<PAGE>
SCHEDULE 14A INFORMATION
(RULE 14a-101)
SCHEUDLE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
KOO KOO ROO, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: Not
Applicable
(2) Aggregate number of securities to which transaction applies: Not
Applicable
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: Not Applicable
(4) Proposed maximum aggregate value of transaction: Not Applicable
(5) Total fee paid: Not Applicable
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
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Notes:
<PAGE>
KOO KOO ROO, INC.
11075 SANTA MONICA BOULEVARD
SUITE 225
LOS ANGELES, CALIFORNIA 90025
-----------------------
NOTICE AND PROXY STATEMENT
FOR ACTION TO BE TAKEN BY WRITTEN CONSENT
IN LIEU OF A MEETING OF STOCKHOLDERS
To Our Stockholders:
Attached hereto is a Proxy Statement (the "Proxy Statement") which solicits
the written consent of the stockholders of Koo Koo Roo, Inc., a Delaware
corporation (the "Company"), for the following action:
To amend the Company's Certificate of Incorporation to increase the
authorized shares of common stock, par value $.01 per share (the
"Common Stock"), from 50,000,000 to 75,000,000 shares (the
"Amendment").
THE BOARD OF DIRECTORS HAS APPROVED THE AMENDMENT, DEEMS IT ADVISABLE AND
RECOMMENDS THAT STOCKHOLDERS APPROVE IT. This proposed Amendment is described in
detail in the Proxy Statement attached to this notice and incorporated herein by
this reference.
Substantially all of the 50,000,000 shares presently authorized have been
issued. Accordingly, rather than deferring consideration of the Amendment to
the next annual meeting of stockholders or incurring the expense of a special
meeting, the Board of Directors believes that it is in the best interests of the
Company and its stockholders to solicit such approval as of the earliest
possible date. In order to accomplish this objective, the Board of Directors is
hereby soliciting the approval of the Amendment by stockholders by written
consent, in lieu of a meeting of stockholders.
By Order of the Board of Directors
RONALD D. GARBER
Secretary
Los Angeles, California
April ___, 1998
- --------------------------------------------------------------------------------
IN ORDER TO ENSURE YOUR REPRESENTATION IN THE ACTION TO BE TAKEN BY WRITTEN
CONSENT, YOU ARE REQUESTED TO SIGN AND DATE THE ENCLOSED CONSENT CARD AS
PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED ENVELOPE (TO WHICH NO POSTAGE
NEED BE AFFIXED IF MAILED IN THE UNITED STATES).
- --------------------------------------------------------------------------------
<PAGE>
KOO KOO ROO, INC.
11075 SANTA MONICA BOULEVARD
SUITE 225
LOS ANGELES, CALIFORNIA 90025
---------------------
PROXY STATEMENT
FOR STOCKHOLDER ACTION BY WRITTEN CONSENT
---------------------
This Proxy Statement is furnished to the stockholders by the Board of
Directors of Koo Koo Roo, Inc., a Delaware corporation (the "Company"), for
solicitation of the written consent of stockholders to approve an amendment to
the Company's Restated Certificate of Incorporation to increase the authorized
shares of Common Stock from 50,000,000 to 75,000,000 shares (the "Amendment").
It is anticipated that the mailing to stockholders of this Proxy Statement and
the enclosed Consent Card will commence on or about April ___, 1998. The
procedure for indicating approval of the Amendment is described in detail in
this Proxy Statement.
GENERAL INFORMATION
BACKGROUND
Substantially all of the 50,000,000 shares presently authorized have been
issued. Accordingly, rather than deferring consideration of the Amendment to
the next annual meeting of stockholders or incurring the expense of a special
meeting, the Board of Directors believes that it is in the best interests of the
Company and its stockholders to solicit such approval as of the earliest
possible date. In order to accomplish this objective, the Board of Directors is
hereby soliciting the approval of the Amendment by stockholders by written
consent, in lieu of a meeting of stockholders.
VOTING SHARES AND VOTING RIGHTS
Stockholders of record at the close of business on April ___, 1998 (the
"Record Date") are entitled to approve the Amendment. There were 49,850,000
shares of Common Stock of the Company issued and outstanding on that date (net
of treasury shares). Each share of the Common Stock is entitled to one vote. The
Amendment must be approved by the holders of a majority of the outstanding
shares of the Common Stock of the Company.
The beneficial ownership of the Company's Common Stock by certain
stockholders and by each of the Company's directors, certain of its most highly-
compensated executive officers and all executive officers and directors as a
group is set forth below under "Beneficial Ownership of Principal Stockholders,
Directors and Executive Officers."
Under the Company's Restated Certificate of Incorporation and Bylaws and
pursuant to applicable Delaware law, any action which may be taken at any annual
or special meeting of the
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stockholders of the Company may be taken without a meeting, without prior notice
and without a vote, if a consent or consents in writing, setting forth the
action so taken, is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted. The matter being considered by the stockholders is being
submitted for action by written consent, rather than by votes cast at a meeting.
The text of the Amendment being submitted for stockholder adoption by written
consent is set forth in full under "Proposed Amendment to the Company's Restated
Certificate of Incorporation." The Amendment will be deemed to have been
approved upon receipt by the Company of Consent Cards which have not previously
been revoked representing the approval of a majority of the shares of Common
Stock issued and outstanding on the Record Date, provided that such approval is
received on or prior to May ___, 1998 (the "Termination Date"). If, however,
sufficient written consents have not been received by the Termination Date, the
Company reserves the right to extend the solicitation of written consents made
hereby except that, under Delaware law, such solicitation may not be extended
past June ___, 1998. Any election to extend this consent solicitation will be
made by the Company by news release or other similar public announcement. The
date on which the Amendment is deemed approved hereunder is referred to as the
"Effective Date."
Stockholders are being requested to indicate approval of the Amendment by
executing the enclosed Consent Card and by checking the box which corresponds to
the action the stockholder wishes to take. Failure to check any of the boxes
will, if the Consent Card has been signed, constitute approval of the Amendment.
The text of the Amendment has not been set out on the Consent Card itself
because of space limitations. Nevertheless, signing and indicating approval on
the Consent Card will be deemed to be written consent to the approval of the
Amendment. Consent Cards that reflect abstentions will be treated as voted for
purposes of determining the approval of the Amendment and will have the same
effect as a vote against the Amendment; Consent Cards that reflect "broker non-
votes" will be treated as unvoted for purposes of determining approval and will
not be counted as votes for or against the Amendment.
Execution of the Consent Card will constitute your approval, as a
stockholder of the Company, of the Amendment. Stockholders who do not consent to
the approval of the Amendment by execution of the Consent Card will nonetheless
be bound by the Amendment if sufficient written consents are received by the
Company to approve such Amendment as set forth above. No dissenters or similar
rights apply to stockholders who do not approve the Amendment.
The Company will pay the entire cost of the preparation and mailing of this
Proxy Statement and all other costs of this solicitation. Following the initial
mailing of this Proxy Statement, the Company and its agents may also solicit
proxies by mail, telephone, facsimile or in person; employees of the Company who
assist in such activities will not receive additional compensation in connection
therewith. The Company will reimburse banks, brokerage firms and other
custodians, nominees and fiduciaries for the reasonable expenses incurred by
them in sending proxy materials to stockholders. The Company has retained
____________ to assist in the solicitation of proxies at an estimated cost of
$_____, plus expenses.
The Company's principal executive offices are located at 11075 Santa Monica
Boulevard, Suite 225, Los Angeles, California 90025; its telephone number is
(310) 479-2080
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DELIVERY OF WRITTEN CONSENTS
The Board of Directors requests that each stockholder complete, sign, date
and mail or deliver the Consent Card to Chase Mellon Shareholder Services, LLC
at the following address:
Chase Mellon Shareholder Services, LLC
___________________________________
___________________________________
An addressed envelope is provided for your convenience in returning the Consent
Card. YOUR VOTE IS IMPORTANT. ACCORDINGLY, THE CONSENT CARD PROVIDED WITH THIS
PROXY STATEMENT SHOULD BE RETURNED AS SOON AS POSSIBLE AND, IN ANY EVENT, PRIOR
TO MAY ___, 1998. DO NOT SEND CONSENT CARDS TO THE COMPANY.
REVOCATION OF WRITTEN CONSENTS
Any Consent Card executed and delivered by a stockholder may be revoked by
delivering written notice of such revocation prior to the Effective Date to the
Company at the address set forth below:
Koo Koo Roo, Inc.
11075 Santa Monica Boulevard
Suite 225
Los Angeles, California 90025
Attention: Secretary
Consent Cards may not be revoked after the Effective Date.
NOTICE OF EFFECTIVENESS OF AMENDMENT
If the Amendment is approved by stockholders and the Effective Date occurs,
the Company will promptly give notice thereof to all stockholders who have not
consented in writing to the extent required by Section 228(d) of the Delaware
General Corporation Law.
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BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information as of March 31, 1998
with respect to the beneficial ownership of the Company's Common Stock, which
constitutes the Company's only outstanding class of voting securities, by (i)
each person who, to the knowledge of the Company, beneficially owned more than
5% of the Common Stock, (ii) each director of the Company, (iii) the Named
Executive Officers (as defined below) and (iv) all executive officers and
directors of the Company as a group. As of March 31, 1998, 49,850,000 shares of
Common Stock were issued and outstanding.
<TABLE>
<CAPTION>
NAME AND ADDRESS(1) NUMBER OF SHARES OWNED(2) PERCENT OF CLASS
------------------- ------------------------- ----------------
<S> <C> <C>
Kenneth Berg 3,644,116 (3) 7.2%
A. William Allen --- (4) *
Mel Harris --- *
Lee A. Iacocca 309,000 (5) *
Robert F. Kautz --- *
Don Wohl --- *
Ronald D. Garber 151,000 (6) *
John Kaufman 120,000 (7) *
William M. McKay --- *
All Directors 580,000 (8) 1.2%
and Named Executive Officers
as a Group (9 persons)
</TABLE>
______________________
* Represents less than 1% of the outstanding Common Stock.
(1) The address of Kenneth Berg, A. William Allen, John Kaufman and Ronald D.
Garber is in care of the Company, 11075 Santa Monica Boulevard, Suite 225,
Los Angeles, California 90025. The address of Mr. Iacocca is 1440 South
Sepulveda Blvd., Third Floor, Los Angeles, California 90025. The address
of Mr. Wohl is 1800 Avenue of the Stars, Suite 1114, Los Angeles,
California 90067. The address of Mr. Harris is 10800 Biscayne Boulevard,
Penthouse Floor, North Miami, Florida 33161. The address of Mr. Kautz is
1333 Second Street, First Floor, Santa Monica, California 90401.
(2) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them, subject to community property laws
where applicable. A person is deemed to be the beneficial owner of
securities
4
<PAGE>
that can be acquired by such person within 60 days of a specified date as
provided for in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended. Each beneficial owner's percentage is determined by assuming that
options or warrants that are held by such person (but not those held by any
other person) and which are exercisable within 60 days of the date of the
above table have been exercised. Further, the amounts do not give effect to
any conversion of outstanding shares of the Company's Series A Convertible
Preferred Stock or Series B Convertible Preferred Stock because the number
of shares of Common Stock deemed to be beneficially owned by such persons
cannot be estimated, although such ownership, if any, is indicated in the
footnotes to the table. The number of shares of Common Stock issuable is
dependent on future trading prices of the Common Stock, and the conversion
formulas applicable to the Series A Convertible Preferred Stock and the
Series B Convertible Preferred Stock, as applicable, at the time of
conversion. As of the date of the table, there were outstanding 440 shares
of Series A Convertible Preferred Stock and 21,723 shares of Series B
Convertible Preferred Stock.
(3) Kenneth Berg's holdings include: (a) 830,000 shares of Common Stock in
respect of which Mr. Berg has only the right to vote pursuant to a proxy,
and over which he does not possess any control over disposition and
transfer (Mr. Berg disclaims beneficial ownership of such shares); and (b)
886,666 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of the date of the table.
(4) Excludes shares of Common Stock issuable upon exercise of options, none of
which are exercisable within 60 days of the date of the table.
(5) Includes _______ shares of Common Stock issuable upon exercise of options
within 60 days of the date of the table.
(6) Includes 151,000 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of the date of the table.
(7) Includes _________ shares of Common Stock issuable upon exercise of options
within 60 days of the date of the table.
(8) Includes _________ shares of Common Stock reserved for issuance pursuant
to the Company's Stock Awards Plan and non-plan options and warrants to
purchase _________ shares of Common Stock, all of which are exercisable
within 60 days of the date of the table.
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PROPOSED AMENDMENT TO THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION
GENERAL
The Board has approved, deems it advisable and recommends that the
stockholders approve the Amendment which would amend the Company's Certificate
of Incorporation to increase the authorized shares of Common Stock to 75,000,000
shares. Authorizing the Company to issue more shares than currently authorized
by the Restated Certificate of Incorporation will not affect any substantive
rights, powers or privileges of holders of shares of Common Stock, except to the
extent such holders are diluted, pro rata, by the issuance of additional shares
of Common Stock.
As of March 31, 1998, 49,850,000 shares of Common Stock were issued and
outstanding. In addition, as of such date the Company had issued and outstanding
440 shares of its Series A Convertible Preferred Stock, and warrants to acquire
shares of Series A Convertible Preferred Stock (the "Series A Convertible
Preferred Stock Warrants"), 21,723 shares of its Series B Convertible Preferred
Stock, and warrants to acquire shares of Series B Convertible Preferred Stock
(the "Series B Convertible Preferred Stock Warrants"). The Company also had
issued and outstanding options to purchase 3,509,228 shares of Common Stock at
an average exercise price of $1.56 per share, of which options to purchase
___________ shares at an average price of $_______ per share were exercisable.
The Company also had issued and outstanding warrants to purchase ______ shares
of Common Stock at an average price of $_____ per share, of which warrants for
_____ share of Common Stock were exercisable as of such date.
CONSEQUENCES IF STOCKHOLDER APPROVAL IS NOT OBTAINED
If the stockholder approval sought hereby is not obtained, the Company will
be prohibited under its Certificate of Incorporation from issuing more than
150,000 shares of Common Stock in respect of the shares of Series A Convertible
Preferred Stock, Series B Convertible Preferred Stock and the outstanding
options to purchase and warrants exercisable into shares of Common Stock (based
on the number of shares of Common Stock issued and outstanding on March 31,
1998). Unless the approval sought hereby is granted, the Company will not be
able to issue additional shares of Common Stock to satisfy any obligations it
has to existing holders of convertible preferred stock, options and warrants. In
such event, the holders of shares of convertible preferred stock, options and
warrants may have the right to seek legal remedies as a result of the inability
to convert or exercise, as the case may be, such securities into shares of
Common Stock. Such remedies could include the payment of cash in an amount equal
to the value of the shares of Common Stock issuable upon the exercise or
conversion of such securities, as applicable, less the additional consideration,
if any, required to be paid by the holder thereof or the requirement that the
Company issue additional shares of Common Stock. There can be no assurance that
the Company will have available the cash resources to satisfy any such
obligations. Among other things, the Company would be prohibited from issuing
shares of Common Stock, or securities convertible into or exercisable for Common
Stock, to finance any such obligations or otherwise to provide working capital.
If the Company were obligated to make cash payments to the holders of shares of
the convertible preferred stock, options or warrants, such payments could have a
material adverse effect on the Company's financial position and its ability to
execute its growth plan.
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As noted above, the exact number of shares issuable upon conversion of the
remaining shares of Series A Convertible Preferred Stock and Series B
Convertible Preferred Stock cannot currently be estimated. Assuming a
conversion price of $____ per share, however, the Company's remaining liability
would be to issue approximately ____ shares of Common Stock in respect of the
convertible preferred stock (assuming no adjustment is required due to any delay
in issuing such shares). The current holders of Common Stock will be diluted by
the conversion of such shares and may be very substantially diluted depending on
the future market price of the Common Stock. See "Effects of Amendment on
Holders of Common Stock."
EFFECTS OF THE AMENDMENT ON HOLDERS OF COMMON STOCK
The Amendment will have no effect on the rights or privileges of existing
holders of Common Stock except to extent that the interest of each such
stockholder in the economic results and voting rights of the Company are diluted
pro rata based on the number of shares owned by existing stockholders prior to
any issuance.
The exact number of shares issuable upon full of the remaining shares of
Series A Convertible Preferred Stock and Series B Convertible Preferred Stock
cannot currently be estimated but, generally, the number of shares of Common
Stock issuable upon full conversion of such shares will vary inversely with the
market price of the Common Stock. The number of shares of Common Stock issuable
in connection with the Series A Convertible Preferred Stock, including the
shares of Series A Convertible Preferred Stock issuable upon the conversion of
the Series A Convertible Preferred Stock Warrants, and the Series B Convertible
Preferred Stock, including the shares of Series B Convertible Preferred Stock
issuable upon the conversion of the Series B Convertible Preferred Stock
Warrants, is not a linear function of the market price of the Common Stock. The
number of shares issuable will increase at an increasing rate as such market
price decreases (and decrease at a decreasing rate as such market price
increases, subject to the maximum market price per share used in connection with
conversion of Series A Convertible Preferred Stock of $_____ per share) relative
to a given assumed market price. Assuming a market price per share of Common
Stock of $3.125, the last reported sale price per share as reported by Nasdaq on
March 31, 1998 and the low trade in the previous five trading days of $1.56, the
Company would have been obligated to issue approximately 1,900,000 shares of
Common Stock to satisfy the conversion rights of the holders of the remaining
outstanding shares of convertible preferred stock. The current holders of
Common Stock will be diluted by additional conversions of convertible preferred
stock. On April 2, 1998, the last reported sales price of the Common Stock on
the Nasdaq National Market was $3.0625 per share. The information presented
above is not intended to constitute a prediction as to the future market price
of the Common Stock or as to the number of shares of Common Stock which will be
issued in respect of the remaining convertible preferred stock and related
warrants. See "Capital StockPreferred Stock."
Under applicable Delaware law and the Company's Restated 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. 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
7
<PAGE>
and inhibiting certain equity issuances until substantially all such shares of
preferred stock are converted or redeemed. The Company has no present agreement
or intention to issue any shares of preferred stock or any of the additional
shares of Common Stock to be authorized by the proposed Amendment, except that
(i) as indicated above, the Company has obligations to issue shares of Common
Stock under outstanding shares of convertible preferred stock, options and
warrants as summarized elsewhere in this Proxy Statement and (ii) the Company
has stated in recent reports and public statements that it intends to raise a
moderate amount of growth capital in 1998 to achieve its development plans in
core markets. As of the date of this Proxy Statement, the Company has not
determined what form any such additional capital will take or received
commitments from any investors.
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
To the knowledge of the Company, no person who presently is or has been a
director or executive officer of the Company since January 1, 1997 has an
interest in the adoption of the Amendment, except that (i) the Company
understands that Mr. Alex Cappello, members of his family and employees of his
investment firm hold warrants to acquire shares of Series B Convertible
Preferred Stock and (ii) all executive officers and certain directors hold stock
options issued by the Company pursuant to plans sponsored by the Company and
other arrangements. Each such person may be deemed interested in the approval
of the Amendment because such approval is necessary to permit such persons to
exercise or convert such securities and receive shares of Common Stock.
NO APPRAISAL OR DISSENTERS' RIGHTS; NO PREEMPTIVE RIGHTS
Under applicable Delaware law, stockholders are not entitled to any
statutory dissenters' rights or appraisal of their shares of Common Stock in
connection with the Amendment. Existing stockholders have no preemptive rights
in respect of any of the securities to be issued upon conversion of the Series A
Convertible Preferred Stock or Series B Convertible Preferred Stock, or any
other securities issuances by the Company.
VOTE REQUIRED
Stockholder approval of the Amendment requires the affirmative vote of
the holders of a majority of the shares of Common Stock entitled to vote
thereon. THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE AMENDMENT.
Form of Amendment
As so amended, the first sentence of Article IV of the Restated Certificate
of Incorporation would read as set forth below:
The total number of shares of stock which the Corporation shall have
authority to issue is 80,000,000, consisting of 5,000,000 shares of
preferred stock, par value $.01 per share (hereinafter referred to as
"Preferred Stock"), and 75,000,000 shares of common stock, par value
$.01 per share (hereinafter referred to as "Common Stock").
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<PAGE>
The Amendment will be deemed to have been approved upon receipt by the
Company on or prior to the Termination Date of Consent Cards which have not
previously been revoked representing the approval of a majority of the shares of
Common Stock issued and outstanding on the Record Date.
9
<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, 1998, 49,850,000 shares of Common Stock, 440 shares of Series A
Convertible Preferred Stock and 21,723 shares of Series B Convertible Preferred
Stock were issued and outstanding.
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.
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 of this Prospectus, 1,350,000 of such shares have been designated as
Series A Convertible Preferred Stock and 400,000 of such shares have been
designated as Series B Convertible Preferred Stock, 29,000 of which are subject
to Series B Convertible Preferred Stock Warrants.
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 commencing more than 90 days after the date of issuance of 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 additional 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
10
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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.
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 then-effective
conversion price applicable to the Common Stock (the "Series A Conversion
Price"). The Series A Conversion Price, as of any date, shall be the lesser of
(a) $____ (representing 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 following the date of issue) 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 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.
The shares of Series A Convertible Preferred Stock were originally issued in
March 1996.
The Series A Convertible Preferred Stock may be redeemed in whole or
in part at any time beginning 14 months after the date of issuance, 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 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, subject to the maximum Conversion
Price applicable to the Series A Convertible Preferred Stock set forth above.
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.
Series B Convertible Preferred Stock
Each share of Series B Convertible Preferred Stock is entitled to
receive dividends, payable 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 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
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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. Except as otherwise
provided by applicable law, holders of shares of Series B Convertible Preferred
Stock have no voting rights.
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 "Conversion Price"). The
Conversion Price through April 1998 shall be the lowest trading price of the
Common Stock during the five trading days immediately preceding the date of
conversion, reduced by the Applicable Percentage. The "Applicable Percentage"
for conversions of Series B Preferred Stock during March or April 1998 are 22%
and 25%, respectfully. At any date more than fourteen months after the date of
issuance, the Conversion Price will be the lesser of (a) 75% 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 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 "Conversion Cap"). The terms of the
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. The 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 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 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.
PREFERRED STOCK WARRANTS
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 (all of which have been
exercised) 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.
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In connection with the 1997 private placement transactions, 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 will be 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. Such warrants have been presented for 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.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and, in accordance therewith, files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Reports, proxy statements and other information filed by
the Company may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's Regional Offices located
at Seven World Trade Center, New York, New York 10048 and Citicorp Center, 500
West Madison Street, Chicago, Illinois 60621-2511, or by way of the Commission's
Internet address, http://www.sec.gov. Copies of such materials may be obtained
by mail from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. 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 BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSED AMENDMENT TO
THE RESTATED CERTIFICATE OF INCORPORATION.
By Order of the Board of Directors
RONALD D. GARBER
Secretary
Los Angeles, California
April __, 1998
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ALL STOCKHOLDERS ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE
ACCOMPANYING CONSENT CARD IN THE ENCLOSED ENVELOPE AS SOON AS POSSIBLE AND,
IN ANY EVENT, PRIOR TO May __, 1998.
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THIS WRITTEN CONSENT IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
KOO KOO ROO, INC.
CONSENT CARD FOR ACTION BY WRITTEN CONSENT OF STOCKHOLDERS TO BE EFFECTIVE AS
SET FORTH IN THE PROXY STATEMENT ACCOMPANYING THIS CONSENT CARD.
Proposed consent resolution to approve and authorize increasing the
authorized shares of Common Stock from 50,000,000 to 75,000,000
shares.
FOR [_] AGAINST [_] ABSTAIN [_]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE ABOVE PROPOSAL.
FAILURE TO CHECK ANY OF THE BOXES WITH RESPECT TO THE PROPOSAL WILL, IF THIS
CONSENT CARD HAS BEEN SIGNED AND DATED, CONSTITUTE APPROVAL OF AND CONSENT TO
THE ADOPTION OF THE PROPOSAL.
<PAGE>
__________________ ________________
Consent Card Number Number of Shares
Dated: ___________________________, 199_
_______________________________________
_______________________________________
(Signature(s) of Stockholder(s))
(NOTE--Please sign exactly as your name or
names appear on the label. If more than one
name appears, all persons so designated should
sign. When signing in a representative
capacity, please give your full title.)
Please return promptly in the enclosed envelope, which requires no postage if
mailed in the U.S.A.
DO NOT FOLD, STAPLE OR MUTILATE
