<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
Information Required In Proxy Statement
Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by 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 CULINARY ACADEMY, 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.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] 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:
---------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------
5) Total fee paid:
---------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
---------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------
3) Filing Party:
---------------------------------------------------------------
4) Date Filed:
---------------------------------------------------------------
<PAGE>
CALIFORNIA CULINARY ACADEMY, INC.
625 Polk Street
San Francisco, California 94102
June 9, 1999
Dear Shareholder:
On behalf of California Culinary Academy, Inc. (the "Academy"), I cordially
invite you to attend the 1999 Annual Meeting of Shareholders, which will begin
at 4:00 p.m., California time, on Monday, June 28, 1999, at the offices of the
Academy, 625 Polk Street, San Francisco, California. At the meeting,
shareholders will be asked to vote on the election of seven directors.
Shareholders will also be asked to approve the issuance of Common Stock of the
Academy issuable in connection with the conversion of Convertible Notes and
Series B Preferred Stock and the exercise of Warrants which, subject to
shareholder approval and certain other conditions, will be sold by the Academy
to raise gross proceeds of $7 million. The Academy will also have certain
rights to sell additional Convertible Notes and Warrants to raise an additional
$3 million. The principal purpose of this financing is to provide additional
funds for the development of a new regional campus in New Orleans, Louisiana.
In addition, shareholders will be asked to approve an amendment to the Academy's
By-laws authorizing a minimum of six and a maximum of nine directors, with the
exact number to be seven unless otherwise fixed by the Board of Directors or
shareholders and to ratify the selection of Deloitte & Touche LLP as the
independent auditors for the 2000 fiscal year.
These are very important matters that may have significant impact on the
future of the Academy. The accompanying Notice and Proxy Statement describe
these proposals. We urge you to read this information carefully and vote your
shares promptly. The directors and officers of the Academy hope that as many
shareholders as possible will be present at the meeting. BECAUSE THE VOTE OF
EACH SHAREHOLDER IS IMPORTANT, WE ASK THAT YOU SIGN AND RETURN THE ENCLOSED
PROXY CARD IN THE ENVELOPE PROVIDED, WHETHER OR NOT YOU NOW PLAN TO ATTEND THIS
MEETING. This will not limit your right to attend the meeting or to change your
vote at the meeting.
We appreciate your cooperation and interest in the Academy. To assist us
in preparation for the meeting, please return your proxy card at your earliest
convenience.
Sincerely yours,
Keith H. Keogh
President and Chief Executive Officer
<PAGE>
CALIFORNIA CULINARY ACADEMY, INC.
-----------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held On June 28, 1999
-----------------------
June 9, 1999
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
California Culinary Academy, Inc. (the "Academy") will be held at the Academy's
principal offices at 625 Polk Street, San Francisco, California, on Monday, June
28, 1999, at 4:00 P.M., local time, for the following purposes:
1. To elect seven directors to hold office until the 2000 Annual Meeting
of Shareholders and until their successors are elected and qualified.
The Board of Directors currently intends to nominate the following
persons for election: Ralph Brennan, James D. Cockman, Bert P.
Cutino, Keith H. Keogh, Paul H. Prudhomme, Leenie Rubin and David
Warnock.
2. To approve the issuance of shares of the Academy's Common Stock, no
par value, issuable upon conversion of the Academy's Convertible Notes
and Series B Preferred Stock, and upon exercise of Warrants to
purchase shares of Common Stock, as further described in the attached
Proxy Statement dated June 9, 1999, under Nasdaq Rule 4460(i)(1)(D).
3. To approve an amendment of the By-Laws of the Academy to authorize a
minimum of six and a maximum of nine directors, with the exact number
to be set at seven directors until otherwise fixed by the Board of
Directors or shareholders of the Academy.
4. To ratify the selection of Deloitte & Touche LLP as independent
accountants for the fiscal year ending June 30, 1999.
5. To transact such other business as may properly come before the
meeting or any postponement or adjournment thereof.
All of the above matters are more fully described in the accompanying Proxy
Statement. Only shareholders of record at the close of business on May 21,
1999, are entitled to notice of and to vote at the meeting or any postponement
or adjournment thereof.
<PAGE>
All shareholders are cordially invited to attend the meeting in person.
HOWEVER, TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO MARK,
SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE POSTAGE
PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. Any shareholder attending the
meeting may vote in person even if he or she returned a proxy.
Sincerely yours,
Keith H. Keogh
President and Chief Executive Officer
-2-
<PAGE>
PROXY STATEMENT
-----------------------
ANNUAL MEETING OF SHAREHOLDERS OF
CALIFORNIA CULINARY ACADEMY, INC.
TO BE HELD ON JUNE 28, 1999
-----------------------
GENERAL
The enclosed proxy is solicited by and on behalf of the Academy for use at
the Annual Meeting of Shareholders (the "Annual Meeting") to be held on Monday,
June 28, 1999, at 4:00 P.M., California time, or at any postponement or
adjournment thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting of Shareholders. The Annual Meeting will be held at
the principal executive offices of the Academy, located at 625 Polk Street, San
Francisco, California. All expenses incurred in connection with this
solicitation, including postage, printing, handling and the actual expenses
incurred by brokerage houses, custodians, nominees and fiduciaries in forwarding
proxy material to beneficial owners, will be paid by the Academy. In addition
to solicitation by mail, certain officers, directors and regular employees of
the Academy, who will receive no additional compensation for their services, may
solicit proxies by telephone, telegram or personal call. These proxy
solicitation materials are being mailed on or about June 9, 1999, to all
shareholders entitled to vote at the Annual Meeting.
A copy of the Academy's Annual Report to Shareholders for the fiscal year
ended June 30, 1998 is being mailed with this Proxy Statement to each of the
Academy's shareholders of record at the close of business on May 21, 1999. The
report includes financial statements examined and reported upon by Deloitte &
Touche LLP, independent auditors for the Academy.
OUTSTANDING SHARES AND RIGHTS
Only shareholders of record at the close of business on May 21, 1999 (the
"record date") are entitled to notice of and to vote at the Annual Meeting. At
the record date, there were 3,815,431 shares of common stock, no par value (the
"Common Stock"), issued and outstanding. The presence in person or by proxy of
the holders of a majority of the outstanding shares of Common Stock entitled to
vote at the Annual Meeting will constitute a quorum for the purpose of
transacting business at the Annual Meeting. 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") will be included in the determination of
the number of shares present and voting for purposes of determining the presence
of a quorum, so long as, in the case of broker non-vote shares, such shares are
voted on at least one matter at the Annual Meeting.
-1-
<PAGE>
Each share of Common Stock is entitled to one vote on each matter that may
come before the Annual Meeting, subject to the provision regarding cumulative
voting in the election of directors as described below. The nominees for
director receiving a plurality of the votes cast at the Annual Meeting shall be
elected. The affirmative vote of a majority of the outstanding shares entitled
to vote is required for approval of the proposed amendment to the Academy's
By-Laws. An affirmative vote of a majority of the shares present and voting at
the Annual Meeting and of shares representing more than 25% of the total number
of shares entitled to vote at the Annual Meeting is required for approval of all
other matters being submitted to the shareholders at the Annual Meeting. The
number of abstentions and broker non-votes with respect to a matter will not be
counted as votes for the matter and therefore will have the same effect as a
negative vote.
Under California law and the Academy's Articles of Incorporation and
By-Laws, cumulative voting is permitted in the election of directors. Under
cumulative voting rules, every shareholder voting in the election of
directors may cumulate such shareholder's votes and give one candidate a
number of votes equal to the number of directors to be elected multiplied by
the number of votes to which the shareholder's shares are entitled, or
distribute the shareholder's votes among the number of directors to be
elected, or for any two or more of them, as the shareholder may see fit,
provided, however, that no shareholder will be entitled so to cumulate votes
unless the name of the candidate or candidates for whom such votes would be
cast has been placed in nomination prior to the voting and any shareholder
has given notice, at the Annual Meeting and prior to the commencement of
voting, of such shareholder's intention to cumulate his votes. The
candidates receiving the highest number of votes, up to the number of
directors to be elected, shall be elected. The persons authorized to vote
shares represented by executed proxies in the enclosed form (if authority to
vote for the election of directors is not withheld) will have full discretion
and authority to vote cumulatively and to allocate votes among any or all of
the Board of Directors' nominees as they may determine or, if authority to
vote for a specified nominee or nominees has been withheld, among those
nominees for whom authority to vote has not been withheld.
REVOCABILITY OF PROXIES
At the Annual Meeting, valid proxies will be voted as specified by the
shareholder. Any shareholder giving a proxy in the accompanying form retains
the power to revoke the proxy at any time prior to the exercise of the powers
conferred in the proxy and may do so by taking any of the following actions: (i)
delivering written notice that the proxy is revoked to the Secretary of the
Academy; (ii) delivering to the Secretary of the Academy a duly executed proxy
bearing a later date; or (iii) voting in person at the Annual Meeting. A
shareholder who attends the Annual Meeting but does not vote will not revoke the
shareholder's proxy. Please note that if shares are held of record by a broker,
bank or other nominee and the shareholder wishes to vote at the Annual Meeting,
the shareholder must obtain from the record holder a proxy issued in the name of
the shareholder.
-2-
<PAGE>
ANNOUNCEMENT REGARDING INTENTION OF MAJOR SHAREHOLDERS
On May 26, 1999, the Academy announced that it had received a letter from
three shareholders purporting to hold a majority of the Academy's shares
indicating that they intent to act together to elect a new board of directors
and to vote against the proposed financing to be voted upon by the shareholders
at the Annual Meeting.
The three shareholders, Theodore G. Crocker, William G. DeMar, and Thomas
C. Green, have further indicated their desire that the Academy should seek
opportunities for a business combination transaction and that they are speaking
to potential acquirers. Crocker is the former chairman and chief executive of
the Academy and DeMar is a former director. Green is an affiliate of Thomas
Green Securities, which makes a market in the Academy's common stock.
The Academy's Board of Directors will give appropriate consideration to any
business combination proposal that the Academy may receive and intends to meet
with any potential acquirers who express appropriate interest. This is the
second time, however, in the past 18 months that Crocker and DeMar have sought
proposals to sell the Academy. There can be no assurance that the Academy will
receive any offer with respect to a business combination transaction or that any
offer the Academy may receive will be approved by the shareholder group and the
Board of Directors.
Management and the Board of Directors continue to support the Academy's
current strategic plan and related financing. The Board of Directors and
management believe that the plan offers the best prospect for shareholder value.
While the board and management will therefore make an appropriate evaluation of
any business combination opportunities that may arise, they intend to pursue the
plan and seek shareholder support for the financing described in this Proxy
Statement. The Board of Directors and management can give no assurance that they
will remain with the Academy if the shareholder group votes to change the
Academy's current course.
-3-
<PAGE>
ELECTION OF DIRECTORS
Seven directors are to be elected at the Annual Meeting to serve until the
next Annual Meeting of Shareholders and until their respective successors are
elected and qualified. All of the nominees are presently members of the Board
of Directors of the Academy. Unless marked to the contrary, the proxies
received will be voted FOR the election of the nominees named below. In the
event that prior to the Annual Meeting any nominee indicates that he or she is
unable or declines to serve as a director, the proxies will be voted for the
balance of those named and for such other nominee as the Board of Directors may
select.
INFORMATION WITH RESPECT TO NOMINEES
RALPH BRENNAN, DIRECTOR. Mr. Brennan is the co-owner of Mr. B's Bistro and
owner of Bacco and Ralph Brennan's Red Fish Grill in New Orleans' French
Quarter. He is also a managing partner of the Storyville District Jazz Club.
Mr. Brennan was elected to the Academy's Board of Directors in 1998. He is
47 years old.
JAMES D. COCKMAN, DIRECTOR. He formerly served as Chairman and Chief
Executive Officer of the Food Service Division of Sara Lee Corp. and is a
partner in Woof Gang Brand Development. Mr. Cockman serves on the boards of
Ryans Family Steak House, Greenville, South Carolina, and several charitable
organizations. Mr. Cockman was elected to the Board of Directors in 1997.
Mr. Cockman is 66 years old.
BERT P. CUTINO, DIRECTOR. Since October 1968, Mr. Cutino has been
Executive Chef and Owner of the Sardine Factory Restaurant in Monterey,
California. Mr. Cutino served as a member of the Board of Advisors to the
California Culinary Academy from 1994 to 1998. Mr. Cutino was elected to the
Board of Directors in July 1998. Mr. Cutino is 59 years old.
KEITH H. KEOGH, PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR. Mr. Keogh
joined the Academy as Executive Vice President of Education in June 1995. In
April 1996, he was appointed as President and Chief Operating Officer of the
Academy, and in May, 1998, he was appointed as Chief Executive Officer of the
Academy and joined the Board of Directors. From 1971 until 1995, Mr. Keogh was
employed at Walt Disney World, Orlando, Florida, and held various positions,
most recently as Executive Chef, Research and Development - Theme Parks. Mr.
Keogh was the Manager of the Culinary Team USA (the US Culinary Olympic Team)
from 1988 to 1996 and past president of the World Association of Cooks Societies
and the American Culinary Federation. Mr. Keogh is 46 years old.
PAUL H. PRUDHOMME, DIRECTOR. For more than five years, Chef Paul Prudhomme
has been the proprietor of K-Paul's Louisiana Kitchen, located in the French
Quarter of New Orleans, Louisiana. Chef Prudhomme also has developed and, for
more than five years, has been distributing a line of natural herbs and spices,
"Chef Paul Prudhomme's Magic Seasoning Blends." Chef Prudhomme is also the
author of several cookbooks. Chef Prudhomme was elected to the Board of
Directors in 1997. Chef Prudhomme is 57 years old.
-4-
<PAGE>
LEENIE RUBIN, DIRECTOR. Ms. Rubin is the founder and since 1982 has been
president of Marketing Spectrum, a marketing and research firm with major
clients in the food service industry. Ms. Rubin was elected to the Board of
Directors in 1998. Ms. Rubin is 57 years old.
DAVID WARNOCK, DIRECTOR. Mr. Warnock is a founding partner of Cahill,
Warnock & Company LLC, which is the general partner of Strategic Associates,
L.P., and is a general partner of the general partner of Cahill, Warnock
Strategic Partners Fund, L.P, the purchasers in the proposed transaction
described beginning on page 9 of this Proxy Statement. Prior to founding
Cahill, Warnock & Company, Mr. Warnock was employed from 1983 to 1995 at T. Rowe
Price Associates, Inc. He was founder and President of T. Rowe Price Strategic
Partners and T. Rowe Price Strategic Partners II, private equity partnerships
with committed capital of over $72 million. He also served as an Executive Vice
President of the T. Rowe Price New Horizons Fund. He is on the board of
directors of several portfolio companies including Environmental Safeguards,
Inc., Concord Career Colleges, Touchstone Applied Science, and Childrens
Comprehensive Services, and of several charitable organizations. David received
a BA from the University of Delaware, an MS (in finance) from the University of
Wisconsin and is a CFA. Mr. Warnock was elected to the Board of Directors in
May 1999. Mr. Warnock is 41 years old.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board of Directors has two standing committees: the Compensation
Committee and the Audit Committee. The Board of Directors does not have a
nominating committee.
The Audit Committee consists of Ralph Brennan, James D. Cockman and
Keith H. Keogh. The Audit Committee recommends engagement of the Academy's
independent accountants, approves services performed by such accountants and
reviews, in consultation with the independent accountants, the Academy's
accounting system and system of internal controls. The Audit Committee met one
time during the fiscal year ended June 30, 1998.
The Compensation Committee consists of James D. Cockman, Bert P. Cutino and
Leenie Rubin. The Compensation Committee administers the Academy's stock option
plans and employee benefit plans and approves salaries, bonuses and other
compensation arrangements for the Academy's executive officers. The
Compensation Committee met two times during the fiscal year ended June 30, 1998.
During the fiscal year ended June 30, 1998, the Board of Directors held
nine meetings. Each incumbent director attended more than 75% of the aggregate
number of all Board meetings and meetings of committees on which such director
served during the fiscal year ended June 30, 1998.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the General Corporation Law of California (the
"Corporations Code"), the Academy's Articles of Incorporation eliminate, to the
fullest extent permitted under California law, the personal liability of a
director to the Academy for monetary damages in an action brought by or in the
right of the Academy for breach of a director's duties to the Academy
-5-
<PAGE>
and its shareholders. In addition, the Academy's Articles of Incorporation
and By-Laws provide for indemnification, to the fullest extent permitted
under the Corporations Code, of directors, officers and agents of the Academy
and persons who serve at the request of the Academy as a director, officer,
employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
The Academy has also entered into indemnification agreements with its
directors and executive officers, as permitted under the By-Laws. The
indemnification agreements provide that the directors and executive officers
will be indemnified to the fullest extent permitted by applicable law against
all expenses (including attorneys' fees), judgments, fines and amounts
reasonably paid or incurred by them for settlement in any threatened, pending or
completed action, suit or proceeding, including any derivative action, on
account of their services as a director or executive officer of the Academy of
any subsidiary of the Academy or of any other Academy or enterprise in which
they are serving at the request of the Academy.
EXECUTIVE OFFICERS
The following are executive officers but not directors of the Academy:
Laura Rivera joined the Academy in March 1999 as Vice President of
Marketing. From July 1994 to July 1998, Ms. Rivera was Director of Marketing
and Publicity of the Feature Animation Division of The Disney Academy. Ms.
Rivera holds a B.A. and a Masters degree from University of Wisconsin and an
M.B.A. in Marketing from Harvard Business School. Ms. Rivera is 37 years old.
Thomas A. Spanier joined the Academy in May 1998 as Vice President -
Operations and Development and Chief Operating Officer. From February 1998 to
May 1998, he consulted with the Academy as interim CFO. From August 1994 until
May 1998, he was an independent business consultant, providing interim
management services as well as consulting services to a range of high technology
and marketing companies. From May 1997 to May 1998, he was also interim Chief
Financial Officer of Nuko Information Systems. From April 1993 to August 1994,
Mr. Spanier was Executive Vice President and Chief Operations Officer of the
Academy. He is currently a director of Pantechnicon. Mr. Spanier holds a B.S.
degree in Business (Managerial Economics) from the University of California,
Berkeley and an M.B.A. from Harvard Business School. Mr. Spanier is 53 years
old.
Charles E. White joined the Academy in May 1998 as Vice President and Chief
Financial Officer. Mr. White has provided consulting and turn-around management
services to a range of companies in the restaurant, real estate development and
hospitality industries. From 1996 until 1998, he was Chief Operating Officer of
Stars Restaurants. From June 1993 to June 1995, he was General Manager and
Chief Executive officer of Lummi Casino, and since 1986, he has been President
and Chief Executive Officer of Pea Soup Andersen's. Mr. White is a C.P.A. and
Certified Hotel Administrator. He holds a B.S. degree in Accounting from San
Diego State University, an M.B.A. from Southland University and an L.L.B. degree
from La Salle Extension University. Mr. White is 57 years old.
-6-
<PAGE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
Directors who are employees of the Academy are not separately compensated
for their services as directors or as members of committees of the Board of
Directors. During fiscal 1998, directors who were not employees of the Academy
and who resided in Northern California received $9,000 per annum as an annual
retainer for serving on the Board of Directors. During fiscal 1998, directors
who were not employees of the Academy and who resided outside Northern
California received $12,000 per annum as an annual retainer for serving on the
Board of Directors.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation paid to Keith H. Keogh, the
Academy's Chief Executive Officer, and Theodore G. Crocker, who was Chief
Executive Officer of the Academy until May 1, 1998 (the "Named Executives"). No
other executive officer received total salary and bonus exceeding $100,000 for
the fiscal year ended June 30, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
Annual --------------
Compensation Securities All Other
------------ Underlying Compensation
Name and Principal Position Year ($) Options/SARs (#) ($)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Keith H. Keogh............................... 1998 $195,000 0 $10,522(1)
President and Chief 1997 184,769 0 10,010(2)
Executive Officer 1996 153,846 120,000 564(3)
Theodore G. Crocker.......................... 1998 0 0 $72,000(4)
Chief Executive Officer(5) 1997 0 0 72,000(4)
1996 0 0 72,000(4)
</TABLE>
- -----------------
(1) Includes $772 in payments on life insurance policies and $9,750 in employer
contributions to the 401(k) Plan
(2) Includes $772 in payments on life insurance policies and $9,238 in employer
contributions to the 401(k) Plan.
(3) Represents payments on life insurance policies.
(4) Represents $72,000 reimbursement for office space and related costs.
(5) Mr. Crocker served as Chief Executive Officer until May 1998.
-7-
<PAGE>
The following table shows certain information regarding options held at
June 30, 1998 by the Named Executives:
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
Shares Number of Unexercised Options at Value of in-the-Money Options at
Acquired Fiscal Year-End Fiscal Year-End
on Value ----------------------------------- ---------------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ----------------------------- -------------- ------------- --------------- ------------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Keith H. Keogh.......... 0 $0 60,000 0 $0(1) 0
80,000 40,000 $84,000(2) $42,000 (2)
Theodore G. Crocker..... 107,990 $358,226 40,000 0 $59,200 (3) 0
</TABLE>
- -----------------
(1) Calculated as the difference between the fair market value of the Common
Stock at June 30, 1998 of $7.75 and the option exercise price of $8.00 per
share.
(2) Calculated as the difference between the fair market value of the Common
Stock at June 30, 1998 of $7.75 and the option exercise price of $6.70 per
share.
(3) Calculated as the difference between the fair market value of the Common
Stock at June 30, 1998 of $7.75 and the option exercise price of $6.27 per
share.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 1997, certain Directors exercised options issued under the Academy's
1992 Stock Option Plan to purchase Common Stock in the aggregate amount of
122,840 shares. The payment for these exercises was in the form of unsecured
promissory notes in the aggregate amount of $571,271, each due with interest at
the rate of 9.5% per annum in a single payment on or before June 30, 1998. A
note from Theodore G. Crocker was extended to December 31, 1998. The note has
not been paid and at March 15, 1999, the amount outstanding, including accrued
but unpaid interest, was $519,956.
Security Ownership Of Certain Beneficial Owners And Management
The following table sets forth certain information as of March 1, 1999 with
respect to the shares of Common Stock beneficially owned by (i) persons known by
the Academy to own more than five percent of the outstanding shares of Common
Stock; (ii) each director and nominee for director; (iii) the executive officers
named in the Summary Compensation Table (see "Executive Compensation") and (iv)
all directors and executive officers of the Academy as a group. Ownership
information is based upon information furnished by the respective individuals.
-8-
<PAGE>
<TABLE>
<CAPTION>
Beneficial Ownership(2)
Directors, Nominees, Executive Officers and 5% -----------------------------------------
Shareholders(1) Number of Shares Percent
- ------------------------------------------------------------------------ ----------------------------- ----------
<S> <C> <C>
Ralph Brennan................................................. 500 *
James D. Cockman.............................................. 40,000(3) 1.04%
Theodore G. Crocker........................................... 1,170,576(3) 30.36%
Bert P. Cutino................................................ 500 *
Keith H. Keogh................................................ 147,590(4) 3.73%
Paul H. Prudhomme............................................. 40,000(3) 1.04%
Leenie Ruben.................................................. 0 -
David Warnock................................................. 0(5) -
Thomas Green.................................................. 404,869(6) 10.61%
c/o Thomas Green Securities
601 S. Figueroa Street, Suite 2750
Los Angeles, CA 90017
All Directors and Executive Officers as a
group (10 Persons)............................................ 261,290 6.47%
</TABLE>
* Less than 1%
(1) Except as otherwise noted, the address of each listed person is c/o
California Culinary Academy, Inc., 625 Polk Street, San Francisco, CA
94102.
(2) Beneficial ownership of directors, executive officers and 5% or more
shareholders includes both outstanding Common Stock and shares of which the
person specified has the right to acquire beneficial ownership within 60
days after the date of this Proxy Statement. Shares of which the person
specified has the right to acquire beneficial ownership within 60 days of
the date of this Proxy Statement are deemed to be beneficially owned by
such person and to be outstanding in calculating the percentage ownership
of the person but are not deemed to be outstanding as to any other person.
(3) Includes 40,000 shares of Common Stock issuable upon exercise of currently
exercisable options.
(4) Includes 140,000 shares of Common Stock issuable upon exercise of currently
exercisable options.
(5) Mr. Warnock is a partner of the general partner of Strategic Associates,
L.P., and a general partner of the general partner of Cahill, Warnock
Strategic Partners Fund, L.P., the purchasers in the proposed transaction
described beginning on page 9 of this Proxy Statement.
(6) Based on information contained in Schedule 13G dated February 11, 1999
-9-
<PAGE>
PROPOSAL TO APPROVE THE ISSUANCE OF SHARES OF THE
ACADEMY'S COMMON STOCK ISSUABLE UPON CONVERSION OF THE CONVERTIBLE NOTES AND
SERIES B PREFERRED STOCK AND EXERCISE OF THE WARRANTS UNDER NASDAQ RULE
4460(i)(1)(D).
GENERAL
The Academy's shareholders are being asked to approve the issuance of
shares of Common Stock issuable upon conversion of the Academy's Convertible
Notes (the "Convertible Notes") in an aggregate principal amount of up to $10
million and Series B Preferred Stock (the "Series B Preferred Stock") and upon
exercise of warrants (the "Warrants") to purchase up to 275,000 shares of Common
Stock. The Academy has entered into a Securities Purchase Agreement, dated as
of April 28, 1999 (the "Securities Purchase Agreement"), pursuant to which it
has agreed to sell Convertible Notes with an aggregate principal amount of $7
million, Warrants to purchase 250,000 shares of Common Stock and one share of
Series B Preferred Stock to Cahill, Warnock Strategic Partners Fund,
L.P.("Cahill Warnock") and Strategic Associates, L.P. (together with Cahill
Warnock, the "Purchasers") for $7 million in cash. The closing of the sale of
such securities (the "Transaction") is subject to approval of this proposal by
the Academy's shareholders and the satisfaction of certain other conditions set
forth in the Securities Purchase Agreement and related documents (collectively,
the "Transaction Documents") described below. The Securities Purchase Agreement
also provides the Academy with certain rights to sell additional Convertible
Notes in an aggregate principal amount of $3 million and Warrants to purchase
25,000 shares of Common Stock for $3 million in cash.
The Academy's shareholders are being asked to approve this proposal in
order to comply with rules for maintaining the Academy's listing of its Common
Stock on the Nasdaq National Market. Such rules generally require shareholder
approval in advance of any issuance of more than 20% of a listed security.
Assuming full conversion of the Convertible Notes and Series B Preferred Stock
and full exercise of the Warrants, the Academy would be required to issue at
least 1,525,000 shares (1,941,667 shares if the conversion price applicable to
the Convertible Notes is reduced to $6 under the circumstances described below),
representing approximately 29% of the outstanding Common Stock (34% assuming a
$6 conversion price).
The maintenance criteria for Nasdaq National Market issuers also require
shareholder approval for transactions that result in a "change of control."
Although the Academy does not believe that the transactions contemplated by the
Securities Purchase Agreement involve a change of control of the Academy, if
such transactions were so construed, the approval sought under this proposal
would be effective to satisfy the required shareholder vote.
The Academy's shareholders have no dissenters' rights or preemptive rights
in connection with the issuance of the Convertible Notes, Warrants and Preferred
Stock.
-10-
<PAGE>
IN DECIDING HOW TO VOTE ON THIS PROPOSAL, SHAREHOLDERS SHOULD CAREFULLY
CONSIDER THE INFORMATION UNDER THE CAPTION "RISK FACTORS" BEGINNING ON PAGE 20
OF THIS PROXY STATEMENT.
BACKGROUND OF THE TRANSACTION
At the time the Academy entered into the Securities Purchase Agreement, the
primary purpose of the financing was to provide funding for the Academy's
strategic plan, including the costs associated with the development of a second
core campus in New Orleans, Louisiana (the "New Orleans Project"), the opening
of additional college of food locations and the production of a new television
series.
Since then, the proposed financing has also become important to the
Academy's short-term liquidity. The announced intention of the shareholder
group discussed above has adversely impacted the Academy's plans for a separate
financing involving the $10 million sale and leaseback of the real property
acquired in connection with New Orleans Project, which had been expected to
result in the immediate return of the Academy's investment in the property of
approximately $1.2 million. The prospective sale and leaseback investors have
indicated their unwillingness to proceed without assurances as to the outcome of
the matters to be voted upon at the Annual Meeting.
The Academy also has contractual obligations primarily related to
development of the New Orleans Project and the television series described below
which call for the Academy to make payments of more than $700,000 in the next 45
days. The Academy's cash on hand and available credit under existing facilities
are not sufficient to meet these payment obligations. The Academy believes that
it will be able to obtain alternative financing in the short term, although
there is not assurance that such financing will be available on favorable terms
if at all. If shareholder approval is not obtained or for other reasons the
proposed financing proves to be unavailable, it is possible that the Academy
will be in default of certain of its obligations. The Academy also would have to
terminate pursuit of its strategic plan.
The objective of the Academy's strategic plan is to significantly increase
the size and scope of the Academy's operations. The Academy believes that the
strength of its brand name gives it numerous opportunities to expand and to do
so in a way that will result in improved operating results and cash flows. In
addition to the New Orleans Project, the Academy's strategic plan calls for the
opening of up to five additional College of Food locations in California and the
southeastern United States in the next few years. The Academy also sees
opportunities in the culinary consumer education and post-secondary education
sectors, with a view to creating a "learning ladder" that offers course work
from the consumer education level to the college level through on-site classes
and distance learning. The Academy also plans to produce media programs such as
the highly acclaimed and successful "Cooking at the Academy" series to promote
the Academy's brand name and products.
The Academy believes that New Orleans, with its distinct culinary culture,
has become a major culinary center. Further, the Academy believes that there is
a significant unfulfilled
-11-
<PAGE>
demand for culinary education in the Southeast. Over the next two years, the
Academy intends to develop the New Orleans school into a regional campus
similar in size and scope to the Academy's campus in San Francisco,
California. The Academy believes that its ability to offer students the
opportunity to study at both core campuses, with their very different
culinary cultures, will be a significant competitive advantage in recruiting
new students.
In January 1999, the Academy announced the purchase of the historic
Schubert Theater and Civic Arts complex which will serve as the new New Orleans
campus. These buildings consist of the Schubert Theater, built in 1910, two
additional 19th century buildings and a fourth building all located in the
central business district of New Orleans. The $3.1 million purchase price was
funded primarily though a mortgage loan.
The Academy intends to begin phased construction in June, 1999 to convert
these buildings into a campus that will ultimately support an enrollment of
1,200 students and include 12 teaching kitchens, a central auditorium, a
restaurant open to the public, a 300-bed dormitory, a library, and a sales,
administration and student services area. The Academy intends to finance a
portion of the estimated $18.0 million in total construction and development
costs through a sale and leaseback of the campus facilities. While no
definitive agreements have been reached regarding a sale and leaseback, the
Academy expects to raise approximately $6.8 million from the sale and leaseback
transaction, with the remainder of the costs funded from proceeds of the
proposed sale of securities described here and cash generated from operations.
The Academy intends to complete construction of the first phase of the project
in January, 2000, and, subject to receipt of the anticipated funding,
construction of the entire project within approximately 2 1/2 years.
In 1988, the Academy engaged Legg Mason Wood Walker, Inc. ("Legg Mason") to
assist it with raising equity capital to fund a portion of the construction
costs for the New Orleans campus. Legg Mason advises the Academy that Legg
Mason contacted more than fifty institutional investors in connection with the
proposed financing. All of the responses received from interested investors
involved convertible debt and warrants, rather than equity. The most favorable
proposal was that received from the Purchasers
The Academy believes that the Purchasers will bring substantial benefits to
the Academy and its shareholders as a result of their significant experience in
the education industry and with the financial community. The Academy has
nominated David Warnock for election to its Board of Directors at the Annual
Meeting.
DESCRIPTION OF THE SECURITIES PURCHASE AGREEMENT
The following is a summary of the material provisions of the Securities
Purchase Agreement. It is not intended to be complete and is subject to and
qualified in its entirety by reference to, all of the provisions of such
agreement, a copy of which has been filed with the Academy's Quarterly Report on
Form 10-QSB for the fiscal quarter ended March 31, 1999.
-12-
<PAGE>
ISSUANCE AND SALE OF CONVERTIBLE NOTES, WARRANTS AND SERIES B PREFERRED STOCK
Pursuant to the Securities Purchase Agreement, the Academy will sell, and
the Purchasers will purchase, for $7,000,000 newly issued Convertible Notes of
the Academy with an aggregate principal amount of $7,000,000, Warrants to
purchase 250,000 shares of Common Stock of the Academy and one share of Series B
Preferred Stock. In addition, the Securities Purchase Agreement provides the
Academy with certain rights to sell additional Convertible Notes in aggregate
principal amount of $3 million and Warrants to purchase 25,000 shares of Common
Stock for $3 million in cash. See "-Put Option" below.
TERMS OF THE CONVERTIBLE NOTES
INTEREST. The Convertible Notes bear interest at a rate of 10% per annum,
except that if an Event of Default (described below) occurs, the Convertible
Notes shall bear interest at a rate of 15% per annum.
PRINCIPAL. Commencing on January 1, 2002, principal on the Convertible
Notes shall be due and payable quarterly on the last day of each of March,
June, September and December in an amount equal to $175,000. However, the
Purchasers may defer repayment of principal in any fiscal year by providing
notice to the Academy by the preceding March 31. Upon a change of control of
the Academy, defined generally as an acquisition of 30% of the Academy's
Common Stock calculated on a fully diluted basis, unless the Series B
Preferred Stock is still outstanding or the current holders of the
Convertible Notes approve such Change of Control, the Purchasers may elect to
accelerate repayment of principal, and in such event, one-half of the
outstanding principal shall be due and payable on the first and second
anniversaries of the date of such change of control. All outstanding
principal shall finally be due and payable on the six-year anniversary of the
date of issuance of the Convertible Notes.
EVENTS OF DEFAULT. Upon any of the following events, and following
specified grace periods (each an "Event of Default"), the Purchasers may declare
all outstanding principal and unpaid accrued interest on the Convertible Notes
immediately due and payable and from and after the date of any such Event of
Default the unpaid principal shall bear interest at a rate of 15% per annum
until repaid in full: (i) the Academy fails to pay an installment of principal
or interest when due; (ii) the Academy fails to perform or defaults in the
performance of any material term or covenant contained in the Securities
Purchase Agreement or any other material agreement with the Purchasers, and such
failure or default has a material adverse effect on the Academy; (iii) a breach
of a representation or warranty of the Academy in any certificate, instrument or
written statement made or delivered pursuant to any Transaction Document was
incorrect when made and has a material adverse effect on the Academy; (iv) the
Academy suffers certain events of bankruptcy or insolvency; (v) a final judgment
against the Academy in excess of $1 million is not discharged within 30 days
after the Academy has exhausted all rights to appeal; (vi) a breach by the
Academy of its agreements having a material adverse effect on the Academy;
(vii) upon the removal of the Purchasers' representative on the Board of
Directors; (viii) certain adverse events with respect to the Academy's
participation in Title IV programs; or (ix) the Academy fails to maintain $1
million in its accounts until the end of the tenth quarter
-13-
<PAGE>
after the closing date of the Transaction (the "Closing Date"), and
thereafter for so long as the Preferred Stock remains outstanding, fails to
maintain an EBITDA Coverage Ratio of 2:1. "EBITDA Coverage Ratio" is
generally defined as the ratio of the Academy's earnings before interest,
taxes and depreciation allowance, as set forth in its financial reports, for
the four most recently completed fiscal quarters, to the interest expense of
the Academy for such period, excluding any amounts not paid or not required
to be paid in cash.
REDEMPTION. The Academy may redeem the outstanding principal of the
Convertible Notes at a price which causes a on the redeemed principal to the
Purchasers of 25%, (i) on or after the third anniversary of the Closing Date or
(ii) in the event of certain mergers or qualified public offerings involving the
Academy.
CONVERSION. The Convertible Notes are convertible into shares of Common
Stock at a conversion price equal to $8 (i.e., the Company would be required to
issue a number of shares equal to the principal amount of debt to be converted
divided by $8) or, if converted after January 1, 2002, the lesser of $8 or the
average closing sales price of the Common Stock on the twenty (20) business days
prior to September 30, 2001, except that the conversion price cannot be less
than $6. The conversion price is subject to adjustment for dividends, stock
splits or combinations, reorganizations, mergers, and sales of substantially all
of the Academy's assets. In addition, if the Academy sells Common Stock or
issues options, warrants or the rights to purchase shares of Common Stock of the
Academy (except pursuant to employee or director stock option plans or in
connection with acquisitions) at a price less than the conversion price of the
Convertible Notes then in effect, the conversion price of the Convertible Notes
shall be reduced to equal such lower price. Accordingly, it is possible that
the conversion price will be less than $6.
DESCRIPTION OF THE WARRANTS
Pursuant to the Securities Purchase Agreement, on the Closing Date the
Academy will sell to the Purchasers Warrants to purchase up to an aggregate of
250,000 shares of Common Stock of the Academy. The Warrants have a term of six
years and will be exercisable in full or in part from time to time by means of
payment of the exercise price (which shall be equal to the conversion price on
the Convertible Notes) in cash or by the election of the holder of the Warrant
to receive the net value of the Warrants in shares. The Warrants are subject to
customary adjustments to the Exercise Price in the event of certain dividends
and distributions to holders of Common Stock, stock splits, combinations, sales
of Common Stock at less than market value and mergers, tender offers and similar
transactions. Additionally, if an Event of Default occurs, the exercise price
per share for the Warrants shall be reduced to $.01. Finally, the Academy will
sell to the Purchasers Warrants to purchase 25,000 shares of Common Stock if the
Academy elects to exercise the Put Option. See "--Put Option" below.
DESCRIPTION OF THE SERIES B PREFERRED STOCK
GENERAL. Pursuant to the Securities Purchase Agreement, the Academy will
sell to Cahill Warnock one share of the Series B Preferred Stock. The Series B
Preferred Stock automatically converts into a single share of Common Stock upon
(i) a merger involving the
-14-
<PAGE>
Academy or a sale of substantially all of the Academy's assets, (ii) the
repayment by the Academy of 50% of the principal amount of the Convertible
Notes, (iii) the conversion of 50% of the aggregate principal amount of the
Convertible Notes issued under the Securities Purchase Agreement, or (iv) the
sale or transfer of the Series B Preferred Stock to any person other than
Cahill Warnock.
SPECIAL VOTING RIGHTS. The holder of the Series B Preferred Stock, so long
as such share is outstanding, has the right to vote as a separate class, and
approve by a vote or written consent, as provided by law, before the Academy
may: (i) declare or pay dividends other than stock dividends, or redeem any
security for cash or otherwise; (ii) increase the size of the Board of Directors
to more than nine directors; (iii) amend the articles of incorporation or the
by-laws of the Academy in a manner that would adversely affect the rights of
holders of the Convertible Notes or the Series B Preferred stock; (iv) incur,
issue, guarantee or assume any debt, provided, however, that the foregoing shall
not restrict the Academy from incurring any debt in any of the following
circumstances: (A) the debt is incurred in connection with the New Orleans
Project, (B) the debt is not in excess of $1 million (excluding debt incurred in
connection with the Put Option), (C) the debt is incurred under a working
capital facility secured by accounts receivable or (D) following the incurrence
of the debt the Academy is in compliance with an "Indebtedness to Net Worth
Ratio" equal to 8:1; (v) effect a merger or consolidation of the Academy, except
into a wholly owned subsidiary, or sell substantially all of the Academy's
assets; or (vi) enter into any transaction with the Academy's officers,
directors, employees or affiliates, other than those involving employment
decisions, compensation matters and other transactions in the ordinary course of
the Academy's business. "Indebtedness to Net Worth Ratio" is generally defined
as the ratio of (i) all items that would, in conformity with generally accepted
accounting principles, be classified as liabilities or contingent liabilities of
the Academy, but in any event including without limitation (a) all obligations
under leases that have been, or under generally accepted accounting principles
("GAAP") are required to be, capitalized, (b) all indebtedness endorsed (other
than for collection or deposit in the ordinary course of business) or discounted
with recourse, and (c) all indebtedness guaranteed, directly or indirectly, by
the Academy, to (ii) the net worth of the Academy calculated on consolidated
basis in accordance with GAAP.
ELECTION OF DIRECTORS. The holder of Series B Preferred Stock shall vote
as a separate class to elect one (1) director to the Academy's Board of
Directors. The Purchasers have agreed that David Warnock will serve as the
director appointed by the Series B Preferred Stock until the next annual meeting
or until his successor is duly elected and qualified.
DIVIDENDS. Additionally, the Series B Preferred Stock participates in
dividends and other distributions as if it were converted into one share of
Common Stock, and receives a one cent preference in the event of the Academy's
liquidation, dissolution or winding up.
PUT OPTION
Under the Securities Purchase Agreement, the Academy has the right under
certain circumstances to sell an additional $3 million aggregate principal
amount of Convertible Notes to the Purchasers and Warrants to purchase 25,000
shares of Common Stock for $3 million (the
-15-
<PAGE>
"Put Option"). The Academy may exercise the Put Option if the Academy
achieves 90% of certain cumulative EBITDA targets over specified periods.
Assuming such financial tests are met, the Academy may exercise the Put
Option on one occasion between June 30, 2000 and the last day of the
twenty-first full month following the Closing Date. If the Academy chooses to
exercise the Put Option, the Purchasers shall be entitled to appoint one
additional person to the Academy's Board of Directors.
REGISTRATION RIGHTS
The Securities Purchase Agreement provides that the Academy shall enter
into a Registration Rights Agreement with the Purchasers (the "Registration
Rights Agreement"), pursuant to which the Purchasers or their transferees (each
a "Holder") will be entitled to certain additional rights with respect to the
registration under the Securities Act of shares of Common Stock issuable upon
conversion of the Convertible Notes or upon the exercise of Warrants (including
certain securities issuable with respect to such Common Stock by way of a stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or reorganization ) ("Registrable
Securities").
The Registration Rights Agreement provides for demand and piggyback
registration rights. Holders of a majority of the Registrable Securities then
outstanding may demand up to two registrations with respect to Registrable
Securities, except that the minimum anticipated aggregated net offering price
must be at least $5 million based on the then-current trading price of the
Common Stock. Additionally, the Academy is not required to file a demand
registration statement during the period from 60 days prior to 180 days after
the effective date of any other registration statement pertaining to a public
offering by the Academy, the Academy need not effect more than one registration
in any 12-month period, and the Academy has certain rights to delay such
registration.
The Registration Rights Agreement also provides for unlimited "piggyback"
registration rights. If the Academy proposes to register the sale of its
capital stock under the Securities Act, the, subject to certain exceptions, the
Holders will be entitled to include Registrable Securities in any such
registration.
The Academy shall bear all expenses relating to any demand and piggyback
registrations, although the Holders and the Academy shall ratably pay all
underwriting discounts and commissions.
CERTAIN REPRESENTATIONS AND WARRANTIES
Under the Securities Purchase Agreement, the Academy has made certain
representations and warranties to the Purchasers as to the Academy including
with respect to (i) due corporate organization and qualification to do business;
(ii) the capital structure of the Academy; (iii) the lack of subsidiaries;
(iv) the Academy's interest in other entities; (v) the due authorization,
execution, delivery and performance of the Securities Purchase Agreement and
related agreements and their enforceability; (vi) required consents from
governmental authorities or other third parties; (vii) compliance with laws and
absence of pending and threatened litigation;
-16-
<PAGE>
(viii) insurance; (ix) intellectual property; (x) the absence of any conflict
with or violation of the Academy's organizational documents or bylaws, any of
the Academy's material agreements and applicable law; (xi) permits; (xii)
employee benefits plans; (xiii) absence of agreements to sell assets,
noncompete covenants, expenditures, transactions with related parties, or
licenses; (xiv) registration rights; (xv) delivery of documents; (xvi) real
property assets; (xvii) tangible assets; (xviii) environmental matters; (xix)
the reports and other documents filed by the Academy with the SEC and the
accuracy of the information contained therein; (xx) state accreditation and
licensure; (xxi) federal educational certification and eligibilities; (xxii)
absence of certain changes to the Academy's business, assets or financial
condition; (xxiii) taxes; (xxiv) status as a qualified small business; (xxv)
labor and employment matters; (xxvi) absent of certain pending transactions;
(xxvii) pending and threatened litigation; (xxviii) indebtedness; (xxix) year
2000 compliance; (xxx) full disclosure; (xxxi) books and records; (xxxii)
brokers' fees; (xxxiii) absence of status as an Investment Company; and
(xxxiv) absence of status as a Real Property Holding Company.
CONDITIONS TO CLOSING
CONDITIONS TO PURCHASERS' OBLIGATIONS. The Securities Purchase Agreement
provides that the obligations of the Purchasers to consummate the transactions
contemplated by the Securities Purchase Agreement are subject to the fulfillment
prior to or on the Closing Date of certain conditions precedent, or the waiver
thereof, including the following: (i) the representations and warranties of the
Academy are true and correct in all material respects as of the Closing Date as
though made on or as of the Closing Date; (ii) the Academy has performed and
complied in all material respects with all covenants, agreements and conditions
contained in the Securities Purchase Agreement required to be performed or
complied with by the Academy prior to the Closing; (iii) there have not occurred
any events or circumstances that would have a material adverse effect on the
business, financial condition, property or results of operations of the Academy
or a matter that has prevented or would reasonably be expected to prevent the
consummation of the transactions contemplated by the Securities Purchase
Agreement (excluding general changes in the educational service industry,
economic conditions or the securities markets); (iv) the Academy has received
all registrations, qualifications and permits required under applicable state
securities laws and by any other governmental regulatory agency; (v) the Academy
has obtained the approval of its shareholders in accordance with the rules and
regulations of NASDAQ; (vi) the Academy has issued the Convertible Notes,
Warrants and Preferred Stock and delivered certain related instruments;
(vii) the Academy has provided evidence of a firm commitment for a sale and
leaseback transaction involving the New Orleans Project providing annual lease
payments no greater than 15% of such purchaser's total investment in the
project; (viii) the Academy has executed and delivered the Registration Rights
Agreement; (ix) David Warnock, or another individual designated by Cahill
Warnock, has been appointed to the Academy's Board of Directors; (x) certain of
the Academy's executives has confirmed that the transactions contemplated by the
Securities Purchase Agreement do not trigger change of control provisions in
their employment agreements; (xi) the Academy has implemented an operation and
management plan for lead-based paint at its headquarters; (xii) no Event of
Default has occurred or then exists; (xiii) the Academy has executed and
delivered the Purchaser Rights Agreement; (xiv) Keith H. Keogh has executed and
delivered the Shareholders
-17-
<PAGE>
Agreement; (xv) the Purchasers have received a legal opinion from counsel to
the Academy with respect to certain matters; (xvi) the Academy has delivered
to Purchasers certificates, executed by the Academy's president or vice
president, as to certain matters; (xvii) the Academy has received or obtained
all required consents, approvals, permits or waivers from other parties
required to consummate the transactions contemplated the Securities Purchase
Agreement; (xviii) the Academy has delivered certificates from certain state
officials; (xix) Keith H. Keogh has entered into a two year employment
contract; and (xx) the Academy has provided the Purchasers with certain
assurances regarding the Academy's records with the U.S. Department of
Education.
CONDITIONS TO THE ACADEMY'S OBLIGATIONS. The obligations of the Academy to
consummate the transactions contemplated by the Securities Purchase Agreement
are subject to the fulfillment prior to or on the Closing Date of certain
conditions precedent, or the waiver thereof, including the following: (i) the
representations and warranties of the Purchasers are true and correct in all
material respects as of the Closing Date as though made on and as of the Closing
Date; (ii) the Purchasers have delivered to the Academy certificates as to
certain matters; (iii) the Purchasers has executed and delivered the Purchaser
Rights Agreement, the Standstill Agreement and the Registration Rights
Agreement; (iv) the Purchasers have obtained all registrations, qualifications
and permits required under applicable state securities laws; (v) the Academy has
received the approval of its shareholders in accordance with the rules and
regulations of NASDAQ; (vi) the Academy has received or obtained all required
consents, approvals, permits and waivers from governmental entities or other
parties required to consummate the transactions contemplated by the Securities
Purchase Agreement; and (vii) the Purchasers have transferred $7,000,000 in cash
to the Academy's account.
TERMINATION; TERMINATION FEES
The Securities Purchase Agreement may be terminated at any time prior to
the Closing Date (i) by unilateral action of the Academy; (ii) by the Academy or
the Purchasers if (a) Academy's shareholders fail to approve the transaction or
(b) if the Closing has not occurred on or before June 30, 1999, other than as a
result of a breach by the terminating party; or (iii) by either party if the
other party is in breach of any of its representations, warranties or covenants,
the breach of which would reasonably be expected to have a material adverse
effect, and such condition either is incapable of being satisfied prior to the
Closing Date or the other party is not using its best efforts to cure such
breach in as timely a manner as practicable.
If the Securities Purchase Agreement is terminated as provided above, there
shall be no further liability on the part of any party, except that the Academy
shall pay the Purchasers an aggregate termination fee of $140,000 as liquidated
damages if (i) the Academy unilaterally terminates the Securities Purchase
Agreement; (ii) the Purchasers have terminated due to the Academy's breach of
any representation, warranty or covenant which breach is incapable of being
cured prior to the Closing Date or the Academy is not using its best efforts to
cure the breach; or (iii) the Academy's shareholders do not approve the
Transaction, and within six months after the shareholders' meeting the Academy
enters into a definitive agreement to sell
-18-
<PAGE>
equity or debt securities to a third party where the aggregate net proceeds
to the Academy would exceed $5 million.
INDEMNIFICATION
The Securities Purchase Agreement provides that the Academy and the
Purchasers will indemnify and hold harmless the other and certain of the other's
related persons from and against any and all actual losses, claims, damages,
liabilities, costs and expenses incurred by or asserted or awarded in connection
with or arising out of inaccuracy or breach of such party's representations,
warranties or covenants contained in the Securities Purchase Agreement. All
representations and warranties made in the Securities Purchase Agreement survive
for a period of 15 months after execution of the Securities Purchase Agreement;
provided, however, that the representations and warranties as to environmental
matters, employee benefits, and taxes survive for the applicable statutory
period of limitations.
FEES AND EXPENSES
Under an agreement dated July 8, 1998, the Academy agreed to issue to Legg
Mason warrants to purchase 150,000 shares of Common Stock upon the closing of a
private placement of a specified value of equity securities. Because the nature
and amount of the securities to be sold by the Academy differ from those
contemplated by the agreement with Legg Mason, the Academy and Legg Mason are
currently in discussions concerning the warrants to be issued to Legg Mason,
which will not exceed 150,000 shares. The agreement with Legg Mason called for
the warrants to be exercisable at 120% of the market price per share at the
Closing. Additionally, under an agreement dated June 2, 1998, the Academy is
obligated to pay the Atlantis Group a finder's fee of 1% of the gross proceeds
from the Transaction.
PURCHASER RIGHTS AGREEMENT
CERTAIN RESTRICTIVE COVENANTS. On the Closing Date, the Securities
Purchase Agreement provides that the Academy shall enter into a Purchaser Rights
Agreement (the "Purchaser Rights Agreement"), pursuant to which the Academy will
grant to Purchasers certain additional rights, including the right to receive
(i) monthly, quarterly and annual financial statements; (ii) notice of any
material litigation; (iii) notice of any material contact or agreement; (iv) any
reports or applications to its shareholders, the U.S. Department of Education,
the financial community, the NASDAQ stock market, the National Association of
Securities Dealers or any other market exchange system; (v) accountants'
management letters and correspondence; (vi) lists of shareholders; (vii) annual
budgets; (viii) school profit and loss statements, budgets and initial
projections; (ix) accrediting agency communications; (x) U.S. Department of
Education communications and reports; (xi) state licensing body communications;
and (xii) such other information the Purchasers may reasonably request.
Additionally, the Academy made the following additional covenants: (i) to
provide the Purchasers with access to certain of the Academy's documents;
(ii) to maintain its current directors' and officers' liability insurance
policy, but only up to 200% of its current annual premiums; (iii) to hold
information learned in connection with the Transaction in confidence; (iv)
-19-
<PAGE>
to maintain a cash balance of $1 million in its accounts until 10 quarters
after the closing date, and thereafter maintain an EBITDA Coverage Ratio of
2:1; (v) maintenance of Academy properties; (vi) payment of taxes; (vii) to
maintain insurance policies; and (viii) in connection with the New Orleans
Project, the Academy must have the approval of its Board of Directors prior
to spending amounts in excess of such project's budget. Further, the Academy
has agreed with the Purchasers that, so long as the Series B Preferred Stock
remains outstanding, the Academy will not, without the consent of the
Purchasers, (i) declare or pay any dividends or redeem any security for cash
or otherwise; (ii) enter certain agreements that would restrict the Academy's
ability to perform under the Securities Purchase Agreement or related
agreements; (iii) amend its articles of incorporation or bylaws in a manner
that would adversely affect the Purchasers; (iv) increase the size of its
Board of Directors to more than nine; (v) merge or sell substantially all of
its assets; (vi) liquidate, dissolve or wind up; (vii) or incur indebtedness
other than a described below.
ALLOWED INDEBTEDNESS. Under the Purchaser Rights Agreement, the Academy
may not incur any debt other than (i) debt incurred in connection with the New
Orleans Project; (ii) debt up to $1 million (excluding debt incurred with the
Put Option) (iii) debt under a working capital facility secured by accounts
receivable or (iv) debt which would not cause the Academy to be out of
compliance with an Indebtedness to Net Worth Ratio of 8:1.
NOMINATION AND ELECTION OF DIRECTOR. As long as the Series B Preferred
Stock is outstanding, the Purchasers have the right to elect one director to the
Academy's Board of Directors. If the Purchasers cease to own the Series B
Preferred Stock but continue to own at least 10% of the Common Stock, the
Academy shall use its best efforts to nominate and recommend a director
designated by the Purchasers. If the Academy exercises the Put Option and the
Purchasers own at least 10% of the Academy's outstanding shares, the Purchasers
have the right to nominate two directors. If the Purchasers are no longer
entitled to nominate directors, the Purchasers shall cause any person designated
by them to resign promptly.
PREEMPTIVE RIGHTS. In the Purchaser Rights Agreement, the Academy grants
to each Purchaser the right of first refusal to purchase its pro-rata share of
any securities it proposes to sell after the date of the Securities Purchase
Agreement other than (i) options granted to officers, directors, consultants or
other employees pursuant to stock incentive plans; (ii) securities issued in
connection with an acquisition; (iii) securities issued in a stock split or
stock dividend; or (iv) securities issued in connection with any employee stock
purchase plan.
TERMINATION. All covenants and agreements set forth in the Purchaser
Rights Agreement shall terminate on the sixth anniversary of the Closing Date or
when the Purchasers cease to own the Series B Preferred Stock or less than 10%
of the Academy's capital stock on a fully diluted basis.
STANDSTILL AGREEMENT
On the Closing Date, the Securities Purchase Agreement provides that the
Academy shall enter into a Standstill Agreement (the "Standstill Agreement"),
pursuant to which each of the Purchasers agreed that, prior to January 1, 2002,
unless specifically invited to do so by the
-20-
<PAGE>
Academy, it will not, and will cause each of its affiliates not to, directly
or indirectly, (i) acquire the Academy's securities or options, other than
pursuant to the Warrants, Convertible Notes or the Preferred Stock; (ii) make
a proposal for an acquisition or any merger, consolidation or business
combination involving the Academy or with respect to a substantial portion of
the Academy's assets; (iii) solicit proxies or participate in an election
contest; (iv) propose any matter for a shareholder vote; (v) form or join a
"group," as defined in the Securities Exchange Act, with respect to the
Academy's securities; (vi) grant a proxy with respect to any securities of
the Academy to any person not approved by the Academy; (vii) deposit the
Academy's securities in a voting trust or similar arrangement; (viii) take an
action which would reasonably require the Academy to make a public
announcement regarding any of these matters; (ix) enter into negotiations,
arrangements or understandings with a third party regarding these
restrictions; (x) seek to influence the management or policies of the
Academy; or (xi) publicly disclose any intention, plan or arrangement
inconsistent with the foregoing. Pursuant to the Standstill Agreement, the
Purchasers also agreed that, prior to January 1, 2002, they will not transfer
shares of the Academy's Common Stock to any person who would beneficially own
5% or more of the total voting power of the Academy's equity securities
following such transfer.
SHAREHOLDERS' AGREEMENT
On the Closing Date, the Securities Purchase Agreement provides that Keith
H. Keogh, President and Chief Executive Officer of the Academy, and the
Purchasers shall enter into a Shareholders' Agreement (the "Shareholders'
Agreement"), pursuant to which Mr. Keogh and the Purchasers grant to each other
certain rights of first refusal to buy each others' shares upon the receipt of
certain offers by third parties to purchase such shares, subject to certain
exceptions. Additionally, the parties grant each other certain "tag-along
rights" to participate in sales by any of them to third parties.
RISK FACTORS
Shareholders should consider the following factors, among others, in
deciding whether to vote to approve the proposed issuance of Common Stock.
SUBSTANTIAL INDEBTEDNESS
The proposed issuance of Convertible Notes will substantially increase the
Academy's indebtedness. The interest payments on the Convertible Notes, before
any repayment of principal, would be $700,000 annually, or $1,000,000 should the
Company issue Convertible Notes upon exercise of the Put Option. In addition,
unless the Purchasers elect to defer repayment, principal payments of $175,000
per quarter will begin on January 1, 2002. At the same time, the Academy
anticipates that it will incur substantial new obligations under a lease that it
expects to enter into in connection with the sale and leaseback of the New
Orleans properties. While no definitive agreement is in place, the Academy
currently expects that its annual lease obligations will be up to $1.5 million
per year. This substantial indebtedness, together with the anticipated
obligations under the New Orleans lease, could have important
-21-
<PAGE>
consequences to the Academy's shareholders. For example, such obligations
could (i) make it difficult for the Academy to satisfy its payment
obligations with respect to the Convertible Notes, (ii) increase the
Academy's vulnerability to general adverse economic and industry conditions,
(iii) limit the Academy's ability to fund future working capital, capital
expenditures and other general corporate requirements, (iv) require the
Academy to dedicate a substantial portion of its cash flow from operations to
payments on its indebtedness and leases, thereby reducing the availability of
its cash flow to fund working capital, capital expenditures and other general
corporate purposes, (v) limit its flexibility in planning for, or reacting
to, changes in its business and the educational services industry, (vi) place
the Academy at a competitive disadvantage compared to its competitors that
have fewer debt and lease obligations, and (vii) along with the financial and
other restrictive covenants in the Transaction Documents, limit, among other
things, its ability to borrow additional funds.
POSSIBLE INABILITY TO SERVICE DEBT
The Academy's ability to repay or refinance its debt, including the
Convertible Notes, depends on its successful financial and operating
performance. The Academy's financial and operating performance depends upon a
number of factors, many of which are beyond its control. These factors include
(i) the economic and competitive conditions in the educational services
industry; (ii) any operating difficulties, increased operating costs or pricing
pressures the Academy may experience; (iii) the passage of legislation or other
regulatory developments that may adversely affect the Academy; and (iv) any
delays in implementing any strategic projects. If the Academy cannot repay or
refinance its debts, it may be forced to reduce or delay the expansion of its
business, sell some of its assets, obtain additional equity capital or refinance
or restructure its debt. If the Academy cannot meet its debt service obligations
or comply with its covenants, a default under the Transaction Documents would
result.
RESTRICTIVE DEBT COVENANTS
The terms of Convertible Notes contain a number of significant restrictive
covenants. These covenants will limit the Academy's ability to, among other
things, borrow additional money, make certain expenditures and other
investments, pay dividends or make distributions in respect of capital stock,
merge, consolidate, or dispose of its assets, enter into transactions with its
shareholders or affiliates, or engage in certain other transactions. See
"--Certain Covenants" above. The Academy cannot be certain these covenants will
not adversely affect its ability to finance future operations or capital needs
or engage in other business activities that may be in its interest. In
addition, a breach of these covenants or its inability to comply with the
required financial ratios could result in a default which could cause the
Convertible Notes to become immediately due and payable. If this occurs, the
Academy may not be able to repay or refinance the Convertible Notes. Even if
new financing is available, it may not be on terms that are acceptable to the
Academy.
EFFECTS ON POSSIBLE CHANGE OF CONTROL TRANSACTIONS
The Purchasers' right to approve any merger or consolidation of the Academy
will permit the Purchasers to block certain business combination proposals that
may be made to the
-22-
<PAGE>
Academy in the future. In the past, third parties have made inquiries
concerning a possible purchase of the Academy, and during 1997 and 1998 the
Academy held discussions with other parties concerning possible business
combination transactions. While none of such proposals or discussions
resulted in a transaction that was viewed as in the best interests of
shareholders, if a favorable business combination proposal is received in the
future, including one which would result in a substantial premium to the then
current trading price of the Common Stock, the Academy could not complete
such a transaction without the approval of the Purchasers. As a result, the
rights of the Purchasers may discourage third parties from even making such
proposals to the Academy.
Further, it is possible that the proposed Transaction will facilitate a
future change of control transaction involving the Academy which does not yield
to all shareholders the premium price generally associated with change of
control transactions. As noted above, the Purchasers will enter into a
Standstill Agreement with the Academy which limits their rights to acquire more
shares of Common Stock or to sell shares of Common Stock to certain persons
prior to January 1, 2002. Following the expiration of the Standstill Agreement,
the Purchasers or a third party who acquires the Purchasers' shares would have a
significant advantage in any attempt to acquire a majority of the Academy's
shares. Further, Theodore G. Crocker, beneficial owner of approximately 30.36%
of the Academy's shares, has from time to time indicated to the Board of
Directors his desire to sell his shares. The Purchasers or a third party that
acquires the Purchasers' shares could obtain majority control of the Academy's
outstanding shares by purchasing Mr. Crocker's shares in the future.
SHAREHOLDER DILUTION
The full exercise by the Purchasers of the Warrants and conversion of the
Convertible Notes would result in substantial dilution to the Academy's current
shareholders, giving the Purchasers between 23% and 27% percent of the
outstanding Common Stock (based on an $8 and a $6 conversion price,
respectively). Should the Academy elect to exercise the Put Option, the full
exercise by the Purchasers of the Warrants and conversion of the Convertible
Notes issued in connection with the Put Option would give the Purchasers a total
of between 29% and 34% of the outstanding Common Stock (based on an $8 and a $6
conversion price, respectively). Additionally, if the Academy sells Common Stock
or issues options, warrants or the rights to purchase shares of Common Stock of
the Academy (except pursuant to employee or director stock option plans or in
connection with acquisitions) at a price less than the conversion price of the
Convertible Notes or the exercise price of the Warrants, then the conversion
price of the Convertible Notes and the exercise price of the Warrants shall be
reduced to equal such lower conversion price. Finally, if an Event of Default
occurs, the exercise price per share for the Warrants shall be reduced to $.01,
substantially increasing the dilution of current shareholders.
VOLATILITY OF COMMON STOCK
The Academy is a small public company with limited trading in its shares.
The sale of a large number of shares of the Academy's Common Stock in the public
market by the Purchasers
-23-
<PAGE>
following conversion of the Convertible Notes and exercise of the Warrants
could have an adverse effect on the market price of the Academy's Common
Stock.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that shareholders vote FOR the proposal
to approve the issuance of shares of the Academy's Common Stock issuable upon
conversion of the Convertible Notes and Series B Preferred Stock and upon
exercise of the Warrants.
-24-
<PAGE>
PROPOSAL TO APPROVE AN AMENDMENT TO THE BY-LAWS OF THE
ACADEMY TO AUTHORIZE A MINIMUM OF SIX AND A MAXIMUM
OF NINE DIRECTORS, WITH THE EXACT NUMBER TO BE SET AT
SEVEN DIRECTORS UNTIL OTHERWISE FIXED BY THE BOARD
OF DIRECTORS OR SHAREHOLDERS OF THE ACADEMY
GENERAL. The Academy's shareholders are being asked to approve an
amendment of the By-Laws of the Academy to provide that the number of members of
the Academy's Board of Directors shall be a minimum of six and a maximum of
nine, with the exact number to be set at seven unless otherwise fixed by the
Board of Directors or shareholders of the Academy. The proposed amendment
further provides, in accordance with the General Corporation Law of California,
that the fixed or minimum number of directors cannot be reduced below five if
more than 16-2/3% of the shares entitled to vote thereon vote against or do not
consent to such reduction. The Academy's By-Laws currently provide that the
authorized number of directors shall be seven unless changed by a vote of
shareholders. Accordingly, the Board of Directors currently cannot change the
authorized number of directors.
The proposed text of the By-Laws, as amended and restated, would be as
follows:
Section 17. NUMBER AND QUALIFICATION OF DIRECTORS. The
Corporation has an authorized Board of Directors of no less than six
(6) nor more than nine (9) members. The exact number of directors
shall be set at seven (7) until changed, within the limits specified
above, by a resolution amending such exact number, duly approved by
the Board of Directors or by the shareholders; provided, however, that
an amendment reducing the fixed number or the minimum number of
directors to a number less than five (5) cannot be adopted if the
votes cast against its adoption at a meeting, or the shares not
consenting in the case of an action by written consent, are equal to
more than sixteen and two-thirds percent (16-2/3%) of the outstanding
shares entitled to vote thereon.
The proposed amendment to the By-Laws will provide the Board of Directors
with flexibility to change the number of members of the Board of Directors from
time to time within the specified range should the Board of Directors deem it
desirable to add a new director or should the Board of Directors decide to
reduce the size of the Board of Directors rather than fill a vacancy created by
a resignation or otherwise. Currently, the number of directors is fixed at
seven and cannot be changed without a vote of shareholders. In voting on the
proposed amendment, shareholders should be aware that if the proposed amendment
is approved, the Board of Directors will be able to expand the number of
directors up to nine and appoint directors to fill the vacancies created by
expansion of the Board of Directors without the prior consent of shareholders.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that shareholders vote FOR the proposed
amendment of By-Laws.
-25-
<PAGE>
PROPOSAL TO RATIFY THE SELECTION
OF DELOITTE & TOUCHE LLP AS INDEPENDENT ACCOUNTANTS
FOR THE FISCAL YEAR ENDING JUNE 30, 1999
The Board of Directors has selected Deloitte & Touche LLP as the Academy's
independent auditors for the fiscal year ending June 30, 1999 and has further
directed that management submit the selection of independent auditors for
ratification by the shareholders at the Annual Meeting. Deloitte & Touche has
audited the Academy's financial statements since 1996. Representatives of
Deloitte & Touche are expected to be present at the Annual Meeting. They will
have an opportunity to make a statement if they so desire and will be available
to respond to appropriate questions.
If the shareholders fail to ratify the selection of Deloitte & Touche LLP,
the Audit Committee and the Board of Directors will reconsider whether or not to
retain that firm. Even if the selection is ratified, the Audit Committee and
the Board of Directors, in their discretion, may direct the appointment of a
different independent accounting firm at any time if they determine that such a
change would be in the best interest of the Academy and its shareholders.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that the shareholders vote FOR the
ratification of Deloitte & Touche LLP as the Academy's independent auditors for
the fiscal year ending June 30, 1999.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") requires the Academy's executive officers and directors and
persons who own more than ten percent of a registered class of the Academy's
equity securities to file with the Securities and Exchange Commission ("SEC")
reports of ownership and changes in ownership of Common Stock and other equity
securities of the Academy. Executive officers, directors and greater than ten
percent shareholders are required by SEC regulations to furnish the Academy with
copies of all Section 16(a) forms they file. Based on an examination of these
reports and on written representations provided to the Academy, all such reports
required to be filed for the fiscal year ended June 30, 1998, were timely filed.
SHAREHOLDER PROPOSALS
Under the SEC's proxy rules, any shareholder proposal to be presented at
the 2000 Annual Meeting of Shareholders must be received by the Academy's
Secretary at the Academy's principal offices in San Francisco not later than
February 9, 2000, if it is to be included in the Board of Directors' Proxy
Statement and form of proxy related to that meeting. In addition, under the
SEC's proxy rules, if a shareholder wishes to bring a matter before the annual
meeting of shareholders but does not provide written notice of the proposal to
the Academy at least 45 days before the anniversary date of the mailing of the
proxy materials for the prior year's annual
-26-
<PAGE>
meeting of shareholders, any proxies received by the Board of Directors from
shareholders in response to its solicitation will be voted by the Board of
Directors' designated proxies in their discretion on such matter, regardless
whether specific authority to vote on such matter has been received from the
shareholders submitting such proxies. Accordingly, any shareholder who wishes
to submit a proposal at the 2000 Annual Meeting of Shareholders and who also
wishes to avoid the possibility of discretionary voting by the Board of
Directors' proxies on such matter, must give written notice of the proposal
to the Secretary of the Academy on or before April 25, 2000.
OTHER MATTERS
The Board of Directors knows of no other business that will be presented
for consideration at the Annual Meeting. If other matters are properly brought
before the Annual Meeting, it is the intention of the persons named in the
accompanying proxy to vote the shares represented thereby on such matters in
accordance with their best judgment.
By Order of the Board of Directors
Chuck White
CORPORATE SECRETARY
June 9, 1999
___________
A COPY OF THE ACADEMY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED
JUNE 30, 1998, IS AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO INVESTOR
RELATIONS, CALIFORNIA CULINARY ACADEMY, INC., 625 POLK STREET, SAN FRANCISCO,
CALIFORNIA 94102.
THE ACADEMY'S AUDITED FINANCIAL STATEMENTS, INCLUDING ITS BALANCE SHEETS AS OF
JUNE 30, 1998 AND 1997 AND ITS STATEMENT OF OPERATIONS AND STATEMENTS OF CASH
FLOWS FOR THE FISCAL YEARS ENDED JUNE 30, 1996 AND 1997 AND THE MATERIAL UNDER
THE CAPTION "MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS," EACH AS SET FORTH IN THE ACCOMPANYING 1988 ANNUAL
REPORT, ARE INCORPORATED HEREIN BY REFERENCE.
-27-
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF CALIFORNIA CULINARY ACADEMY, INC.
Annual Meeting of Shareholders
June 28, 1999
The undersigned shareholder of California Culinary Academy, Inc., a California
corporation (the "Academy"), hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and Proxy Statement, each dated June 9, 1999 and the
Annual Report to Shareholders for the fiscal year ended June 30, 1998, and
hereby constitutes and appoints Keith H. Keogh and Charles E. White and each of
them, proxies and attorneys-in-fact with full power to each of substitution, on
behalf and in the name of the undersigned, to represent the undersigned at the
Annual Meeting of Shareholders of the Academy to be held on June 28, 1999, 1999
at 4:00 p.m., Pacific Daylight Time, at 625 Polk Street, San Francisco,
California, and at any postponement or adjournment thereof, and to vote all
shares of Common Stock to which the undersigned would be entitled, if then and
there personally present, on the matters set forth below:
1. To elect seven directors to hold office until the 2000 Annual Meeting of
Shareholders and until their successors are elected and qualified.
<TABLE>
<S> <C> <C>
ELECTION OF DIRECTORS FOR ALL nominees listed below WITHHOLD AUTHORITY
(except as marked to the contrary below) (to vote for ALL nominees listed below)
/ / / /
(Instruction: To withhold the authority to vote for any individual nominee, mark the box next to the nominee's name below.)
Ralph Brennan James D. Cockman Bert P. Cutino Keith H. Keogh
/ / / / / / / /
Paul H. Prudhomme Leenie Ruben David Warnock
/ / / / / /
</TABLE>
2. To approve the issuance of shares of the Academy's Common Stock, no par
value, issuable upon conversion of the Academy's Convertible Notes and Series B
Preferred Stock, and upon exercise of Warrants to purchase shares of Common
Stock, as further described in the Academy's Proxy Statement dated June 9, 1999,
under Nasdaq Rule 4460(i)(1)(D).
FOR AGAINST ABSTAIN
/ / / / / /
-28-
<PAGE>
3. To approve an amendment of the By-laws of the Academy to authorize a
minimum of six and a maximum of nine directors, with the exact number to be set
at seven directors until otherwise fixed by the Board of Directors or
shareholders of the Academy.
FOR AGAINST ABSTAIN
/ / / / / /
4. To ratify the selection of Deloitte & Touche LLP as independent
accountants for the fiscal year ending June 30, 1999.
FOR AGAINST ABSTAIN
/ / / / / /
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER HEREIN SPECIFIED
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS INDICATED, THIS PROXY WILL
BE VOTED IN FAVOR OF PROPOSALS 2, 3 AND 4, AND FOR ALL NOMINEES LISTED IN
PROPOSAL 1, AND IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES ON ANY OTHER
MATTERS TO COME BEFORE THE ANNUAL MEETING.
DATED_____________________, 1999
________________________________________
(Signature)
________________________________________
(Signature)
(This proxy should be marked, dated, signed by
the shareholder(s) exactly as his name appears
hereon and returned promptly in the enclosed
envelope. Executors, administrators, guardians,
officers of corporations and others signing in
a fiduciary capacity should state their full
titles as such. If shares are held by joint
tenants or as community property, both should
sign.)
DO NOT FOLD, STAPLE OR MUTILATE.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO MARK,
SIGN, DATE AND PROMPTLY RETURN THIS PROXY, USING THE ENCLOSED ENVELOPE.
-29-
