<PAGE> 1
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 [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(E)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
CALIFORNIA BEACH RESTAURANTS, INC
- -------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials
<PAGE> 2
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 3
CALIFORNIA BEACH RESTAURANTS, INC.
17383 Sunset Boulevard, Suite 140
Pacific Palisades, California 90272
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 18, 1999
To the Shareholders:
The Annual Meeting of Shareholders of California Beach Restaurants,
Inc., a California corporation (the "Company") will be held at Gladstone's 4
Fish Restaurant, 17300 Pacific Coast Highway, Pacific Palisades, California on
October 18, 1999, at 9:30 a.m., local time, for the following purposes:
1. ELECTION OF DIRECTORS. To elect five Directors to the Board of
Directors to hold office until the 2000 Annual Meeting of Shareholders and until
their respective successors are elected and qualified, or until their earlier
resignation or removal;
2. RATIFICATION OF APPOINTMENT OF ACCOUNTANTS. To ratify the
appointment of Ernst & Young LLP as the independent accountants of the Company
for the fiscal year ending April 30, 2000; and
3. OTHER BUSINESS. To transact such other business as may properly come
before the meeting and any adjournments thereof.
Shareholders of record of common stock at the close of business on
August 30, 1999 are entitled to notice of and to vote at the meeting.
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<PAGE> 4
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES.
By Order of the Board of Directors
/s/ Samuel E. Chilakos
--------------------------
SAMUEL E. CHILAKOS
Secretary
August 30, 1999
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<PAGE> 5
CALIFORNIA BEACH RESTAURANTS, INC.
17383 Sunset Boulevard, Suite 140
Pacific Palisades, CA 90272
(310) 459-9676
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
October 18, 1999
INTRODUCTION
This proxy statement is furnished to the shareholders of common stock
by the Board of Directors of California Beach Restaurants, Inc., a California
corporation (the "Company"), for solicitation of proxies for use at the Annual
Meeting of Shareholders (the "Annual Meeting") to be held at Gladstone's 4 Fish
Restaurant, 17300 Pacific Coast Highway, Pacific Palisades, California on
October 18, 1999, at 9:30 a.m., local time, and at any and all adjournments
thereof.
The expense of this solicitation of proxies will be borne by the
Company. Solicitations will be made only by the use of the mail, except that, if
deemed desirable, officers and regular employees of the Company may solicit
proxies by telephone, telegraph or personal calls. Brokerage houses, custodians,
nominees and fiduciaries will be requested to forward the proxy soliciting
material to the beneficial owners of the stock held of record by such persons
and the Company will reimburse them for their reasonable expenses incurred in
this connection.
The Company's Annual Report to Shareholders, including financial
statements for the fiscal year ended April 30, 1999, accompanies but does not
constitute part of this proxy statement.
It is anticipated that the mailing to shareholders of this proxy
statement and the enclosed proxy will commence on or about September 7, 1999.
The purpose of the Annual Meeting and the matters to be acted upon are
set forth in the attached Notice of Annual Meeting. As of the date of this proxy
statement, the Board of Directors knows of no other business which will be
presented for consideration at the Annual Meeting. A shareholder giving a proxy
pursuant to the present solicitation may revoke it at any time before it is
exercised by submitting a duly executed proxy bearing a later date or by
delivering to the Secretary of the Company a written notice of revocation prior
to the voting of the
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<PAGE> 6
proxy at the Annual Meeting. No proxy will be used if the shareholder is
personally present at the Annual Meeting and informs the Company that such
shareholder wishes to vote the shares in person. Subject to such revocation, all
shares represented by a properly executed proxy received prior to or at the
Annual Meeting will be voted by the proxy holders whose names are set forth in
the accompanying proxy in accordance with the instructions on the proxy. If no
instruction is specified with respect to a matter to be acted upon, the shares
represented by the proxy will be voted (i) "FOR" the election of the nominees
for director set forth herein; and (ii) "FOR" the proposal to ratify the
appointment of Ernst & Young LLP as the independent accountants of the Company
for the fiscal year ending April 30, 2000. If any other business shall properly
come before the Annual Meeting, votes will be cast pursuant to said proxies in
respect of any such other business in accordance with the judgment of the
persons acting under said proxies.
OUTSTANDING SECURITIES AND VOTING RIGHTS
Only shareholders of record of common stock ("Common Stock") at the
close of business on August 30, 1999 (the "Record Date") are entitled to notice
of and to vote at the Annual Meeting and any adjournments thereof. At that date
there were 3,400,930 outstanding shares of Common Stock of the Company. There
was no beneficial owner (as defined under the rules of the Securities and
Exchange Commission) of more than 5% of the Common Stock known to the Company at
August 1, 1999, other than as set forth under the caption "Security Ownership of
Certain Beneficial Owners and Management" below. A quorum at the Annual Meeting
is a majority of the outstanding shares of Common Stock, and each shareholder
shall have one vote for each share registered in such shareholder's name on the
books of the Company, except that in the election of directors, each shareholder
has cumulative voting rights and is entitled to as many votes as equal the
number of shares held multiplied by the number of directors to be elected (5).
All such votes may be cast for a single candidate or distributed among any or
all the candidates as the shareholder sees fit. However, no shareholder shall be
entitled to cumulate votes unless the candidate's name has been placed in
nomination prior to the voting, and the shareholder, or any other shareholder,
has given notice at the Annual Meeting prior to the voting of their intention to
cumulate their votes. The Company is soliciting authority to cumulate votes in
the election of directors, and the enclosed proxy grants discretionary authority
for such purpose. The election of directors requires the affirmative vote for
each candidate of a plurality of the votes cast. Ratification of the appointment
of Ernst & Young LLP as the independent accountants of the Company requires the
affirmative vote of a majority of the votes cast. Typically, any other matters
that may be presented at the Annual Meeting will require a majority of the votes
cast for approval.
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<PAGE> 7
Abstentions, and any shares as to which a broker or nominee has
indicated that it does not have discretionary authority to vote ("broker
non-votes"), on a particular matter generally will be treated as shares that are
present and are entitled to vote for purposes of determining the presence of a
quorum (so long as any broker non-vote shares are voted on at least one matter
at the Annual Meeting) but as unvoted for purposes of determining whether
approval of the shareholders has been obtained with respect to any such matter.
Under California law and the Company's bylaws, a quorum consists of the presence
in person or by proxy of the holders of a majority of the shares entitled to
vote at the Annual Meeting, and a matter (other than the election of directors)
voted on by shareholders will be approved if it receives the vote of a majority
of the shares both present and voting, which shares also constitute a majority
of the required quorum, unless the vote of a greater number of shares is
required. Accordingly, abstentions and broker non-votes will have no effect on
such a vote; provided, however, that in the event the number of shares voted
affirmatively do not represent a majority of the required quorum, abstentions
and broker non-votes will have the effect of a "no" vote. Under California law
and the Company's bylaws, abstentions from voting, broker non-votes and votes
otherwise withheld in the election of directors, which is by plurality, have no
effect.
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, 1999 by (i) each person known to the Company
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 Company 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 Association 1,200,000 35.3%
555 California Street, 18th Floor
Department 15027
San Francisco, CA 94104
Eli Broad(2) 728,345 18.7%
1999 Avenue of the Stars, Suite 3170
Los Angeles, CA 90067
</TABLE>
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<TABLE>
<CAPTION>
Name and Address of Amount of Beneficial Ownership(1)
Beneficial Owners No. Shares % Ownership*
------------------- -------------------- ------------
<S> <C> <C>
Sand and Sea Partners(3) 1,077,478 25.8%
300 S. Grand Avenue, 29th Floor
Los Angeles, CA 90071
Sea Fair Partners(3) 332,478 9.8%
300 South Grand Avenue, 29th Floor
Los Angeles, CA 90071
J. Christopher Lewis(3) 1,409,956 33.8%
300 South Grand Avenue, 29th Floor
Los Angeles, CA 90071
Alan Redhead 780,600(4) 20.3%
California Beach Restaurants, Inc.
17383 Sunset Boulevard, Suite 140
Pacific Palisades, CA 90272
Jefferson W. Asher, Jr. 87,000(5) 2.5%
4765 Park Encino Lane #134
Encino, CA 91436
Richard P. Bermingham 0 0%
2105 Stoney Hill Road
Los Angeles, CA 90049
Robert L. Morrison 0 0%
725 Figueroa Street, Suite 1200
Los Angeles, CA 90017
John C. Cushman III(6) 418,894 11.8%
601 S. Figueroa Street, 47th Floor
Los Angeles, CA 90017-5752
All directors and executive officers as a group 2,277,556(7) 48.8%
(6 persons)
</TABLE>
* Denotes holdings of less than 1%.
(1) The number of shares and percentages in these columns are based on
3,400,930 shares of Common Stock outstanding.
(2) Includes 500,000 shares of Common Stock that are subject to a currently
convertible note.
(3) J. Christopher Lewis, a director of the Company, is the general partner
and a limited partner of Sand and Sea Partners and Sea Fair Partners,
which together own 634,956 shares of
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<PAGE> 9
Common Stock; in addition, Sand and Sea Partners is deemed the
beneficial owner of an additional 775,000 shares of Common Stock that
are subject to a currently convertible note. 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.
(4) Includes currently exercisable options to purchase 335,000 shares of
Common Stock issued under the Omnibus Stock Plan, and 100,000 shares of
Common Stock that are subject to a currently convertible note.
(5) Includes currently exercisable options to purchase 32,000 shares of
Common Stock issued under the Omnibus Stock Plan and 25,000 shares of
Common Stock that are subject to a currently convertible note owned by
a family trust.
(6) 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. The Cushman Family
Trust is deemed the beneficial owner of an additional 150,000 shares of
Common Stock that are subject to a currently convertible note. 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.
(7) Includes currently exercisable options to purchase 367,000 shares of
Common Stock issued under the Omnibus Stock Plan and 900,000 shares of
Common Stock that are subject to a currently convertible note.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's bylaws provide for a range of five to nine directors and allow the
Board of Directors to set the exact number of authorized directors within that
range. The current number of authorized directors established by the Board of
Directors is five, and there are no vacancies on the Board. Directors are
elected at each Annual Meeting to serve thereafter until their successors have
been duly elected and qualified or until their earlier resignation or removal.
The Board of Directors has designated five nominees for the Board of Directors
as listed below. Each of the nominees are currently directors, having served in
that capacity since the date indicated below. All nominees have advised the
Company that they are able and willing to serve as directors. If a nominee
refuses or is unable to serve (an event which is not anticipated), the persons
named in the accompanying proxy will vote for another person nominated by the
Board of Directors. Unless otherwise directed in the accompanying proxy, the
persons named therein will vote FOR the election of the five nominees listed
below, or will vote cumulatively for less than all such nominees. See "Certain
Relation-
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ships and Related Transactions - December 1994 Private Placement and Debt
Restructurings" for a description of the arrangement among certain shareholders
and directors of the Company to designate certain persons to the Board of
Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" THE ELECTION OF EACH OF THE NOMINEES LISTED BELOW
The following table and the footnotes thereto set forth the names and
ages of the directors and executive officers, including the five nominees for
election to the Board of Directors, the principal occupation or employment of
each of them during the past five years and at present, the name and principal
business of the corporation or other organization, if any, in which such
occupation or employment is or was carried on, directorships of other public
companies or investment companies held by them, and the period during which the
directors have served in that capacity with the Company. The number of shares of
Common Stock of the Company beneficially owned by each of them as of August 1,
1999 is given in the table appearing under the caption "Security Ownership of
Certain Beneficial Owners and Management" above. Each of the nominees named
below has consented to being named herein and to serve if elected.
Directors And Executive Officers Of The Company
The directors of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Title
- ---- --- -----
<S> <C> <C>
Alan Redhead 56 Chairman of the Board, President,
Chief Executive Officer
J. Christopher Lewis 43 Director
Jefferson W. Asher, Jr. 74 Director
Richard P. Bermingham 60 Director
Robert L. Morrison 52 Director
</TABLE>
The executive officers of the Company are Mr. Redhead and Samuel E.
Chilakos, age 34, 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.
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<PAGE> 11
Alan Redhead joined the Company 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 Company since June 29, 1990 and a
member of its Audit Committee, has been associated with Riordan, Lewis and
Haden, a venture capital firm, for the past eighteen years. He is currently a
director of Tetra Tech, Inc., Data Processing Resources Corporation, PIA
Merchandising Co. Inc., Steven Myers and Associates, Inc. and several
privately-held companies.
Jefferson W. Asher, Jr. joined the Company as a member of the Board of
Directors on November 23, 1992 and is a member of its Stock Plan and
Compensation Committees. Mr. Asher has spent over twenty years as an independent
management consultant and has 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.
Richard P. Bermingham joined the Company as a member of the Board of
Directors on March 9, 1998 and is a member of its Audit Committee. From 1980 to
1994, Mr. Bermingham was with Collins Foods International, Inc., the parent
company of the Sizzler restaurant chain. Mr. Bermingham served Collins Foods
International, Inc., as a member of its Board of Directors from 1970 to 1994, as
President from 1980 to 1987, and as CEO from 1987 to 1994. From 1994 to 1997,
Mr. Bermingham served as Vice Chairman and as a member of the Board of Directors
of American Golf Corporation, a privately-held company. Currently, Mr.
Bermingham is a director of Farr, Inc., and several privately-held companies.
Robert L. Morrison joined the Company as a member of the Board of
Directors on December 15, 1997 and is a member of its Stock Plan and
Compensation Committees. Mr. Morrison is a partner at the law firm of Pillsbury
Madison & Sutro LLP, a firm he joined in 1972. Mr. Morrison is also a director
of the Friends of Child Advocates, a non-profit organization.
Samuel E. Chilakos joined the Company in May 1998 as Vice
President--Finance, Chief Financial Officer and Corporate Secretary.
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<PAGE> 12
Mr. Chilakos served as Assistant Controller of All American Communications, Inc.
from July 1992 through August 1993. Mr. Chilakos attended Pepperdine University
School of Law in Malibu, California, receiving his J.D. degree, cum laude, in
1996. From February 1997 to April 1998, Mr. Chilakos was a Senior Consultant in
Ernst & Young LLP's Dispute Resolution and Litigation Services practice in Los
Angeles, California. Mr. Chilakos is a Certified Public Accountant and a member
of the State Bar of California, who also spent three years with the
international accounting firm of Deloitte & Touche LLP.
None of the officers and directors of the Company is related to any
other officer or director of the Company.
During the year ended April 30, 1999, the Company's Board of Directors
held 3 regular or special meetings and acted by written consent on 4 occasions.
Each incumbent director attended at least 75 percent of the total number of
meetings of the Board and of the Committees of the Board on which he serves.
During the year ended April 30, 1999, the Audit Committee held 1 meeting and did
not act by written consent. The Stock Plan and Compensation Committees did not
meet or act by written consent during the year ended April 30, 1999. The
functions of the Audit Committee are to review and approve the selection of, and
all services performed by, the Company's independent accountants; to meet and
consult with and to receive reports from the Company's independent accountants
and its financial and accounting staff; and to review and act with respect to
the scope of audit procedures, accounting practices and internal accounting and
financial controls of the Company. The function of the Stock Plan Committee is
to administer the Company's Omnibus Stock Plan. The function of the Compensation
Committee is to review, approve and recommend to the Board compensation for
officers of the Company. The Board of Directors has no Nominating or Executive
Committee, and the Board of Directors as a whole acts on matters that otherwise
would be the responsibilities of such committees. During the year ended April
30, 1999, the Company paid Board of Directors fees of $500 per meeting attended
for each outside Board member.
On October 7, 1992 the Company, faced with the loss of its directors
and officers liability insurance, entered into indemnification agreements with
Messrs. Redhead and Lewis. On November 23, 1992, the Company entered into an
indemnification agreement with Mr. Asher. The Company 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 Company 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
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<PAGE> 13
indemnitee was not entitled to be indemnified pursuant to the agreement. All
directors and officers of the Company are entitled to the protection of
directors' and officers' insurance policies that are maintained by the Company.
At the Annual Meeting of Shareholders held on April 28, 1995, the
Company's shareholders approved an amendment to the Company's Articles of
Incorporation to eliminate, to the fullest extent permitted by California law,
the monetary liability of directors of the Company in performing their duties.
EXECUTIVE COMPENSATION
The following summary compensation table sets forth certain summary
compensation information concerning the Company's chief executive officer for
the three most recent fiscal years. No other executive officer had compensation
in excess of $100,000 for the most recent fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
-------------
Annual Compensation (1)
-------------------------------
Securities
Name and Fiscal Underlying
Principal Position Year Salary($) Bonus($) Options/SARs(#)
------------------ ------ --------- -------- ---------------
<S> <C> <C> <C> <C>
Alan Redhead, 1999 $ 218,953 $ -- --
Chairman of the 1998 218,343 262,341 --
Board, President and 1997 215,700 -- --
Chief Executive Officer
</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, 1999 to the
Company's chief executive officer. No SARs were granted in the fiscal year ended
April 30, 1999:
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<PAGE> 14
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
-------------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
options/SARs Employees in Base Price
Name Granted(#) Fiscal Year ($/Share) Expiration Date
---- ------------ ------------- ----------- ----------------
<S> <C> <C> <C> <C>
Alan Redhead None N/A N/A N/A
</TABLE>
Aggregated Option Exercises In Last Fiscal Year And Fiscal Year-End Option
Values
No options were exercised in the fiscal year ended April 30, 1999. The
following table sets forth certain information concerning the Company's chief
executive officer and the aggregated fiscal year-end value of the unexercised
options of the chief executive officer.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities
Shares Underlying Unexercised Value of Unexercised
Acquired on Value Options/SARs at Fiscal In the Money Options/SARs
Exercise(#) Realized($) Year-End (#) at Fiscal Year-End ($)(1)
----------- ----------- ----------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Alan Redhead None $-- 335,000 -- $ -- $ --
</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 November 14, 1997, the Company entered into an employment
agreement with Alan Redhead, the Company's Chief Executive Officer. The
agreement sets forth certain of the terms of employment, including the right to
receive twelve months of salary as severance pay upon (i) termination of
employment without cause (as defined in the agreement) or (ii) resignation for
good reason (as defined in the agreement). The term of Mr. Redhead's agreement
is three years and provides for a current base salary of $217,067 subject to
annual cost of living adjustments.
For purposes of Mr. Redhead's employment agreement, "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 Company,
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<PAGE> 15
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
Company. "Good reason" is defined to mean (i) the failure of the Company 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 Company in the employee's base salary; (iii) the requirement by
the Company that the employee be based anywhere other than within 25 miles of
the employee's present office location; (iv) the disposition of the business of
the Company; or (v) a failure by the Company to comply with any material
provision, or group of provisions that are material in the aggregate, of the
employment agreement.
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 Company 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 Company 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 spin-off or similar transaction by, the Company.
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<PAGE> 16
The options granted to date by the Committee provide that such options
shall become fully exercisable upon a "change of control" of the Company. 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 Company ("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 Company'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 Company of (a) a reorganization, merger
or consolidation, in each case, with respect to which persons who were the
shareholders of the Company immediately 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 Company or (c) the sale of
all or substantially all of the Company's assets; or (iii) upon the acquisition
(other than from the Company) 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 Company's then
outstanding voting securities entitled to vote generally in the election of
directors, but excluding, for this purpose, any such acquisition by the Company
or any of its subsidiaries, or any employee benefit plan (or related trust) of
the Company 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
Company 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 Company 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 Company by (i) attracting and retaining executive
personnel,
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(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 Company.
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 Company and its affiliates, including officers of the
Company, 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 Company 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
Company. Under the Plan and subject to the limitations thereunder, the Committee
is authorized: (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 Company
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
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<PAGE> 18
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 Company 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 SAR's 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
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
Company 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
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<PAGE> 19
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 Company and Bank of America NT&SA (the "Bank")
entered into an amendment to stock purchase agreement under which the Company
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 Company under the Plan
or other similar plan, or otherwise, to directors, officers, employees,
consultants, or other persons providing services to the Company 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."
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's
directors, its executive (and certain other) officers, and any persons holding
more than ten
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<PAGE> 20
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 Company is required to report in this Proxy Statement any
failure to file by these dates during the fiscal year ended April 30, 1999. All
of these filing requirements were satisfied by its directors, officers and ten
percent holders except that Samuel E. Chilakos, an executive officer of the
Company, filed late his initial ownership report on Form 3. In making these
statements, the Company 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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
December 1994 Private Placement and Debt Restructurings
On December 22, 1994, the Company 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 Company as follows: Sea View Restaurants, Inc. ("Sea
View"), a wholly owned subsidiary of the Company, was the borrower and the
Company 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 Company's Board of Directors concluded
that a consensual debt restructuring offered the best opportunity to enable the
Company to continue its business, preserve value for the Company's shareholders
and maintain creditor relationships. Accordingly, the Company entered into a
term sheet with the Bank on December 2, 1994, pursuant to which the Bank agreed
not to publish a foreclosure sale notice, or foreclose on the collateral if
certain payments (as described below) were made by the Company to the Bank by
December 22, 1994. If the Company 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
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<PAGE> 21
and the County of Los Angeles with respect to the Company'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 Company 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 Company 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 were guaranteed by the Company. 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 Company and the Bank (the
"Stock Purchase Agreement"), the Company 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 Company 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 Company of its capital stock and the Bank is entitled to participate in
any future equity offerings by the Company to the extent required to maintain
its then percentage equity ownership in the Company, 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 Company. The Company 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.
The private placement was effected pursuant to the terms of a
Securities Purchase Agreement among the Company 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 Company, is
general
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<PAGE> 22
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 Company 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 Company,
purchased 352,384 shares of Series A Preferred Stock for $288,000 in cash; and
Mark E. Segal, then Vice President - Finance, Chief Financial Officer and
Secretary of the Company, 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 Company on a fully
diluted basis) upon the effective date of the Reverse Stock Split. On April 28,
1995, the Company's shareholders approved the Reverse Stock Split. A Certificate
of Amendment to the Articles of Incorporation of the Company was filed on May 1,
1995 to effect the Reverse Stock Split.
In October 1995, the Company 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.
Pursuant to the terms of the Stock Purchase Agreement and the
Securities Purchase Agreement, the Company was 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 Company effected such registration in December
1995 (the "Offering").
Also, the Company 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 Company 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
Company 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
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<PAGE> 23
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 Company 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 Company
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
Company under the Company's Omnibus Stock Plan or other similar plan, or
otherwise, to directors, officers, employees, consultants, or other persons
providing services to the Company 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 Company 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
Company 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
Company 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 Company with a more
reasonable capital structure, the Company held a meeting of the shareholders of
the Company 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 Company 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 Company 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.
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<PAGE> 24
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 Company in a manner
that would elect to the Board of Directors of the Company 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 Company's
$3,400,000 indebtedness to the Bank. The Company'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. Such directors
later resigned. 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 Company. 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. During the fiscal year ended April 30, 1998, the balance
of the Loan owed to the Bank was paid in full.
Certain Registration Rights
The Company, 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 Company are parties to a Registration Rights
Agreement which, as amended, provides that the Company 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 Company 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 registerable shares
of Common Stock then outstanding. The Company will pay the expenses in
connection with any such incidental registrations
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<PAGE> 25
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 Company that the Company may propose to sell at a
price less than fair market value.
In connection with the March 1999 note offering referenced below, the
Company afforded such purchasers certain incidental and demand registration
rights with respect to the securities of the Company acquired thereunder.
Certain Compensation Arrangements
Reference is made to "Executive Compensation -- Other Compensation
Agreements" for a description of employment arrangements and other arrangements
between the Company and certain officers and directors.
Certain Financing Arrangements
On November 24, 1997, Sea View entered into a one-year, $1,000,000
unsecured line of credit agreement with Outside LLC, an entity affiliated with
J. Christopher Lewis, one of the Company's principal shareholders and a member
of its Board of Directors. Interest of 10% was paid on all amounts borrowed, as
well as a commitment fee of 1.25% of the total line. The line was guaranteed by
the Company and was paid in full on March 30, 1999. The line was used by Sea
View for seasonal working capital needs as well as for certain renovations to
Gladstone's.
The terms of the 1997 20-year concession agreement between the County
of Los Angeles and Sea View, as amended, require Sea View to post a $2,000,000
letter of credit as a security deposit for rental payments due to the County. In
the event that rents are not paid when due, the County may draw upon the letter
of credit. The Company posted the letter of credit by utilizing cash collateral
provided by Overhead Partners, L.P. ("Overhead"), an entity affiliated with J.
Christopher Lewis. The collateral support for the letter of credit has been
extended through July 31, 1999. In consideration of providing the cash
collateral, the Company paid Overhead $80,000 for the period November 1, 1997
through April 30, 1998, and $200,000 for the period May 1, 1998 through April
30, 1999. In the event that any amounts are drawn down on the letter of credit,
such amounts will automatically convert into a debt obligation of the Company,
payable with interest ninety days (or earlier under certain circumstances) from
the date of such conversion.
On March 30, 1999, the Company completed a private offering of
$1,800,000 of subordinated, convertible notes ("Subordinated Notes") to a
limited number of existing shareholders of the Company who are "accredited
investors" within the meaning of Regulation D promulgated under the Securities
Act of 1933, as amended. The proceeds of the offering were used to retire
existing indebtedness to
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<PAGE> 26
Outside LLC, and to finance the renovations at Gladstone's. The Subordinated
Notes are immediately convertible into common stock of the Company at a rate of
$1 per share, and pay interest at 5% per annum. The Company may pay interest on
the Subordinated Notes in cash or in kind. The Subordinated Notes mature on
March 30, 2003; provided, however, that the holders of the Subordinated Notes
may elect to receive payment for fifty percent of the principal of the
outstanding Subordinated Notes on March 30, 2002. Purchasers included Alan
Redhead, the Company's Chairman of the Board and Chief Executive Officer, who
purchased $100,000 of Subordinated Notes; Sand and Sea Partners, an over 5%
shareholder of the Company and which is affiliated with J. Christopher Lewis,
which purchased $775,000 of Subordinated Notes; a family trust of which
Jefferson W. Asher, Jr., a director of the Company, is trustee, which purchased
$25,000 of Subordinated Notes; Eli Broad, an over 5% shareholder of the Company,
who purchased $500,000 of Subordinated Notes; and a family trust of which John
C. Cushman III, who may be deemed an over 5% shareholder of the Company, is
trustee, which purchased $150,000 of Subordinated Notes.
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Upon recommendation by the Audit Committee, the Board of Directors has
appointed Ernst & Young LLP as the Company's independent accountants for the
fiscal year ended April 30, 2000. Representatives of that firm will be present
at the Annual Meeting to respond to appropriate questions and will be given an
opportunity to make a statement if they so desire.
Shareholders are being asked to ratify the appointment of Ernst & Young
LLP as the Company's independent accountants for the fiscal year ended April 30,
2000. Ratification of the proposal requires an affirmative vote of a majority of
the Company's shares of Common Stock represented and voting at the Annual
Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ABOVE PROPOSAL.
FORM 10-K
UPON WRITTEN REQUEST OF ANY PERSON ENTITLED TO VOTE AT THE ANNUAL
MEETING, ADDRESSED TO THE COMPANY, ATTENTION: SAMUEL E. CHILAKOS, SECRETARY,
CALIFORNIA BEACH RESTAURANTS, INC., 17383 SUNSET BOULEVARD, SUITE 140, PACIFIC
PALISADES, CALIFORNIA 90272, THE COMPANY WILL PROVIDE WITHOUT CHARGE A COPY OF
ITS ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
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<PAGE> 27
YEAR ENDED APRIL 30, 1999, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO THE EXCHANGE ACT.
PROPOSALS OF SHAREHOLDERS
Under certain circumstances, shareholders are entitled to present
proposals for consideration at shareholders meetings. Any such proposal to be
included in the proxy statement for the Company's 2000 Annual Meeting of
Shareholders must be submitted to the Secretary of the Company prior to May 8,
2000 and in accordance with Rule 14a-8 of the Exchange Act. In addition, proxies
solicited by management may confer discretionary authority to vote on matters
which are not included in the Proxy Statement but which are raised at the Annual
Meeting by shareholders, unless the Company receives written notice of such
matters on or before July 26, 2000. However, in the event that the date of the
2000 Annual Meeting of Shareholders is more than 30 days before or more than 30
days after the anniversary date of the 1999 Annual Meeting, proposals to be
considered timely must be received a reasonable time before the Company begins
to print and mail its proxy materials. It is suggested that such proposals be
sent by Certified Mail - Return Receipt Requested.
OTHER MATTERS WHICH MAY COME BEFORE THE ANNUAL MEETING
The Company knows of no other matters to be presented at the Annual
Meeting, but if any other matters should properly come before the meeting, it is
intended that the persons named in the accompanying form of proxy will vote the
same in accordance with their best judgment and in their discretion, and
authority to do so is included in the proxy.
By Order of the Board of Directors
/s/ Samuel E. Chilakos
-------------------------
Samuel E. Chilakos
August 30, 1999 Secretary
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<PAGE> 28
CALIFORNIA BEACH RESTAURANTS, INC.
ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 18, 1999
The undersigned shareholder of California Beach Restaurants, Inc.
(the "Company") hereby nominates, constitutes and appoints Alan Redhead and
Samuel E. Chilakos, and each of them, the agent and proxy of the undersigned,
each with full power of substitution to vote all shares of Common Stock of
the Company which the undersigned is entitled to vote at the Annual Meeting of
Shareholders of the Company to be held at Gladstone's 4 Fish Restaurant, 17300
Pacific Coast Highway, Pacific Palisades, California on October 18, 1999 at
9:30 a.m. and at any and all adjournments thereof, as fully and with the same
force and effect as the undersigned might or could do if personally present
thereat, as follows:
1. THE ELECTION OF DIRECTORS: Electing Alan Redhead, J. Christopher Lewis,
Jefferson W. Asher, Jr., Richard P. Bermingham and Robert L. Morrison as
Directors of the Company as set forth in the Proxy Statement.
AUTHORITY GIVEN [ ] AUTHORITY WITHHELD [ ]
(INSTRUCTION: To grant authority to vote for all of the nominees named
above check the "AUTHORITY GIVEN" box; to withhold authority for any individual
nominee check the "AUTHORITY GIVEN" box and cross out the name of the Individual
above; to withhold authority for all nominees check the "AUTHORITY WITHHELD"
box.)
2. RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS: Ratifying the
appointment of Ernst & Young LLP to serve as independent accountants of the
Company for the fiscal year ending April 30, 2000.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. OTHER BUSINESS: To transact such other business as may properly come
before the meeting or any adjournments thereof.
(PLEASE SIGN AND DATE THE OTHER SIDE)
<PAGE> 29
THE BOARD OF DIRECTORS RECOMMENDS A VOTE OF "AUTHORITY GIVEN" ON PROPOSAL
1 AND A VOTE OF "FOR" ON PROPOSAL 2. THIS PROXY CONFERS AUTHORITY TO AND SHALL
BE VOTED IN ACCORDANCE WITH SUCH RECOMMENDATIONS OF THE BOARD OF DIRECTORS
UNLESS A CONTRARY INSTRUCTION IS INDICATED, IN WHICH CASE THE PROXY SHALL BE
VOTED IN ACCORDANCE WITH SUCH INSTRUCTION. IN ALL OTHER MATTERS, IF ANY,
PRESENTED AT THE MEETING, THIS PROXY SHALL BE VOTED IN ACCORDANCE WITH THE
RECOMMENDATIONS OF THE BOARD OF DIRECTORS.
PLEASE SIGN AND DATE BELOW.
Dated: _______________________________
I do _____ do not _____ expect to attend the
meeting.
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(Signature of Shareholder)
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(Signature of Shareholder)
(Please date this proxy and sign your name as
it appears on the stock certificate.
Executors, administrators, trustees, etc.
should give their full title. All joint
owners should sign.)
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS, AND MAY BE REVOKED
PRIOR TO ITS EXERCISE BY FILING WITH THE
SECRETARY OF THE COMPANY AN INSTRUMENT
REVOKING THIS PROXY OR A DULY EXECUTED
PROXY BEARING A LATER DATE OR BY
APPEARING AND VOTING IN PERSON AT THE
MEETING.
