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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 5, 1997
REGISTRATION NO. 333-23263
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
KOO KOO ROO, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 22-3132583
(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
11075 SANTA MONICA BOULEVARD, SUITE 225
LOS ANGELES, CALIFORNIA 90025
(310) 479-2080
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ROBERT F. KAUTZ
PRESIDENT AND CHIEF FINANCIAL OFFICER
11075 SANTA MONICA BOULEVARD, SUITE 225
LOS ANGELES, CALIFORNIA 90025
(310) 479-2080
(NAME, ADDRESS, INCLUDING ZIP CODE, TELEPHONE NUMBER, INCLUDING AREA CODE, OF
AGENT FOR SERVICE)
Copies to:
Ronald D. Garber, Esq. Anthony J. Richmond, Esq.
Koo Koo Roo, Inc. Latham & Watkins
11075 Santa Monica Boulevard, Suite 225 633 West Fifth Street, Suite 4000
Los Angeles, California 90025 Los Angeles, California 90071
(310) 479-2080 (213) 485-1234
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the same prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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PROSPECTUS
SUBJECT TO COMPLETION,
DATED MAY 5, 1997
10,300,000 SHARES*
KOO KOO ROO, INC.
COMMON STOCK
(Par Value $.01 per Share)
All of the shares of Common Stock, par value $.01 per share ("Common
Stock"), of Koo Koo Roo, Inc., a Delaware corporation (the "Company"), offered
hereby (the "Shares") are being offered by certain selling securityholders of
the Company (the "Selling Stockholders") as described more fully herein. The
Company will not receive any of the proceeds from the sale of the Shares offered
hereby. All expenses of this offering will be paid for by the Company except for
commissions, fees and discounts of any underwriters, brokers, dealers or agents
retained by the Selling Stockholders. The Common Stock is traded on the Nasdaq
National Market under the symbol "KKRO." On April 28, 1997, the last reported
sale price of the Common Stock on the Nasdaq National Market was $3.7188 per
share. Investors are urged to obtain current market data. See "Use of Proceeds,"
"Selling Stockholders" and "Plan of Distribution."
* The shares of Common Stock offered hereby includes the resale of such
presently indeterminate number of shares of Common Stock as shall be issued in
respect of: (i) all shares of Common Stock issuable upon conversion of or
otherwise in respect of 290,000 shares of the Registrant's 6% Adjustable
Convertible Preferred Stock, par value $.01 and liquidation preference $100 per
share (the "Series B Convertible Preferred Stock"), issued in a private
placement in February 1997 (the "1997 Private Placement"); (ii) all shares of
Common Stock issuable upon conversion of or otherwise in respect of 29,000
shares of Series B Convertible Preferred Stock issuable upon the exercise of
warrants (the "Series B Convertible Preferred Stock Warrants") issued in
connection with the foregoing private placement; (iii) all shares of Common
Stock issuable upon conversion of shares of Series B Convertible Preferred Stock
issuable, in lieu of cash, as dividends in respect of shares of Series B
Convertible Preferred Stock; (iv) 155,204 shares of Common Stock originally
issued in other private placement transactions; and (v) 520,000 shares of Common
Stock issuable upon exercise of outstanding options and warrants originally
issued in other private placement transactions. The number of shares of Common
Stock indicated to be issuable in connection with such transactions and offered
for resale hereby is an estimate based upon the market price of the Common Stock
set forth above, is subject to adjustment and could be materially less or more
than such estimated amount depending upon factors which cannot be predicted by
the Company at this time, including, among others, the future market price of
the Common Stock and the decisions by the holders of Series B Convertible
Preferred Stock as to when to convert such shares. If, however, the above-noted
market price of the Common Stock were used to determine the number of shares
issuable as of the first date on which the Series B Convertible Preferred Stock
may be converted, the Company would be obligated to issue a total of
approximately 9,600,000 shares of Common Stock if all 319,000 shares of Series B
Convertible Preferred Stock outstanding or issuable upon the exercise of Series
B Convertible Preferred Stock Warrants were converted on such dates. This
presentation is not intended to constitute a prediction as to the future market
price of the Common Stock or as to when holders will elect to convert shares of
Series B Convertible Preferred Stock into shares of Common Stock. See "Risk
Factors--Effect of Conversion of Series A Convertible Preferred Stock and Series
B Convertible Preferred Stock" and "Description of Capital Stock."
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. ACCORDINGLY, PROSPECTIVE INVESTORS SHOULD CAREFULLY
CONSIDER THE FACTORS SET FORTH UNDER THE CAPTION "RISK FACTORS" ON PAGE 8 OF
THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The Date of this Prospectus is , 1997
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AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities of the Commission located at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at the New York Regional
Office of the Commission, Seven World Trade Center, Suite 1300, New York, New
York 10048, and at the Chicago Regional Office of the Commission, Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60621-2511, or by
way of the Commission's Internet address, http://www.sec.gov. Copies of such
material can also be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Such reports and other information may also be inspected at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the registration of the shares of Common
Stock offered hereby. This Prospectus does not contain all of the information
set forth in the Registration Statement and the exhibits thereto, certain
portions of which have been omitted as permitted by the rules and regulations of
the Commission. Statements contained in this Prospectus or in any document
incorporated by reference herein as to the contents of any contract or other
documents referred to herein or therein are not necessarily complete and, in
each instance, reference is made to the copy of such documents filed as an
exhibit to the Registration Statement or such other documents, which may be
obtained from the Commission as indicated above upon payment of the fees
prescribed by the Commission. Each of such statements is qualified in its
entirety by such reference.
FORWARD LOOKING STATEMENTS
The forward looking statements and comments contained in this Prospectus
concerning, among other things, the prospects for the Company to grow rapidly
and attain profitable operations, are necessarily subject to risks and
uncertainties, some of which are significant in scope and nature. Actual results
will be dependent upon many factors the outcome of which cannot be predicted as
of the date of this Prospectus. The Company believes that it has summarized the
most significant of such factors of which it is aware under the caption "Risk
Factors." Accordingly, prospective investors should carefully consider such Risk
Factors, which are provided commencing on Page 8 of this Prospectus, in addition
to the other information provided herein and incorporated herein by reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission, are incorporated herein by reference: (i) the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996; (ii) the
Company's Amendment No. 1 to Form 10-K on Form 10-K/A for the fiscal year ended
December 31, 1996; (iii) the Company's Current Reports on Form 8-K dated
February 27, 1997, March 6, 1997 and April 10, 1997; (iv) the Company's Proxy
Statement dated March 14, 1997. In addition, each document filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date of this Prospectus and prior to termination of the offering of the
Shares shall be deemed to be incorporated by reference into this Prospectus and
to be a part hereof from the date such document is filed with the Commission.
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Any statement contained herein, or any document, all or a portion of which
is incorporated or deemed to be incorporated by reference herein, shall be
deemed to be modified or superseded for purposes of the Registration Statement
and this Prospectus to the extent that a statement contained herein, or in any
subsequently filed document that also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute part of the Registration Statement or this Prospectus. All
information appearing in this Prospectus is qualified in its entirety by the
information and financial statements (including notes thereto) appearing in the
documents incorporated herein by reference. This Prospectus incorporates
documents by reference which are not presented herein or delivered herewith.
These documents (other than exhibits thereto) are available without charge, upon
written or oral request by any person to whom this Prospectus has been
delivered, from Ronald D. Garber, General Counsel and Secretary, 11075 Santa
Monica Blvd., Suite 225, Los Angeles, California 90025, telephone number (310)
479-2080.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere or incorporated by
reference in this Prospectus. Without limiting the generality of the foregoing,
prospective investors should carefully consider the factors set forth under the
caption "Risk Factors."
THE COMPANY
Koo Koo Roo, Inc. (the "Company") operates restaurants in the emerging food
service category of fresh, convenient meals. The restaurants feature the
Company's proprietary Original Skinless Flame-Broiled Chicken/TM/, fresh oven-
roasted hand-carved turkey, country herb rotisserie chicken, made to order
tossed salads, specialty sandwiches on fresh baked rolls, a signature vegetable
soup and more than 23 side dishes including hand-mashed potatoes, stuffing,
steamed green beans and other vegetables, rices and grains, all prepared fresh
in small batches on-site throughout the day. As of March 31, 1997, the Company
operated 28 Koo Koo Roo restaurants.
The Company's restaurants are designed to appeal to consumers who look for
good tasting, freshly prepared food, and who also appreciate menu items that are
wholesome and healthy. The products are easy to understand, high in quality and
generally low in fat, calories and cholesterol, without the negative connotation
or taste of "health food." The sights and smells of fresh food preparation,
such as turkey carving and salad tossing, are displayed in glass enclosed
stations featuring "chefs" in restaurant whites and toques.
Over the past several years, executive management, together with the
Company's corporate chef and professional designers, developed the layout, menu
and appearance of the current prototype store, referred to as the Koo Koo Roo
California Kitchen/TM/ concept. The performance and continuing improvement of
this concept led management to plan for a rapid expansion starting in 1995 and
to focus on Company ownership or joint venture relationships rather than
franchising. The Company is presently emphasizing growth through the development
of additional Koo Koo Roo California Kitchen/TM/ stores which will be either
owned and operated by the Company or owned in partnership with domestic and
international joint venture partners. The Company intends to act
opportunistically to establish additional joint venture arrangements and make
restaurant acquisitions and may also grow through the acquisition of
complementary businesses. Although the focus in 1997 will be on Company-owned
restaurants, the Company may pursue additional joint ventures or franchising in
certain markets.
The Company also owns 90% of the outstanding capital stock of Color Me
Mine, Inc. ("Color Me Mine"), a chain of paint-your-own ceramics studios. As of
March 31, 1997, there were nine Company-owned Color Me Mine studios, three
franchised studios and four joint venture studios, open and operating.
The Company's principal executive offices are located at 11075 Santa Monica
Boulevard, Suite 225, Los Angeles, California 90025 and its telephone number is
(310) 479-2080.
RECENT DEVELOPMENTS
On February 27, 1997, the Company completed a private placement transaction
in which the Company received gross proceeds of $29.0 million in connection with
the issuance of 290,000 shares of its Series B Convertible Preferred Stock. In
connection with the private placement, the Company also agreed to issue warrants
to purchase 29,000 shares of Series B Convertible Preferred Stock at $100 per
share. The number of shares of Common Stock issuable upon conversion of the
Series B Convertible Preferred Stock, including the shares of Series B
Convertible Preferred Stock issuable upon exercise of the Series B Convertible
Preferred Stock Warrants, is subject to adjustment and will depend upon factors
which cannot be predicted
4
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by the Company at this time including, among other things, the future market
price of the Common Stock and the decisions by holders of shares of Series B
Convertible Preferred Stock as to when to convert such shares. See "Risk
Factors--Effect of Conversion of Series A Convertible Preferred Stock and Series
B Convertible Preferred Stock" and "Description of Capital Stock."
On March 21, 1997, the Company entered into a purchase agreement to
acquire, out of bankruptcy, 14 Hamburger Hamlet restaurants for total
consideration consisting of $9.70 million in cash and 150,000 restricted shares
of Common Stock plus the assumption of $250,000 of debt as well as the
assumption of the related real property leases. Ten of the fourteen restaurants
are located in California and the remaining four are located in the Washington,
D.C. Beltway area. The Company presently expects to finance the acquisition
either with cash on hand or borrowings under a debt package which is currently
being negotiated. No assurance can be given, however, that the acquisition of
the Hamburger Hamlet restaurants will be consummated. See "Risk Factors--
Proposed Expansion; Need for Additional Financing," "--Management of Growth" and
"Recent Developments."
On April 10, 1997, the Company's Board of Directors approved a plan for the
repurchase of up to 1.0 million shares of the Company's Common Stock. The
Company cannot estimate the market price per share at which shares of Common
Stock would be repurchased, if any. However, if the Company repurchased all 1.0
million shares of Common Stock at the price per share set forth on the cover
page of this Prospectus, the aggregate purchase price for such repurchases would
be approximately $3.2 million. The Company expects to finance the repurchase of
shares of Common Stock, if any, through working capital.
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THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Common Stock Offered by the
Selling Stockholders (estimate).............. 10,300,000 shares (1)
Shares of Common Stock Outstanding
Prior to the Offering........................ 16,615,459 shares (2)
Use of Proceeds................................ The proceeds from the sale of
the shares of Common Stock
offered hereby are solely for
the account of the Selling
Stockholders. Accordingly, the
Company will receive none of
the proceeds from sales
thereof. See "Use of
Proceeds."
Nasdaq National Market Common Stock Symbol..... KKRO
</TABLE>
(1) As set forth in the text on the cover of this Prospectus, this offering
includes the resale of such presently indeterminate number of shares of
Common Stock as shall be issued in respect of: (i) all shares of Common
Stock issuable upon conversion of or otherwise in respect of 290,000 shares
of the Series B Convertible Preferred Stock issued in the 1997 Private
Placement; (ii) all shares of Common Stock upon conversion of or otherwise
in respect of 29,000 shares of the Series B Convertible Preferred Stock
issuable upon the exercise of the Series B Convertible Preferred Stock
Warrants; (iii) all shares of Common Stock issuable upon conversion of
shares of Series B Convertible Preferred Stock issuable, in lieu of cash, as
dividends in respect of shares of Series B Convertible Preferred Stock; (iv)
155,204 shares of Common Stock originally issued in other private placement
transactions; and (v) 520,000 shares of Common Stock issuable upon exercise
of outstanding options and warrants originally issued in other private
placement transactions. The number of shares of Common Stock indicated to be
offered hereby on the cover of this Prospectus and above is an estimate
based upon the market price of the Common Stock set forth on the cover page
of this Prospectus assuming that all shares of Series B Convertible
Preferred Stock, including shares issuable upon exercise of the Series B
Convertible Preferred Stock Warrants, are converted on the first date
permitted. The number of shares of Common Stock issuable in connection with
such transactions and offered for resale hereby is subject to adjustment and
could be materially less or more than such amount depending upon factors
which cannot be predicted by the Company at this time, including, among
others, the future market price of the Common Stock and the decisions by
holders of Series B Convertible Preferred Stock as to when to convert such
shares. This presentation is not intended to constitute a prediction as to
the future market price of the Common Stock or as to when holders will elect
to convert shares of Series B Convertible Preferred Stock into shares of
Common Stock. See "Risk Factors--Effect of Conversion of Series A
Convertible Preferred Stock and Series B Convertible Preferred Stock" and
"Description of Capital Stock."
(2) As of March 31, 1997, excludes: (i) approximately 7.8 million shares of
Common Stock subject to presently outstanding options granted by the
Company under certain stock option plans and through direct grants, of
which approximately 3.3 million shares are issuable under options
exercisable as of the date of this Prospectus; (ii) approximately 1.6
million shares of Common Stock issuable upon the exercise of presently
outstanding warrants to purchase Common Stock, of which approximately 1.5
million shares are issuable pursuant to warrants exercisable as of the
date of this Prospectus; (iii) approximately 8.9 million shares of Common
Stock estimated to be issuable upon conversion of presently outstanding
shares of the Company's 5% Series A Adjustable Convertible Preferred Stock
(the "Series A Convertible Preferred Stock") issued in a private placement
transaction during 1996 (the "1996 Private Placement"); (iv) approximately
1.0 million shares of Common Stock estimated to be issuable upon
conversion of or otherwise in respect of 108,000 shares of Series A
Convertible Preferred Stock issuable upon the exercise of presently
outstanding warrants issued in connection with the 1996 Private Placement
(the "Series A Convertible Preferred Stock Warrants"); and (v) the shares
of
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Common Stock offered hereby, except for the 155,204 shares of Common Stock
identified in clause (iv) of footnote (1) above. Also excludes 72,512
treasury shares. The number of shares of Common Stock indicated to be
issuable pursuant to clauses (iii) through (v) of this footnote (2) is
estimated based on the market price of the Common Stock set forth on the
cover page of this Prospectus, assuming that all shares of Series A
Convertible Preferred Stock and Series B Convertible Preferred Stock are
converted on the first date permitted. As of March 31, 1997, there were
939,939 shares of Series A Convertible Preferred Stock outstanding which had
not yet been converted into shares of Common Stock. The number of shares of
Common Stock issuable upon conversion of such shares of Series A Convertible
Preferred Stock is subject to adjustment and could be materially less or more
than such amount depending upon factors which cannot be predicted at this
time, including, among others, the future market price of the Common Stock
and the decisions by holders of shares of Series A Convertible Preferred
Stock as to when to convert such shares. See "Risk Factors--Dilutive Effect
of Options and Warrants to Purchase Common Stock; Shares Available for Future
Sale," "--Effect of Conversion of Series A Convertible Preferred Stock and
Series B Convertible Preferred Stock," "Description of Capital Stock" and
"Shares Available for Future Sale."
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RISK FACTORS
The securities offered hereby involve a high degree of risk including, but
not necessarily limited to, the risk factors described below. Each prospective
investor should carefully consider the following risk factors inherent in and
affecting the business of the Company and this offering before making an
investment decision.
LIMITED OPERATING HISTORY; LIMITED REVENUES; HISTORY OF LOSSES. The Company
was organized in February 1987 and opened its first restaurant in August 1988
(which has since been closed). In addition, more than half of the Company's
owned and operated restaurants were opened since January 1, 1995. As a result,
the Company has a limited operating history upon which an evaluation of the
Company's performance can be made. The Company's prospects must be considered in
light of the risks, expenses and difficulties frequently encountered in the
establishment of a new business and concept in the highly competitive restaurant
industry, which is characterized by a high failure rate. Since inception, the
Company has generated limited revenues and has generally incurred operating
losses. There can be no assurance that the Company will generate significant
revenue or achieve profitable operations.
LIMITED NUMBER OF RESTAURANTS IN OPERATION; GEOGRAPHIC CONCENTRATION OF
RESTAURANTS; DEPENDENCE ON DISCRETIONARY SPENDING. As of March 31, 1997, the
Company operated 28 Koo Koo Roo restaurants. Of these, seven restaurants had
been in operation for more than two years and ten restaurants had been in
operation for less than one year. Twenty-three restaurants are in Southern
California, including nine restaurants opened in Southern California since
1995. The Company's revenues are dependent on discretionary spending by
consumers, particularly by consumers living in the communities in which the
restaurants are located. A significant weakening in any of the local economies
in which the Company operates may cause the residents of such communities to
curtail discretionary spending which, in turn, could have a material adverse
effect on the results of operations and financial position of the entire
Company. Consequently, the results achieved to date by the Company's restaurants
may not be indicative of the prospects or market acceptance of a larger number
of restaurants, particularly in wider and more geographically dispersed areas
with varied demographic characteristics.
UNCERTAINTY OF MARKET ACCEPTANCE. The Company has limited marketing
experience and to date has engaged in limited marketing activities. Achieving
consumer awareness and market acceptance, particularly as the Company seeks to
penetrate new markets, will require substantial efforts and expenditures by the
Company. There can be no assurance that the Company's restaurants and ceramics
studios will achieve significant market acceptance.
PROPOSED EXPANSION; NEED FOR ADDITIONAL FINANCING. Although the Company
intends to pursue a strategy of aggressive growth, the Company must depend on a
limited number of key experienced personnel in affecting this expansion. The
Company's proposed expansion (including, without limitation, accomplishment of
its new restaurant opening plans and expansion of Color Me Mine) will be
dependent on, among other things, market acceptance of the Company's business
concepts, the availability of suitable sites, timely development and
construction of stores, the hiring of skilled management and other personnel,
the general ability to successfully manage growth including monitoring stores,
controlling costs and maintaining effective quality controls, and the
availability of adequate financing. The Company may also grow through the
acquisition of existing businesses to the extent that such businesses can be
acquired on advantageous terms and meet the Company's investment and market
criteria. There can be no assurance that the Company will be successful in its
proposed expansion. Until the Company increases the size of its base of
restaurants and ceramics studios, the lack of success of a small number of
stores may have a disproportionate impact on the Company's performance. To
implement its expansion, the Company expects to issue additional equity
securities in the future and, if market conditions permit, may incur additional
indebtedness. The Company regularly investigates and pursues transactions to
raise such capital. There can be no assurance that such additional capital, if
and when required, will be available on terms acceptable to the Company, or at
all. In addition, future issuances of Common Stock, if any, would dilute the
present ownership of all stockholders in the Company, including investors
purchasing shares in this offering. See "Use of Proceeds."
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EFFECT OF CONVERSION OF SERIES A CONVERTIBLE PREFERRED STOCK AND SERIES B
CONVERTIBLE PREFERRED STOCK. The Company's Series A Convertible Preferred Stock
and Series B Convertible Preferred Stock entitles the holders thereof to convert
such shares into shares of Common Stock. The exact number of shares of Common
Stock issuable upon conversion of all of the Series A Convertible Preferred
Stock, and the shares of Common Stock offered hereby issuable upon the
conversion of all of the shares of the Series B Convertible Preferred Stock,
cannot currently be estimated but, generally, such issuances of Common Stock,
respectively, will vary inversely with the market price of the Common Stock. The
holders of Common Stock will be materially diluted by conversion of the Series A
Convertible Preferred Stock and Series B Convertible Preferred Stock which
dilution will depend on, among other things, the future market price of the
Common Stock and the decisions by holders of shares of Series A Convertible
Preferred Stock and Series B Convertible Preferred Stock as to when to convert
such shares. On April 28, 1997, the last reported sales price of the Common
Stock on the Nasdaq National Market was $3.7188 per share. If such market price
were used to determine the number of shares of Common Stock issuable as of the
first date on which the outstanding shares of Series A Convertible Preferred
Stock may be converted, the Company would issue a total of approximately
9,925,000 shares of Common Stock (which amount also assumes the exercise of the
outstanding Series A Convertible Preferred Stock Warrants). In addition, if such
market price of the Common Stock were used to determine the number of shares of
Common Stock issuable as of the first date on which the outstanding shares of
Series B Convertible Preferred Stock may be converted, the Company would issue a
total of approximately 9,600,000 shares of Common Stock (which amount also
assumes the exercise and conversion of the Series B Convertible Preferred Stock
Warrants). To the extent the market price per share of the Common Stock is lower
or higher than $3.7188 as of any date on which outstanding shares of Series A
Convertible Preferred Stock and Series B Convertible Preferred Stock are
converted, the Company would issue more or less shares of Common Stock than
reflected in such estimate, and such difference could be material. The number of
shares of Common Stock issuable in connection with the outstanding shares of
Series A Convertible Preferred Stock and Series B Convertible Preferred Stock is
not a linear function of the market price of the Common Stock, and will increase
at an increasing rate as such market price decreases (and decrease at a
decreasing rate as such market price increases) relative to a given assumed
market price. The number of shares of Common Stock may also increase should
holders of Series B Convertible Preferred Stock continue to hold such shares,
thereby causing the discount to market price applicable upon conversion of such
shares to increase. This presentation is not intended to constitute a prediction
as to the future market price of the Common Stock or as to when holders will
elect to convert shares of Series A Convertible Preferred Stock and Series B
Convertible Preferred Stock into shares of Common Stock. The holders of the
outstanding shares of Series A Convertible Preferred Stock and Series B
Convertible Preferred Stock also possess certain registration rights, including
the right to include all of the shares of Common Stock that such holders may
desire to sell in certain underwritten public offerings by the Company. The
terms of the Series A Convertible Preferred Stock and Series B Convertible
Preferred Stock do not provide for any limit on the number of shares of Common
Stock which the Company may be required to issue in respect thereof. Stock
market volatility, whether related to the stock market generally or the Company
specifically, and if coincident in time with conversions of Series A Convertible
Preferred Stock and Series B Convertible Preferred Stock, will impact directly
the number of shares of Common Stock issuable upon conversion thereof. See
"--Securities Market Factors" and "Description of Capital Stock."
DILUTIVE EFFECT OF OPTIONS AND WARRANTS TO PURCHASE COMMON STOCK; SHARES
AVAILABLE FOR FUTURE SALE. As of March 31, 1997, the Company had granted
options to purchase an aggregate of approximately 7.7 million shares (excluding
approximately 70,000 shares of Common Stock offered hereby issuable upon
exercise of certain options issued in other private placement transactions), and
warrants to purchase an aggregate of approximately 1.1 million shares (excluding
approximately 450,000 shares of Common Stock offered hereby issuable upon
exercise of certain warrants issued in other private placement transactions), of
Common Stock at exercise prices ranging from $0.625 per share to $10.00 per
share, with a weighted average exercise price of $6.16 per share. In the event
that all such options and warrants are exercised for cash, the aggregate
proceeds to the Company would be approximately $50.0 million. To the extent
that the stock options and warrants are exercised, material dilution of the
ownership interest of the
9
<PAGE>
Company's present stockholders will occur. The Company also expects that in the
ordinary course of its business it will issue additional warrants and grant
additional stock options including, but not limited to, options granted pursuant
to its Stock Awards and Director's Stock Option Plans. Investors should note
that the recent trading prices of the Common Stock significantly exceeds the
Company's book value for financial accounting purposes. In addition, the
approximately 1.1 million shares of Common Stock issuable upon exercise of
presently outstanding warrants and a significant portion of the outstanding
stock options and restricted shares of Common Stock are subject to certain
registration rights and, upon the effectiveness of a registration statement
covering such shares, will be eligible for resale in the public market without
restriction under the Securities Act. Sales of substantial amounts of Common
Stock by stockholders, or the perception that such sales could occur, could
adversely affect the market price for the Common Stock. See "--Effect of
Conversion of Series A Convertible Preferred Stock and Series B Convertible
Preferred Stock," "--Securities Market Factors," "Description of Capital Stock"
and "Shares Available for Future Sale."
MANAGEMENT OF GROWTH. The Company's business has grown rapidly in recent
periods and management's plans call for continued growth, which may place
significant strains on the Company's managerial, operational, financial and
information systems. This growth has in the past and may in the future involve
the acquisition of restaurants or complementary businesses. Acquisitions may
involve a number of special risks, including diversion of management's
attention, the inability to integrate successfully any acquired business, the
incurrence of legal liabilities and unanticipated events or circumstances, some
or all of which could have a material adverse effect on the Company's results of
operations, financial condition, business and prospects. The Company's success
also depends to a significant extent on the ability of its executive officers
and other members of senior management to respond to these challenges
effectively. The Company's expansion has also resulted in substantial growth in
the number of its employees, resulting in increased responsibility for both
existing and new management personnel. In addition, the Company is in the
ongoing process of evaluating and enhancing its operating and financial
procedures and systems in an effort to increase efficiencies in managing its
expanding business. There can be no assurance that the Company's management
will be able to manage future expansions successfully, or that its management,
personnel or system will be adequate to support the Company's operations or will
be implemented in a cost-effective or timely manner. Any such inabilities or
inadequacies would have a material adverse effect on the Company's business,
operating results and financial condition.
On March 21, 1997, the Company entered into a purchase agreement to
acquire, out of bankruptcy, 14 Hamburger Hamlet restaurants. No assurance can be
given that the acquisition of these Hamburger Hamlet restaurants will be
consummated, or, if consummated, that Company would be able to manage and
operate such restaurants successfully, either of which could have a material
adverse effect on the Company's business, operating results and financial
condition. See "--Proposed Expansion; Need for Additional Financing" and "Recent
Developments."
COMPETITION. The restaurant industry, and particularly the quick-service
segment, is highly competitive with respect to price, service and location, and
numerous well-established competitors possess substantially greater financial,
marketing, personnel and other resources than the Company. In addition, the
quick-service industry is characterized by the frequent introduction of new
products, accompanied by substantial promotional campaigns. The Company is
required to respond to various factors affecting the restaurant industry,
including changes in consumer preferences, tastes and eating habits, demographic
trends and traffic patterns, increases in food and labor costs, competitive
pricing and national, regional and local economic conditions. In recent years
numerous companies in the quick-service industry have introduced products,
including chicken, which were developed to capitalize on growing consumer
preference for food products which are, or are perceived to be, healthful,
nutritious, low in calories and low in fat content. It can be expected that the
Company will be subject to increasing competition from companies whose products
or marketing strategies address these consumer preferences. There can be no
assurance that consumers will regard the Company's products as sufficiently
distinguishable from competitive products (such as, for example, those offered
by El Pollo Loco and Boston Market), that substantially equivalent products will
not be introduced by the Company's competitors or that the Company will be able
to compete successfully.
10
<PAGE>
Similarly, Color Me Mine will likely face significant competition from similar
concepts and other businesses providing leisure and entertainment services.
DEPENDENCE UPON KEY PERSONNEL. The success of the Company is largely
dependent on the efforts of certain key personnel of the Company, including
Kenneth Berg, its Chairman of the Board and Chief Executive Officer, and other
key executives. Although the Company has entered into employment agreements with
certain of its executive officers, none of such agreements obligate these
employees to continue to work for the Company. The loss of their services would
have a material adverse effect on the Company. Additionally, in order to
successfully implement its proposed expansion and manage anticipated growth, the
Company will be dependent upon its ability to retain existing and hire
additional qualified personnel. There can be no assurance that the Company will
be able to retain or hire necessary personnel.
POSSIBLE CONFLICTS OF INTEREST; BENEFITS TO CERTAIN EXECUTIVE OFFICERS AND
STOCKHOLDERS. Kenneth Berg's employment agreement with the Company provides
that he is obligated to devote his full-time services to the Company but is
permitted to continue to engage in the other business activities currently
conducted by him. However, his employment agreement provides that he may do so
only so long as such activities do not conflict with or otherwise unreasonably
interfere with the performance of his services to the Company. Mr. Berg's
employment agreement also provides for significant payments to him upon the
occurrence of certain defined events including, among others, his termination
without "cause" and a "change in control" of the Company.
GOVERNMENT REGULATIONS. The Company is subject to various federal, state
and local laws and regulations affecting its business. The Company's stores are
subject to regulation by various governmental agencies, including those
responsible for compliance with state and local licensing, zoning, land use,
construction and environmental regulations and various health, sanitation,
safety and fire standards. Any difficulties or failure in obtaining required
licenses or approvals could delay or prevent the opening of a new store. In
addition, suspension of certain licenses or approvals, due to failure to comply
with applicable regulations or otherwise, could interrupt the operations of the
affected store or otherwise adversely affect the store or the Company. The
Company is also subject to federal and state laws establishing minimum wages and
regulating overtime and working conditions. Since many of the Company's
restaurant personnel are paid at rates which may be affected by the federal
minimum wage, increases in such minimum wage (which recently have been enacted
by Congress and the State of California) may result in an increase in the
Company's labor costs. The Company cannot predict the impact on its results of
operations should applicable federal or State minimum wage laws be changed.
Federal and state franchise laws will also impose significant compliance
obligations on the Company as it pursues the expansion of Color Me Mine.
EXPANSION INTO FOREIGN MARKETS. The Company presently is seeking to expand
its business into certain foreign markets, principally through the use of
licensing agreements, joint ventures and similar arrangements with existing
local businesses and members of each respective local business community. The
Company's ability to successfully expand its business into foreign markets
depends, in part, on cultural barriers to entry, the identity of the local
businesses and members of the local business community with whom the Company
enters into any such agreements, the consumer preferences of local consumers and
acceptance in each foreign market, prevailing local economic conditions,
currency fluctuations, changes in regulatory requirements, compliance with
foreign laws and regulations, local economy inflation and local economy interest
rates. No assurance can be given that the Company will be able to establish
profitable operations in any of the foreign markets which it is pursuing.
INSURANCE AND POTENTIAL LIABILITY. The Company maintains insurance,
including insurance relating to personal injury, in amounts which the Company
currently considers adequate. Nevertheless, a partially or completely uninsured
claim against the Company, if successful and of sufficient magnitude, could have
a material adverse effect on the Company.
11
<PAGE>
SECURITIES MARKET FACTORS. The market price for the Company's Common Stock
is significantly affected by such factors as the Company's financial results,
opening of new restaurants and ceramics studios and performance of existing
stores, introduction of new products by the Company or its competitors, status
of compliance with franchise regulation and various factors affecting the quick-
service restaurant and leisure time industries generally. Additionally, in
recent years, the stock market has experienced a high level of price and volume
volatility and market prices for many companies, particularly small emerging
growth companies, have experienced wide price fluctuations not necessarily
related to the operating performance of such companies. The market price for the
Common Stock may be affected by general stock market volatility. Any such
volatility, whether related to the stock market generally or the Company
specifically, and if coincident in time with conversions of Convertible
Preferred Stock, will also impact directly the number of shares of Common Stock
issuable upon conversion of shares of Series A Convertible Preferred Stock and
Series B Convertible Preferred Stock and in respect of the other securities
issued in the Company's 1996 Private Placements and 1997 Private Placement. See
"--Effect of Conversion of Series A Convertible Preferred Stock and Series B
Convertible Preferred Stock" and "Description of Capital Stock."
NO COMMON STOCK DIVIDENDS. To date, the Company has not paid any cash
dividends on its Common Stock and does not intend to declare any such dividends
in the foreseeable future. The Company is obligated to pay dividends at the rate
of 5% per annum on its Series A Convertible Preferred Stock (which may be paid
in cash or, subject to certain restrictions, in shares of Common Stock which may
be offered for resale under the Securities Act) and 6% per annum on its Series B
Convertible Preferred Stock (which may be paid in cash or, subject to certain
restrictions, in additional shares of Series B Convertible Preferred Stock
convertible into shares of Common Stock which may be offered for resale
hereunder). During 1996, the dividends payable in respect of the Series A
Convertible Preferred Stock for the quarter ended March 31, 1996 was paid in
cash and the remaining three quarterly dividends were paid in shares of Common
Stock. Future dividend payments in respect of the Series A Convertible Preferred
Stock are also expected to be made by issuing additional shares of Common Stock.
The Company currently plans to pay all dividends on Series B Convertible
Preferred Stock in additional shares of Series B Convertible Preferred Stock.
See "Description of Capital Stock--Preferred Stock--Series A Convertible
Preferred Stock" and "--Series B Convertible Preferred Stock."
POSSIBLE ISSUANCE OF ADDITIONAL SHARES OF PREFERRED STOCK WITHOUT
STOCKHOLDER APPROVAL. The Company's Certificate of Incorporation authorizes the
issuance of "blank check" Preferred Stock with such designations, rights and
preferences as may be determined from time-to-time by the Company's Board of
Directors. Accordingly, the Board is empowered, without approval by holders of
the Common Stock, to issue additional shares of Preferred Stock with dividend,
liquidations, redemption, conversion, voting or other rights which could
adversely affect the voting power or other rights of the holders of the Common
Stock. It was pursuant to this authority that the shares of Series A Convertible
Preferred Stock and Series B Convertible Preferred Stock were issued. In the
event of issuance, Preferred Stock could be used, under certain circumstances,
as a method of discouraging, delaying or preventing a change in control of the
Company. The Company may issue additional shares of Preferred Stock in the
future to raise capital. See "Description of Capital Stock."
12
<PAGE>
USE OF PROCEEDS
The proceeds from the sale of the shares of Common Stock offered hereby are
solely for the account of the Selling Stockholders. Accordingly, the Company
will receive none of the proceeds from sales thereof. However, certain of the
shares of Common Stock offered hereby are issuable in the future upon the
conversion of shares of Series B Convertible Preferred Stock issuable upon the
exercise of the 29,000 Series B Convertible Preferred Stock Warrants issued in
connection with the 1997 Private Placement. If all of such warrants to purchase
Series B Convertible Preferred Stock were exercised, the Company would receive
gross proceeds of approximately $2.9 million in the aggregate, unless such
warrants are exercised, at the holders option, on a net basis without the
payment of additional consideration pursuant to the terms of such warrants. In
addition, if all of the approximately 520,000 shares of Common Stock offered
hereby issuable upon the exercise of options and warrants issued in other
private placement transactions are exercised, the Company would receive gross
proceeds of approximately $3.1 million in the aggregate. The Company expects to
use the proceeds from the exercise of such warrants and options, if any, for
general corporate purposes. See "Description of Capital Stock."
RECENT DEVELOPMENTS
On February 27, 1997, the Company completed a private placement offering of
290,000 shares of the Company's newly established Series B Convertible Preferred
Stock and received aggregate net proceeds therefrom of approximately $26.9
million (after cash fees to the placement agent and estimated transaction
expenses). The Series B Convertible Preferred Stock has a liquidation
preference of $100.00 per share, is non-voting and is entitled to quarterly
dividends of 6% per annum, first payable on August 1, 1997, which dividends may
be paid either in cash or, at the option of the Company, in additional shares of
Series B Convertible Preferred Stock, valued at $100.00 per share. On the 91st
day after the date of issuance (or on such earlier date as the registration
statement in connection with the Series B Convertible Preferred Stock is
declared effective by the Commission), 43,500 shares of the Series B Convertible
Preferred Stock will become eligible for conversion. Each month thereafter, a
portion of the remaining 246,500 shares of Series B Convertible Preferred Stock
will become convertible ratably, such that all shares of Series B Convertible
Preferred Stock will be convertible on and after November 1, 1997. The Series B
Convertible Preferred Stock will be convertible at a discount to the Common
Stock ranging from 3% to 25%, depending upon the date on which such shares are
converted. Accordingly, the exact number of shares of Common Stock issuable
upon conversion of the Series B Convertible Preferred Stock cannot be determined
and will depend upon, among other things, the future market price of the Common
Stock at the date of conversion and the decisions by holders of shares of Series
B Convertible Preferred Stock as to when to convert such shares. The Company
has agreed to issue to the placement agent in the private placement transaction
three-year warrants to purchase 29,000 shares of Series B Convertible Preferred
Stock at $100.00 per share and paid 6 3/4% of the gross proceeds from the
issuance and sale of the Series B Convertible Preferred Stock as cash
consideration for such services. See "Risk Factors--Effect of Conversion of
Series A Convertible Preferred Stock and Series B Convertible Preferred Stock"
and "Description of Capital Stock."
On March 21, 1997, the Company entered into a purchase agreement to
acquire, out of bankruptcy, 14 Hamburger Hamlet restaurants for total
consideration equal to $9.70 million in cash and 150,000 restricted shares of
Common Stock plus the assumption of $250,000 of debt and the leases covering the
restaurants to be acquired. Ten of the fourteen restaurants are located in
California and the remaining four are located in the Washington, D.C. Beltway
area. The Company presently expects to finance the acquisition either with cash
on hand or borrowings under a debt package which is currently being negotiated.
No assurance can be given, however, that the acquisition of these Hamburger
Hamlet restaurants will be consummated, that debt financing of such proposed
acquisition, if available, would be on terms favorable to the Company, or that
the Company, if such proposed purchase
13
<PAGE>
is consummated, would be able to manage and operate such restaurants
successfully. See "Risk Factors--Proposed Expansion; Need for Additional
Financing" and "--Management of Growth."
SHARES AVAILABLE FOR FUTURE SALE
In general, Rule 144 under the Securities Act, as recently amended by the
Commission ("Rule 144"), provides that a person (or persons whose sales are
aggregated) who is an affiliate of the Company or who has beneficially owned
shares that were issued and sold in reliance upon exemptions from registration
under the Securities Act ("Restricted Shares") for at least one year is entitled
to sell within any three-month period a number of shares that does not exceed
the greater of one percent (1%) of the then outstanding shares of Common Stock
or the average weekly trading volume in the Common Stock during the four
calendar weeks preceding the filing of a notice of intent to sell. Sales under
Rule 144 are also subject to certain manner-of-sale provisions, notice
requirements and the availability of current public information about the
Company. However, a person who is not deemed to have been an "affiliate" of the
Company at any time during the three months preceding a sale, and who has
beneficially owned Restricted Shares for at least two years, is entitled to sell
such shares under Rule 144(k) without regard to volume limitations, manner-of-
sale provisions, notice requirements or the availability of current public
information about the Company. Additional material amendments to Rule 144 have
been proposed by the Commission and the Company cannot predict whether such
proposed amendments will be adopted or, if adopted, the effect of any such
amendment on the Company or the market for shares of the Common Stock.
Of the approximately 26.9 million shares of Common Stock estimated to be
outstanding upon completion of this offering (subject to the assumptions set
forth or referred to on the cover page of this Prospectus related to future
market prices of the Common Stock and conversion decisions made by holders of
the Series B Convertible Preferred Stock), approximately 24.4 million shares
will have been registered under the Securities Act and will be freely tradeable,
and approximately 2.5 million shares will be saleable subject to compliance with
the requirements of Rule 144 and approximately 26,000 shares of Common Stock
will be tradeable subject to the holding period restrictions under, and
compliance with the other requirements of, Rule 144 discussed above. See
"Summary--The Offering."
As of March 31, 1997, the Company also had outstanding 939,939 shares of
its Series A Convertible Preferred Stock and warrants to issue an additional
108,000 shares of Series A Convertible Preferred Stock. Such shares of Series A
Convertible Preferred Stock are convertible into a presently indeterminate
number of shares of Common Stock. If, however, $3.7188 per share (the last
reported sale price of the Common Stock on the Nasdaq National Market on April
28, 1997) were used to determine the number of shares of Common Stock issuable
upon conversion, the Company would be obligated to issue a total of
approximately 9,925,000 shares of Common Stock if all shares of Series A
Convertible Preferred Stock outstanding or issuable upon the exercise of the
Series A Convertible Preferred Stock Warrants were converted. All such shares
have been registered for resale under the Securities Act. See "--Effect of
Conversion of Series A Convertible Preferred Stock and the Series B Convertible
Preferred Stock."
In addition, as of March 31, 1997, approximately 1.1 million shares of
Common Stock were issuable upon exercise of presently outstanding warrants
(excluding the warrants issued in connection with the 1996 and 1997 Private
Placements and approximately 450,000 shares of Common Stock offered hereby
issuable upon exercise of certain warrants issued in other private placement
transactions), and approximately 7.7 million shares of Common Stock were
issuable upon exercise of presently outstanding options (excluding approximately
70,000 shares of Common Stock offered hereby issuable upon exercise of certain
options issued in other private placement transactions). Such shares are
entitled to certain registration
14
<PAGE>
rights, and upon the effectiveness of a registration statement covering such
shares, would be eligible for resale in the public market without restriction
under the Securities Act. Until any such registration is effective, such shares
of Common Stock would be tradeable subject to the holding period restrictions
under, and compliance with the other requirements of, Rule 144 discussed above.
Kenneth Berg, the Company's Chairman and Chief Executive Officer, and Mel
Harris, one of the Company's Directors, each has agreed for the 14-month period
following the original issuance of the Series B Convertible Preferred Stock, not
to sell, and not to permit any of their controlled affiliates to sell, more than
10% of the Common Stock owned by such stockholder as of such date without the
prior consent of the placement agent in connection with the private placement of
the Series B Convertible Preferred Stock.
No predictions can be made as to the effect that sales of Common Stock
under Rule 144, pursuant to a registration statement or otherwise, or the
availability of shares of Common Stock for sale, will have on the market price
prevailing from time to time. Nevertheless, sales of substantial amounts of
Common Stock in the public market, or the perception that such sales could
occur, could adversely affect prevailing market prices and could impair the
Company's future ability to raise capital through an offering of its equity
securities. Further, certain of the share amounts set forth above under the
caption "Shares Available for Future Sale" are estimates based only on recent
market prices, are subject to adjustment, and could be materially less or more
than such estimated amounts depending upon factors which cannot be predicted at
this time, including, among others, the future market price per share of the
Common Stock and conversion decisions made by holders of both the Series A
Convertible Preferred Stock and the Series B Convertible Preferred Stock. See
"Risk Factors--Dilutive Effect of Options and Warrants; Shares Available for
Future Sale," and "--Effect of Conversion of Series A Convertible Preferred
Stock and the Series B Convertible Preferred Stock."
15
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Shares to be offered hereby as of March 31, 1997, and as
adjusted to reflect the sale of the securities offered hereby, by the Selling
Stockholders. Except as otherwise indicated, to the knowledge of the Company,
all persons listed below have sole voting and investment power with respect to
their securities, except to the extent that authority is shared by spouses under
applicable law or as otherwise noted below. The information in the table
concerning the Selling Stockholders who may offer Common Shares hereunder from
time to time is based on information provided to the Company by such
securityholders, except for the assumed conversion ratio of shares of Series B
Convertible Preferred Stock into Common Stock, which is based solely on the
assumptions discussed or referenced in footnote (1) to the table. Information
concerning such Selling Stockholders may change from time to time and any
changes of which the Company is advised will be set forth in a Prospectus
Supplement to the extent required. See "Plan of Distribution."
<TABLE>
<CAPTION>
COMMON SHARES COMMON SHARES
BENEFICIALLY COMMON SHARES BENEFICIALLY
OWNED PRIOR TO TO BE SOLD OWNED AFTER
THE OFFERING/(1)/ IN THE OFFERING/(1)/ THE OFFERING
NAME OF ------------------ -------------------- -------------------
SELLING STOCKHOLDER NUMBER PERCENT NUMBER NUMBER PERCENT
------------------- ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
AG Arb Partners, L.P. 70,047 * 33,099 36,948 *
AG Long Term Super Fund, L.P. 66,199 * 66,199 0 0
Angelo, Gordon & Co., L.P. 97,868 * 66,199 31,670 *
Michael Angelo 93,305 * 82,748 10,557 *
Alfred Partners LLC 396,118 2.3% 264,795 131,323 *
ARBCO Associates, L.P. 215,978 1.3% 165,497 50,481 *
Gerard K. Cappello 232,092 1.4% 33,099 198,993 1.2%
Linda Cappello 358,689 2.1% 49,649 309,040 1.8%
Robert A. Davidow and Diana R. 249,949 1.5% 165,497 84,452 *
Davidow, JTWROS
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
COMMON SHARES COMMON SHARES
BENEFICIALLY COMMON SHARES BENEFICIALLY
OWNED PRIOR TO TO BE SOLD OWNED AFTER
THE OFFERING/(1)/ IN THE OFFERING/(1)/ THE OFFERING
NAME OF ------------------ -------------------- -------------------
SELLING STOCKHOLDER NUMBER PERCENT NUMBER NUMBER PERCENT
------------------- ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
Deere Park Capital Management, 330,993 2.0% 330,993 0 0
Inc.
DFG Corporation 138,495 * 11,816 126,678 *
Elliott Associates, L.P. 661,987 3.9% 661,987 0 0
European American Securities Inc. 49,649 * 49,649 0 0
Fayerweather Associates 167,201 1.0% 82,748 84,452 *
Christomano B. Garcia Trust 33,099 * 33,099 0 0
Gotham Capital III, L.P. 790,287 4.6% 562,689 227,599 1.4%
High Risk Opportunities HUB 330,993 2.0% 330,993 0 0
Fund Ltd.
JMG Capital Partners, L.P. 486,228 2.8% 330,993 137,235 *
KA Investments LDC 39,719 * 39,719 0 0
Andrew Kaplan 16,550 * 16,550 0 0
Jerry Kaplan 23,170 * 23,170 0 0
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
COMMON SHARES COMMON SHARES
BENEFICIALLY COMMON SHARES BENEFICIALLY
OWNED PRIOR TO TO BE SOLD OWNED AFTER
THE OFFERING/(1)/ IN THE OFFERING/(1)/ THE OFFERING
NAME OF ------------------ -------------------- -------------------
SELLING STOCKHOLDER NUMBER PERCENT NUMBER NUMBER PERCENT
------------------- ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
Stanley A. Kaplan 33,099 * 33,099 0 0
Karpnale Investment PTE LTD 165,497 1.0% 165,497 0 0
Kayne, Anderson Non-Traditional 369,776 2.2% 165,497 204,279 1.2%
Investments, L.P.
Charles B. Krusen 33,099 * 33,099 0 0
LAKE Management LDC 317,754 1.9% 317,754 0 0
Lakeshore International, Ltd. 459,375 2.7% 248,245 211,131 1.3%
LICAP Partners 259,076 1.5% 132,397 126,678 *
Theodore Meisel 95,838 * 66,199 13,090 *
Merced Partners L.P. 689,915 4.0% 82,748 358,922 2.2%
Nelson Partners 926,381 5.3% 330,993 595,388 3.6%
Newberg Family Trust UTA DTD 439,614 2.6% 330,993 380,035 2.3%
12/18/90
NU Investments LLC 66,199 * 59,579 0 0
NY-DBL Diamond Group 415,445 2.5% 66,199 84,452 *
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
COMMON SHARES COMMON SHARES
BENEFICIALLY COMMON SHARES BENEFICIALLY
OWNED PRIOR TO TO BE SOLD OWNED AFTER
THE OFFERING/(1)/ IN THE OFFERING/(1)/ THE OFFERING
NAME OF ------------------ -------------------- -------------------
SELLING STOCKHOLDER NUMBER PERCENT NUMBER NUMBER PERCENT
------------------- ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
Offense Group Associates, L.P. 431,080 2.5% 330,993 100,086 *
Olympus Securities, Ltd. 402,387 2.4% 330,993 396,925 2.4%
Palamundo LDC 233,692 1.4% 5,461 68,195 *
ProFutures Special Equities Fund, 16,550 * 165,497 0 0
L.P.
John J. Pujol 82,748 * 16,550 0 0
Pyramid Investments LLC 82,748 * 82,748 0 0
Raphael, L.P. 477,081 2.8% 82,748 63,339 *
RGC International Investors LDC 16,550 * 413,742 0 0
Alfred Romano 49,649 * 16,550 0 0
RSP VI Limited Partnership 109,625 * 49,649 0 0
Seneca Capital International 142,669 * 25,354 119,500 *
Seneca Capital L.P. 693,582 4.0 109,625 668,228 4.0%
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
COMMON SHARES COMMON SHARES
BENEFICIALLY COMMON SHARES BENEFICIALLY
OWNED PRIOR TO TO BE SOLD OWNED AFTER
THE OFFERING/(1)/ IN THE OFFERING/(1)/ THE OFFERING
NAME OF ------------------ -------------------- -------------------
SELLING STOCKHOLDER NUMBER PERCENT NUMBER NUMBER PERCENT
------------------- ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
Lisa G. Shine 542,257 3.2% 23,170 12,668 *
SIL Nominees Ltd. 556,450 3.3% 529,589 523,350 3.2%
Strome Global Income Fund 430,291 2.5% 33,0991 0 0
Strome Offshore Limited 430,291 2.5% 430,291 0 0
Strome Susskind Hedgecap Fund, 182,046 1.1% 430,291 0 0
L.P.
Strome Susskind Hedgecap Fund, 148,947 * 182,046 0 0
L.P.
The Tail Wind Fund Ltd. 368,396 2.2% 148,947 0 0
Trust Company of America FBO 82,748 * 368,396 0 0
Perspective Advisory Company
Jeffrey Ullman 204,863 1.2% 82,748 105,565 *
Western Reserve Life Assurance 28,796 * 99,298 0 0
Company
Western Reserve Life Assurance 165,497 1.0% 28,796 0 0
Company
Wood Gundy London Ltd. 13,240 * 165,497 0 0
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
COMMON SHARES COMMON SHARES
BENEFICIALLY COMMON SHARES BENEFICIALLY
OWNED PRIOR TO TO BE SOLD OWNED AFTER
THE OFFERING/(1)/ IN THE OFFERING/(1)/ THE OFFERING
NAME OF ------------------ -------------------- -------------------
SELLING STOCKHOLDER NUMBER PERCENT NUMBER NUMBER PERCENT
------------------- ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C>
ZPG Securities 13,240 * 13,240 0 0
Ad Marketing 10,000 * 10,000 0 0
Robert Courson 75,000 * 75,000 0 0
Bob Muh 25,000 * 25,000 0 0
Don Wohl 100,000 * 100,000 0 0
Iacocca Capital Partners 250,000 1.5% 250,000 0 0
Irving Link 15,000 * 15,000 0 0
Chris Furie 30,000 * 30,000 0 0
Mark Beychock 15,000 * 15,000 0 0
Ken Grier Family Trust 26,633 * 26,633 0 0
Robin Monroe & Josh Culver 128,571 * 128,571 0 0
</TABLE>
- -------------------
* Represents less than 1% of the outstanding Common Stock.
(1) Such beneficial ownership represents an estimate of the number of shares of
Common Stock beneficially owned by such person, including shares of Common
Stock issuable upon the conversion of shares of Series A Convertible
Preferred Stock and Series B Convertible Preferred Stock beneficially owned
by such person (either directly or through the exercise of Series A
Convertible Preferred Stock Warrants and Series B Convertible Preferred
Stock Warrants, respectively), assuming the last reported sales price of
$3.7188 per share of Common Stock on April 28, 1997 was used to determine
the number of shares of Common Stock issuable as of the first date on which
Series A Convertible Preferred Stock and Series B Convertible Preferred
Stock may be converted and that all dividends on shares of Series B
Convertible Preferred Stock are paid, in lieu of cash, in additional shares
of Series B Convertible Preferred Stock. The actual number of shares of
Common Stock offered hereby is subject to adjustment and could be materially
less or more than the estimated amount indicated depending upon factors
which cannot be predicted by the Company at this time, including, among
others, application of the conversion provisions based on market prices
prevailing at the actual date of conversion and whether dividends on shares
of Series B Convertible Preferred Stock are paid in cash or in additional
shares of Series B Convertible Preferred Stock. This presentation is not
intended to constitute a prediction as to the future market price of the
Common Stock or as to when holders will elect to convert shares of Series B
Convertible Preferred Stock into shares of Common Stock. The shares of
Series B Convertible Preferred Stock (other than the shares of Series B
Convertible Preferred Stock issued as dividends) and the Series B
Convertible Preferred Stock Warrants were issued in the 1997 Private
Placement. See "Risk Factors--Effect of Conversion of Series A Convertible
Preferred Stock and the Series B Convertible Preferred Stock" and
"Description of Capital Stock."
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company's Certificate of Incorporation, as amended, authorizes the
issuance of 55,000,000 shares of capital stock, of which 50,000,000 shares are
designated as Common Stock, par value $0.01 per share, and 5,000,000 shares are
designated as Preferred Stock, par value $0.01 per share, 1,350,000 of which
have been designated as shares of Series A Convertible Preferred Stock and
400,000 of which have been designated as Series B Convertible Preferred Stock.
As of March 31, 1997, 16,615,459 shares of Common Stock (net of treasury shares)
and 939,939 shares of Series A Convertible Preferred Stock were issued and
outstanding. In March 1996, 1,200,000 shares of Series A Convertible Preferred
Stock were issued in the 1996 Private Placements and, through March 31, 1997,
260,061 of such shares had been converted into 1,201,850 shares of Common Stock
(excluding shares of Common Stock issued as payment-in-kind dividends). On
February 27, 1997, 290,000 shares of Series B Convertible Preferred Stock were
issued in the 1997 Private Placement. As of March 31, 1997, no shares of Series
B Convertible Preferred Stock had been exercised.
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share of Common
Stock on all matters submitted to a vote of stockholders. There are no
cumulative voting rights. The rights, privileges and preferences of the holders
of Common Stock are subject to the rights of the holders of the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock and of any
shares of Preferred Stock that may be designated and issued by the Company in
the future. Subject to the restrictions contained in Preferred Stock issued by
the Company, holders of Common Stock are entitled to receive dividends when and
if declared by the Board of Directors out of legally available funds. Upon any
liquidation, dissolution or winding up of the Company, subject to the rights of
holders of shares of Preferred Stock, holders of Common Stock are entitled to
share pro rata in any distribution to the stockholders. Holders of Common Stock
do not have preemptive or other subscription rights. There are no redemption or
sinking fund provisions applicable to the Common Stock.
Pursuant to Section 2115 of the California Corporations Code (the "California
Law"), a corporation incorporated in a State other than California (such as the
Company, which is incorporated in Delaware) may nevertheless be subject to
certain of the provisions of the California Law (as specified in Section 2115 of
the California Law) applicable to California corporations (commonly designated a
"Quasi-California Corporation") if more than one-half of its outstanding voting
securities are owned of record by persons having addresses in California and
more than half of its business is conducted in California (generally, if the
average of its property factor, payroll factor and sales factor (as defined in
Sections 25129, 25132 and 25134, respectively of the California Revenue and
Taxation Code) is more than 50 percent during its latest full income year). Such
a foreign corporation will not be treated as a Quasi-California Corporation if,
however, it has more than 800 holders of a class of securities qualified for
trading on the Nasdaq National Market. Based on the stockholders list prepared
for the Company's April 17, 1997 Special Meeting of Stockholders, the Company
exceeds this requirement by a significant amount and, accordingly, Section 2115
is not presently applicable to the Company.
PREFERRED STOCK
The Company's Board of Directors, without the approval of the holders of the
Common Stock, is authorized to designate for issuance up to 5,000,000 shares of
Preferred Stock, in such series and with such rights, privileges and preferences
as the Board of Directors may from time to time determine. As of the date
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<PAGE>
of this Prospectus, 1,350,000 of such shares have been designated as Series A
Convertible Preferred Stock, 939,939 of which were issued and outstanding as of
March 31, 1997 and 108,000 are subject to the Series A Convertible Preferred
Stock Warrants; and 400,000 of such shares have been designated as Series B
Convertible Preferred Stock, 290,000 of which are issued and outstanding as of
the date of this Prospectus and 29,000 of which are subject to Series B
Convertible Preferred Stock Warrants. The Company has no current plans to issue
any of the 42,000 shares of Series A Convertible Preferred Stock that are
unissued and not subject to Series A Convertible Preferred Stock Warrants or of
the 81,000 shares of Series B Convertible Preferred Stock that are unissued and
not subject to Series B Convertible Preferred Stock Warrants, except, in the
case of Series B Convertible Preferred Stock, as dividends in respect of shares
of Series B Convertible Preferred Stock outstanding from time to time.
Series A Convertible Preferred Stock
Each share of Series A Convertible Preferred Stock is entitled to receive
dividends, payable quarterly, at the rate of 5% per annum in preference to any
payment made on any other shares of capital stock of the Company. Any dividend
payable on the Series A Convertible Preferred Stock may be paid, at the option
of the Company, either (i) in cash or (ii) upon proper notice, in shares of
Common Stock if such shares have been registered for resale under the Securities
Act. If a dividend is paid in Common Stock, the shares to be issued as a
dividend shall be valued at the average of the daily means between the low
trading price and the closing price of the Common Stock over the three
consecutive trading days prior to the related dividend record date. Each share
of Series A Convertible Preferred Stock is also entitled to a liquidation
preference of $25.00 per share, plus any accrued but unpaid dividends, in
preference to any other class or series of capital stock of the Company. Except
as otherwise provided by applicable law, holders of shares of Series A
Convertible Preferred Stock have no voting rights.
As of the date of this Prospectus, all shares of Series A Convertible
Preferred Stock are convertible into shares of Common Stock. The number of
shares of Common Stock issuable upon conversion of shares of Series A
Convertible Preferred Stock will equal the liquidation preference of the shares
being converted divided by the conversion price applicable to the Common Stock
(the "Series A Conversion Price"). The Series A Conversion Price is the lesser
of (a) 71% of the average of the daily means between the low trading price of
the Common Stock and the closing price of the Common Stock for all the trading
days during the 13th month after March 20, 1996, the date of issuance or (b) 71%
of the average of the daily means between the low trading price and the closing
price of the Common Stock during the three days immediately preceding the date
of conversion. The Series A Conversion Price is also subject to adjustment for
customary anti-
23
<PAGE>
dilution events such as stock splits, stock dividends, reorganizations and
certain mergers affecting the Common Stock. The shares of Series A Convertible
Preferred Stock were originally placed in March 1996.
The Series A Convertible Preferred Stock may be redeemed in whole or in part
at any time, on at least 30 days' notice, at a redemption price equal to $25.00
per share plus accrued and unpaid dividends if (i) the average closing price of
the Common Stock for the 20 consecutive trading days prior to the date of such
notice exceeds $18.00 per share and (ii) the shares of Common Stock issuable
upon conversion are subject to an effective resale registration statement under
the Securities Act or may otherwise be sold pursuant to Rule 144(k) under such
act. Further, the Company may require holders of Series A Convertible Preferred
Stock to convert such shares into shares of Common Stock if the Company sells
Common Stock for cash in a registered underwritten public offering and the
underwriters agree to sell all shares of Common Stock that holders of Series A
Convertible Preferred Stock desire to sell in the offering. In such event, the
conversion price for such shares will be the public offering price, less the
underwriters' gross spread, reduced by the Series A Applicable Percentage set
forth above.
The exact number of shares issuable upon conversion of all of the Series A
Convertible Preferred Stock cannot currently be estimated but, generally, such
issuances of Common Stock will vary inversely with the market price of the
Common Stock. The holders of Common Stock ownership interest will be materially
diluted by conversion of the Series A Convertible Preferred Stock, which
dilution will depend on, among other things, the future market price of the
Common Stock and the conversion decisions made by holders of the Series A
Convertible Preferred Stock. The terms of the Series A Convertible Preferred
Stock do not provide for any limit on the number of shares of Common Stock which
the Company may be required to issue in respect thereof. Investors should review
carefully the material under "Risk Factors--Effect of Series A Convertible
Preferred Stock and Series B Convertible Preferred Stock" and "Securities Market
Factors" as well as the other information contained or incorporated by reference
in this Prospectus.
Series B Convertible Preferred Stock
Each share of Series B Convertible Preferred Stock is entitled to receive
dividends, payable commencing August 1, 1997 and thereafter quarterly on
November 1, February 1, May 1 and August 1 of each year, when and as declared by
the Company's Board of Directors, at the rate of 6% per annum in preference to
any payment made on any shares of Common Stock or any other class or series of
capital stock of the Corporation ranking junior to the Series B Convertible
Preferred Stock. Any dividend payable after the date of issuance of the Series B
Convertible Preferred Stock may be paid, at the option of the Company, either
(i) in cash or (ii) upon proper notice, in additional shares of Series B
Convertible Preferred Stock valued at $100.00 per share, if (1) the shares of
Common Stock issuable upon conversion of such Series B Convertible Preferred
Stock have been registered for resale under the Securities Act (as provided for
hereunder) and the registration statement, including the prospectus with respect
to such shares of Common Stock, remains in effect at the date of the delivery of
such shares of Series B Convertible Preferred Stock or (2) such shares of Common
Stock may be sold pursuant to Rule 144(k) under the Securities Act of 1933, as
amended (the "Securities Act"). Each share of Series B Convertible Preferred
Stock is also entitled to a liquidation preference of $100.00 per share, plus
any accrued but unpaid dividends, in preference to any other class or series of
capital stock of the Company, other than the Series A Convertible Preferred
Stock and any other class or series of capital stock which is entitled to
priority over the Series B Convertible Preferred Stock; provided, however, that
a share of Series B Convertible Preferred Stock which is converted into Common
Stock prior to August 1, 1997 shall receive no adjustment for accrued dividends,
and the liquidation preference of such shares, for conversion purposes, shall
not include any amount in respect of accrued and unpaid dividends. Except as
otherwise provided by applicable law, holders of shares of Series B Convertible
Preferred Stock have no voting rights.
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<PAGE>
Commencing the earlier of (i) 91 days after the date of issuance and (ii) the
date that a registration statement registering the shares of Common Stock
issuable upon conversion of the Series B Convertible Preferred Stock (including
such shares issuable upon exercise of the Series B Convertible Preferred Stock
Warrants) is declared effective by the Securities and Exchange Commission, 15%
(or such larger percentage as is determined by the Company in its sole
discretion) of the number of shares of Series B Convertible Preferred Stock held
of record by each holder on such day shall become convertible into shares of
Common Stock, and thereafter on the successive monthly anniversaries of such day
an equal number of such shares of Series B Convertible Preferred Stock shall
become convertible. On and after November 1, 1997, all shares of Series B
Convertible Preferred Stock will be convertible into shares of Common Stock. The
number of shares of Common Stock issuable upon conversion of shares of Series B
Convertible Preferred Stock will equal the liquidation preference of the shares
being converted divided by the then-effective conversion price applicable to the
Common Stock (the "Series B Conversion Price"); provided, however, that a share
of Series B Convertible Preferred Stock which is converted into Common Stock
prior to August 1, 1997 shall receive no adjustment for accrued and unpaid
dividends. The Series B Conversion Price as of any date during the eight-month
period following the date of issuance shall be the lesser of (i) the actual
selling price at which the holder converting has sold shares of Common Stock (if
any) during the three trading days prior to conversion in a bona fide trade with
an unaffiliated third party (which may not be less than the lowest trading price
on the date of such trade as reported by the Nasdaq National Market) or (ii) the
average of the daily means between the low trading price and the closing price
of the Common Stock for the three consecutive trading days prior to conversion,
in either case reduced by the Series B Applicable Percentage (as defined below).
The Series B Conversion Price as of any date after the eight-month period
following the date of issuance through the 14th month following the date of
issuance shall be the lowest trading price of the Common Stock during the five
trading days immediately preceding the date of conversion, reduced by the Series
B Applicable Percentage. The "Series B Applicable Percentage" is dependent upon
the amount of time which has passed from original issuance to the date of
measurement, being 3% through the fourth month and from the fifth month through
the end of the fourteenth month being 4%, 5%, 12%, 12 3/4%, 13 1/2%, 14 1/2%,
16%, 19%, 22% and 25%, respectively. At any date more than fourteen months after
the date of issuance, the Series B Conversion Price will be the lesser of (a)
75% of the average of the daily mean between the low trading price of the Common
Stock and the closing price of the Common Stock for all the trading days during
the 14th month or (b) 75% of the average of the daily means between the low
trading price and the closing price of the Common Stock during the five trading
days immediately preceding the date of conversion. The Series B Conversion Price
is at all times also subject to adjustment for customary anti-dilution events
such as stock splits, stock dividends, reorganizations and certain mergers
affecting the Common Stock. On February 27, 2000, all of the then outstanding
shares of Series B Convertible Preferred Stock will be automatically converted
into shares of Common Stock at the then-applicable Series B Conversion Price.
Notwithstanding the foregoing, no holder of Series B Convertible Preferred Stock
will be entitled to convert any share of Series B Convertible Preferred Stock
into shares of Common Stock if, following such conversion, the holder and its
affiliates (within the meaning of the Securities Exchange Act of 1934) will be
the beneficial owners (as defined in Rule 13d-3 thereunder) of 10% or more of
the outstanding shares of Common Stock.
In addition, following conversion of the Series B Convertible Preferred Stock
into shares of Common Stock, the initial holders of such shares of Common Stock
will be limited on resales of such shares to the greatest of: (i) 10% of the
average daily trading volume of the Common Stock for the five trading days
preceding any such sale date; (ii) 20,000 shares and (iii) 10% of the trading
volume for the Common Stock on the date of any such sale.
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<PAGE>
The Company may require holders of Series B Convertible Preferred Stock to
convert such shares into shares of Common Stock if the Company sells Common
Stock for cash in a registered underwritten public offering and the underwriters
agree to sell all shares of Common Stock that holders of Series B Convertible
Preferred Stock desire to sell in the offering. In such event, the conversion
price for such shares will be the public offering price, less the underwriters'
gross spread, reduced by the Applicable Percentage set forth above.
The exact number of shares issuable upon conversion of all of the Series B
Convertible Preferred Stock and offered hereby cannot currently be estimated
but, generally, such issuances of Common Stock will vary inversely with the
market price of the Common Stock. The holders of Common Stock ownership interest
will be materially diluted by conversion of the Series B Convertible Preferred
Stock, which dilution will depend on, among other things, the future market
price of the Common Stock and the conversion decisions made by holders of the
Series B Convertible Preferred Stock. Investors should review carefully the
material under "Risk Factors--Effect of Series A Convertible Preferred Stock and
the Series B Convertible Preferred Stock" and "Securities Market Factors" as
well as the other information contained or incorporated by reference in this
Prospectus.
General
Under applicable Delaware law and the Company's Certificate of Incorporation,
the Company's Board of Directors has the authority, without further action by
the stockholders, to issue additional shares of preferred stock in one or more
series and to fix the rights, preferences, privileges and restrictions granted
to or imposed upon any series of unissued preferred stock and to fix the number
of shares constituting any series and the designation of such series, without
any further vote or action by the stockholders. Issuance of additional shares of
preferred stock may adversely affect the rights, privileges and preferences
afforded the holders of Common Stock, including a decrease in the amount
available for distribution to holders of the Common Stock in the event of a
liquidation or payment of preferred dividends. The issuance of additional shares
of preferred stock, and shares of Common Stock into which such preferred stock
may be converted, may, among other things, have the effect of delaying,
deferring or preventing a change in control of the Company, discouraging tender
offers for the Company and inhibiting certain equity issuances until
substantially all such shares are converted or redeemed. The Company currently
has no plans to designate and/or issue any additional shares of preferred stock,
except those issuable pursuant to the Convertible Preferred Stock Warrants and
as dividends on shares of Series B Convertible Preferred Stock.
26
<PAGE>
WARRANTS AND OPTIONS
In connection with certain 1996 private placement transactions, the Company
agreed to issue to the placement agents in the transactions the Series A
Convertible Preferred Stock Warrants to purchase 108,000 shares of Series A
Convertible Preferred Stock at $25.00 per share and common stock warrants to
purchase 40,500 shares of Common Stock at $7.75 per share. Such warrants are
exercisable for a period of five years. Pursuant to its terms, the Series A
Convertible Preferred Stock is convertible at a discount of 29% to the market
price of Common Stock at the date of exercise. The number of shares of Common
Stock issuable upon exercise of the common stock warrants is also subject to
adjustment. None of such warrants had been exercised as of March 31, 1997. See
"--Common Stock" and "--Preferred Stock--Series A Convertible Preferred
Stock."
In connection with the 1997 Private Placement, the Company agreed to issue to
the Placement Agent the Series B Convertible Preferred Stock Warrants to
purchase 29,000 shares of Series B Convertible Preferred Stock at $100.00 per
share. The Series B Convertible Preferred Stock Warrants are exercisable for a
period of three years from the date of issuance for securities that are
substantially identical to the Series B Convertible Preferred Stock. In
addition, on each of the first and second anniversary of the issuance of the
Series B Convertible Preferred Stock Warrants, the Company may, at its option,
call the warrants for mandatory exercise for one-third of the original shares
issuable upon exercise, subject to adjustment, provided, that the Common Stock
issuable upon conversion of the Series B Convertible Preferred Warrant stock
have been registered for resale under the Securities Act, and a current
prospectus is available on the date of delivery of such stock. The Series B
Convertible Preferred Stock Warrants, at the option of the holder, may be
exercised on a net basis without the payment of additional consideration
pursuant to their terms, subject to the prevailing market price of the Company's
Common Stock on the date of exercise. The Company will be obligated to register
the shares of Common Stock issuable upon exercise and conversion of the Series B
Convertible Preferred Stock Warrants for resale under the Securities Act.
In addition to the warrants issued in connection with the 1996 Private
Placements and the 1997 Private Placement, the Company had outstanding as March
31, 1997 warrants to purchase an aggregate of approximately 1.1 million shares
of Common Stock (excluding approximately 450,000 shares of Common Stock offered
hereby issuable upon exercise of certain warrants issued in other private
placement transactions) at an average exercise price of $5.55 and presently
outstanding options to purchase an aggregate of approximately 7.7 million shares
of Common Stock (excluding approximately 70,000 shares of Common Stock offered
hereby issuable upon exercise of certain options issued in other private
placement transactions) at a weighted average exercise price of $6.18.
DELAWARE LAW AND LIMITATIONS ON CHANGES IN CONTROL
Section 203 of the Delaware General Corporation Law (the "DGCL") prevents an
"interested stockholder" (defined in Section 203, generally, as a person owning
15% or more of a corporation's outstanding voting stock) from engaging in a
"business combination" (as defined in Section 203) with a publicly-held Delaware
corporation for three years following the date such person became an interested
stockholder unless (i) before such person became an interested stockholder, the
board of directors of the corporation approved the transaction in which the
interested stockholder became an interested stockholder or approved the business
combination; (ii) upon consummation of the transaction that resulted in the
interested stockholder's becoming an interested stockholder, the interested
stockholder owns at least 85% of the voting stock of the corporation outstanding
at the time the transaction commenced (excluding stock held by directors who are
also officers of the corporation and by employee stock plans that do not provide
employees with the right to determine confidentially whether shares held subject
to the plan will be tendered in a tender or
27
<PAGE>
exchange offer); or (iii) following the transaction in which such person became
an interested stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of stockholders by the
affirmative vote of the holders of 66-2/3% of the outstanding voting stock of
the corporation not owned by the interested stockholder.
The Company's bylaws require advance notice of any action (including
nomination of directors) to be proposed at any annual or special meeting of
stockholders and set forth other specific procedures that a stockholder must
follow to properly bring any business in front of such a meeting. In addition,
the bylaws provide that a special meeting of the Company's stockholders may only
be called by the Chairman of the Board of Directors of the Company or by a
majority of the total number of directors which the Company would have if there
were no vacancies; no such meeting may be called by the stockholders. A director
may be removed from office at any time, with or without cause by stockholders,
but only by the affirmative vote of the holders of at least 75% of the then-
outstanding shares of voting stock of the Company. Any amendment of the bylaws
or certain provisions of the Certificate of Incorporation by stockholders will
require the affirmative vote of the holders of at least 75% of the shares of
Common Stock then outstanding.
These bylaw provisions, the provisions authorizing the Board of Directors to
issue preferred stock without stockholder approval and the provisions of Section
203 of the DGCL could have the effect of delaying, deferring or preventing a
change in control of the Company or the removal of existing management.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Certificate of Incorporation provides that a director of the
Company will not be personally liable to the Company or its stockholders for
monetary damages for any breach of fiduciary duty as a director, except in
certain cases where liability is mandated by the Delaware General Corporation
Law. This provision has no effect on any non-monetary remedies that may be
available to the Company or its stockholders, nor does it relieve the Company or
its directors from compliance with federal or state securities laws. The
Certificate of Incorporation also provides that each person who is or was or had
agreed to become a director or officer of the Company or of certain affiliated
entities shall be indemnified by the Company, in accordance with its Bylaws, to
the full extent permitted from time to time by the Delaware General Corporation
Law and that the Company may enter into one or more agreements with any person
which provide for indemnification greater or different therefrom. The bylaws
provide that each person who was or is made a party or is threatened to be made
a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or she
or a person of whom he or she is the legal representative is or was a director,
officer or employee of the Company or is or was serving at the request of the
Company as a director, officer, employee or agent of another enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action in an official capacity as a director,
officer, employee or agent, or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Company to the fullest extent authorized by the Delaware General Corporation
Law. The bylaws also provide for advancement of expenses. Following any "change
in control" of the Company of the type required to be reported under Item 1 to
Form 8-K promulgated under the Exchange Act, any determination of entitlement to
indemnification under the Company's Bylaws must be made by independent legal
counsel.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock, the Series A
Convertible Preferred Stock and the Series B Convertible Preferred Stock is
ChaseMellon Shareholder Services, L.L.C.
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<PAGE>
PLAN OF DISTRIBUTION
The Selling Stockholders have advised the Company that the sale or
distribution of the Common Stock may be effected directly to purchasers by the
Selling Stockholders or by pledgees, donees, transferees or other successors in
interest, as principals or through one or more underwriters, brokers, dealers or
agents from time to time in one or more transactions (which may involve crosses
or block transactions) (i) on any stock exchange, in the Nasdaq National Market,
or in the over-the-counter market, (ii) in transactions otherwise than on any
stock exchange or in the over-the-counter market, or (iii) through the writing
of options (whether such options are listed on an options exchange or otherwise)
on, or settlement of short sales of, the Common Stock. Any of such transactions
may be effected at market prices prevailing at the time of sale, at prices
related to such prevailing market prices, at varying prices determined at the
time of sale or at negotiated or fixed prices, in each case a determined by the
Selling Stockholder or by agreement between the Selling Stockholder and
underwriters, brokers, dealers or agents, or purchasers. If the Selling
Stockholders effect such transactions by selling Common Stock to or through
underwriters, brokers, dealers or agents, such underwriters, brokers, dealers or
agents may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholders or commissions from purchaser of
Common Stock for whom they may act as agent (which discounts, concessions or
commissions as to particular underwriters, brokers, dealers or agents may be in
excess of those customary in the types of transactions involved). The Selling
Stockholders and any brokers, dealers or agents that participate in the
distribution of the Common Stock may be deemed to be underwriters, and any
profit on the sale of Common Stock by them and any discounts, concessions or
commissions received by any such underwriters, brokers, dealers or agents may be
deemed to be underwriting discounts and commissions under the Securities Act.
Under the securities laws of certain states, the Common Stock may be sold in
such states only through registered or licensed brokers or dealers. In
addition, in certain states the Common Stock may not be sold unless the Common
Stock has been registered or qualified for sale in such state or an exemption
from registration or qualification is available and is complied with.
The Company will pay all of the expenses incident to the registration,
offering and sale of the Common Stock to the public hereunder other than
commissions, fees and discounts of underwriters, brokers, dealers and agents.
The Company has agreed to indemnify the Selling Stockholders and their
controlling persons against certain liabilities, including liabilities under the
Securities Act. The Company estimates that the expenses of the offering to be
borne by it will be approximately $145,000. The Company will not receive any
proceeds from the sale of any of the Common Stock by the Selling Stockholders.
Cappello & Laffer Capital Corp. acted as placement agent in connection with
the placement of the Series B Convertible Preferred Stock which has been or will
be converted into the Common Stock offered hereby, and said firm received a fee
and warrants from the Company in connection therewith.
The Company has informed the Selling Stockholders that the anti-manipulation
provisions of Regulation M under the Exchange Act may apply to purchases and
sales of Common Stock by the Selling Stockholders, and that there are
restrictions on market-making activities by persons engaged in the distribution
of the Common Stock. The Company has also advised the Selling Stockholders that
if a particular offer of Common Stock is to be made on terms constituting a
material change from the information set forth above with respect to the Plan of
Distribution, then to the extent required, a Prospectus Supplement must be
distributed setting forth such terms and related information as required.
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<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby has been passed
upon for the Company by McKenna & Stahl, Irvine, California. Harry S. Stahl, a
partner in McKenna & Stahl, owns options to acquire 30,000 shares of Common
Stock.
EXPERTS
The consolidated financial statements incorporated herein by reference have
been audited by BDO Seidman, LLP, independent certified public accountants, to
the extent and for the periods set forth in their report appearing elsewhere
herein and in the Registration Statement, and are included in reliance upon such
report given upon the authority of said firm as experts in auditing and
accounting.
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===============================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY ANY SELLING STOCKHOLDER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE OF THIS PROSPECTUS.
______________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information.............. 2
Prospectus Summary................. 4
Risk Factors....................... 8
Use of Proceeds.................... 13
Recent Developments................ 13
Shares Available for Future Sale... 14
Selling Stockholders............... 16
Description of Capital Stock....... 22
Plan of Distribution............... 29
Legal Matters...................... 30
Experts............................ 30
</TABLE>
===============================================================================
KOO KOO ROO, INC.
COMMON STOCK
(Par Value $.01 per Share)
___________________
PROSPECTUS
___________________
__________, 1997
===============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the fees and expenses in connection with the
issuance and distribution of the securities being registered hereunder. All of
the costs identified below will be paid by the Company. Except for the SEC
registration fee, all amounts are estimates.
<TABLE>
<S> <C>
SEC Registration Fee............................. $ 12,145
Nasdaq Listing Fee............................... 17,500
Printing and Engraving Expenses.................. 12,000
Legal Fees and Expenses.......................... 75,000
Accounting Fees and Expenses..................... 5,000
Registrar and Transfer Agent Fees and Expenses... 5,000
Blue Sky Fees and Expenses....................... 10,000
Miscellaneous Expenses........................... 8,355
--------
Total......................................... $145,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Restated Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), provides that a director of the Company will
not be personally liable to the Company or its stockholders for monetary damages
for any breach of fiduciary duty as a director, except in certain cases where
liability is mandated by the Delaware General Corporation Law. This provision
has no effect on any non-monetary remedies that may be available to the Company
or its stockholders, nor does it relieve the Company or its directors from
compliance with federal or state securities laws. The Certificate of
Incorporation also provides that each person who is or was or had agreed to
become a director or officer of the Company or of certain affiliated entities
shall be indemnified by the Company, in accordance with its Bylaws, to the
fullest extent permitted from time to time by the Delaware General Corporation
Law and that the Company may enter into one or more agreements with any person
which provide for indemnification greater or different therefrom. The Bylaws
provide that each person who was or is made a party or is threatened to be made
a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or she
or a person of whom he or she is the legal representative is or was a director,
officer or employee of the Company or is or was serving at the request of the
Company as a director, officer, employee or agent of another enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action in an official capacity as a director,
officer, employee or agent, or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Company to the fullest extent authorized by the Delaware General Corporation
Law. The Bylaws also provide for advancement of expenses. Following any "change
in control" of the Company of
II-1
<PAGE>
the type required to be reported under Item 1 to Form 8-K promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), any
determination of entitlement to indemnification under the Company's Bylaws must
be made by independent legal counsel.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
---------- ----------------------
<C> <S>
4.1 Form of Certificate for Common Stock of Registrant /1/
4.2 Form of Certificate for 5% Convertible Preferred Stock of Registrant /2/
4.3 Certificate of Amendment to the Restated Certificate of Incorporation of Registrant /2/
4.4 Certificate of Designations of 5% Convertible Preferred Stock of Registrant /2/
4.5 Form of Warrant Agreement used in connection with the Company's February 1995 private placement
of Company Common Stock and Warrants /3/
4.6 Form of Warrant Agreement used in connection with the Company's June 1995 private placement
of Company Common Stock and Warrants /3/
4.7 Form of Stock Purchase Agreement dated March 12, 1996 by and among the Registrant and the
purchasers named therein /2/
4.8 Form of Preferred Stock Investment Agreement dated March 20, 1996 by and among the Registrant
and the purchasers named therein /2/
***4.9 Form of 5% Convertible Preferred Stock Warrant Agreement dated March 20, 1996
***4.10 Form of Common Stock Warrant Agreement dated March 12, 1996
4.11 Certificate of Designations of Series B Convertible Preferred Stock of Registrant /4/
4.12 Form of Certificate for Series B Convertible Preferred Stock /4/
4.13 Series B Preferred Stock Investment Agreement dated February 27, 1997 by and among the
Registrant and the purchasers named therein /4/
**4.14 Form of Series B Preferred Stock Warrant Agreement dated February 27, 1997
**5.1 Opinion of McKenna & Stahl
**23.1 C Consent of McKenna & Stahl (included in Exhibit 5.1)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
---------- ----------------------
<C> <S>
*23.2 Consent of BDO Seidman, LLP
***24.1 Power of Attorney
</TABLE>
- --------------------
* Filed herewith.
** To be filed by amendment.
*** Previously filed.
/1/ Incorporated by reference from the Company's Registration Statement on Form
S-18 (No. 33-42487-NY) declared effective on October 15, 1991.
/2/ Incorporated by reference from the Company's Current Report on Form 8-K
dated March 18, 1996.
/3/ Incorporated by reference from the Company's Amendment No. 2 to its Annual
Report on Form 10-K/A for the fiscal year ended June 30, 1995.
/4/ Incorporated by reference from the Company's Current Report on Form 8-K
dated February 27, 1997.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer of controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of is counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue .
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by
II-4
<PAGE>
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized in the City of Los Angeles, State of California, as of the 5th
day of May, 1997.
KOO KOO ROO, INC.
By: /s/ Kenneth Berg
-------------------------------------
Kenneth Berg, Chairman of
the Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1933, this
Amendment No. 1 to Registration Statement has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Kenneth Berg Chairman of the Board, May 5, 1997
- ------------------------- Chief Executive
Kenneth Berg Officer and Director
(Principal Executive
Officer)
/s/ Robert F. Kautz President of Koo Koo Roo, May 5, 1997
- ------------------------- Inc., Chief Financial Officer
Robert F. Kautz and Director (Principal
Financial Officer)
/s/ John S. Kaufman President of Koo Koo May 5, 1997
- ------------------------- Roo USA and Director
John S. Kaufman
</TABLE>
S-1
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Michael D. Mooslin President of Koo Koo Roo May 5, 1997
- ------------------------- International and Director
Michael D. Mooslin
</TABLE>
S-2
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Mary E. Arnold Vice President Finance May 5, 1997
- ------------------------- (Principal Accounting Officer)
Mary E. Arnold
* Treasurer and Director May 5, 1997
- -------------------------
Morton J. Wall
* President of Arrosto May 5, 1997
- ------------------------- Coffee Company and Director
Kory L. Berg
* Director May 5, 1997
- -------------------------
Lee A. Iacocca
* Director May 5, 1997
- -------------------------
Donald Wohl
* Director May 5, 1997
- -------------------------
Jess M. Ravich
* Director May 5, 1997
- -------------------------
Mel Harris
</TABLE>
* By: /s/ Ronald D. Garber
--------------------
Ronald D. Garber
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Exhibit No. Description of Exhibit Page No.
----------- --------------------------------------------------------------------------- ----------
<C> <S> <C>
4.1 Form of Certificate for Common Stock of Registrant /1/
4.2 Form of Certificate for 5% Convertible Preferred Stock of Registrant /2/
4.3 Certificate of Amendment to the Restated Certificate of Incorporation
of Registrant /2/
4.4 Certificate of Designations of 5% Convertible Preferred Stock /2/
4.5 Form of Warrant Agreement used in connection with the Company's
February 1995 private placement of Company Common Stock and
Warrants /3/
4.6 Form of Warrant Agreement used in connection with the Company's
June 1995 private placement of Company Common Stock and
Warrants /3/
4.7 Form of Stock Purchase Agreement dated March 12, 1996 by and
among the Registrant and the purchasers named therein /2/
4.8 Form of Preferred Stock Investment Agreement dated March 20, 1996
by and among the Registrant and the purchasers named therein /2/
***4.9 Form of 5% Convertible Preferred Stock Warrant Agreement dated
March 20, 1996
***4.10 Form of Common Stock Warrant Agreement dated March 12, 1996
4.11 Certificate of Designations of 6% Convertible Preferred Stock of
Registrant /4/
4.12 Form of Certificate for 6% Convertible Preferred Stock /4/
4.13 Series B Preferred Stock Investment Agreement dated February 27,
1997 by and among the Registrant and the purchasers named therein /4/
**4.14 Form of Series B Preferred Stock Warrant Agreement dated February
27, 1997
**5.1 Opinion of McKenna & Stahl
**23.1 Consent of McKenna & Stahl (included in Exhibit 5.1)
*23.2 Consent of BDO Seidman, LLP
***24.1 Power of Attorney
</TABLE>
- -------------------------
* Filed herewith.
** To be filed by amendment.
*** Previously filed.
<PAGE>
1 Incorporated by reference from the Company's Registration Statement on Form
S-18 (No. 33-42487-NY) declared effective on October 15, 1991.
2 Incorporated by reference from the Company's Current Report on Form 8-K
dated March 18, 1996.
3 Incorporated by reference from the Company's Amendment No. 2 to its Annual
Report on Form 10-K/A for the fiscal year ended June 30, 1995.
4 Incorporated by reference from the Company's Current Report on Form 8-K
dated February 27, 1997.
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Koo Koo Roo, Inc.
Los Angeles, California
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement on Form S-3 (333-23263) of our report dated March 5,
1997, relating to the consolidated financial statements of Koo Koo Roo, Inc.
which is incorporated by reference in such Prospectus.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO SEIDMAN, LLP
Los Angeles, California
May 5, 1997
