<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-K/A
(Amendment No. 1)
(Mark One)
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended April 30, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from ______ to _______
Commission File No. 0-12226
CALIFORNIA BEACH RESTAURANTS, INC.
(Exact name of registrant as specified in its charter)
California 95-2693503
(state or other (IRS Employer
jurisdiction of Identification No.)
incorporation or
organization)
17383 Sunset Boulevard, Suite 140
Pacific Palisades, California 90272
(Address of principal executive office) (ZIP Code)
Registrant's telephone number: (310) 459-9676
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting and non-voting common stock held by
non-affiliates of the Registrant based upon the average bid price in the
over-the-counter market on August 11, 1995 (the date of the last posted quote)
was approximately $12,144.
The number of outstanding shares of the Registrant's Common Stock as of July 15,
1997 was 3,400,975.
Documents incorporated by reference: None
<PAGE> 2
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors of the Registrant are as follows:
<TABLE>
<CAPTION>
Name Age Title
- ---- --- -----
<S> <C> <C>
Alan Redhead 54 Chairman of the Board,
President, Chief Executive
Officer
J. Christopher Lewis 41 Director
Jefferson W. Asher, Jr. 72 Director
Scott C. Dew 39 Director
George Nicolais 53 Director
Faisal Shah 36 Director
Barry A. Chase 41 Director
</TABLE>
The executive officers of the Registrant are Mr. Redhead and Mark
E. Segal, age 38, Vice President - Finance, Chief Financial Officer and
Secretary. Directors hold office until their term of office expires and their
successors are elected and qualified. Executive officers serve at the discretion
of the Board of Directors.
Alan Redhead joined the Registrant in June 1992 as its Chief
Executive Officer ("CEO") and as a member of its Board of Directors and
executive committee. Mr. Redhead resigned as a member of the Board of Directors
and the Executive Committee in November 1992. Mr. Redhead subsequently re-joined
the Board of Directors in September 1993. He became Chairman of the Board in
March 1995. From 1986 to 1992, Mr. Redhead was involved in various restaurant
businesses and a non-profit organization. From 1974 to 1986 Mr. Redhead was with
Hungry Tiger, Inc., including 7 years as its CEO. Hungry Tiger Inc. owned and
operated Hungry Tiger Restaurants, Breakers Seafood Restaurants, Castagnola's
Lobster House and the restaurant and catering operations at the Los Angeles
Music Center.
J. Christopher Lewis, a director of the Registrant since June 29,
1990 and a member of its Stock Plan and Compensation Committees, has been
associated with Riordan, Lewis and Haden, a venture capital firm, for the past
twelve years. He is currently a director of Tetra Tech, Inc., Data Processing
Resources Corporation and PIA Merchandising Co. Inc. and several privately-held
companies.
Jefferson W. Asher, Jr. joined the Registrant as a member of the
Board of Directors on November 23, 1992 and is a member of its Audit Committee.
Mr. Asher has spent over twenty years as an independent management consultant
and has
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served as an advisor to several private companies. Mr. Asher is also a
member of the Board of Directors of Baldor Electric Company, a New York Stock
Exchange manufacturer of industrial electric motors and drives.
Scott C. Dew joined the Registrant as a member of the Board of
Directors on March 13, 1995 and is a member of its Stock Plan and Compensation
Committees. Since June 1995, Mr. Dew has been General Counsel for
Rubin-Pachulski Properties, Inc., a real estate investment firm. From 1985 to
June 1995, Mr. Dew was an attorney with the law firm of Levene & Eisenberg, P.C.
George Nicolais joined the Registrant as a member of the Board of
Directors on April 28, 1995 and is a member of the Audit Committee. Mr. Nicolais
was nominated for election to the Board of Directors at the request of the Bank
of America National Trust and Savings Association (the "Bank"), pursuant to the
exercise of its contractual rights with the Registrant. See "Certain
Relationships and Related Transactions--December 1994 Private Placement and Debt
Restructurings." Mr. Nicolais has been President of George Nicolais &
Associates, Inc., a firm providing financial advisory and management consulting
services, since 1976.
Faisal Shah joined the Registrant as a member of the Board of
Directors on May 6, 1996, at the request of the Bank, pursuant to the exercise
of its contractual rights with the Registrant. See "Certain Relationships and
Related Transactions--December 1994 Private Placement and Debt Restructurings."
Mr. Shah is a partner at the law firm of Pillsbury Madison & Sutro LLP, a firm
he joined in 1986.
Barry A. Chase joined the Registrant as a member of the Board of
Directors on April 28, 1995 and is a member of the Audit Committee. Mr. Chase
was nominated for election to the Board of Directors at the request of John C.
Cushman, III, pursuant to the exercise of Mr. Cushman's contractual rights with
the Registrant. See "Certain Relationships and Related Transactions--December
1994 Private Placement and Debt Restructurings." Mr. Chase was a consultant to
Cushman Equities Corporation from 1990 to 1991 and was President of such
corporation and Cushman Energy Corporation from 1991 until February 1996. From
1993 until 1996, he was also President of Cushman Investment and Development
Corporation, a real estate developer. In January 1997, Mr. Chase became
President of Asset Recovery Solutions, a barter company that assists companies
in disposing of excess or distressed real estate assets in exchange for media
advertising or travel credits.
Mark E. Segal joined the Registrant in July 1991 as Vice
President - Finance and Chief Financial Officer. From October 1987 through June
1991, Mr. Segal was Vice President Finance of Martin Lawrence Limited Editions,
Inc., a New York Stock Exchange retailer and wholesaler of fine art. From
January 1984 through September 1987 Mr. Segal was Controller and Assistant
Treasurer for Orange Julius International, Inc. He is a Certified Public
Accountant and spent four years with the international accounting firm of
KPMG-Peat Marwick.
None of the officers and directors of the Registrant is related
to any other officer or director of the Registrant.
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During the year ended April 30, 1997, the Registrant paid Board
of Directors fees of $500 per meeting attended for each outside Board member.
On October 7, 1992 the Registrant, faced with the loss of its
directors and officers liability insurance, entered into indemnification
agreements with Messrs. Redhead, Lewis and Segal. On November 23, 1992, the
Registrant entered into an indemnification agreement with Mr. Asher. The
Registrant believed that the indemnification agreements were required to induce
the various officers and directors to continue to serve in their existing
capacities. Generally the agreements provide for indemnification by the
Registrant to each of the individuals against expenses, judgments, fines and
penalties incurred in connection with any proceeding to the full extent
permitted by the law of the State of California and the advancement of expenses
prior to any final disposition of a proceeding. Each indemnitee has agreed to
repay any amount advanced if it is determined that the indemnitee was not
entitled to be indemnified pursuant to the agreement. All directors and officers
of the Registrant are entitled to the protection of directors' and officers'
insurance policies that are maintained by the Registrant.
At the Annual Meeting of Shareholders held on April 28, 1995, the
Registrant's shareholders approved an amendment to the Registrant's Articles of
Incorporation to eliminate, to the fullest extent permitted by California law,
the monetary liability of directors of the Registrant in performing their
duties.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Registrant's
directors, its executive (and certain other) officers, and any persons holding
more than ten percent of the Common Stock are required to report their ownership
of the Common Stock and any changes in that ownership to the Securities and
Exchange Commission ("Commission"). Specific due dates for these reports have
been established and the Registrant is required to report in this document any
failure to file by these dates during the fiscal year ended April 30, 1997. All
of these filing requirements were satisfied by its directors, officers and ten
percent holders, except that Jefferson W. Asher, Jr., a director of the
Registrant, filed late one Form 4 reporting his acquisition of shares of Common
Stock. In making these statements, the Registrant has relied on the written
representations of its directors, officers and its ten percent holders and
copies of the reports that they have filed with the Commission.
ITEM 11 EXECUTIVE COMPENSATION
The following summary compensation table sets forth certain summary
compensation information concerning the Registrant's executive officers for the
three most recent fiscal years:
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
------
Annual Compensation (1)
-----------------------
Securities
Name and Fiscal Underlying
Principal Position Year Salary($) Bonus($) Options/SARs(#)
------------------ ------ --------- -------- ----------------
<S> <C> <C> <C> <C>
Alan Redhead, 1997 $ 215,700 -- --
Chairman of the 1996 212,000 $30,894 --
Board, President and 1995 207,000 -- 335,000
Chief Executive
Officer
Mark E. Segal, Vice 1997 $ 114,000 -- --
President--Finance, 1996 112,000 $21,214 --
Chief Financial 1995 111,000 -- 110,000
Officer and Secretary
</TABLE>
Option Grants in Last Fiscal Year
The following sets forth certain information concerning
individual grants of stock options during the fiscal year ended April 30, 1997
to each of the Registrant's executive officers. No SARs were granted in the
fiscal year ended April 30, 1997:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Name Options/SARs Employees in Base Price
---- Granted(#) Fiscal Year ($/Share) Expiration Date
------------ ------------- ----------- ---------------
<S> <C> <C> <C> <C>
Alan Redhead None N/A N/A N/A
Mark E. Segal None N/A N/A N/A
</TABLE>
Aggregated Option Exercises In Last Fiscal Year And Fiscal Year-End Option
Values
No options were exercised in the fiscal year ended April 30, 1997. The
following table sets forth certain information concerning executive officers and
the aggregated fiscal year-end value of the unexercised options of each of the
named executive officers.
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AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities
Shares Underlying Unexercised Value of Unexercised
Acquired on Value Options/SARs at Fiscal In the Money Options/SARs
Exercise(#) Realized($) Year-End (#) at Fiscal Year-End ($)(1)
----------- ----------- -------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alan Redhead None $-- 279,167 55,833 $ -- $ --
Mark E. Segal None $-- 91,667 18,333 $ -- $ --
</TABLE>
1) Market value of underlying securities at year-end, minus the exercise
or base price of "in the money" options.
Other Compensation Agreements
Effective May 21, 1993, the Registrant entered into employment
agreements with Messrs. Redhead and Segal. These employment agreements set forth
certain of the terms of employment for each of these individuals, including the
right to receive nine months' salary as severance pay upon (i) termination of
employment without cause (as defined below) or (ii) resignation for good reason
(as defined below). The term of Mr. Redhead's agreement was four years, expiring
May 21, 1997, and provided for a base salary of $200,000, subject to annual cost
of living adjustments. His current salary is $210,000. Mr. Segal's original
agreement was for three years, expiring May 21, 1996, and provided for a base
salary of $103,000, subject to annual cost of living adjustments. In April 1996,
Mr. Segal's agreement was extended for one year. His current salary is $108,000.
Currently, neither Mr. Redhead nor Mr. Segal is operating under an employment
agreement.
For purposes of each of these individuals' employment agreements,
"cause" is defined to mean (i) the willful engaging by the employee in
misconduct which is or could reasonably be expected to become materially
injurious to the Registrant, monetarily or otherwise; (ii) conviction of a
felony or any crime involving moral turpitude; or (iii) participation in any
fraud against or theft from the Registrant. "Good reason" is defined to mean (i)
the failure of the Registrant to vest the employee with the powers and authority
of his office or any removal of the employee from or failure to re-elect the
employee to his office; (ii) a reduction by the Registrant in the employee's
base salary; or (iii) the requirement by the Registrant that the employee be
based anywhere other than within 25 miles of the employee's present office
location.
In recognition of their past services, including efforts during the
Registrant's debt restructuring, the Board of Directors has agreed to pay (i)
Mr. Redhead a cash bonus equal to 125% of his base annual salary and (ii) Mr.
Segal a cash bonus equal to 100% of his base annual salary in the event the
Registrant extends its concession agreement with the County of Los Angeles for
its Gladstone's 4 Fish restaurant for a minimum of 10 years on terms acceptable
to the Board of Directors, the recipient is employed by the Registrant as of
such date, the Registrant's current debt
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obligations to the Bank have been repaid in full, and the Registrant has
available cash resources.
The Omnibus Stock Plan
The Omnibus Stock Plan (the "Plan") was adopted by the Board of
Directors in March 1995 and was approved by the shareholders of the Registrant
on April 28, 1995. The Plan provides for the issuance of a maximum of 1,000,000
shares of Common Stock. The Plan provides for the issuance of stock options,
stock appreciation rights, restricted stock and other awards (collectively
"awards").
The shares awarded shall be authorized but unissued shares. If an award
granted under the Plan expires, terminates or lapses for any reason, without the
issuance of shares of Common Stock thereunder, or if the Registrant receives any
shares of Common Stock as the exercise price of any award, such shares shall
again be available under the Plan.
Under the Plan, options or awards granted and outstanding as of the date
the Plan terminates are not affected or impaired by such termination. In the
event of a merger, consolidation, reorganization, recapitalization, spin-off,
stock dividend or stock split, or combination or other increase or reduction in
the number of issued shares of Common Stock, or extraordinary cash dividend or
any other similar event, the Board of Directors or the Committee (as defined
herein) may, in order to prevent the dilution or enlargement of rights under
awards, make such adjustments in the number and type of shares covered by, or
with respect to which payments are measured under, outstanding awards and the
exercise prices specified therein as may be determined to be appropriate and
equitable. The Committee may provide in the agreement evidencing any award for
adjustments to such award in order to prevent the dilution or enlargement of
rights thereunder or to provide for acceleration of benefits thereunder in the
event of a change in control, merger, consolidation, reorganization,
recapitalization, sale or exchange of substantially all assets or dissolution
of, or spinoff or similar transaction by, the Registrant.
The options granted to date by the Committee provide that such options
shall become fully exercisable upon a "change of control" of the Registrant. A
"change of control" is deemed to have occurred (i) if individuals who, as of the
date of such award, constitute the board of directors of the Registrant
("Incumbent Board") cease for any reason to constitute at least a majority of
the board, provided that a person becoming a director subsequent to the date of
the award whose election, or nomination for election by the Registrant's
shareholders, was approved by a vote of at least three-quarters of the directors
comprising the Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual or
threatened election contest) shall be considered a member of the Incumbent
Board; or (ii) upon approval by the shareholders of the Registrant of (a) a
reorganization, merger or consolidation, in each case, with respect to which
persons who were the shareholders of the Registrant immediately
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prior to such reorganization, merger or consolidation do not, immediately
thereafter, own more than 60% of the combined voting power entitled to vote
generally in the election of directors of the reorganized, merged or
consolidated corporation's then outstanding voting securities, (b) a liquidation
or dissolution of the Registrant or (c) the sale of all or substantially all of
the Registrant's assets; or (iii) upon the acquisition (other than from the
Registrant) by any person, entity or "group," within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934 (the "Exchange Act")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 51% or more of either the then outstanding shares or the
combined voting power of the Registrant's then outstanding voting securities
entitled to vote generally in the election of directors, but excluding, for this
purpose, any such acquisition by the Registrant or any of its subsidiaries, or
any employee benefit plan (or related trust) of the Registrant or its
subsidiaries, or any corporation with respect to which, following such
acquisition, more than 60% of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by the individuals and entities who
were the beneficial owners of the voting securities of the Registrant
immediately prior to such acquisition in substantially the same proportion as
their ownership, immediately prior to such acquisition, of the then outstanding
combined voting power of the then outstanding voting securities of the
Registrant entitled to vote generally in the election of directors.
The purpose of the Plan, which, in addition to non-qualified stock
options and stock appreciation rights, provides for the granting of incentive
stock options (which qualify under the provisions of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") and restricted stock and various
types of awards described herein, is to promote the long term financial
interests and growth of the Registrant by (i) attracting and retaining executive
personnel, (ii) motivating executive personnel by means of growth-related
incentives; (iii) providing incentive compensation opportunities that are
competitive with those of other comparable corporations, and (iv) furthering the
identity of interests of participants with those of the shareholders of the
Registrant.
The Plan is not subject to the Employee Retirement Income Security Act
of 1974. The Plan is not qualified under Section 401(a) of the Code.
Participants in the Plan are selected by the Stock Plan Committee of the
Board of Directors (the "Committee") which administers the Plan. The Plan
contemplates that awards will be granted to key employees, to directors and to
consultants, and that participants will be such employees or directors of or
consultants to the Registrant and its affiliates, including officers of the
Registrant, as from time to time are designated as such by the Committee. The
Plan requires that the Committee consist of at least two directors of the
Registrant who are "non-employee directors" as such term is used in Rule 16b-3
under the Exchange Act. Members of the Committee are selected by and serve at
the pleasure of the Board of Directors. Each member of the Committee is a
director of the Registrant. Under the Plan and subject to the limitations
thereunder, the Committee is authorized:
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(i) to select participants in the Plan, (ii) to make awards in such forms and
amounts as it shall determine, (iii) to impose such limitations, restrictions
and conditions upon such awards as it shall deem appropriate, (iv) to interpret
the Plan and to adopt, amend and rescind administrative guidelines and other
rules and regulations relating to the Plan, (v) to correct any defect or
omission or to reconcile any inconsistency in the Plan or in any award granted
thereunder and (vi) to make all other determinations and to take all other
actions necessary or advisable for the implementation and administration of the
Plan.
The Board of Directors or the Committee may suspend or terminate the
Plan or any portion thereof at any time and may amend it from time to time in
such respects as the Board of Directors or the Committee may deem advisable;
provided, however, that no such amendment will be made, without shareholder
approval to the extent such approval is required by law, agreement or the rules
of any exchange upon which the Common Stock is listed, and provided further,
that the Plan will terminate no later than March 9, 2005. No such amendment,
suspension or termination will impair the rights of participants under
outstanding awards without the consent of the participants affected thereby or
make any change that would disqualify the Plan, or any other plan of the
Registrant intended to be so qualified from the exemption provided by Rule
16b-3.
The Committee may amend or modify any award in any manner to the extent
that the Committee would have had the authority under the Plan to initially
grant such award. No such amendment or modification will impair the rights of
any participant under any award without the consent of such participant.
Under the Plan, a participant to whom an option is granted will have the
right to purchase the number of shares of Common Stock covered by the option,
subject to the terms and provisions of the Plan. The option price to be paid by
a participant is determined by the Committee and is set forth in a stock option
agreement between the Registrant and the participant. Such price cannot be less
than 100% of the fair market value of the Common Stock on the date on which the
option in respect thereof is granted as to incentive stock options within the
meaning of Section 422 of the Code, or any successor provision, and the par
value of a share of Common Stock as to other options.
Under the Plan, the purchase price of an option is payable in cash or by
the surrender, at the fair market value on the date on which the option is
exercised, of shares of Common Stock, by any combination of cash and such shares
or with any other consideration.
In addition, the Plan authorizes the Committee to grant stock
appreciation rights ("SAR"). No SARs have been granted under the Plan.
SARs and options which are not incentive stock options may, in the
Committee's discretion, provide that in connection with exercises thereof the
holders will receive cash payments in amounts necessary to reimburse holders for
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their income tax liability resulting from such exercise and the payment made
pursuant to this provision.
Incentive stock options (within the meaning of Section 422 of the Code)
may be granted at the option of the Committee under the Plan. The fair market
value of the Common Stock is determined as of the time of award of the option to
which it is subject. Incentive stock options are subject to a $100,000 exercise
limitation per year.
Any option granted under the Plan must be fully exercised prior to its
expiration on the date determined by the Committee or on an earlier termination
date in the case of termination of employment or consultant status.
With respect to the options granted to date, the Committee has provided
in the stock option agreement that if such participant's employment by the
Registrant or its subsidiaries is terminated for any reason, other than death or
disability, such participant may exercise an option within the period ending on
the earlier of three months after such termination or the date the option
expires in accordance with its terms. If such participant dies or is disabled
prior to termination of employment, he or his legatees, executors, distributees
or personal representatives may, subject to the provisions of the Plan, exercise
the option granted to such participant within the period ending on the earlier
of (i) twelve months after the date of such death or disability or (ii) the date
the option expires in accordance with its terms.
The option of a participant who dies after termination may be exercised
in respect to the same number of shares in the same manner and to the extent as
if such participant were then living.
The right of any participant to exercise an option granted to such
participant may not be transferred, assigned, pledged or hypothecated in any way
other than by will or the laws of descent and distribution. Options are
exercisable by a participant during his lifetime only by him.
The Plan also permits the Committee to grant shares of Common Stock to a
participant subject to the terms and conditions imposed by the Committee
("restricted stock"). No shares of restricted stock have been awarded under the
Plan.
Under the Plan, in addition to stock options, stock appreciation rights
and restricted stock, participants may be awarded performance shares,
convertible debentures, other convertible securities and any other forms of
awards that the Committee in its discretion may determine are consistent with
the objectives and limitations of the Plan. No such awards have been granted
under the Plan.
On August 1, 1995, the Registrant and the Bank entered into an amendment
to stock purchase agreement under which the Registrant agreed to issue the Bank
securities equivalent in form if more than 600,000 shares of Common Stock in the
aggregate are issued by the Registrant under the Plan or other similar plan, or
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otherwise, to directors, officers, employees, consultants, or other persons
providing services to the Registrant for so long as the Bank or its permitted
successor holds not less than 75% of the shares of Common Stock currently held
by the Bank. Until August 1, 1996, the Bank would pay only nominal consideration
for any stock issued pursuant to the amendment, and thereafter would, with
certain exceptions, pay the same consideration as provided in any such issuances
of shares in excess of the 600,000 share amount. See "Certain Relationships and
Related Transactions--December 1994 Private Placement and Debt Restructurings."
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth information as to the shares of
the Common Stock owned as of August 1, 1997 by (i) each person known to the
Registrant to be the beneficial owner of more than five percent of the Common
Stock, (ii) each director, (iii) each executive officer named in the summary
compensation table, and (iv) all directors and executive officers of the
Registrant as a group. Unless otherwise indicated in the footnotes following the
table, the persons as to whom the information is given had sole voting and
investment power over the shares of Common Stock shown as beneficially owned by
them, subject to community property laws where applicable.
<TABLE>
<CAPTION>
Name and Address of Amount of Beneficial Ownership(1)
Beneficial Owners No. Shares % Ownership*
- ----------------- ---------- ------------
<S> <C> <C>
Bank of America National Trust and Savings 1,200,000 35.3%
Association
555 California Street, 18th Floor
Department 15027
San Francisco, CA 94104
Eli Broad 228,345 6.7%
1999 Avenue of the Stars, Suite 3170
Los Angeles, CA 90067
Sand and Sea Partners(2) 302,478 8.9%
300 S. Grand Avenue, 29th Floor
Los Angeles, CA 90071
Sea Fair Partners(2) 332,478 9.8%
300 South Grand Avenue, 29th Floor
Los Angeles, CA 90071
J. Christopher Lewis (2) 634,956 18.7%
300 South Grand Avenue, 29th Floor
Los Angeles, CA 90071
Alan Redhead 652,683(3) 17.6%
California Beach Restaurants, Inc.
17383 Sunset Boulevard, Suite 140
Pacific Palisades, CA 90272
</TABLE>
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<TABLE>
<CAPTION>
Name and Address of Amount of Beneficial Ownership(1)
Beneficial Owners No. Shares % Ownership*
- ----------------- ---------- ------------
<S> <C> <C>
Jefferson W. Asher, Jr. 59,333(4) 1.7%
4118 Stansbury Avenue
Sherman Oaks, CA 91423
Mark E. Segal 139,233(5) 4.0%
California Beach Restaurants, Inc.
17383 Sunset Boulevard, Suite 140
Pacific Palisades, CA 90272
Scott C. Dew 0 0%
10351 Santa Monica Boulevard, Suite 410
Los Angeles, CA 90025
George Nicolais 0 (6) 0%
George Nicolais & Associates, Inc.
3452 East Foothill Blvd.
Pasadena, CA 91107
Faisal Shah 0 (6) 0%
725 S. Figueroa Street, Suite 1200
Los Angeles, CA 90017
Barry A. Chase 17,571 (7) *
Asset Recovery Solutions
100 Wilshire Boulevard, Suite 2020
Santa Monica, CA 90401
John C. Cushman III (8) 268,894 7.9%
601 S. Figueroa Street, 47th Floor
Los Angeles, CA 90017-5752
All directors and executive officers as a 1,503,776(9) 39.2%
group (8 persons)
</TABLE>
* Denotes holdings of less than 1%.
(1) The number of shares and percentages in these columns are based on
3,400,975 shares of Common Stock outstanding.
(2) J. Christopher Lewis, a director of the Registrant, is the general
partner and a limited partner of Sand and Sea Partners and Sea Fair
Partners, which together own 634,956 shares of Common Stock. Mr. Lewis
disclaims beneficial ownership of the shares owned by such partnerships,
except with respect to (i) 25,268 shares which represent a limited
partnership interest in each partnership of approximately 3.8% and (ii)
an additional undetermined number of such shares by virtue of his rights
as a general partner under the limited partnership agreement. As general
partner of such partnership, Mr. Lewis may have the power to direct the
voting or disposition of such shares and therefore may be deemed to
beneficially own all the shares held by such partnerships.
(3) Includes currently exercisable options to purchase 307,083 shares of
Common Stock issued under the Omnibus Stock Plan.
(4) Includes currently exercisable options to purchase 29,333 shares of
Common Stock issued under the Omnibus Stock Plan.
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(5) Includes currently exercisable options to purchase 100,833 shares of
Common Stock issued under the Omnibus Stock Plan.
(6) Does not include 1,200,000 shares of Common Stock owned by the Bank.
Messrs. Nicolais and Shah were nominated for election to the Board of
Directors of the Registrant at the request of the Bank pursuant to the
exercise of its contractual rights with the Registrant. See "Certain
Relationships and Related Transactions--December 1994 Private Placement
and Debt Restructurings." Messrs. Nicolais and Shah disclaim beneficial
ownership of all shares of Common Stock of the Registrant owned by the
Bank.
(7) Includes 14,500 shares indirectly owned by Mr. Chase through North
American Trust. Does not include 268,894 shares deemed to be
beneficially owned by John C. Cushman, III, including shares held by
partnerships in which Cushman Equities Corporation is a general partner
and the Cushman Family Trust. Mr. Chase has been affiliated with Cushman
Equities Corporation but holds no equity interest in such corporation.
Mr. Chase was nominated for election to the Board of Directors of the
Registrant at the request of Mr. Cushman pursuant to the exercise of Mr.
Cushman's contractual rights with the Registrant. See "Certain
Relationships and Related Transactions--December 1994 Private Placement
and Debt Restructurings." Mr. Chase disclaims beneficial ownership of
all shares of Common Stock of the Registrant beneficially owned by Mr.
Cushman.
(8) Includes 128,911 shares held by Cushman Sea View Partners, a California
general partnership, 85,938 shares held by Cushman K Sea View Partners,
and 54,045 shares held by the Cushman Family Trust. Mr. Cushman is a
general partner in Cushman Sea View Partners and Cushman K Sea View
Partners and may be deemed to beneficially own Cushman Equities
Corporation, which is also a general partner of such partnerships.
(9) Includes currently exercisable options to purchase 437,249 shares of
Common Stock issued under the Omnibus Stock Plan.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
December 1994 Private Placement and Debt Restructurings
On December 22, 1994, the Registrant completed a $1,600,000 private
placement of its Series A Convertible Preferred Stock ("Series A Preferred
Stock") and 9-3/4% Convertible Subordinated Notes Due October 31, 1995 (the
"Notes") to certain existing shareholders, members of management and new
investors. The purpose of the private placement was to implement certain debt
restructurings of the Registrant as follows: Sea View Restaurants, Inc. ("Sea
View"), a wholly owned subsidiary of the Registrant, was the borrower and the
Registrant was the guarantor under a loan agreement ("Loan Agreement") with the
Bank which, prior to the private placement, had an outstanding principal balance
plus accrued interest of approximately $9,680,000 ("Loan"), which was in
default. The Loan was secured by substantially all of the assets of Sea View. On
August 24, 1994, the Bank recorded a notice of foreclosure with respect to all
of the real property and personal property collateral for the Loan. In light of
these severe financial circumstances, the Registrant's Board of Directors
concluded that a consensual debt restructuring offered the best opportunity to
enable the Registrant to continue its business, preserve value for the
Registrant's shareholders and maintain creditor relationships. Accordingly, the
Registrant entered into a term sheet with the Bank on December 2, 1994, pursuant
to which the Bank
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agreed not to publish a foreclosure sale notice, or foreclose on the collateral
if certain payments (as described below) were made by the Registrant to the Bank
by December 22, 1994. If the Registrant had not reached an agreement to
restructure the Loan, the Bank would have proceeded with such foreclosure
actions in December 1994.
Additionally, Sea View was the issuer of a certain Contingent Promissory
Note ("Contingent Note") payable to jojo's Restaurant, Inc., a wholly-owned
subsidiary of Family Restaurants, Inc. (collectively "FRI"). The Contingent Note
became payable upon the renewal of the Concession Agreement between Sea View and
the County of Los Angeles with respect to the Registrant's Gladstone's 4 Fish
restaurant. The Contingent Note was in the principal amount of $5,000,000 with
contingent accrued interest of 12.5% from April 2, 1990 of approximately
$4,000,000. The Registrant and Sea View were in default under the Loan, and in
the event of the renewal of the Concession Agreement, would be unable to pay the
Contingent Note. The Bank required as a condition to the debt restructuring that
the Contingent Note be settled. Accordingly, as part of the debt restructuring,
the Registrant paid FRI $500,000 on December 22, 1994 in full satisfaction of
the Contingent Note.
The Bank agreed to compromise the Loan by amending the Loan Agreement to
provide for the payment by Sea View of an aggregate of $4,700,000, payable
$300,000 on December 2, 1994; $1,000,000 not later than December 22, 1994; and
the balance of $3,400,000 in two notes: a senior secured note in the principal
amount of $3,000,000, bearing interest at the rate of 12% per annum and payable
at varying monthly amounts through October 31, 1997, and a junior secured note
in the principal amount of $400,000, accruing interest at 12% per annum with
both interest and principal payable in a single lump sum on October 31, 1997.
Such notes are guaranteed by the Registrant. As additional consideration for the
restructuring of the Loan, and pursuant to the terms of a Stock Purchase
Agreement dated as of December 22, 1994 between the Registrant and the Bank (the
"Stock Purchase Agreement"), the Registrant issued to the Bank on December 22,
1994, 1,223,556 shares of Series A Preferred Stock that converted into 1,200,000
shares of Common Stock on May 1, 1995 upon the filing of a Certificate of
Amendment to the Articles of Incorporation of the Registrant effecting the
one-for-33.286962 reverse stock split ("Reverse Stock Split") (constituting 30%
of the combined voting power of all outstanding shares of capital stock on a
fully diluted basis). Additionally, as described below, the Bank is entitled to
participate together with investors in the private placement in certain demand
and incidental registration rights with respect to future registered offerings
by the Registrant of its capital stock and the Bank is entitled to participate
in any future equity offerings by the Registrant to the extent required to
maintain its then percentage equity ownership in the Registrant, and to a
mandatory prepayment of the restructured Loan in an amount equal to 35% of the
net proceeds of any such future equity offering by the Registrant. The
Registrant has a right of first refusal under the Stock Purchase Agreement with
respect to any private sale or transfer of the shares held by the Bank.
Pursuant to the terms of the Stock Purchase Agreement, the Bank is
entitled to two nominees on the Registrant's Board of Directors until it holds
either less than 75% of the stock purchased or the restructured Loan is repaid,
and upon the election of two
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nominees from the Bank, the Registrant is obligated to revise its bylaws (i) to
entitle the Bank to designate any successor directors to fill vacancies
resulting from the resignation or death of directors serving at the direction of
the Bank, (ii) to provide for a quorum of not less than 3 directors, including
one director designated by the Bank, (iii) to provide that there shall be no
delegation of the powers of the Board of Directors to a committee without a vote
of at least one Bank designated director, and (iv) to cause the bylaws of Sea
View to provide that Sea View will have the same Board of Directors as the
Registrant, and that Sea View will not be authorized to issue securities without
the approval of both Bank designated directors, or if there are none, by the
written consent of the Bank. Pursuant to the foregoing, the Bank selected George
Nicolais and Samuel M. Victor as its nominees for election to the Registrant's
Board of Directors, they were elected at the Annual Meeting of Shareholders held
on April 28, 1995 and the Registrant's bylaws have been appropriately amended.
On May 1, 1996, Samuel M. Victor resigned as a director, and on May 6, 1996
Faisal Shah was elected a director as designated by the Bank.
The private placement was effected pursuant to the terms of a Securities
Purchase Agreement among the Registrant and the purchasers, dated as of December
22, 1994 ("the Securities Purchase Agreement"). The purchasers invested
$1,600,000 consisting of $817,290 of Series A Preferred Stock and $782,710 of
Notes. Sand and Sea Partners and Sea Fair Partners, California limited
partnerships of which J. Christopher Lewis, a director of the Registrant, is
general partner, each purchased 126,026 shares of Series A Preferred Stock for
$103,000 in cash and $209,500 principal amount of Notes. Eli Broad, an over 10%
shareholder of the Registrant at the time, purchased 168,036 shares of Series A
Preferred Stock for $137,334 in cash and $37,666 principal amount of Notes; Alan
Redhead, President and Chief Executive Officer and a director of the Registrant,
purchased 352,384 shares of Series A Preferred Stock for $288,000 in cash; and
Mark E. Segal, Vice President - Finance, Chief Financial Officer and Secretary
of the Registrant, purchased 39,154 shares of Series A Preferred Stock for
$32,000 in cash. Each share of Series A Preferred Stock automatically converted
into .980748 shares of Common Stock (or a total of 2,180,748 shares,
approximately 55% of the outstanding Common Stock of the Registrant on a fully
diluted basis) upon the effective date of the Reverse Stock Split. On April 28,
1995, the Registrant's shareholders approved the Reverse Stock Split. A
Certificate of Amendment to the Articles of Incorporation of the Registrant was
filed on May 1, 1995 to effect the Reverse Stock Split.
In October 1995, the Registrant effected a subscription rights offering
("Subscription Rights Offering") in which shareholders who did not participate
in the December 1994 private placement or otherwise were excluded by contract
were offered rights to subscribe for 4.7215 shares of Common Stock for each
share owned as of September 11, 1995 at a price of $.83 per share. 244,020
shares of Common Stock were purchased in the Subscription Rights Offering. The
proceeds of the Subscription Rights Offering of $202,536.60 were used to redeem
a portion of the Notes on a pro rata basis. The unredeemed portion of the Notes
converted into 696,207 shares of Common Stock on October 30, 1995.
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Pursuant to the terms of the Stock Purchase Agreement and the Securities
Purchase Agreement, the Registrant is obligated, to the extent permitted under
applicable securities laws and subject to reasonable costs, to use its best
efforts to register under the Securities Act of 1933 ("Securities Act") the
resale of the Common Stock issued upon the conversion of the Series A Preferred
Stock and Notes and to maintain such registration for a reasonable period to
facilitate resale. The Registrant effected such registration in December 1995
(the "Offering").
Also, the Registrant and the Bank entered into an Amendment to Stock
Purchase Agreement dated as of August 1, 1995 ("Amendment"), amending the Stock
Purchase Agreement by providing that the Registrant would, no later than
November 15, 1995, register for resale the Common Stock held by the Bank
pursuant to Rule 415 under the Securities Act and would file amendments in order
to update it at any time for up to two years when requested in writing by the
Bank, with the Registrant bearing all the expenses of such registration and
updates up to certain limits. The Offering effected such registration. The
purchasers of Series A Preferred Stock and Notes in the December 1994 private
placement included in the Offering the shares of Common Stock received by them
(i) upon conversion of the Series A Preferred Stock in connection with the
Reverse Stock Split and (ii) to the extent the proceeds of the Subscription
Rights Offering did not fully redeem the Notes. Certain other shareholders of
the Registrant who have registration rights were also afforded an opportunity to
include shares in the Offering, subject to the terms and conditions of such
registration rights. The Registrant also agreed, in the Amendment, to issue the
Bank securities equivalent in form if more than 600,000 shares of Common Stock
in the aggregate are issued by the Registrant under the Registrant's Omnibus
Stock Plan or other similar plan, or otherwise, to directors, officers,
employees, consultants, or other persons providing services to the Registrant
for so long as the Bank or its permitted successor holds not less than 75% of
the shares of Common Stock currently held by the Bank. Until August 1, 1996, the
Bank would pay only nominal consideration for any stock issued pursuant to the
Amendment, and thereafter would, with certain exceptions, pay the same
consideration as provided in any such issuance of shares in excess of the
600,000 share amount. See "Executive Compensation--The Omnibus Stock Plan."
Also, investors in the private placement, together with the Bank,
holding at least 20% of the shares of Common Stock into which the Series A
Preferred Stock have been converted have two demand registration rights to
require the Registrant to register such shares for resale under the Securities
Act and applicable state securities laws for resale to the public. This right of
registration shall continue until such time as in the opinion of counsel for the
Registrant such registration is no longer necessary for shareholders to sell the
shares of Common Stock without registration. Such investors, together with the
Bank, are also be entitled to certain incidental registration rights. The
Registrant will pay the expenses in connection with any such incidental
registrations and two such demand registrations.
Pursuant to the terms of the Stock Purchase Agreement and the Securities
Purchase Agreement, and in order to provide the Registrant with a more
reasonable capital structure, the Registrant held a meeting of the shareholders
of the Registrant
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to vote upon, among other things, the Reverse Stock Split. As noted above, the
Reverse Stock Split was approved at the April 28, 1995 Annual Meeting of
Shareholders.
Pursuant to the terms of the Stock Purchase Agreement and the Securities
Purchase Agreement, the Registrant agreed to use its best efforts to effectuate
the Subscription Rights Offering, the proceeds of which were used to partially
redeem the Notes. The purpose of the Subscription Rights Offering was to afford
to those shareholders of the Registrant who did not participate in the December
1994 private placement the opportunity to purchase shares of Common Stock on
terms as substantially similar as practicable to the terms provided to the
investors in the private placement.
Sea View and the Bank entered into a First Amendment to Amended and
Restated Loan Agreement, dated as of August 1, 1995, which amended the covenant
of Sea View regarding maintenance of "Minimum Free Cash Flow" during certain
periods with respect to the accounting treatment of certain expenses, including
expenses of the Offering and the Subscription Rights Offering.
As a condition to the closing of the Stock Purchase Agreement and the
Securities Purchase Agreement, Sand and Sea Partners, Sea Fair Partners and the
Bank entered into a Shareholders and Noteholders Agreement dated as of December
22, 1994 (the "Shareholders Agreement") pursuant to which Sand and Sea Partners
and Sea Fair Partners agreed to vote their shares of the Registrant in a manner
that would elect to the Board of Directors of the Registrant two individuals
designated by the Bank until such time as the Bank holds less than 75% of its
current holdings in Common Stock or repayment in full of the Registrant's
$3,400,000 indebtedness to the Bank. The Registrant's three directors also
agreed under the Shareholders Agreement, when requested by the Bank, to take all
Board action and all steps necessary to assist shareholder action in order to
elect two designees of the Bank to the Board of Directors, including increasing
the size of the Board to six. Two Bank nominees were elected to the Board of
Directors at the April 28, 1995 Annual Meeting of Shareholders. The Shareholders
Agreement is subject to the shareholders agreement dated April 10, 1990 ("1990
Shareholders Agreement") among Sand and Sea Partners, Sea Fair Partners, John C.
Cushman, III, and other investors in a 1990 private placement of Common Stock in
the Registrant. The 1990 Shareholders Agreement provides that Sand and Sea
Partners, Sea Fair Partners and other investors will cause certain
representatives of the investor group to be nominated to the Board. Pursuant to
such agreement, Mr. Cushman requested that Barry A. Chase be nominated for
election to the Board of Directors. At a meeting of the Board of Directors on
April 28, 1995, Mr. Chase was elected as an additional Director.
Certain Registration Rights
The Registrant, Richard S. Stevens, Sand and Sea Partners, Sea Fair
Partners, Eli Broad, Cushman/Sea View Partners, Cushman K/Sea View Partners and
certain other shareholders of the Registrant are parties to a Registration
Rights Agreement
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which, as amended, provides that the Registrant shall use its best efforts to
register under the Securities Act the shares of any of the shareholders who are
party to the Registration Rights Agreement, and who requests such registration
with regard to a certain minimum number of shares of Common Stock, at certain
times when the Registrant otherwise proposes to register certain of its
securities. Such registration rights applied to the Offering. The parties to the
Registration Rights Agreement, except Stevens, individually and collectively may
make a total of two written demands for registration of their shares so long as
the demand relates to at least 20% of the registrable shares of Common Stock
then outstanding. The Registrant will pay the expenses in connection with any
such incidental registrations and two such demand registrations. In certain
circumstances such shareholders also have a contractual right of first refusal
to purchase, on a pro-rata basis, any equity securities of the Registrant that
the Registrant may propose to sell at a price less than fair market value.
Certain Compensation Arrangements
Reference is made to "Executive Compensation -- Other Compensation
Agreements" for a description of employment arrangements and other arrangements
between the Registrant and certain officers and directors.
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, in the State of California, on August 26, 1997.
CALIFORNIA BEACH RESTAURANTS, INC.
By: /s/ Alan Redhead
------------------------------------------
Alan Redhead, Chief Executive Officer
By: /s/ Mark E.Segal
------------------------------------------
Mark E. Segal, Chief Financial Officer
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