shares.

The Odd-Lot Offers have generally been made by letter, on ELXSI
letterhead, individually addressed and sent to those stockholders who, according
to the Company's stock record books, are Odd-Lot Holders. The terms of the Odd-
Lot Offers are that Cadmus will purchase shares at the closing sale price of the
Common Stock on the trading day immediately preceding the post-mark or other
date of forwarding by a tendering Odd-Lot Holder of his or her return materials.
In addition, in no event will Cadmus purchase pursuant to the Odd-Lot Offers a
number of shares of Common Stock that, together with all other shares of Common
Stock purchased by Cadmus in the preceding 12 months, would constitute more than
2% of the outstanding shares of Common Stock. As of March 16, 1998, Cadmus
purchased 4,337 shares of Common Stock from approximately 110 Odd-Lot Holders
pursuant to its Odd-Lot Offers.

Compensation Committee Interlocks and Insider Participation

Throughout 1997, the Company's Compensation Committee was comprised of
Messrs. Milley, Kavarana and O'Donnell. Throughout 1997, Mr. Milley also served
as Chairman, President and Chief Executive Officer of the Company and ELXSI and
as President and Chief Executive Officer of the Cues division. Throughout 1997
Messrs. Druggish, Milley and Shaw all served as directors and/or executive
officers of Azimuth and/or one or more Azimuth Subsidiaries. Messrs. Milley,
Druggish and Shaw were directors and/or executive officers of Bell National
throughout 1997. Messrs. Milley and Shaw were directors and executive officers
of Cadmus throughout 1997.

Section 16(a) Beneficial Ownership Reporting Compliance

In December 1997, Mr. Milley filed with the Commission two "Statements
of Changes in Beneficial Ownership" on Form 4 ("Form 4"), as required under
rules promulgated under Section 16(a) of the Securities Exchange Act of 1934, as
amended ("Section 16(a)"), in order to report certain purchases of Common Stock
by Cadmus and Azimuth. These two filings disclosed, for the first time for
purposes of Section 16(a): (i) five purchases by Cadmus of Common Stock odd-lots
covering 100 shares in the aggregate consummated in April through August 1997,
(ii) three additional purchases by Cadmus of Common Stock odd-lots covering 245
shares in the aggregate consummated in October 1997, and (iii) two open-market
purchases by Cadmus of an aggregate of 3,000 shares of Common Stock. In April
1998, Mr. Milley filed a Form 4 that disclosed, for the first time for purposes
of Section 16(a), three purchases by Cadmus of Common Stock odd-lots covering 68
shares in the aggregate consummated in July and November 1996. Each of the
foregoing transactions should have been reported on a Form 4 filed with the
Commission by the tenth day of the month following their respective consummation
dates.

Stock Performance Graph

Presented below is a stock performance graph which shows a comparison
of the performance of the Company's Common Stock over the five-year period from
December 31, 1992 through December 31, 1997 versus The Nasdaq Stock Market
("Nasdaq") Index and the Nasdaq Non-Financial Stocks Index. The Nasdaq
Non-Financial Stocks Index was chosen as an appropriate industry index, as the
Company operates in two distinct business segments: restaurants and equipment
manufacturing and servicing. Thus, a broad definition of industry such as
"Non-Financial" was deemed appropriate by the Company and has been used for this
Proxy Statement graph since 1993.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

- ------------------------------------------------------------------------------------------------------------
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>

Nasdaq Index 100 115 112 159 195 240
- ------------------------------------------------------------------------------------------------------------
ELXSI Corporation 100 163 105 123 133 230
- ------------------------------------------------------------------------------------------------------------
Nasdaq Non-Financial 100 115 111 155 188 221
- ------------------------------------------------------------------------------------------------------------

</TABLE>

<PAGE>

</TABLE>

<PAGE>

PROPOSAL NO. 2 -- APPROVAL OF THE
ELXSI CORPORATION 1998 INCENTIVE STOCK OPTION PLAN
(Item 2 on the Proxy Card)

The Board of Directors adopted the ELXSI Corporation 1997 Incentive
Stock Option Plan (the "1997 Option Plan") on February 20, 1998. The purpose and
terms of the 1998 Option Plan, which is reprinted in full in Annex A hereto, are
described generally below, but that description is qualified in its entirety by
reference to such Annex A hereto.

The 1998 Option Plan, which if approved by the stockholders of the
Company at the Annual Meeting of Stockholders will become effective on the date
thereof, provides for the grant to selected directors, officers and executive,
managerial and administrative employees of the Company or any of its
subsidiaries ("Eligible Persons") of either incentive stock options (within the
meaning of ss.422 of the Internal Revenue Code (the "Code")) or nonqualified
options (intended not to qualify as incentive stock options) to purchase Common
Stock of the Company. However, only employees within the meaning of Code
ss.3401(c) are entitled to receive incentive stock options under the 1998 Option
Plan. The 1998 Option Plan is to be administered by a committee appointed by the
Board of Directors consisting of at least two directors of the Company (the
"Committee"). In the absence of such appointment the Compensation Committee of
the Board of Directors will serve as the Committee; it is currently intended
that the Compensation Committee will serve that function.

As of the date of this Proxy Statement, there are approximately 28
Eligible Persons, two of whom are non- executive directors, three of whom are
executive directors and two of whom are non-director executive officers of the
Company or ELXSI. Because the number of shares that may be made subject to
options under the 1998 Option Plan ("Options"), as well as the option price per
share of Common Stock, depend on contingent and variable factors, it is not
possible to estimate or otherwise determine the Options likely to be granted
pursuant to the 1998 Option Plan. The market value of the Common Stock at the
close of business on March 31, 1998 was $14.375 per share.

The maximum number of shares of Common Stock that may be made subject
to Options is 75,000 shares. Each Eligible Person who is selected by the
Committee will be offered an Option to purchase a specified maximum number of
shares of Common Stock of the Company at a specified price. The exercise price
per share of an incentive stock Option may not be less than the fair market
value per share of Common Stock as of the date of grant, and the exercise price
per share of a nonqualified Option may not be less that 75% of such fair market
value; in either case, however, the per share exercise price may not be less
than the per share book value of the Common Stock. An Eligible Person to whom an
Option is granted must execute an option agreement evidencing that Option in the
form prescribed by the Committee no later than 30 days from the date the Option
is granted or, if later, 10 days after the Eligible Person receives an option
agreement evidencing the Option. All Options will be nontransferable except by
will or the laws of descent and distribution.

Except in the event of a nonqualified stock Option holder's death or
disability (as described below), no Option may be exercised more than 10 years
after its date of grant. Although not required by the terms of the 1998 Option
Plan, an Option may contain terms making it exercisable in increments over a
specified interval of time.

An optionee may exercise an Option on any date that is more than six
months after the date of grant to the extent the Option is exercisable on that
date (but for not fewer than 25 shares, or the total number of shares
exercisable, if less). The option price payable on exercise of an Option may be
paid in cash, in shares or other securities of the Company, partly in each, or
by a broker-assisted "cashless" exercise involving an immediate sale of a
sufficient number of the shares being acquired to pay the Option exercise price.

An outstanding Option that is wholly or partially unexercisable at a
given time shall become immediately exercisable in full upon a change in control
of the Company. A change in control is defined generally as (i) the sale

<PAGE>

of all or substantially all of the Company's assets, (ii) an election of new
directors if a majority of the directors immediately thereafter consists of
persons who were not nominated by management to stand for election, (iii) the
sale in a single transaction of at least 50% of the outstanding Common Stock,
consummation of a tender offer for more than 50% of the outstanding Common
Stock, or the consummation of a merger or consolidation of the Company, if
immediately after any such event a majority of directors consists of persons who
were not directors immediately prior to the event. However, in the event of a
merger or consolidation in which the Company does not survive, the Committee may
negate the accelerated exercisability of Options, but only if the agreement of
merger or consolidation requires that each optionee on that date receives the
same merger consideration as he or she would have received as a stockholder of
the Company had the exercisability of the Option been accelerated and had the
optionee, immediately prior to the merger or consolidation, exercised the Option
for the full number of shares subject thereto, paid the option price in full,
and satisfied all other conditions for the exercise of the Option.

The 1998 Option Plan provides for adjustment in the maximum number of
shares of Common Stock that may be granted thereunder and in the number of
shares of Common Stock subject to outstanding Options in the event of any stock
dividend, stock split, stock combination, merger, consolidation, reorganization,
recapitalization or other change in the capital structure of the Company
affecting the Common Stock. The Board of Directors may amend, suspend or
terminate the 1998 Option Plan at any time, except that no such change in the
1998 Option Plan can adversely affect any Options outstanding on the date of
such change without the optionee's consent. Furthermore, any such change that
requires stockholder approval to comply with applicable provisions of the Code,
applicable federal or state securities laws or Nasdaq or exchange listing
requirements will not be effective if stockholder approval is not obtained as
required. Unless sooner terminated, the 1998 Option Plan will terminate on
February 20, 2007.

For federal income tax purposes, the grant to an optionee of a
nonqualified stock option will not constitute a taxable event to the optionee or
to the Company. Upon exercise of a nonqualified stock option (or, in certain
cases, a later tax recognition date), the optionee will recognize compensation
income taxable as ordinary income, measured by the excess of the fair market
value of the Common Stock purchased on the exercise date (or later tax
recognition date) over the amount paid by the optionee for such Common Stock,
and will be subject to tax withholding. The Company may claim a deduction for
the amount of such compensation. The optionee will have a tax basis in the
Common Stock purchased equal to the amount paid plus the amount of ordinary
income recognized upon exercise of the nonqualified stock option. Upon the
subsequent sale of the Common Stock received upon exercise of the nonqualified
Option, an optionee will recognize capital gain or loss equal to the difference
between the amount realized on such sale and his or her tax basis in the Common
Stock, which may be long-term capital gain or loss if the optionee holds the
Common Stock for more than one year from the exercise date.

For federal income tax purposes, neither the grant nor the exercise of
an incentive stock Option will constitute a taxable event to the optionee or to
the Company, assuming the Option qualifies as an incentive stock Option under
Code ss.422. If an optionee does not dispose of the Common Stock acquired upon
exercise of an incentive stock option during the statutory holding period, any
gain or loss upon subsequent sale of the Common Stock will be long-term capital
gain or loss, assuming the shares represent a capital asset in the optionee's
hands. The statutory holding period is the later of two years from the date the
incentive stock Option is granted or one year from the date the Common Stock is
transferred to the optionee pursuant to the exercise of the Option. If the
statutory holding period requirements are satisfied, the Company may not claim
any federal income tax deduction upon either the exercise of the incentive stock
Option or the subsequent sale of the Common Stock received upon exercise
thereof. If the statutory holding period requirement is not satisfied, the
optionee will recognize compensation income taxable as ordinary income on the
date the Common Stock is sold (or later tax recognition date) in an amount equal
to the lesser of (i) the fair market value of the Common Stock on that date less
the amount paid by the optionee for such Common Stock, or (ii) the amount
realized on the disposition of the Common Stock less the amount paid by the
optionee for such Common Stock; the Company may then claim a deduction for the
amount of such compensation income.

<PAGE>

The federal income tax consequences summarized hereinabove are based
upon current law and are subject to change.

The 1998 Option Plan is being submitted to the stockholders of the
Company for approval in order to comply with certain Nasdaq rules applicable to
the Company. In the event that the 1998 Plan is not approved by stockholders, it
will not be effective; however, the Board of Directors may consider readoption
of the 1998 Option Plan or another similar plan.

The Board of Directors recommends that stockholders vote FOR the
approval of the 1998 Option Plan.

PROPOSAL NO. 3 -- CHARTER AMENDMENT TO REDUCE
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
(Item 3 on Proxy Card)

Like all Delaware corporations, the Company pays annual franchise taxes
to the State of Delaware ("Delaware Franchise Tax"). The amount of Delaware
Franchise Taxes that the Company must pay is determined based on the number of
its outstanding shares, the number of its authorized shares and the amount of
its total assets; the higher the amount of the latter two figures the higher the
tax.

For 1992 through 1995, the Company paid Delaware Franchise Taxes of
less than $100 per year. In 1997, the Delaware taxing authorities advised the
Company that, due to an administrative determination made in 1995 with respect
to the way corporations in general must calculate total assets for Delaware
Franchise Tax purposes, the Company's Delaware Franchise Tax assessment would
increase to approximately $47,000 for each of 1996 and 1997. The Company expects
similar, or greater, amounts of Delaware Franchise Tax for future years. These
amounts can be reduced, for 1998 and subsequent periods, if the number of shares
of the Company's authorized capital stock is reduced. Under Delaware law, such a
reduction can be effected only by an amendment to a corporation's certificate of
incorporation, which requires stockholder approval.

Currently, the Company's Restated Certificate of Incorporation (the
"Charter") authorizes the issuance of 160,000,000 shares of Common Stock and
5,000,000 shares of Preferred Stock. There are currently outstanding less than
4,700,000 shares of Common Stock and no shares of Preferred Stock. The Board of
Directors has determined that significantly reducing the 160,000,000 number of
authorized common shares will have little, if any, presently foreseeable
negative impact on the Company or its stockholders, and will serve their
interests by decreasing, in proportion to the reduction in the number of
authorized shares, the Delaware Franchise Tax that would otherwise be payable by
the Company.

The Board of Directors has thus proposed an amendment to the Charter to
reduce the number of authorized shares of Common Stock to 60,000,000 (the
"Charter Amendment"). The number of authorized shares of Preferred Stock will
remain unchanged, at 5,000,000. If approved by the stockholders, the Charter
Amendment will have the effect of reducing the Delaware Franchise Taxes
otherwise payable by the Company by 60%. The Charter Amendment will not result
in any changes to outstanding shares of Common Stock or the rights of the
holders thereof.

The Board of Directors deems the Charter Amendment to be advisable and
recommends that stockholders vote FOR its approval.

<PAGE>

PROPOSAL NO. 4 -- RATIFICATION OF APPOINTMENT OF
INDEPENDENT ACCOUNTANTS
(Item 4 on Proxy Card)

The Board of Directors of the Company has appointed the firm of Price
Waterhouse LLP as its independent accountants for the fiscal year ending
December 31, 1998. Price Waterhouse LLP served in such capacity for the
Company's preceding fiscal year. The Company has been advised by Price
Waterhouse LLP that neither it nor any member thereof has any financial
interest, direct or indirect, in the Company in any capacity. A representative
of Price Waterhouse LLP is expected to be present at the Annual Meeting of
Stockholders, will be given an opportunity to make a statement if he or she
desires to do so and is expected to be available to respond to appropriate
questions.

The Board of Directors recommends that stockholders vote FOR the
ratification of the appointment of Price Waterhouse LLP as the Company's
independent accountants for the current fiscal year.

OTHER MATTERS

The Board of Directors of the Company knows of no other matters which
are to be brought before the meeting. If any other matters should be presented
for proper action, it is the intention of the persons named in the enclosed form
of Proxy to vote in accordance with their discretion pursuant to the terms of
the Proxy.

PROPOSALS OF STOCKHOLDERS

Proposals of stockholders intended to be presented at the 1999 Annual
Meeting of Stockholders must be received at the Company's executive offices on
or before December ___, 1998, for inclusion in the Company's Proxy Statement
with respect to such meeting.

ELXSI CORPORATION

By Alexander M. Milley,
President

It is important the Proxies be returned promptly. Therefore,
stockholders who do not expect to attend the meeting in person are urged to fill
in, sign, date and return the enclosed Proxy card.

A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, filed with the Securities and Exchange Commission, may
be obtained without charge by any stockholder of the Company of record as of
March 31, 1998 by writing to ELXSI Corporation, 3600 Rio Vista Avenue, Suite A,
Orlando, Florida 32805, Attention: Thomas R. Druggish.

The Company's stock transfer agent is Continental Stock Transfer &
Trust Company, 2 Broadway, New York, New York 10004. Telephone: (212) 509-4000.

<PAGE>

Annex A

ELXSI CORPORATION
1998 INCENTIVE STOCK OPTION PLAN

1. Purpose. The purpose of this Plan is to advance the interests of
ELXSI Corporation by providing an opportunity to selected directors, officers
and key employees of the Company and its Subsidiaries to purchase shares of
Common Stock through the exercise of options granted pursuant to this Plan,
which may be either Incentive Options or Nonqualified Options. By encouraging
such stock ownership, the Company seeks to establish as close an identity as
feasible between the interests of the Company and its Subsidiaries and those of
such directors, officers and key employees and also seeks to attract, retain,
motivate and reward persons of superior ability, training and experience.

2. Definitions.

(1) Board means the Board of Directors of the Company.

(2) Code means the Internal Revenue Code of 1986 and regulations
thereunder, as amended from time to time.

(3) Committee means the committee appointed by the Board
responsible for administering the Plan or, in the absence of
the such an appointment, the Compensation Committee of the
Board.

(4) Common Stock means the common stock of the Company, par value
$.001 per share.

(5) Company means ELXSI Corporation, a Delaware corporation.

(6) Director means each individual who is serving as a member of
the Board as of the time of reference.

(7) Eligible Person means an individual who is serving in any one
or more of the following capacities: Director, director of a
Subsidiary, officer of the Company, officer of any
Subsidiary, or Key Employee.

(8) Employee means an employee of the Company or any Subsidiary
within the meaning of Code Section 3401(c).

(9) Incentive Option means a stock option granted to an Employee
and intended to qualify as an "incentive stock option" within
the meaning of Code Section 422 and designated as such.

(10) Key Employee means an executive, managerial or administrative
Employee.

(11) Nonqualified Option means a stock option not intended to be
an Incentive Option and designated as nonqualified, the
federal income tax treatment of which is determined generally
under Code Section 83.

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<PAGE>

(12) Option means either an Incentive Option or a Nonqualified
Option granted pursuant to this Plan.

(13) Plan means this ELXSI Corporation 1998 Incentive Stock Option
Plan as set forth herein, and as amended from time to time.

(14) Securities Act means the Securities Act of 1933, as amended,
and rules and regulations promulgated pursuant thereto, as
amended from time to time.

(15) Subsidiary means a "subsidiary" of the Company within the
meaning of Code Section 424(f), which generally is defined as
any corporation (other than the Company) in an unbroken chain
of corporations beginning with the Company if, at the
relevant time, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50%
or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.

3. Effective Date. This Plan was approved and adopted by the Board on
February 20, 1998. The effective date of this Plan shall be May 19, 1998, the
date of the annual meeting of stockholders of the Company, so long as this Plan
is approved by the stockholders of the Company on said date.

4. Stock Subject to Plan. The maximum aggregate number of shares of
Common Stock that may be made subject to Options granted hereunder is 75,000
shares, which number shall be adjusted in accordance with Section 9 in the event
of any change in the Company's capital structure. Shares of Common Stock issued
pursuant to this Plan may consist, in whole or in part, of either authorized and
unissued shares or issued shares held in the Company's treasury. Any shares
subject to an Option that for any reason expires or is terminated unexercised as
to such shares may again be the subject of an Option under this Plan.

5. Administration. The Plan shall be administered by a Committee
appointed by the Board consisting of not fewer than two individuals who are
Directors. The Board shall have the discretion to remove and appoint members of
the Committee from time to time. The Committee shall have full power and
discretion, subject to the express provisions of this Plan, (i) to determine the
Eligible Persons to whom Options are to be granted, the time or times at which
Options are to be granted, the number of shares of Common Stock to be made
subject to each Option, whether each Option is to be an Incentive Option or a
Nonqualified Option, the exercise price per share under each Option, and the
maximum term of each Option; (ii) to interpret and construe the Plan and to
prescribe, amend and rescind rules and regulations for its administration; (iii)
to determine the terms and provisions of each option agreement evidencing an
Option; and (iv) to make all other determinations the Committee deems necessary
or advisable for administering this Plan. All decisions of the Committee shall
be made by a majority of its members, which shall constitute a quorum, and shall
be reflected in minutes of its meetings.

6. Eligibility. Options may be granted to such Eligible Persons as the
Committee selects.

7. Terms and Conditions of Options. Options granted pursuant to this
Plan shall be evidenced by stock option agreements in such form and containing
such terms and conditions as the Committee shall determine. If an Eligible
Person to whom an Option is granted does not execute an option agreement
evidencing that Option in the form prescribed by the Committee within the later
of (i) thirty days from the date of grant of the Option or (ii) ten days after
the Eligible Person's receipt of an option agreement from the Company, the
Option shall be void and of no further force or effect. Each option agreement
evidencing an Option shall contain among its terms and conditions the following:

A-2

<PAGE>

(1) Price. Subject to the conditions on Incentive Options contained
in Section 8(2), if applicable, the purchase price per share of
Common Stock payable upon the exercise of each Option granted
hereunder shall be as determined by the Committee in its
discretion but shall not be less than the fair market value (or,
in the case of Nonqualified Options, 75% of the fair market
value) of the Common Stock on the day the Option is granted or,
if greater, the book value of the Common Stock on that date. The
fair market value of Common Stock shall be as determined by the
Committee in its discretion in accordance with any applicable
laws or rules.

(2) Number of Shares and Kind of Option. Each option agreement shall
specify the number of shares to which it pertains and shall
specify whether the Option is a Nonqualified Option or an
Incentive Option.

(3) Terms of Exercise. Subject to the conditions on Incentive
Options contained in Section 8(2), if applicable, and to Section
10, each Option shall be exercisable for the full amount or for
any part thereof and at such intervals or in such installments
as the Committee may determine at the time it grants such
Option; provided, however, that (i) no Option shall be exercised
as to fewer than 25 shares of Common Stock or, if less, the
total number of shares of Common Stock remaining unexercised
under the Option, and (ii) no Option shall be exercisable with
respect to any shares earlier than six months from the date the
Option is granted or later than ten years after the date the
Option is granted, except to the extent permitted in the event
of the death of the holder of a Nonqualified Option under
Section 7(7).

(4) Notice of Exercise and Payment. An Option shall be exercisable
only by delivery of a written notice to the Company's Treasurer,
or any other officer of the Company that the Committee
designates to receive such notices, specifying the number of
shares of Common Stock for which the Option is being exercised.
If the shares of Common Stock acquired upon exercise of an
Option are not at the time of exercise effectively registered
under the Securities Act, the optionee shall provide to the
Company or Committee, as a condition to the optionee's exercise
of the Option, a letter, in form and substance satisfactory to
the Company, to the effect that the shares are being purchased
for the optionee's own account for investment and not with a
view to distribution or resale, and to such other effects as the
Company deems necessary or appropriate to comply with federal
and applicable state securities laws. Payment shall be made in
full at the time the Option is exercised. Payment shall be made
by:

(i) cash;

(ii) delivery and assignment to the Company of shares of
Common Stock owned by the optionee;

(iii) delivery and assignment to the Company of other
securities of the Company owned by the optionee;

(iv) delivery of a written exercise notice, including
irrevocable instructions to the Company to deliver
the stock certificates issuable upon exercise of the
Option directly to a broker named in the

A-3

<PAGE>

notice that has agreed to participate in a
"cashless" exercise on behalf of the optionee.

(v) a combination of (i), (ii) and (iii).

Upon the optionee's satisfaction of all conditions
required for the exercise of the Option and payment
in full of the purchase price for the shares being
acquired as aforesaid, the Company shall, within a
reasonable period of time following such exercise,
deliver a certificate representing the shares of
Common Stock so acquired; provided, that the Company
may postpone issuance and delivery of shares upon
any exercise of an Option to the extent necessary or
advisable to comply with the applicable requirements
of The Nasdaq Stock Market ("Nasdaq") or any
exchange on which the Common Stock is listed, or any
federal or state securities laws.

(5) Withholding Taxes. The Company's obligation to deliver shares of
Common Stock upon exercise of an Option, in whole or in part,
shall be subject to the optionee's satisfaction of all
applicable federal, state and local tax withholding obligations,
if any.

(6) Nontransferability of Option. No Option shall be transferable by
the optionee otherwise than by will or the laws of descent and
distribution and shall be exercisable during the optionee's
lifetime only by the optionee (or the optionee's guardian or
legal representative).

(7) Legends. Any restriction on transfer of shares of Common Stock
provided in this Plan or in the option agreement evidencing any
Option shall be noted or referred to conspicuously on each
certificate evidencing such shares.

8. Restrictions on Incentive Options. Incentive Options (but not
Nonqualified Options) granted under this Plan shall be subject to the following
restrictions:

(1) Limitation on Number of Shares. The aggregate fair market value,
determined as of the date an Incentive Option is granted, of the
shares with respect to which Incentive Options are exercisable
for the first time by an Employee during any calendar year shall
not exceed $100,000. If an Incentive Option is granted pursuant
to which the aggregate fair market value of shares with respect
to which it first becomes exercisable in any calendar year by an
Employee exceeds the aforementioned $100,000 limitation, the
portion of such Option which is in excess of the $100,000
limitation shall be treated as a Nonqualified Option pursuant to
Code Section 422(d)(1). In the event that an Employee is
eligible to participate in any other stock option plan of the
Company or a Subsidiary which is also intended to comply with
the provisions of Code Section 422, the $100,000 limitation
shall apply to the aggregate number of shares for which
Incentive Options may be granted under all such plans.

(2) 10% Stockholder. If any Employee to whom an Incentive Option is
granted pursuant to the provisions of this Plan is on the date
of grant the owner of stock (as determined under Code Section
424(d)) possessing more than 10% of the total

A-4

<PAGE>

combined voting power of all classes of stock of the Company or
a Subsidiary, then the following special provisions shall be
applicable to the Incentive Option granted to such individual:

(i) The Option price per share subject to such Incentive Option
shall not be less than 110% of the fair market value of one
share on the date of grant; and

(ii) The Incentive Option shall not have a term in excess of five (5)
years from its date of grant.

9. Adjustment for Changes in Capitalization. Appropriate and equitable
adjustment shall be made in the maximum number of shares of Common Stock subject
to this Plan under Section 4 and, subject to Section 10, in the number, kind and
option price of shares of Common Stock subject to then outstanding Options to
give effect to any changes in the outstanding Common Stock by reason of any
stock dividend, stock split, stock combination, merger, consolidation,
reorganization, recapitalization or any other change in the capital structure of
the Company affecting the Common Stock after the effective date of this Plan.

10.Change in Control, Merger, Etc.

(1) Change in Control. Upon the occurrence of any of the events
listed below, all outstanding Incentive Options and Nonqualified
Options held by all optionees pursuant to this Plan which are
not otherwise exercisable in whole or in part shall become
immediately exercisable in full, unless and to the extent
otherwise determined by the Committee. The events are as
follows:

(i) Thesale by the Company of all or substantially all of
its assets; (ii) Any of the following events if,
immediately following such event, a majority of the
Directors consists of persons who were not Directors
immediately prior to the date of such event:

(a) the sale of 50% or more of the outstanding
shares of Common Stock of the Company in a
single transaction; (b) the consummation of a
tender offer (by a party other than the
Company) for more than 50% of the outstanding
shares of Common Stock of the Company; or (c)
subject to Section 10(2) below, the
consummation of a merger or consolidation
involving the Company; or

(iii) An election of new Directors if immediately following
such election a majority of the Directors consists of
persons who were not nominated by management to stand
for election as Directors in such election.

(2) Where Company Does Not Survive. In the event of a merger or
consolidation to which the Company is a party but is not the
surviving company, the Committee in its discretion may vote to
negate and give no effect to the acceleration of Options

A-5

<PAGE>

pursuant to Section 10(1)(ii)(c), but only if and to the extent
that an executed agreement of merger or consolidation provides
that the optionee holding such an Option shall receive the same
merger consideration as the optionee would have received as a
stockholder of the Company had the exercisability of the Option
been accelerated in accordance with Section 10(1)(ii)(c) and had
the optionee, immediately prior to the merger or consolidation,
exercised the Option for the full number of shares subject
thereto, paid the exercise price in full, and satisfied all
other conditions for the exercise of the Option.

(3) Liquidation or Dissolution. The provisions of Section 9 and
Subsections 10(1) and (2) shall not cause any Option to
terminate other than in accordance with other applicable
provisions of this Plan. However, in the event of the
liquidation or dissolution of the Company, each outstanding
Option shall terminate, except to the extent otherwise
specifically provided in the option agreement evidencing the
Option.

11. Rights of Optionee. No Eligible Person shall have a right to be
granted an Option or, having received an Option, a right again to be granted an
Option. An optionee shall have no rights as a stockholder with respect to any
shares of Common Stock covered by his or her Option until the date the Option
has been exercised and the full purchase price for such shares has been received
by the Company. Nothing in this Plan or in any Option granted pursuant to the
Plan shall confer on any individual any right to continue in the employ of or to
continue as an officer or director of, this Company or any Subsidiary or to
interfere in any way with the right of the Company or any Subsidiary to
terminate or modify the terms or conditions of the Option holder's employment or
other relationship with the Company or any Subsidiary.

12. Amendment and Termination of the Plan. Unless sooner terminated by
the Board, this Plan shall terminate, so that no Options may be granted pursuant
to it thereafter, on February 20, 2008. The Board may at any time amend, suspend
or terminate this Plan in its discretion without further action on the part of
the stockholders of the Company, except that:

(1) no such amendment, suspension or termination of the Plan shall
adversely affect or impair any then outstanding Option without
the consent of the optionee holding the Option; and

(2) any such amendment, suspension or termination that requires
approval by the stockholders of the Company in order to comply
with applicable provisions of the Code, applicable federal or
state securities laws or Nasdaq or exchange listing requirements
shall be subject to approval by the stockholders of the Company
within the applicable time period prescribed thereunder, and
shall be null and void if such approval is not obtained.

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<PAGE>

ELXSI Corporation
3600 Rio Vista Avenue, Suite A
Orlando, Florida 32805

PROXY FOR ANNUAL MEETING OF STOCKHOLDERS

May 19, 1998

This Proxy is Solicited on Behalf of the Board of Directors

The undersigned hereby constitute(s) and appoint(s) Alexander
M. Milley and Robert C. Shaw, and each of them, as proxies of the undersigned,
with full power of substitution, to vote all shares of Common Stock of ELXSI
Corporation (the "Company") which the undersigned is (are) entitled to vote at
the Annual Meeting of the Stockholders of the Company to be held at the
Company's headquarters offices, located at 3600 Rio Vista Avenue, Suite A,
Orlando, Florida 32805, on Tuesday, May 19, 1998, at 9:00 a.m. (local time), and
at any adjournment(s) thereof (the "Meeting"), on all matters that may come
before such Meeting. Said proxies are instructed to vote on the following
matters in the manner herein specified.

1. Election of the following Five Nominees as Directors of the Company: Farrokh
K. Kavarana; Kevin P. Lynch; Alexander M. Milley; Denis M. O'Donnell; and Robert
C. Shaw

[] FOR all nominees listed above (except as indicated below)
[] WITHHOLD AUTHORITY to vote for all nominees listed above

FOR all nominees listed above except withhold authority to vote for the
following nominee(s):

2. Approval of the ELXSI Corporation 1998 Incentive Stock Option Plan

[] FOR [] AGAINST [] ABSTAIN

3.Amendment of the Company's charter to reduce the number of authorized shares
for the purpose of reducing Delaware franchise taxes.

[] FOR [] AGAINST [] ABSTAIN

4. Ratification of Appointment of Price Waterhouse LLP as the Company's
independent accountants for the fiscal year ending December 31, 1998

[] FOR [] AGAINST [] ABSTAIN

5. In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the Meeting.

(Please date and sign this Proxy on the reverse side)

IF THIS PROXY IS PROPERLY EXECUTED, THE SHARES OF COMMON STOCK COVERED
HEREBY WILL BE VOTED AS SPECIFIED HEREIN. IF NO SPECIFICATION IS MADE, SUCH
SHARES WILL BE VOTED "FOR" PROPOSALS 1, 2, 3 AND 4, AND AS THE PROXIES DEEM
ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.

The undersigned hereby revoke(s) all previous Proxies and acknowledge(s)
receipt of the Notice of the Meeting dated April 17, 1998, the Proxy Statement
attached thereto and the Annual Report on Form 10-K of the Company for the
fiscal year ended December 31, 1997 forwarded therewith.

Dated: , 1998
---------------------------------------------

----------------------------------------------------------
Signature

Please mark, sign and return this Proxy promptly using the
enclosed envelope. This Proxy should be signed exactly as
the name appears hereon. If stock is held in the names of
joint owners, each should sign. Persons signing as an
attorney, executor, administrator, guardian, trustee,
corporate officer or in any other fiduciary or
representative capacity should give full title.

<PAGE>

A Message from the President:

ELXSI Corporation achieved another record-setting year in 1997. Both
Bickford's Family Restaurants and Cues again recorded their highest year ever in
sales and profit. This reflects the eighth straight year of uninterrupted
increases in earnings per share, twenty eighth quarter in a row of profitability
and seventh straight year of returns on equity exceeding 20%.

The 1997 financials incorporate the positive effects of two items which
could be viewed as unusual, i.e. SFAS 109 (Accounting for Income Taxes) and the
unique profit earned from the financing transaction with Azimuth Corporation.
However, before delving into the relevant details of each, I am delighted to
report that both Bickford's and Cues registered solid operating increases in
basically all key fundamental categories before any enhancements or effects from
SFAS 109 and the Azimuth financing transaction. This is an important point as it
reflects the ongoing consistency of these core underlying businesses in
achieving valuable operating improvements year to year. Marrying strong
operating performances with the benefits of sheltered income has been the
cornerstone of the Company's strategy from the outset. Creating value for
shareholders depends most heavily on achieving improvements at the operating
level of each business and of course the resulting increase in the overall value
of the entity as a going concern. This was accomplished at both divisions in
1997.

Bickford's

Restaurant sales increased by $3,913,000 or 6.4% in 1997, as a result
of increased sales in our base restaurants combined with new restaurant
openings. In addition, restaurant operating profit improved by approximately 20%
from $6.0 million to $7.2 million as the converted Abdow's restaurants
complemented increases in the base Bickford's business.

In 1997, we continued our efforts to maintain and expand our leadership
presence in the New England marketplace. The three new restaurants opened in
1997 will become solid income producers in 1998 and beyond. In 1998, we plan to
selectively open another four to five new locations.

New openings in 1997 were:
o Brattleboro, VT
o Quincy, MA
o Needham, MA

In addition, we successfully reopened our Brockton, Massachusetts
restaurant which had been closed due to a fire, and also completed procurement
of a new site in Mystic, Connecticut which opened in February 1998.

Finally, in the fourth quarter of 1997, we made a commitment to further
enhance our service during peak periods by staffing additional management
personnel in the dining rooms on weekend mornings. By increasing our staffing,
we are spending more on labor, but we expect to reap significant benefits
through improved customer counts and an overall higher quality experience.

<PAGE>

Cues

Cues continues to pioneer the development and sale of new and
outstanding innovations for making our water collection systems more productive
in managing a truly vital and increasingly precious resource, water.

Key introductions during 1997 include the "Slopemaster" inclinometer
system for recording the incline of pipes and then continually registering such
data on a Cues data collection system. This enables engineers to evaluate the
pitch of a particular pipe segment in conjunction with the actual video. A new
edition in the mainline pipe tractor category, "Ultra Shorty" is picking up
where "Shorty" left off by proving to be the only device consistently clearing
6" diameter pipe. Finally, the introduction of a major new portable system,
"Inspector General" essentially combines all the key elements of a mainline
inspection system in a unique compact electronic portable system that is capable
of inspecting pipe from 2" to 100" in diameter, a real engineering feat
considering the vast disparity of power and light combinations to accommodate
such a range. Furthermore, the unit is light enough to be carried by an
individual and flexible enough to be mounted in a van or carried in the rear of
a pickup truck.

In addition to the above, there were numerous value-added improvements
made across the board which have been met with widespread market acceptance.

Although price competition and a low barrier to entry in certain market
segments present an ongoing challenge, the Cues team has been able to provide
the highest quality hardware, software and support for the broadest product line
in the marketplace at the most attractive prices.

Keeping the above combination clicking is our goal and through the
brute determination exhibited in winning past battles, we look forward to the
current and future challenges.

SFAS 109 & Azimuth Transaction

SFAS 109. In compliance with SFAS 109 requirements, the Company recorded an
additional $8.2 million of non-cash net income and a corresponding increase in
the deferred tax asset. Essentially this relates to the regulatory bodies'
approach to valuing and recording net operating tax loss carryforwards on the
balance sheet that were previously dealt with as "off balance sheet" items.

This $8.2 million addition increases the deferred tax asset to over $11
million, which represents the estimated realizable value of ELXSI's net
operating tax loss carryforwards given the regulatory bodies' parameters. The
regulation also requires amortizing this asset over its estimated life.
Consequently, beginning in 1998 and going through 2003, ELXSI will be
recognizing an increase in tax expense by amortizing this non-cash asset. As a
result of amortizing this $11 million asset, which was created by recording $11
million of income during the last two years, ELXSI will be reporting a full tax
rate of approximately 40% on its income statement even though ELXSI will
actually be paying taxes on a cash basis at an approximate rate of 11%.

<PAGE>

Management greatly sympathizes with the potential confusion and loss of
comparability resulting from this regulatory requirement. The administrative
challenge it posed during the last 18 months was hardly desirous to say the
least. However, we are committed to providing our shareholders with the most
compliant, accurate and comparable financial records possible. Consequently, we
have spent the time to disclose and explain in the accompanying Annual Report on
Form 10K and will continue to spend significant hours explaining in great detail
the workings of SFAS 109 to potential and existing investors, lenders and
analysts.

Azimuth Transaction. ELXSI entered into a financing agreement with Azimuth
Corporation on December 30, 1996 whereby ELXSI made an opportunistic "bridge
loan". The knowledge of the Azimuth credit and the short time frame imposed on
Azimuth to secure financing rendered ELXSI unique in its ability to capture such
an attractive financing opportunity. For making a very prudent secure loan,
which was fully repaid ahead of schedule during June 1997, ELXSI received a
hefty $709,000 ($0.14 per share on a diluted basis) of net interest income
during 1997 and a total of $936,000 of net interest income over the period the
loan was outstanding. Management will continue to look for similar opportunities
where the Company's debt capacity can be prudently utilized to earn a return not
generally available.

Conclusion

As we enter 1998, ELXSI is poised to continue registering attractive
increases in consolidated sales and earnings as well as overall shareholder
value. I am very hopeful that the spirited efforts by our people in conquering
past challenges will lift us to new levels of achievement in the coming years.

Sincerely,

Alexander M. Milley
Chairman of the Board,
President & CEO