<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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
Santa Barbara Restaurant Group, 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] Fee not 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:
----------------------------------------------------------------------
(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> 2
SANTA BARBARA RESTAURANT GROUP, INC.
3916 STATE STREET
SUITE 300
SANTA BARBARA, CALIFORNIA 93105
-------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AUGUST 16, 1999
To the Stockholders:
The Annual Meeting of Stockholders of Santa Barbara Restaurant Group, Inc.,
a Delaware corporation, will be held on August 16, 1999, at 10:00 a.m., local
time, at Fess Parker's Doubletree Resort, 633 East Cabrillo Blvd., Santa
Barbara, California for the following purposes:
(1) to elect nine directors to the Board of Directors to serve for the next
year or until their successors are duly elected and qualified or until
their earlier death, resignation or removal;
(2) to approve an amendment to the Santa Barbara Restaurant Group, Inc.
1998 Stock Option Plan (the "Plan") and to ratify certain stock option
grants made under the Plan;
(3) to approve an amendment to the Restated Certificate of Incorporation to
authorize the issuance of Preferred Stock;
(4) to approve the conversion of Parent Notes to be issued to La Salsa
Holding Company, Inc. under an Agreement and Plan of Merger; and
(5) to transact such other business as may properly come before the Meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy Statement
accompanying this Notice. Only stockholders of record at the close of business
on June 25, 1999, are entitled to notice of and to vote at the Meeting. All
stockholders are cordially invited to attend the Meeting in person.
Sincerely,
/s/ ANDREW F. PUZDER
Andrew F. Puzder
Chief Executive Officer
Santa Barbara, California
July 15, 1999
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE TO ASSURE
REPRESENTATION OF YOUR SHARES. ANY STOCKHOLDER SUBMITTING A PROXY MAY REVOKE IT
PRIOR TO THE TIME IT IS VOTED BY FILING WITH THE SECRETARY, ANDREW D. SIMONS, A
WRITTEN NOTICE OF REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER DATE, OR
BY VOTING IN PERSON AT THE MEETING. NO POSTAGE NEED BE AFFIXED TO THE PROXY IF
IT IS MAILED IN THE UNITED STATES.
<PAGE> 3
SANTA BARBARA RESTAURANT GROUP, INC.
3916 STATE STREET
SUITE 300
SANTA BARBARA, CALIFORNIA 93105
-------------------------
PROXY STATEMENT
-------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited by the Board of Directors of Santa Barbara
Restaurant Group, Inc. (the "Company") for use at the Annual Meeting of
Stockholders (the "Meeting") to be held on August 16, 1999, at 10:00 a.m., local
time, or at any adjournment thereof, for the purposes set forth herein and in
the accompanying Notice of Annual Meeting of Stockholders. The Meeting will be
held at Fess Parker's Doubletree Resort, 633 East Cabrillo Blvd., Santa Barbara,
California.
It is anticipated that such proxy, together with this Proxy Statement, will
be first mailed on or about July 15, 1999, to all stockholders entitled to vote
at the Meeting.
The Company's corporate offices are located at 3916 State Street, Suite
300, Santa Barbara, California 93105 and its telephone number at that address is
(805) 563-1566.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company's Secretary a
written notice of revocation or a duly executed proxy bearing a later date or by
attending the Meeting and voting in person.
VOTING AND SOLICITATION
Each share has one vote on each matter properly submitted for a vote at the
Meeting. The cost of this solicitation will be borne by the Company. In
addition, the Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in forwarding
solicitation materials to such beneficial owners. Proxies may also be solicited
by certain of the Company's directors, officers and regular employees, without
additional compensation, personally or by telephone or telegram.
Votes cast by proxy or in person at the Meeting will be counted by the
persons appointed by the Company to act as election inspectors for the Meeting.
The election inspectors will treat shares represented by properly signed and
returned proxies that reflect abstentions as shares that are present and
entitled to vote for purposes of determining the presence of a quorum on all
matters.
The election inspectors will treat shares referred to as "broker non-votes"
(i.e., shares held by brokers or nominees as to which instructions have not been
received from the beneficial owners or persons entitled to vote that the broker
or nominee does not have discretionary power to vote on a particular matter) as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum.
Abstentions and "broker non-votes" will not affect the outcome of the
director elections. As to other votes, an abstention will have the same effect
as a negative vote and a "broker non-vote" will have no effect on the vote.
RECORD DATE AND STOCK OWNERSHIP
Stockholders of record at the close of business on June 25, 1999, are
entitled to notice of and to vote at the Meeting. As of June 25, 1999,
16,246,293 shares of the Company's Common Stock (the "Common Stock"), $.08 par
value, were issued and outstanding. On that date, there were 2,769 stockholders
of record.
<PAGE> 4
As of June 11, 1999, the following table sets forth the beneficial
ownership of the Common Stock of the Company by each director who owns shares,
by the director nominees, all executive officers named in the Summary
Compensation Table, all directors and executive officers as a group and by all
persons known by the Company to be the beneficial owners of more than 5% of the
Company's Common Stock. The information as to beneficial stock ownership is
based on data furnished by the persons concerning whom such information is
given. The Company had 16,246,293 shares outstanding as of June 11, 1999.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
---------------------------------------
NAME AND ADDRESS(1) NUMBER OF SHARES PERCENT OF TOTAL(2)
------------------- ---------------- -------------------
<S> <C> <C>
Fidelity National Financial, Inc........... 7,187,765(3) 36.5%
17911 Von Karman Ave., Suite 300
Irvine, CA 92614
CKE Restaurants, Inc. ..................... 1,656,453 8.4%
3916 State Street, Garden Suite
Santa Barbara, CA 93105
KCC Delaware Company....................... 998,377 6.1%
103 Springer Building
3411 Silverside Rd.
Wilmington, DE 19810
T. Anthony Gregory......................... 157,666(4) *
25651 Paseo de la Paz
San Juan Capistrano, CA 92675
Bruce H. Haglund........................... 199,261(5) 1.0%
2010 Main Street, Suite 400
Irvine, CA 92614
William P. Foley, II....................... 1,424,400(6) 7.2%
1200 North Carl Karcher Way
Anaheim, CA 92803
Andrew F. Puzder........................... 204,000(7) 1.0%
1200 North Carl Karcher Way
Anaheim, CA 92803
Frank P. Willey............................ 80,000(8) *
1200 North Carl Karcher Way
Anaheim, CA 92803
C. Thomas Thompson......................... 0 *
1200 North Carl Karcher Way
Anaheim, CA 92803
Charles Rolles............................. 0 *
1200 North Carl Karcher Way
Anaheim, CA 92803
Burt Sugarman.............................. 0(9) *
1200 North Carl Karcher Way
Anaheim, CA 92803
Dermot F. Rowland.......................... 590,189(10) 3.0%
4021 Vernon Avenue South
St. Louis Park, MN 55416
Nicholas J. Caddeo......................... 53,200(11) *
1200 North Carl Karcher Way
Anaheim, CA 92803
All directors and officers as a group (10
persons)................................. 2,893,711(12) 14.7%
</TABLE>
- ---------------
* Represents less than 1%.
(1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days of the above date upon the exercise
of warrants or options. Each beneficial owner's percentage ownership is
determined by assuming that options or warrants that are held by such
person (but not
2
<PAGE> 5
those held by any other person) and which are exercisable within 60 days of
the above date have been exercised.
(2) Assumes 19,683,297 shares outstanding, including 16,246,293 shares
currently outstanding and 3,437,004 shares issuable upon exercise of
presently exercisable stock options and warrants held by the above-listed
shareholders.
(3) Includes 2,470,000 shares issuable upon the exercise of presently
exercisable warrants.
(4) Includes 104,194 shares issuable upon the exercise of presently exercisable
nonstatutory stock options.
(5) Includes 119,194 shares issuable upon the exercise of presently exercisable
nonstatutory stock options.
(6) Excludes the 7,187,765 beneficial shares held by Fidelity National
Financial, Inc. and 1,656,453 beneficial shares held by CKE Restaurants,
Inc., of which William P. Foley, II is the Chairman of the Board and Chief
Executive Officer. Includes 350,000 shares issuable upon the exercise of
presently exercisable nonstatutory stock options.
(7) Includes 200,000 shares issuable upon the exercise of presently exercisable
nonstatutory options.
(8) Includes 80,000 shares issuable upon the exercise of presently exercisable
nonstatutory options.
(9) Excludes 998,377 beneficial shares held by KCC Delaware Company, of which
Burt Sugarman is the Chief Executive Officer.
(10) Includes 81,116 shares issuable upon the exercise of presently exercisable
nonstatutory options.
(11) Includes 32,500 shares issuable upon the exercise of presently exercisable
incentive stock options.
(12) Includes an aggregate of 1,152,004 shares issuable upon the exercise of
presently exercisable stock options held by officers and directors of the
Company.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented by such
stockholders at the Company's 2000 Annual Meeting must be received by the
Company no later than March 17, 2000, in order that they may be considered for
inclusion in the Proxy Statement and form of proxy relating to that meeting.
PROPOSAL NO. 1 TO THE ANNUAL MEETING -- ELECTION OF DIRECTORS
NOMINEES
Under the Bylaws, the Company may have up to ten directors. The seven
directors set forth below are standing for re-election to hold office until the
next annual meeting of stockholders. T. Anthony Gregory and Bruce H. Haglund are
currently members of the Board of Directors but are not running for another
term.
<TABLE>
<S> <C>
William P. Foley, II Dermot Rowland
Frank P. Willey Burt Sugarman
Andrew F. Puzder Charles Rolles
C. Thomas Thompson
</TABLE>
Any stockholder entitled to vote for the election of directors at a meeting
may nominate persons for election as directors only if written notice of the
stockholder's intent to make such nomination is given, either by personal
delivery or by United States mail, postage prepaid and addressed to: Secretary,
Santa Barbara Restaurant Group, Inc., 3916 State Street, Suite 300, Santa
Barbara, California 93105, not later than: (i) with respect to any election to
be held at an Annual Meeting of Stockholders, 90 days in advance of such
Meeting, and (ii) with respect to any election to be held at a Special Meeting
of Stockholders for the election of directors, the close of business on the 10th
day following the date on which notice of such meeting is first given to
stockholders. Each such notice must set forth: (a) the name and address of the
stockholder who intends to make the nomination and of the person or persons to
be nominated; (b) a representation that such stockholder is a holder of record
of stock of the Company entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice; (c) a description of all arrangements or understandings between
such stockholder and each nominee and any other person or persons
3
<PAGE> 6
(naming such person or persons) pursuant to which the nomination or nominations
are to be made by such stockholder; (d) such other information regarding each
nominee proposed by such stockholder as would have been required to be included
in a Proxy Statement filed pursuant to the proxy rules of the Securities and
Exchange Commission if such nominee had been nominated or intended to be
nominated by the Board of Directors; and (e) the consent of each nominee to
serve as a director of the Company, if elected. The Chairman of a stockholders'
meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure. The names of the director nominees, all
directors, and all executive officers, and certain information about them, are
set forth below:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
---- --- -------------------- --------
<S> <C> <C> <C>
William P. Foley, II................... 54 Chairman and Director 1997
Andrew F. Puzder....................... 48 Chief Executive Officer and 1997
Director
Frank P. Willey........................ 45 Director 1997
Bruce H. Haglund....................... 47 Director 1989
T. Anthony Gregory..................... 60 Director 1989
C. Thomas Thompson..................... 49 Director 1998
Dermot F. Rowland...................... 61 Director 1998
Charles Rolles......................... 64 Director 1999
Burt Sugarman.......................... 60 Director 1999
Nicholas J. Caddeo..................... 51 Executive Vice President and Chief N/A
Operating Officer
Theodore Abajian....................... 35 Executive Vice President and Chief N/A
Financial Officer
Carl A. Strunk......................... 61 Executive Vice President, Finance N/A
Andrew D. Simons....................... 38 Senior Vice President, General N/A
Counsel and Secretary
Gary R. Nelson......................... 51 Treasurer N/A
</TABLE>
WILLIAM P. FOLEY, II
Mr. Foley became Chairman of the Board and a Director of the Company in
July 1997. Mr. Foley is also Chairman of the Board and Chief Executive Officer
of Fidelity National Financial, Inc., a company engaged in title insurance and
related services. Mr. Foley is also the Chairman of the Board and Chief
Executive Officer of CKE Restaurants, Inc., a company engaged in the quick
service restaurant business. He is Chairman of the Board of American National
Financial, Inc., Checkers Drive-In Restaurants, Inc. and Rally's Hamburgers,
Inc. He is also a member of the Boards of Directors of Micro General
Corporation, Fresh Foods, Inc., and Miravant Medical Technologies, Inc.
ANDREW F. PUZDER
Mr. Puzder became a Director of the Company in July 1997 and was appointed
Chief Executive Officer in August 1997. Mr. Puzder also serves as an Executive
Vice President, General Counsel, and Secretary for CKE Restaurants, Inc. Mr.
Puzder is also an Executive Vice President for Fidelity National Financial, Inc.
Mr. Puzder has been with Fidelity National Financial, Inc. since January 1995.
From March 1994 to December 1994, he was a partner with the law firm of
Stradling, Yocca, Carlson & Rauth. Prior to that, he was a partner with the law
firm of Lewis, D'Amato, Brisbois & Bisgard, from September 1991 through March
1994, and he was a partner of the Stolar Partnership from February 1984 through
September 1991. Mr. Puzder is also a Director for Javelin Systems, Inc., Rally's
Hamburgers, Inc. and Fresh Foods, Inc.
4
<PAGE> 7
FRANK P. WILLEY
Mr. Willey became a Director in July 1997. He is also the President of
Fidelity National Financial, Inc. and has been a director since February 1984.
He was the General Counsel of Fidelity National Financial, Inc. from 1984 to
January 1995. Mr. Willey also serves on the Boards of Directors of CKE
Restaurants, Inc. and Ugly Duckling Holdings, Inc.
BRUCE H. HAGLUND
Mr. Haglund has served as a Director of the Company since 1989. Mr. Haglund
is an attorney in private practice in Orange County, California and has been a
principal in the law firm of Gibson, Haglund & Johnson since April 1994. He was
a principal in the law firm of Phillips, Haglund, Haddan & Jeffers from February
1991 to April 1994. From 1984 to February 1991, he was a partner in the law firm
of Gibson & Haglund, and from 1980 to 1984 was an associate with the firm. He is
also a director of Aviation Distributors, Inc.
T. ANTHONY GREGORY
Mr. Gregory has served as a Director of the Company since 1989. Since 1962,
Mr. Gregory has owned and operated U.S. Customs Air Bonded Warehouse. In June
1989, Mr. Gregory opened U.S. Customs Bonded Container and Freight Station, and
in August 1989 opened Custom Air Trucking Company. Mr. Gregory was Vice
President and Secretary of Equitable Savings & Loan Association, a holding
company for several savings and loan companies from 1963 to 1965.
C. THOMAS THOMPSON
Mr. Thompson became a director in 1998. Mr. Thompson is also the President
and Chief Operating Officer of CKE Restaurants, Inc. Mr. Thompson has been a
Carl's Jr. franchisee since 1984, and currently operates 17 Carl's Jr.
restaurants in the San Francisco Bay Area. Mr. Thompson also serves as a member
of the Boards of Directors of Rally's Hamburgers, Inc. and Checkers Drive-In
Restaurants, Inc. Mr. Thompson has more than 20 years of experience in the
restaurant industry.
DERMOT F. ROWLAND
Mr. Rowland has served as a Director since 1998. Mr. Rowland was the
founder of Timber Lodge Steakhouse, Inc. (acquired by the Company on September
1, 1998) and has served as Chairman of the Board, Chief Executive Officer,
Secretary and as a Director of Timber Lodge since 1989. Prior to establishing
Timber Lodge, Mr. Rowland was involved in the formation and management of
Homestyle Buffet, Inc., which subsequently changed its name to Staceys Buffet
Inc. ("Staceys"). Staceys, based in Largo, Florida, develops and operates buffet
restaurants. He co-founded Staceys in 1986 and served as its President and Chief
Executive Officer from 1986 to 1987. In 1987, he became its Chairman of the
Board and continued as a consultant and Director until 1991.
BURT SUGARMAN
Mr. Sugarman has served as a director of the Company since 1999. Mr.
Sugarman has been the Chairman of the Board, President and Chief Executive
Officer of GIANT Group, Ltd. for five years and served as the Chief Executive
Officer of Rally's Hamburgers, Inc. from 1990 and as the Chairman of the Board
of Directors of Rally's from 1991, resigning from these offices in February
1994. Mr. Sugarman resumed the position of Chairman of the Board of Directors of
Rally's Hamburgers, Inc. in November 1994 and resigned such office in October
1997. Mr. Sugarman is a Director of GIANT Group, Ltd., Rally's Hamburgers, Inc.
and Checkers Drive-In Restaurants, Inc.
5
<PAGE> 8
CHARLES ROLLES
Mr. Rolles has served as a director of the Company since 1999. Mr. Rolles
has been engaged in the business of real estate development for the past 30
years. In addition, Mr. Rolles was the founder of the 50 unit Chuck's Steakhouse
chain. Mr. Rolles also served as a director of Liberty Bank from 1978 to 1990.
NICHOLAS J. CADDEO
Mr. Caddeo has been an Executive Vice President and Chief Operating Officer
of the Company since August 1992. Prior to joining the Company, he was employed
for more than 20 years by Foodmaker, Inc., the corporate operator of
Jack-in-the-Box restaurants, serving as a Regional Manager for the Los Angeles
area from January 1985 to July 1992.
THEODORE ABAJIAN
Mr. Abajian was appointed Executive Vice President, Chief Financial Officer
in May 1998. Prior to joining Santa Barbara Restaurant Group, Inc. Mr. Abajian
served as the Chief Financial Officer of Star Buffet, Inc, since its formation
in July 1997. Mr. Abajian also served as a director of Stacey's Buffet, Inc.
from October 31, 1997, to February 4, 1998. Mr. Abajian has been the Vice
President and Controller of Summit Family Restaurants Inc. (the predecessor to
JBRI) since 1994. From 1983 to 1994, he held several positions with Family
Restaurants, Inc., including Director of Financial Analysis, Planning and
Reporting for the family restaurant division, which included approximately 350
Carrows and Coco's restaurants.
CARL A. STRUNK
Mr. Strunk was appointed Executive Vice President, Finance in December
1997. Mr. Strunk also serves as Executive Vice President, Chief Financial
Officer for CKE Restaurants, Inc. and Executive Vice President and Chief
Financial Officer of American National Financial, Inc. Mr. Strunk served as
Executive Vice President, Chief Financial Officer of Fidelity National
Financial, Inc. from 1992 to 1997 and has been with Fidelity National Financial,
Inc. in some capacity since 1992. Mr. Strunk previously served as President of
Land Resources Corporation from 1986 to 1991. Mr. Strunk is a Certified Public
Accountant. Mr. Strunk is a member of the Board of Directors of Micro General
Corporation and American National Financial, Inc.
ANDREW D. SIMONS
Mr. Simons was appointed Senior Vice President, General Counsel and
Secretary of the Company in July 1999. From April 1996 to June 1999 Mr. Simons
was Vice President, General Counsel and Secretary of Circon Corporation. From
July 1992 through April 1996 Mr. Simons worked for Tokos Medical Corporation in
various capacities including Vice President, General Counsel and Secretary.
Prior to 1992, Mr. Simons was an associate at the law firm of Gibson, Dunn &
Crutcher.
GARY R. NELSON
Mr. Nelson served as Chief Financial Officer of the Company from August
1997 through May 1998 and continues to hold the position of treasurer. Mr.
Nelson also serves as the Senior Vice President of Mergers and Acquisitions for
Fidelity National Title Insurance Company and has since 1992. Mr. Nelson
previously served as the Senior Vice President, Chief Financial Officer and
Treasurer of Fidelity National Financial, Inc. from 1988 to 1991. Mr. Nelson is
a Certified Public Accountant.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF PROPOSAL NO. 1,
THE ELECTION OF ALL OF THE ABOVE NOMINEES.
6
<PAGE> 9
PROPOSAL NO. 2 -- APPROVAL OF AN AMENDMENT TO THE
SANTA BARBARA RESTAURANT GROUP, INC.
1998 STOCK OPTION PLAN AND RATIFICATION OF STOCK OPTION GRANTS
PLAN AMENDMENT
The Board of Directors of the Company adopted and the stockholders
approved, the Company's 1998 Stock Option Plan (the "1998 Plan"). The Plan
enhances the Company's ability to retain the services of existing executive
personnel, key employees and nonemployee directors of the Company or its
affiliates, to attract and retain competent new executive personnel and key
employees, to provide the incentive to all such personnel, employees and
nonemployee directors to devote their utmost effort and skill to advancement and
betterment of the Company.
The Board of Directors, or a committee consisting of two or more members of
the Board of Directors, will administer the Plan (the "Administrator"). The
Administrator will have the full power and authority to interpret the Plan,
select the recipients of options and Purchase Rights, determine and authorize
the type, terms and conditions of, including vesting provisions, and the number
of shares subject to, grants under the Plan, and adopt, amend and rescind rules
relating to the Plan.
The Plan currently authorizes the grant of options up to a maximum of
1,000,000 shares of Common Stock. Option grants have been made in excess of the
1,000,000 share limit. These excess option grants were conditioned upon the
ratification and approval of the Company's shareholders. If approved by the
Company's shareholders, the Plan will be amended only to increase the maximum
number of shares available under the Plan from 1,000,0000 shares to 2,000,000
shares. This increase in the number of shares available under the Plan will
cover the options that have already been granted and that are discussed below.
GRANTS TO BE RATIFIED
The number of shares of the Company's common stock issuable pursuant to
option grants under the Plan for which the Company's Board of Directors is
seeking ratification by the Company's shareholders is 600,000. Options were
granted to the following persons for the following number of shares:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ------------
<S> <C>
William P. Foley, II........................................ 300,000(1)
Chairman of the Board
Andrew F. Puzder............................................ 150,000(1)
Chief Executive Officer
Burt Sugarman............................................... 20,000(2)
Director
Charles Rolles.............................................. 20,000(2)
Director
Nicholas Caddeo............................................. 15,000(1)
Chief Operating Officer
Ted Abajian................................................. 10,000(1)
Executive Vice President and Chief Financial Officer
Andrew D. Simons............................................ 10,000(2)
Senior Vice President, General Counsel and Secretary
Non-Executive Officer Employee Group (11 persons)........... 75,000(1)
</TABLE>
- ---------------
(1) Based on the Closing Price of the Company's Common Stock on May 13, 1999,
the grant date, which was $2.94.
(2) Based on the Closing Price of the Company's Common Stock on June 23, 1999,
the grant date, which was $2.56.
7
<PAGE> 10
VOTE REQUIRED FOR APPROVAL OF AMENDMENT TO THE PLAN AND RATIFICATION OF GRANTS
MADE THEREUNDER
Approval of a majority of the shares of Common Stock present or represented
by proxy and entitled to vote at the Annual Meeting is required to approve the
amendment to the Plan and ratify the grants made thereunder. Broker non-votes
with respect to this matter will not be deemed to have been cast either "for" or
"against" the matter, although they will be counted in determining if a quorum
is present. Proxies marked "abstain" or a vote to abstain by a stockholder
present in person at the Annual Meeting will have the same legal effect as a
vote "against" the matter because it represents a share present or represented
at the meeting and entitled to vote, thereby increasing the number of
affirmative votes required to approve this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF PROPOSAL NO. 2,
THE AMENDMENT TO THE PLAN AND RATIFICATION OF GRANTS MADE UNDER THE PLAN ON MAY
13, 1999.
PROPOSAL NO. 3 -- AMENDING THE RESTATED CERTIFICATE OF INCORPORATION
TO AUTHORIZE THE ISSUANCE OF PREFERRED STOCK
The Board of Directors has directed that there be submitted to the
stockholders of the Company at the Annual Meeting a proposed amendment to the
Article FOURTH of the Company's Restated Certificate of Incorporation. The
proposed amendment can be used to make a change in control of the Company more
difficult.
Currently, the Article FOURTH authorizes the Company only to issue up to
50,000,000 shares of Common Stock, $.08 par value per share. The proposed
amendment, which was unanimously approved by the Company's Board of Directors,
will authorize the issuance of 2,000,000 shares of Preferred Stock. The Board of
Directors shall be authorized to provide for the issuance of the Preferred Stock
in one or more series, to establish the number of shares to be included in each
such series and to fix the designations, powers, preferences and relative,
participating, optional or other special rights of such series, along with any
other qualifications, limitations and restrictions thereon. There are no
pre-emptive rights to purchase or otherwise acquire any Preferred Stock that may
be issued in the future.
It is not possible to state the effects of the proposed amendment upon the
rights of holders of Common Stock until the Board of Directors determines the
respective rights, including any dividend rates, conversion prices or voting
rights, of the holders of one or more series of Preferred Stock. The effects of
such issuance could include, however, (i) reduction of the amount otherwise
available for payment on dividends on Common Stock, (ii) restrictions on
dividends on Common Stock, (iii) dilution of the voting power of Common Stock,
and (iv) restrictions on the rights of holders of Common Stock to share in the
Company's assets on liquidation until satisfaction of any liquidation preference
granted to the holders of such designated series of Preferred Stock.
The proposed amendment will give the Company increased financial
flexibility as it will allow shares of Preferred Stock to be available for
issuance from time to time as determined by the Board for any proper corporate
purpose. Such purpose could include, without limitation, issuance for cash as a
means of obtaining capital for use by the Company, or issuance as part or all of
the consideration required to be paid by the Company for acquisitions of other
businesses or properties.
Shares of voting or convertible Preferred Stock could be issued, or rights
to purchase such shares could be issued, to create voting impediments or to
frustrate persons seeking to effect a takeover or otherwise gain control of the
Company. The ability of the Board of Directors to issue Preferred Stock, with
rights and preferences it deems advisable, could discourage an attempt by a
party to acquire control of the Company by tender offer or other means. Such
issuances could therefore deprive stockholders of benefits that could result
from such an attempt, such as the realization of a premium over the market price
for their shares in a tender offer or the temporary increase in market price
that such an attempt could cause. Moreover, the issuance of Preferred Stock to
persons friendly to the Board of Directors could make it more difficult to
remove incumbent managers and directors from office even if such change were to
be favorable to stockholders generally.
While the amendment may have anti-takeover ramifications, the Board of
Directors believes that financial flexibility offered by the amendment outweighs
any disadvantages. To the extent that it may have
8
<PAGE> 11
anti-takeover effects, the amendment may encourage persons seeking to acquire
the Company to negotiate directly with the Board of Directors, enabling the
Board to consider the proposed transaction in a manner that best serves the
stockholders' interests.
The affirmative vote of the holders of the majority of the outstanding
shares of Common Stock is required to authorize the proposed amendment regarding
the issuance of Preferred Stock.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" PROPOSAL NO.
3, THE AMENDMENT TO THE COMPANY'S RESTATED ARTICLES OF INCORPORATION TO
AUTHORIZE THE ISSUANCE OF 2,000,000 SHARES OF PREFERRED STOCK.
PROPOSAL NO. 4 -- APPROVAL OF CONVERSION OF PARENT NOTES
TO BE ISSUED TO STOCKHOLDERS OF LA SALSA HOLDING COMPANY, INC. UNDER
AN AGREEMENT AND PLAN OF MERGER
The Board of Directors has directed that there be submitted to the
stockholders of the Company at the Annual Meeting a proposal for the approval of
the conversion into the Company's Common Stock of the outstanding principal of
certain subordinated promissory notes (the "Parent Notes") to be issued to the
stockholders of La Salsa Holding Co., Inc., a Delaware corporation ("La Salsa"),
pursuant to that certain Agreement and Plan of Merger dated as of June 8, 1999
by and among the Company, La Salsa and La Salsa Merger, Inc., a Delaware
corporation ("Sub") and wholly-owned subsidiary of the Company (the
"Agreement"). Pursuant to the Agreement, Sub will be merged with and into La
Salsa (the "Merger") and La Salsa will continue as the surviving corporation in
the Merger. As a result, La Salsa will become a wholly-owned subsidiary of the
Company.
By virtue of the Merger, all of the outstanding equity securities of La
Salsa (the "La Salsa Shares") will be converted into (i) three million
(3,000,000) shares of fully paid and nonassessable Common Stock, together with
cash in lieu of any fractional shares of Common Stock, (ii) Parent Notes in the
aggregate principal amount of Six Million Dollars $6,000,000, (iii) warrants to
purchase Two Hundred Fifty Thousand (250,000) shares of Common Stock at an
exercise price of $7.00 per share currently held by Fidelity National Financial,
Inc. ("FNF") ("$7.00 Warrants"), and (iv) warrants to purchase Two Hundred Fifty
Thousand (250,000) shares of Common Stock at an exercise price of $7.50 per
share currently held by FNF ("$7.50 Warrant").
The issuance of the Common Stock and the issuance of Common Stock upon
conversion of the Parent Notes will result in an aggregate issuance of
approximately 29.5% of the number of shares of Common Stock outstanding before
such issuance; therefore, pursuant to the Marketplace Rules of the Nasdaq
National Market, an affirmative vote of the holders of the majority of the
outstanding shares of the Common Stock is necessary to approve the conversion of
the principal amount of the Parent Notes to Common Stock. Upon the approval of
the Company's stockholders, the principal amount of the Parent Notes will
automatically convert into Common Stock at a conversion price of $4.00 per
share.
Because of the time requirements for a stockholders' meeting and the desire
by the Company to consummate the Merger, it was determined to proceed with the
Agreement, and the Company covenanted in the Agreement to include in this proxy
statement proposal No. 4 to approve the conversion of the Parent Notes to Common
Stock in accordance with the terms of the Parent Notes. If the Company's
stockholders approve proposal No. 4, the Parent Notes will be automatically
converted into Common Stock, of which the Company covenanted in the Agreement to
use its best efforts to list on the Nasdaq National Market (along with the
Common Stock issuable upon the exercise of the $7.00 Warrants and $7.50
Warrants). If the stockholders vote against Proposal No. 4, all of the principal
and accrued and unpaid interest, together with a 25% premium of such amount,
shall become due and payable within 30 days following the date of the Annual
Meeting. There is no trading market for the Parent Notes. See Appendix A, "Form
of Convertible Subordinated Note" attached hereto for a description of the
rights, preferences and restrictions, including conversion ratio, of the Parent
Notes.
In order to (i) further enhance the equity interests of the Company and the
stockholders of the Company and (ii) avoid the need to pay the principal sums of
the Parent Notes and the interest due thereto, the Board
9
<PAGE> 12
of Directors hereby requests that stockholders approve the conversion of the
Parent Notes to Common Stock in accordance with the terms of the Parent Notes.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" PROPOSAL NO.
4, THE APPROVAL OF THE CONVERSION OF PARENT NOTES TO COMMON STOCK IN ACCORDANCE
WITH THE TERMS OF THE PARENT NOTES.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the
compensation of Andrew F. Puzder, the Company's Chief Executive Officer and a
Director for each of the three years in the period ended December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------------
LONG TERM
OTHER COMPENSATION
ANNUAL AWARDS- ALL OTHER
BONUS COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) ($) ($) (#) ($)
--------------------------- ---- --------- ----- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Andrew F. Puzder(1)................ 1998 0 0 0 0 $ 0
Chief Executive Officer 1997 0 0 0 0 0
1996 N/A N/A N/A N/A N/A
</TABLE>
- ---------------
(1) Became a Director in July 1997 and Chief Executive Officer in August 1997.
OPTIONS GRANTED IN FISCAL YEAR 1998
During the fiscal year ended December 31, 1998, non-qualified stock options
representing 110,000 shares were granted to Andrew F. Puzder at an exercise
price of $4.875 per share. Said options vest at the end of one year from
issuance. In addition, on September 1, 1998, non-qualified stock options
representing a total of 200,000 shares were repriced at $4.875 per share (see
Ten-Year Option Repricings).
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF
SHARES GRANTED TO STOCK PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM
OPTIONS IN FISCAL PRICE PER EXPIRATION ------------------------
GRANTED YEAR 1998 SHARE DATE 5% 10%
---------- ------------ --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Andrew F. Puzder......... 100,000 5.0% $4.875 8/31/08 $306,586 $776,949
10,000 0.5% $4.875 8/31/08 30,659 77,695
20,000 1.0% $4.875 8/26/07 53,653 132,100
30,000 1.5% $4.875 8/26/07 80,480 198,150
50,000 2.5% $4.875 8/26/07 134,134 330,250
100,000 5.0% $4.875 2/26/08 287,086 717,004
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 1998 AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth the number of options, both exercisable and
unexercisable, held by each of the executive officers of the Company as of
December 31, 1998. There were no in-the-money options.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1998 DECEMBER 31, 1998
ACQUIRED ON VALUE ---------------------------- ----------------------------
EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Andrew F. Puzder..... 0 0 100,000 210,000 $ 0 $ 0
</TABLE>
10
<PAGE> 13
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
LENGTH OF
NUMBER MARKET ORIGINAL
OF PRICE EXERCISE OPTION TERM
SECURITIES OF STOCK PRICE NEW REMAINING
UNDERLYING AT TIME OF AT TIME OF EXERCISE AT DATE OF
OPTIONS REPRICING REPRICING PRICE REPRICING
NAME DATE REPRICED ($) ($) ($) ($)
---- ------ ------------ ---------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Nicholas Caddeo........... 9/1/98 25,000 4.875 8.625 4.875 9 yrs
Chief Operating Officer 9/1/98 7,500 4.875 5.750 4.875 9 yrs
William P. Foley, II...... 9/1/98 80,000 4.875 8.625 4.875 9 yrs
Chairman of the Board 9/1/98 50,000 4.875 8.625 4.875 9 yrs
Director 9/1/98 20,000 4.875 8.625 4.875 9 yrs
9/1/98 200,000 4.875 8.250 4.875 9 yrs 6 mos
T. Anthony Gregory........ 9/1/98 50,000 4.875 7.000 4.875 6 yrs 8 mos
Director 9/1/98 20,000 4.875 8.625 4.875 9 yrs
9/1/98 10,000 4.875 8.250 4.875 9 yrs 6 mos
Bruce H. Haglund.......... 9/1/98 50,000 4.875 7.000 4.875 6 yrs 8 mos
Director 9/1/98 10,000 4.875 5.750 4.875 6 yrs 5
9/1/98 20,000 4.875 8.625 4.875 9 yrs
9/1/98 10,000 4.875 8.250 4.875 9 yrs 6 mos
Frank P. Willey........... 9/1/98 20,000 4.875 8.625 4.875 9 yrs
Director 9/1/98 50,000 4.875 8.625 4.875 9 yrs
9/1/98 10,000 4.875 8.250 4.875 9 yrs 6 mos
M'Liss Jones Kane......... 9/1/98 10,000 4.875 8.625 4.875 9 yrs
Assistant Secretary 9/1/98 25,000 4.875 8.250 4.875 9 yrs 6 mos
Gary R. Nelson............ 9/1/98 50,000 4.875 8.625 4.875 9 yrs
Treasurer 9/1/98 25,000 4.875 8.250 4.875 9 yrs 6 mos
Andrew F. Puzder.......... 9/1/98 20,000 4.875 8.625 4.875 9 yrs
Chief Executive Officer 9/1/98 30,000 4.875 8.625 4.875 9 yrs
Director 9/1/98 50,000 4.875 8.625 4.875 9 yrs
9/1/98 100,000 4.875 8.250 4.875 9 yrs 6 mos
Carl A. Strunk............ 9/1/98 50,000 4.875 10.375 4.875 9 yrs 4 mos
Executive Vice President 9/1/98 25,000 4.875 8.250 4.875 9 yrs 6 mos
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has not entered into any employment agreements.
COMPENSATION COMMITTEE REPORT ON OPTION REPRICING
On September 1, 1998, the Compensation Committee approved the repricing of
1,017,500 options granted pursuant to the Company's existing stock option plans
for non-employee directors and executive officers. Such options had exercise
prices ranging from $5.75 to $10.375. The repricing was effected by exchanging
new options with an exercise price of $4.875 per share, and the same vesting
period as the original option, for the options then held by such optionees.
The Compensation Committee approved the repricing because it believes that
equity interests are a significant factor in the Company's ability to retain
directors, executive officers and employees, by providing an incentive to all
such personnel to devote their utmost effort and skill to the advancement and
betterment of the company by permitting them to participate in the success and
increased value of the Company. Following the
11
<PAGE> 14
grant of such options, however, the price per share of the Company's Common
Stock declined as a result of unforeseen market factors. The Compensation
Committee believed, that as a result of this relatively sudden decline, the
options so granted would not have the desired motivational effect on the
optionees. Accordingly, the Compensation Committee approved the repricing as a
means of ensuring that such optionees have a meaningful equity interest in the
Company.
COMPENSATION OF THE BOARD OF DIRECTORS
The members of the Board of Directors who are not employees receive $1,000
for their attendance in person at Board meetings and $500 if they are present at
a Board meeting telephonically. Members of the Board of Directors received
nonstatutory stock options in the past in recognition of their service as
members of the Board of Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1998, the members of the Compensation Committee of the
Company's Board of Directors were Messrs. Willey (Chairman), Haglund and
Gregory. None of the Compensation Committee members were officers, former
officers or employees of the Company during fiscal 1997. Mr. Willey serves as
President and a Director of Fidelity National Financial, Inc. and a Director of
CKE Restaurants, Inc.
COMPENSATION COMMITTEE REPORT
The Committee, comprised of three non-employee directors, is responsible
for administering the executive compensation policies, administering the various
management incentive programs (including option plans), and making
recommendations to the Board of Directors with respect to these policies and
programs. In addition, the Committee makes annual recommendations to the Board
of Directors concerning the compensation paid to the Chief Executive Officer.
Set forth below is a report submitted by the Committee addressing compensation
policies for fiscal 1998 as they affected the Executive Officers.
Compensation Policies Towards Executive Officers. The Committee believes
that the most effective executive compensation program is one that provides
incentives to achieve both current and long-term strategic management goals,
with the ultimate objective of enhancing stockholder value. With respect to
equity-based compensation, the Committee believes that an integral part of the
Company's compensation program is the ownership and retention of the Company's
Common Stock by its Executive Officers. By providing Executive Officers with a
meaningful stake in the Company, the value of which is dependent on the
Company's long-term success, a commonality of interests between the Company's
Executive Officers and its stockholders is fostered.
Relationship of Performance to Compensation. Compensation that may be
earned by the Executive Officer under the current management team consists
primarily of stock options. The Committee, in its discretion, may apply
different factors, particularly different measures of company performance, in
setting executive compensation for future fiscal years, but all compensation
decisions will be designed to further the general compensation policies
indicated above. With regard to the Company's performance, the measures used for
margin, quality of service, meeting strategic goals within the current economic
climate and industry environment, scope of responsibilities, expansion by
acquisition or otherwise, profit retention, and profitability, all of which
combine to enhance stockholder value.
Stock Options. Stock option grants motivate Executive Officers to manage
the business to improve long-term Company performance and align the interests of
Executive Officers with stockholder value. Customarily, option grants are made
with exercise prices equal to the fair market value of the shares on the grant
date and will be of no value unless the market price of the Company's shares of
Common Stock appreciates, thereby aligning a substantial part of the Executive
Officer's compensation package with the return realized by the stockholders.
Options generally vest in equal installments over a period of time, contingent
upon the Executive Officer's continued employment with the Company. Accordingly,
an option will provide a return to the Executive Officer only if the Executive
Officer remains employed by the Company and the market price of the
12
<PAGE> 15
underlying shares appreciates over the option term. The size of an option grant
is designed to create a meaningful opportunity for stock ownership and is based
upon the individual's current position with the Company, internal comparability
with option grants made to other Company executives and the individual's
potential for future responsibility and promotion over the option term.
Chief Executive Officer Compensation. Andrew F. Puzder became the Company's
Chief Executive Officer in August 1997. Mr. Puzder did not receive any cash
compensation during fiscal 1997 or fiscal 1998 for such position. Mr. Puzder
received 100,000 stock options in 1997 and an additional 210,000 stock options
in 1998 to reward him for the Company's performance in 1997 and 1998 and to
incentivize him to excel in 1999.
Corporate Deduction for Compensation. Section 162(m) of the Internal
Revenue Code generally limits to $1.0 million the corporate deduction for
compensation paid to certain executive officers, unless certain requirements are
met. At this time, the Company's deduction for officer compensation is not
limited by the provisions of Section 162(m). The Committee intends to monitor
regulations issued pursuant to Section 162(m) and to take such actions with
respect to the executive compensation program as are reasonably necessary to
preserve the corporate tax deduction for executive compensation paid.
The report of the Compensation Committee of the Board of Directors shall
not be deemed incorporated by reference into any previous filing by the Company
under the Securities Act of 1933 ("Securities Act") or under the Securities
Exchange Act of 1934 ("Exchange Act"), that incorporates future Securities Act
or Exchange Act filings in whole or in part by reference.
Dated: May 12, 1999 Compensation Committee
T. Anthony Gregory
Bruce H. Haglund
Frank P. Willey
13
<PAGE> 16
PERFORMANCE GRAPH
Set forth below is a graph comparing cumulative total stockholder return on
the Company's common stock against the cumulative total return on the S & P 500
Index and against the cumulative total return of a peer group index, the
Restaurants 500 Index for the five-year period ending December 31, 1998. The
peer group comparison has been weighted based on the Company's stock market
capitalization. The graph assumes an initial investment of $100.00 on January 1,
1994, with dividends reinvested over the periods indicated.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
OF COMPANY, INDUSTRY INDEX AND BROAD MARKET
<TABLE>
<CAPTION>
SANTA BARBARA RESTAURANT
GROUP S&P 500 INDEX RESTAURANTS 500
------------------------ ------------- ---------------
<S> <C> <C> <C>
'Dec 93' 100.00 100.00 100.00
'Dec 94' 93.94 101.32 99.69
'Dec 95' 118.18 139.40 149.51
'Dec 96' 89.39 171.40 147.72
'Dec 97' 131.82 228.59 158.61
'Dec 98' 46.21 293.91 248.57
</TABLE>
ASSUMES $100 INVESTED ON JANUARY 1, 1994
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DECEMBER 31, 1998
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors has a standing Compensation Committee. The Board
does not have a nominating or audit committee or other committee performing
similar functions. The Compensation Committee, whose current members are Messrs.
Willey (Chairman), Haglund and Gregory, considers the hiring and election of
corporate officers, salary and incentive compensation policies for officers and
directors, and the granting of stock options to employees.
During fiscal 1998, The Board of Directors held four meetings and the
Compensation Committee did not hold any meetings in 1998. During fiscal 1998, no
director attended fewer than 75% of the aggregate meetings of the Board of
Directors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
General
The Company believes that the transactions hereunder were the result of
arm's-length negotiations, and the terms of each such transaction was no less
favorable to the Company as would have been available from an
14
<PAGE> 17
unaffiliated third party. The transactions discussed below were negotiated
either (i) before the parties became affiliates; (ii) after the parties ceased
to be affiliates; or (iii) with a majority of the disinterested members of the
Company's Board of Directors. Furthermore, it is the policy of the Company that
a majority of the disinterested members of the Company's Board of Directors must
approve related-party transactions.
CKE Restaurants, Inc.
The Company and CKE share certain officers and directors. In September
1998, the Company purchased JBFRI and JBPC from CKE in exchange for
approximately 1.7 million shares or 10.9% of the Company's outstanding common
stock at December 31, 1998. In December 1998, the Company acquired 274,900
shares or less than 1% of CKE's common stock from Fidelity.
In conjunction with the acquisitions of Timber Lodge and JB's, the Company
entered into an agreement with CKE to receive certain general and administrative
support. As of December 31, 1998, the Company has accrued $173,000 for such
services provided during fiscal 1998. Such amount represents the cost to CKE of
providing such services.
During May 1995, the Company reached an agreement with CKE pursuant to
which CKE agreed to convert a minimum of 40 CKE-owned Carl's Jr. restaurants per
year into Carl's Jr./Green Burrito dual-concept stores over a five-year period
commencing July 15, 1995. In February 1997, the Company and CKE modified the
agreement to provide for the conversion of a minimum of 60 Carl's Jr.
restaurants per year to Carl's Jr./Green Burrito dual-concept stores. CKE also
agreed to allow its franchisees to convert their restaurants into Carl's
Jr./Green Burrito dual-concept stores. In November 1998, the Company and CKE
modified the agreement as follows: CKE will convert 45 restaurants in both 1999
and 2000, 40 in 2001, and 36 in 2002 for a total of 328 Carl's Jr./Green Burrito
dual brand restaurants at the expiration of the agreement on December 31, 2002.
Additionally, the amended agreement expands the units available to satisfy CKE's
development obligations by removing limitations on the number of franchised
Carl's Jr. restaurants which can be converted and by including Hardee's
restaurants and Hardee's franchisees.
The initial term of the franchise agreements for CKE-owned locations is 15
years with a 10-year renewal period. The franchise agreements also allow for an
early termination on a per-store basis if royalties payable to the Company for
such location are less than an average of $250 per month for any calendar year.
As of December 31, 1998, there were 176 Carl's Jr./Green Burrito restaurants in
operation in California, Arizona, Oregon, Nevada, Oklahoma and Kansas. For the
fiscal years ended December 31, 1998, 1997 and 1996, the Company recognized
franchise revenues generated from CKE dual-concept franchise stores of
approximately $990,000, $942,000 and $648,000, respectively. The Company had
receivable balances at December 31, 1998 and 1997 of $89,000 and $29,000,
respectively related to royalty and franchise fee payments due from CKE.
The Company leases approximately 650 square feet of office space from CKE
on a month to month basis at the rate of approximately $2,500 per month.
Fidelity National Financial, Inc.
The Company and Fidelity share certain officers and directors. In 1997,
Fidelity acquired 1,000,000 shares of the Company's common stock and 3,470,000
warrants to acquire the Company's common stock. In September 1998, Fidelity
exercised 1,000,000 of its $5.00 common stock purchase warrants resulting in net
proceeds to the Company of $5,000,000. In December 1998, the Company and
Fidelity completed a Share Exchange. As result of these transactions, Fidelity
owns approximately 4.7 million shares or 31% of the Company's common stock at
December 31, 1998, and holds warrants to acquire an additional 2,470,000 shares
of the Company's common stock.
Rally's Hamburgers, Inc.
The Company and Rally's share certain officers and directors. The Company
presently owns 2,408,874 shares or 8.2% of Rally's common stock . On January 29,
1999, Rally's announced the signing of a merger agreement with Checkers Drive-In
Restaurants, Inc. ("Checkers"). The agreement provides that each share
15
<PAGE> 18
of Rally's stock will be exchanged for 1.99 shares of Checkers stock. The
Checkers common stock that Rally's owns (approximately 26% of Checkers common
stock as of December 31, 1998) will be retired following this merger.
Payments to Director for Professional Services
Bruce Haglund, a director of the Company, provided legal services to the
Company valued at $0, $55,261 and $48,467 during 1998, 1997, and 1996,
respectively.
INVESTMENTS IN PARTNERSHIPS
None.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
None.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Rules adopted by the Securities and Exchange Commission ("SEC") under
Section 16(a) of the Exchange Act require the Company's officers and directors,
and persons who own more than 10% of the issued and outstanding shares of the
Company's common stock, to file reports of their ownership, and changes in
ownership, of such securities with the SEC on SEC Forms 3, 4 or 5, as
appropriate. Officers, directors and greater-than-ten-percent stockholders are
required by the SEC's regulations to furnish the Company with copies of all
forms they file pursuant to Section 16(a).
Based solely upon a review of Forms 3, 4 and 5 and amendments thereto
furnished to the Company during its most recent fiscal year end, and any written
representations provided to it, the Company is advised that all filings were
timely and correctly made.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP are the Company's auditors of record and have audited
the Company's annual financial statements from 1996 through December 31, 1998.
The Audit Committee of the Board of Directors has not made a recommendation with
respect to retention of auditors by the Company for year ending December 30,
1999. Representatives of KPMG Peat Marwick LLP are expected to be present at the
Meeting with the opportunity to make a statement, if they desire to do so, and
are expected to be available to respond to appropriate questions.
OTHER MATTERS
The Company knows of no other matters to be submitted at the Meeting. If
any other matters properly come before the Meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Board of Directors may recommend.
16
<PAGE> 19
AVAILABLE INFORMATION
The Company files Annual Reports on Form 10-K with the Securities and
Exchange Commission. A copy of the Annual Report on Form 10-K for the fiscal
year ended December 31, 1998 (except for certain exhibits thereto), may be
obtained, free of charge, upon written request by any stockholder to Santa
Barbara Restaurant Group, Inc., 3916 State Street, Suite 300, Santa Barbara,
California 93105, Attention: Investor Relations. Copies of all exhibits to the
Annual Report on Form 10-K are available upon a similar request, subject to
payment of a $.15 per page charge to reimburse the Company for its expenses in
supplying any exhibit.
By Order of the Board of Directors
Andrew D. Simons
Corporate Secretary
Dated: July 15, 1999
17
<PAGE> 20
PROXY
SANTA BARBARA RESTAURANT GROUP, INC.
3916 STATE STREET, SANTA BARBARA, CALIFORNIA 93105
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints William P. Foley, II and Andrew F. Puzder as
proxies, each with the power to appoint his substitute, and hereby authorizes
each of them to represent and to vote, as designated below, all shares of common
stock of Santa Barbara Restaurant Group, Inc. held of record by the undersigned
on June 25, 1999 at the Annual Meeting of Stockholders to be held on ,
1999, or any adjournment thereof.
1. PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
<TABLE>
<S> <C>
[ ] FOR the nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as marked to the contrary below) for the nominees listed below
</TABLE>
(INSTRUCTION: To withhold authority to vote for an individual nominee, strike a
line through the nominee's name below.)
William P. Foley, II Frank P. Willey C. Thomas Thompson Dermot F. Rowland Bert
Sugarman Charles Rolles Andrew F. Puzder
2. PROPOSAL NO. 2 -- APPROVAL OF AMENDMENT TO THE COMPANY'S 1998 STOCK OPTION
PLAN AND RATIFICATION OF STOCK OPTION GRANTS UNDER THE PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL NO. 3 -- APPROVAL OF AMENDMENT TO RESTATED CERTIFICATE OF
INCORPORATION AND AUTHORIZE ISSUANCE OF PREFERRED STOCK
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. PROPOSAL NO. 4 -- APPROVAL OF CONVERSION OF PARENT NOTES TO BE ISSUED TO
LA SALSA HOLDING COMPANY, INC. UNDER AN AGREEMENT AND PLAN OF MERGER
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting thereof.
<PAGE> 21
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE COMPANY NOMINEES
AND FOR ALL PROPOSALS.
DATED: , 1999
---------------------------
(Signature)
---------------------------
(Signature)
Please sign exaction as
name(s) appear below. When
shares are held by more
than one owner, all should
sign. When signing as
attorney, executor,
administrator, trustee, or
guardian, please give full
title as such. If a
corporation, please sign in
full corporate name by
President or authorized
officer. If a partnership,
please sign in partnership
name by authorized person.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER.
