SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Boston Restaurant Associates, 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] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on
which the filing fee is calculated and state how it was
determined):
-----------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------
5) Total fee paid:
-----------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
-----------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------
3) Filing Party:
-----------------------------------------------------------------
4) Date Filed:
-----------------------------------------------------------------
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS OF
BOSTON RESTAURANT ASSOCIATES, INC.
TO BE HELD ON OCTOBER 18, 1996
-------------------
The Annual Meeting of Stockholders of Boston Restaurant Associates, Inc.
will be held on October 18, 1996 at 10:00 a.m., local time, at the offices of
Brown, Rudnick, Freed & Gesmer, 18th Floor, One Financial Center, Boston,
Massachusetts 02111, for the following purposes:
1. To elect seven (7) directors to serve for the ensuing year and until
their successors are duly elected.
2. To consider and act upon a proposal to amend the Company's 1994
NonEmployee Director Stock Option Plan.
3. To consider and act upon any matters incidental to the foregoing
purposes and any other matters which may properly come before the Meeting or any
adjourned session thereof.
The Board of Directors has fixed September 5, 1996 as the record date for
determining the stockholders entitled to notice of, and to vote at, the Meeting.
You are cordially invited to attend the Meeting.
By Order of the Board Of Directors
GORDON R. PENMAN, Secretary
Boston, Massachusetts
September 10, 1996
YOUR VOTE IS IMPORTANT
YOU ARE URGED TO SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING FORM OF PROXY,
SO THAT IF YOU ARE UNABLE TO ATTEND THE MEETING YOUR SHARES MAY NEVERTHELESS BE
VOTED. EVEN IF YOU HAVE GIVEN YOUR PROXY, THE PROXY MAY BE REVOKED AT ANY TIME
PRIOR TO EXERCISE BY FILING WITH THE SECRETARY OF THE COMPANY A WRITTEN
REVOCATION, BY EXECUTING A PROXY WITH A LATER DATE, OR BY ATTENDING AND VOTING
AT THE MEETING.
-1-
<PAGE>
BOSTON RESTAURANT ASSOCIATES, INC.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
To Be Held On October 18, 1996
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Boston Restaurant Associates, Inc., a
Delaware corporation (the "Company") with its principal executive offices at 205
Portland Street, Boston, Massachusetts 02114, for use at the Annual Meeting of
Stockholders to be held on October 18, 1996, and at any adjournment or
adjournments thereof (the "Meeting"). The enclosed proxy relating to the Meeting
is solicited on behalf of the Board of Directors of the Company and the cost of
such solicitation will be borne by the Company. It is expected that this proxy
statement and the accompanying proxy will be mailed to stockholders on or about
September 10, 1996. Certain of the officers and regular employees of the Company
may solicit proxies by correspondence, telephone or in person, without extra
compensation. The Company may also pay to banks, brokers, nominees and certain
other fiduciaries their reasonable expenses incurred in forwarding proxy
material to the beneficial owners of securities held by them.
Only stockholders of record at the close of business on September 5, 1996
will be entitled to receive notice of, and to vote at, the Meeting. As of that
date, there were outstanding and entitled to vote 5,015,293 shares of Common
Stock, $.01 par value (the "Common Stock") of the Company. Each such stockholder
is entitled to one vote for each share of Common Stock so held and may vote such
shares either in person or by proxy.
The enclosed proxy, if executed and returned, will be voted as directed on
the proxy or, in the absence of such direction, for the election of the nominees
as directors. If any other matters shall properly come before the Meeting, the
enclosed proxy will be voted by the proxies in accordance with their best
judgment. The proxy may be revoked at any time prior to exercise by filing with
the Secretary of the Company a written revocation, by executing a proxy with a
later date, or by attending and voting at the Meeting.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Meeting, seven directors are to be elected to serve until the 1997
Annual Meeting of Stockholders and until their respective successors have been
duly elected and qualified. The persons listed below in the following table have
been nominated by the Board of Directors for election as directors.
All nominees, other than Lucille Salhany and Roger Lipton, are currently
directors of the Company. It is the intention of the persons named as proxies to
vote for the election of the nominees. In the unanticipated event that any such
nominee should be unable to serve, the persons named as proxies will vote the
proxy for such substitutes, if any, as the present Board of Directors may
designate. The nominees have not been nominated pursuant to any arrangement or
understanding with any person.
-2-
<PAGE>
The following table sets forth certain information with respect to the
nominees.
Director
Name Age Position Since
- ---- --- -------- -------
George R. Chapdelaine 51 Chief Executive Officer, 1994
President, Chief Financial
Officer and Director
John P. Polcari, Jr. 65 Treasurer and Director 1994
Terrance Smith(1)(2) 50 Director 1990
Richard J. Reeves(1)(2) 49 Director 1989
Joseph J. Caruso (1)(2) 53 Director 1994
Lucille S. Salhany 50 Nominee For Director *
Roger Lipton 55 Nominee For Director *
- ---------------------
(1) Members of the Compensation Committee.
(2) Member of the Audit Committee.
* Ms. Salhany and Mr. Lipton are nominees for election as directors.
George R. Chapdelaine was elected President, Chief Executive Officer and a
director of the Company in April 1994 upon the consummation of the April 29,
1994 acquisition of 60% of the then outstanding Common Stock of the Company by
the stockholders of Pizzeria Regina, Inc. ("PRI") (the "Capucino's
Acquisition"). Following the Capucino's Acquisition, the Company changed its
name from Capucino's, Inc. to Boston Restaurant Associates, Inc. and PRI changed
its name from Boston Restaurant Associates, Inc. to Pizzeria Regina, Inc. PRI is
currently operating as a wholly owned subsidiary of the Company. Mr. Chapdelaine
joined the predecessor of PRI in 1982 and from that time until April 1994,
served as its and the PRI's President, Chief Executive Officer and a director.
Prior to that time, Mr. Chapdelaine worked in the food service industry in
various capacities, including as an independent marketing consultant, a general
manager of the Food Service division for H.P. Hood, Inc. and a sales manager for
Chiquita Brands, a subsidiary of United Brands. Mr. Chapdelaine holds an MBA
from Clark University and graduated with a B.S. in Hotel and Restaurant
Management from Oklahoma State University.
John P. Polcari, Jr. was elected Treasurer and a director of the Company in
April 1994 upon the consummation of the Capucino's Acquisition. A founder of
PRI, Mr. Polcari served as its Chairman of the Board until April 1994, at which
time he commenced serving as the Treasurer and a director of the Company. Mr.
Polcari has owned or been a principal in various restaurant, catering and other
food service operations located in Boston and Cape Cod, Massachusetts since
1954. Mr. Polcari attended the Bentley School of Accounting. Mr. Polcari is
married to Lucille Salhany, a nominee for election as a director.
-3-
<PAGE>
Richard J. Reeves cofounded the Company in May 1989 and served as a
director from that time until May 1993. In July 1993, Mr. Reeves rejoined the
Company's Board of Directors. From May 1989 to July 1991, Mr. Reeves served as
the Company's President and Chief Operating Officer. Since July 1991, Mr. Reeves
has been engaged in restaurant development as a franchisee of various
restaurants. These restaurants are not competitive with those owned and operated
by the Company. From September 1988 to March 1989, Mr. Reeves served as an
executive officer and principal stockholder of RSMG, Inc. ("RSMG") and from
March 1985 until April 1989 occupied similar positions with Reeves Associates,
Inc., both of which were privately held restaurant development companies.
Terrance A. Smith was elected a director of the Company in August 1990.
From 1988 to the present, Mr. Smith has been President of Chi-Chi's
International Operations, Inc.
Joseph J. Caruso was elected a director of the Company in connection with
the Company's 1994 public offering. Mr. Caruso is the President of Bantam Group,
Inc., a business advisory firm founded by Mr. Caruso in 1986. Mr. Caruso is
presently a member of the board of directors of Audiofile, Inc., Corion
Corporation, Haymarket Bank, Holometrix, Inc. and Tytronics, Inc. and formerly
served on the board of directors of Coffee Connection, Inc. from 1991 to 1994.
Mr. Caruso is a graduate of Northeastern University and the Harvard Business
School.
Lucille S. Salhany is a nominee for election as a director. Since September
1994, Ms. Salhany has been the President and Chief Executive Officer of the
United Paramount Network. Previously, Ms. Salhany served in various capacities
at Fox Broadcasting Company commencing in July 1991, including as its chairman
from January 1993 until her resignation in the summer of 1994. Prior to joining
Fox, Ms. Salhany served in various capacities at Paramount Pictures. Ms. Salhany
is married to Mr. Polcari, a director and the Treasurer of the Company.
Roger Lipton is a nominee for election as a director. Since February 1995,
Mr. Lipton has been President of Lipton Financial Services, Inc., an investment
banking firm specializing in the restaurant, franchising and retailing
industries, and also has been employed by Axiom Capital Management, Inc., an
NASD broker/dealer, where he is a Managing Director. From 1981 until February
1995 he was Managing Director of the Lipton Financial Services Division of
Ladenburg, Thalmann & Co., Inc., also an investment banking firm.
Ms. Salhany is married to John Polcari, a director and the Treasurer of the
Company. Other than as noted in the preceding sentence, there are no family
relationships among the Company's directors and executive officers.
The term of office of each director of the Company ends at the next annual
meeting of the Company's stockholders or when his successor is elected and
qualified.
-4-
<PAGE>
Meetings of the Board of Directors
The Board of Directors of the Company held four meetings during the fiscal
year ended April 28, 1996. The Board of Directors also acted on four occasions
by unanimous written consent in lieu of special meetings. Each current director,
other than Mr. Polcari, attended at least 75% of the aggregate number of all
meetings of the Board of Directors and committees of which he was a member
during such fiscal year.
The Board of Directors has an Audit Committee, currently composed of
Messrs. Smith, Reeves and Caruso. The functions performed by this Committee
include recommending to the Board of Directors the engagement of the independent
auditors, reviewing the scope of internal controls and reviewing the
implementation by management of recommendations made by the independent
auditors.
The Board of Directors has a Compensation Committee, currently composed of
Messrs. Smith, Reeves and Caruso. The functions of the Compensation Committee
include determining salaries, incentive plans, benefits and overall
compensation.
The Audit and Compensation Committees were established in June 1994. The
Compensation Committee held one meeting during the fiscal year ended April 28,
1996 and the Audit Committee meet on one occasion with the Company's independent
auditors during the fiscal year ended April 28, 1996.
The Board of Directors does not have a nominating committee. Nominations of
directors are considered by the whole Board of Directors.
Compensation of Directors
Directors of the Company do not receive cash compensation for their
services as directors. The Company provides health insurance benefits to its
directors and reimburses its directors for their out-of-pocket expenses in
attending Board meetings. In addition, nonemployee directors are eligible for
the grant of stock options under the 1994 Nonemployee Directors Stock Option
Plan. See "Proposal No. 2." Directors of the Company are also party to certain
indemnification agreements. See "Executive Compensation - Limitation of
Officers' and Directors' Liability; Indemnification Agreements".
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of August 8, 1996 for (i)
each person who is known by the Company to own beneficially more than five
percent of the outstanding shares of Common Stock, (ii) each director and
nominee director of the Company, (iii) each person named in the Summary
Compensation Table, and (iv) all current executive officers and directors of the
Company as a group. Unless otherwise indicated below, to the knowledge of the
Company all persons listed below have sole voting and investment power with
respect to their shares of Common Stock except to the extent shared by spouses
under applicable law.
-5-
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Percentage of
Name and Address Beneficially Owned Outstanding Shares
- ---------------- ------------------ ------------------
<S> <C> <C>
George R. Chapdelaine(1)(2) 1,475,150 28.2%
c/o Boston Restaurant
Associates, Inc.
205 Portland Street
Boston, MA 02114
John P. Polcari, Jr.(1)(3) 1,553,700 29.7%
c/o Boston Restaurant
Associates, Inc.
205 Portland Street
Boston, MA 02114
Richard J. Reeves(4) 84,300 1.68%
c/o Boston Restaurant
Associates, Inc.
205 Portland Street
Boston, MA 02114
Terrance A. Smith(5) 6,980 *
c/o Boston Restaurant
Associates, Inc.
205 Portland Street
Boston, MA 02114
Joseph J. Caruso(6) 22,000 *
c/o Boston Restaurant
Associates, Inc.
205 Portland Street
Boston, MA 02114
Lucille Salhany(7) 78,150 1.56%
c/o Boston Restaurant
Associates, Inc.
205 Portland Street
Boston, MA 02114
Roger Lipton (8) 579,455 11.2%
983 Park Avenue
New York, NY 10028
Dolphin Management, Inc.(9) 453,000 9.0%
129 East 17th Street
New York, NY 10003
Equity Assets Management, Inc.(10) 745,680 14.9%
7126 Beneva Road
Sarasota, FL 34238
-6-
<PAGE>
Jordan American Holdings, Inc. (10) 729,975 14.5%
1875 Ski Time Square Dr., Ste. 1
Streamboat Springs, CO 80487
All current executive officers and
directors as a group
(7 persons)(1)(2)(3)(4)(5)(6)(11) 1,881,580 34.3%
</TABLE>
- --------------------------------
* Less than one percent.
(1) Mr. Chapdelaine and Mr. Polcari are the Voting Trustees of a Voting
Trust that holds 1,265,150 shares pursuant to a certain Amended and
Restated Voting Trust Agreement dated April 28, 1994 (the "Voting Trust
Agreement"). As the Voting Trustees, Mr. Chapdelaine and Mr. Polcari
share exclusive voting power with respect to all shares held in the
Voting Trust. Mr. Chapdelaine and Mr. Polcari are also beneficiaries of
the Voting Trust, each having beneficial ownership of 41.3% of the
Voting Trust assets. Such beneficial ownership in the Voting Trust would
entitle each of Mr. Chapdelaine and Mr. Polcari to 522,390 shares of the
Company's Common Stock in the event the Voting Trust assets were
distributed to the beneficiaries thereof. In addition, relatives of Mr.
Polcari have beneficial ownership of the remaining 17.4% of the Voting
Trust assets (approximately 220,370 shares). Mr. Chapdelaine disclaims
beneficial ownership of the approximately 742,760 shares of Common Stock
allocated to beneficiaries of the Voting Trust other than Mr.
Chapdelaine, and Mr. Polcari disclaims beneficial ownership of the
approximately 742,760 shares of Common Stock allocated to the
beneficiaries of the Voting Trust other than Mr. Polcari. The Voting
Trust will dissolve on April 28, 2004 unless earlier dissolved pursuant
to the Voting Trust Agreement.
(2) Includes options to purchase 210,000 shares issuable pursuant to
currently exercisable stock options.
(3) Includes approximately 68,670 shares issued to Lucille Sulhany, Mr.
Polcari's wife, and Mr. Polcari, as joint tenants with rights of
survivorship in connection with the forgiveness of $282,500 of the
Company's indebtedness to Ms. Salhany. Also includes 210,000 shares
issuable pursuant to currently exercisable stock options, and 9,880
shares held by Ms. Salhany, Mr. Polcari's wife, for the benefit of
certain family members.
(4) Includes options to purchase 2,000 shares issuable pursuant to current
exercisable stock options. Excludes 10,000 shares subject to options
granted subject to stockholder approval of the proposed amendment to the
Company's 1994 Nonemployee Director Stock Option Plan. See "Proposal No.
2."
(5) Consists of 6,980 shares issuable pursuant to currently exercisable
stock options. Excludes 20,000 shares subject to options granted subject
to stockholder approval of the proposed amendment to the Company's 1994
Nonemployee Director Stock Option Plan. See "Proposal No. 2."
(6) Includes 10,000 shares held by Bantam Group, Inc., a business advisory
firm controlled by Mr. Caruso and options to purchase 2,000 shares
issuable pursuant to currently exercisable stock options. Excludes
10,000 shares subject to options granted subject to stockholder approval
of the proposed amendment to the Company's 1994 Nonemployee Director
Stock Option Plan. See "Proposal No. 2."
(7) Excludes 1,265,150 shares held by Mr. Polcari as a Voting Trustee under
the Voting Trust. See note (1) above. Includes 9,880 shares held by Ms.
Salhany, Mr. Polcari's wife, for the benefit of certain family members.
-7-
<PAGE>
(8) Based upon a Schedule 13D provided to the Company and discussions with
Mr. Lipton. Includes 166,000 shares issuable pursuant to currently
exercisable warrants.
(9) Based upon a Schedule 13D provided to the Company. Includes 30,000
shares issuable pursuant to currently exercisable warrants.
(10) Based on a Schedule 13G provided to the Company.
(11) Includes 10,000 shares issuable to executive officers pursuant to
currently exercisable stock options.
Management
The names of the Company's executive officers who are not directors of the
Company, and certain biographical information furnished by them, are set forth
below:
Name Age Title
Fran Ross 49 Vice President of Corporate Marketing
Anthony A. Buccieri 41 Vice President of Operations
Anthony A. Buccieri was appointed Vice President of Operations for the
Pizzeria Regina operations in April 1994. Mr. Buccieri joined the predecessor of
PRI in 1974 and has served PRI in various capacities since that date, including
as operations supervisor, assisting in the opening of all Pizzeria Regina
outlets since he joined PRI in 1983. Mr. Buccieri attended the University of
Massachusetts.
Fran Ross was appointed the Company's Vice President of Corporate Marketing
in February 1995. Ms. Ross was Vice President of Marketing for Back Bay
Restaurant Group from December 1993 until December 1994 and for Legal Seafood, a
restaurant chain, from November 1992 until December 1993. From November 1982
until November 1992, Ms. Ross was a Director and Vice President of Marketing for
Ninety Nine, Inc., a restaurant chain. Ms. Ross holds an A.S. in Culinary Arts
from the Culinary Institute of America, a B.S. in Biochemistry from Emmanuel
College and attended graduate school at Cornell University.
Executive Compensation
The following Summary Compensation Table sets forth the compensation during
the last three fiscal years of each person who has served as the Chief Executive
Officer during the last fiscal year and the four most highly compensated
executive officers of the Company, if any, whose annual salary and bonus
exceeded $100,000 for services in all capacities to the Company during the last
fiscal year.
-8-
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation(2)
-------------------------- ----------------------------
Awards Payouts
--------- -------- ---------
Other Securities
Annual Restrict Under-
Name and Fiscal Compens Stock Lying LTIP All Other
Principal Year Salary Bonus ation Award(s) Options Payouts Compensation
Position Ended ($) ($) ($) ($) (=) ($) ($)
- ----------------- --------- -------- -------- -------- --------- -------- --------- ------------
- ----------------- --------- -------- -------- -------- --------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
George R.
Chapdelaine 4/28/96 177,000 35,000
President and 4/30/95 177,000 35,000 - - - - -
Chief Executive 4/30/94 153,575 18,700
Officer(1)
- ----------------- --------- -------- -------- -------- --------- -------- --------- ------------
- ----------------- --------- -------- -------- -------- --------- -------- --------- ------------
</TABLE>
(1) Mr. Chapdelaine became Chief Executive Officer of the Company on April 29,
1994 upon the consummation of the acquisition of Pizzeria Regina, Inc.
("PRI") by the Company. Includes sums earned by Mr. Chapdelaine as
President and Chief Executive Officer of PRI prior to such acquisition.
(2) Does not include stock options granted to Mr. Chapdelaine for this
personal guarantee of financial obligations of the Company. See "Certain
Relationships and Related Transactions - Guarantee of Indebtedness of the
Company; Stock Options."
Employment Contract
The Company and Mr. Chapdelaine, the Chief Executive Officer and President
of the Company, have entered into a five year employment agreement which
provides for an initial annual salary of $165,000, subject to increase after the
first year of employment in the discretion of the Compensation Committee of the
Company's Board of Directors. The employment agreement also provides that Mr.
Chapdelaine will be entitled to an annual cash bonus of $35,000 as well as a
performance bonus based upon yearly projections for the Company's performance.
Mr. Chapdelaine will also be provided with an automobile allowance of $12,000
plus the cost of annual insurance and parking and such other employee benefits
as may be generally available to employees or officers of the Company.
Under the terms of the employment agreement, if Mr. Chapdelaine's
employment with the Company is terminated by the Company without cause, or if
Mr. Chapdelaine terminates his employment with the Company for good reason
(either a material reduction in his overall level of responsibility or the
relocation of the Company's executive offices to a location that is more than 35
miles from Boston, Massachusetts, in each case without his consent) or due to a
change in control of the Company, Mr. Chapdelaine has agreed not to compete with
the Company for a period of three years from the date of such termination,
provided that the Company shall continue to pay Mr. Chapdelaine his then current
base salary and annual cash bonus of $35,000 payable monthly, during the three
year noncompetition period.
Mr. Chapdelaine's employment agreement also contains noncompetition and
confidentiality provisions. The noncompetition provision prohibits Mr.
Chapdelaine from directly or indirectly competing with the Company as long as he
is an employee of the Company and for a period of three years thereafter. The
confidentiality provision provides that Mr. Chapdelaine may never, other than in
furtherance of
-9-
<PAGE>
the business of the Company or in response to a court order, disclose
proprietary information of the Company.
Bonus Program
The Company has adopted an incentive program under which key contributors,
such as store managers, selected by the Compensation Committee will be paid cash
bonuses. The aggregate amount of these bonuses will be based upon a formula
pertaining to the financial performance of the Company. Bonuses, if any, will be
allocated by the Compensation Committee among the individual employees based
upon their performance during the year. The Company is also considering a
similar bonus program for executive officers and senior management.
Limitation of Officers' and Directors' Liability; Indemnification Agreements
As permitted by Delaware law, the Company's Certificate of Incorporation
contains an article limiting the personal liability of directors. The
Certificate of Incorporation provides that a director of the Company shall not
be personally liable for monetary damages for a breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the General Corporation Law of the State of Delaware, which prohibits the
unlawful payment of dividends or the repurchase or redemption of stock or (iv)
for any transaction from which the director derived an improper personal
benefit. This article is intended to afford directors additional protection, and
limit their potential liability, from suits alleging a breach of the duty of
care by a director. The Company believes this article will assist it in securing
the services of directors who are not employees of the Company. As a result of
the inclusion of such a provision, holders of the Company's Common Stock may be
unable to recover monetary damages against directors for actions taken by them
which constitute negligence or gross negligence or which are in violation of
their fiduciary duties, although it may be possible to obtain injunctive or
other equitable relief with respect to such actions. If equitable remedies are
found not to be available for any particular case, holders of the Company's
Common Stock may not have any effective remedy against the challenged conduct.
The Company is also party to an Indemnification Agreement with each of its
present directors and certain executive officers and may enter into such
agreements with any executive officer, director, employee, agent or fiduciary
designated by the Board of Directors. Each Indemnification Agreement provides
that the Company will indemnify the indemnitee against expenses, including
reasonable attorneys' fees, judgments, penalties, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with any civil
or criminal action or administrative proceeding arising out of the performance
of his duties. Such indemnification is available if the indemnitee acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company and with respect to any criminal action, had no
reasonable cause to believe that his conduct was unlawful. The Indemnification
Agreement will also require that the Company indemnify the party thereto in all
cases to the fullest extent permitted by applicable law.
Each Indemnification Agreement requires the Company to advance litigation
expenses at the request of the party seeking indemnification, whether prior to
or after final resolution of a proceeding, provided that he undertakes to repay
such advances if it is ultimately determined that he is not entitled to
indemnification for his expenses. The advance of litigation expenses will
thereby be mandatory upon satisfaction of certain conditions by the indemnitee.
-10-
<PAGE>
Each Indemnification Agreement permits the executive officer, director or
the person that is party thereto to bring suit to seek recovery of amounts due
under the Indemnification Agreement and to recover the expenses of such a suit
if he is successful.
Stock Options
The following tables set forth certain information with respect to the
grants, exercises and fiscal year-end values of stock options to purchase shares
of the Company's Common Stock for the named executive officers during the last
fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
Number of Percent of
Securities Total Options
Underlying Granted to Exercise of
Options Employees in Base Price Expiration
Name Granted(1)(#) Fiscal Year ($/Sh) Date
---- ------- --------- ------ ---------
George R. Chapdelaine 105,000 24.3% .9375 12/16/00
73,500 17.0% .8750 04/19/01
- ----------------
(1) These stock options granted to Mr. Chapdelaine for this personal guarantee
of financial obligations of the Company. See "Certain Relationships and
Related Transactions - Guarantee of Indebtedness of the Company; Stock
Options."
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Shares of
Common Stock
Shares Underlying Value of Unexercised
Acquired Value Unexercised Options In-the-Money Options at
on Realized at April 28, 1996 (#) April 28, 1996 ($)
Name Exercise(#) ($)(1) Exercisable/Unexercisable Exercisable/Unexercisable(1)
---- ---------- ------ ------------------------ ----------------------------\
<S> <C> <C> <C> <C>
George R. 0 0 0/178,500 0/4594
Chapdelaine
</TABLE>
- ----------------
(1) Based upon the closing price of the Company's Common Stock on April 28,
1996 as reported on the Nasdaq Small-Cap Market of $.9375 the respective
option exercise price.
PROPOSAL NO. 2
PROPOSAL TO AMEND THE 1994 NONEMPLOYEE
DIRECTOR STOCK OPTION PLAN
In March 1996, the Board of Directors adopted, subject to stockholder
approval, an amendment to the 1994 Nonemployee Director Stock Option Plan (the
"Directors Plan"). The Directors Plan was initially adopted in May 1994. As set
forth in further detail below, the proposed amendment to the Directors Plan
increases the number of shares reserved for issuance under the Directors Plan
from 30,000
-11-
<PAGE>
to 500,000 shares and provides for the issuance of additional options to the
Company's independent directors.
The purposes of the Directors Plan are to attract and retain the services
of experienced and knowledgeable nonemployee directors and to provide such
persons with increased incentives to continue to work for the best interests of
the Company and its stockholders.
Any director who is neither an employee of the Company nor affiliated with
any 5% stockholder ("Eligible Director") is eligible to receive options under
the Directors' Plan. Of the current directors, Messrs. Reeves, Smith and Caruso
are Eligible Directors.
The Directors' Plan as originally adopted, each Eligible Director receives
an automatic grant of options to purchase 5,000 shares of Common Stock,
effective upon the date he or she is first elected to the Board of Directors or
is otherwise first eligible to receive Options under the Directors Plan. These
options become exercisable in increments of 1,000 shares over a five year period
for each year that the director remains affiliated with the Company.
Under the proposed amendment to the Directors Plan adopted on March 8,
1996, subject to stockholder approval, each Eligible Director shall receive
options to purchase 10,000 shares of Common Stock on March 15 and September 15
of each year commencing on March 15, 1996, provided that such person is then an
Eligible Director. These options become exercisable in full six months after the
date of grant. In addition, each Eligible Director shall receive an option to
purchase 10,000 shares of Common Stock when such person has served a term of
five consecutive years on the Company's Board of Directors. These options become
exercisable in full six months after the date of grant.
The exercise price for all options granted under the Directors Plan will be
the fair market value of the Common Stock at the time the option is granted. No
option under the Directors Plan may be exercised subsequent to ten years from
the date of grant. If an Eligible Director ceases to be a director of the
Company for any reason, all options held by that director that are not then
exercisable terminate. Options that are exercisable at the time of termination
remain exercisable for a period of thirty days following such termination,
unless such termination is a result of death or permanent disability, in which
case such options will be exercisable for a period of one year. Options granted
under the Directors Plan may not be assigned or transferred except by will or
the laws of descent and distribution.
The Directors Plan may be amended by the Board of Directors or any
committee to which such authority has been delegated by the Board of Directors,
subject to certain limitations (i) with respect to certain matters for which
stockholder approval may be required, and (ii) regarding the number of such
amendments which may be made in any six month period. No amendment, suspension
or termination of the Directors Plan, except as described in the Directors Plan,
may adversely affect the rights of an option holder under the Directors Plan
without the holders' consent.
The Directors Plan replaced the Company's 1990 Nonemployee Directors Option
Plan (the "1990 Plan"). Options to purchase 9,980 shares of Common Stock at
prices ranging from $4.37 to $7.00 per share are outstanding under the 1990
Plan.
The Directors Plan will be administered by the Board of Directors whose
authority is limited to construing the Directors Plan, determining all questions
as to participant eligibility and adopting and amending such rules and
regulations for the administration of the Directors Plan as it may deem
desirable.
-12-
<PAGE>
In fiscal 1995, Messrs. Reeves, Smith and Caruso each received options to
purchase 5,000 shares under the Directors Plan with an exercise price of
$1.5625, $1.5625 and $2.375 per share, respectively. In addition, subject to
stockholder approval of the amendment to the Directors Plan, on March 15, 1996,
the Company granted an option to purchase 10,000 shares of Common Stock to each
of these directors, at an exercise price of $1.125 per share, and an option to
purchase an additional 10,000 shares to Messr. Smith also at an exercise price
of $1.125 per share, as he had at that time served on the Board of Directors for
five consecutive years.
If the stockholders do not approve the amendment to the Directors Plan, the
options granted to Messrs. Reeves, Smith and Caruso on March 15, 1996 will be
rescinded. No options have or will be granted under the Directors Plan to the
name executive officer. No options have or will be granted under the Directors
Plan to all current executive officers a group. Options to purchase an aggregate
of 55,000 shares of common Stock have been granted to all current directors who
were not executive officers as a group, including options to purchase 40,000
shares granted on March 15, 1996, subject to stockholder approval of the
proposed amendment to the Directors Plan. The nominees for election as a
director will not be eligible to receive options under the Directors Plan due to
their affiliation with 5% stockholders of the Company. No options were granted
under the Directors Plan to employees (including current officers who are not
executive officers) as a group. At August 8, 1996, the market value of the
Common Stock underlying the outstanding options under the Directors Plan was
$51,563, based upon the closing price per share of the Common Stock ($.9375) on
the Nasdaq Small-Cap Market on that date.
NEW PLAN BENEFITS
1994 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
<TABLE>
<CAPTION>
Number of
Shares Subject
Name Dollar Value ($)(1) to Options(2)(3)
- ---- ------------------- ----------------
<S> <C> <C>
George R. Chapdelaine, Chief Executive Officer, Not eligible --
President and Chief Financial Officer
Executive Officer Group Not eligible --
Non-Executive Director Group 0 40,000
Non-Executive Officer Employee Group Not eligible --
</TABLE>
- ------------------------
(1) Based upon the difference between the market value of the underlying
shares on the date of grant and the exercise price of currently
outstanding options. This valuation does not take into account any
appreciation in market value of the underlying shares which may occur over
the term of the options. The dollar value of options to be received in the
future is not presently determinable because such value depends upon the
future market price of the underlying shares.
(2) Options may be granted under the Directors Plan only to nonemployee
directors.
(3) Subject to stockholder approval of the proposed amendment to the Directors
Plan, on March 15, 1996, the Company granted an option to purchase 10,000
shares to each of Messrs. Reeves, Smith and Caruso at an exercise price of
$1.125 per share and an additional 10,000 shares to Messr. Smith also at
an exercise price of $1.125. If the proposal to amend the Directors Plan
is not approved by the stockholders, all of these options will be
rescinded.
-13-
<PAGE>
FEDERAL TAX CONSEQUENCES OF THE DIRECTORS PLAN AND THE 1995 PLAN
The following general discussion of the Federal income tax consequences of
options granted under the Directors Plan is based upon the provisions of the
Internal Revenue Code as in effect on the date hereof, current regulations
thereunder, and existing public and private administrative rulings of the
Internal Revenue Service. This discussion is not intended to be a complete
discussion of all of the Federal income tax consequences of the Directors Plan
or of all of the requirements that must be met in order to qualify for the tax
treatment described herein. Changes in the law and regulations may modify the
discussion, and in some cases the changes may be retroactive. No information is
provided as to state tax laws. The Directors Plan is not qualified under Section
401 of the Code, nor is it subject to the provisions of the Employee Retirement
Income Security Act of 1974, as amended.
A nonemployee director will not recognize any taxable income upon the
grant of an option under the Directors Plan. Generally, an option holder
recognizes ordinary taxable income at the time an option is exercised in an
amount equal to the excess of the fair market value of the shares of Common
Stock on the date of exercise over the exercise price. However, officers and
directors, including nonemployee directors eligible to participate in the
Directors Plan, generally will be subject to Section 16(b) of the Securities
Exchange Act of 1934 ("Section 16(b)") upon their sale of shares of Common Stock
and this may affect their tax liability. In the case of exercise of an option by
someone whose sale of shares of Common Stock would subject him or her to
liability under Section 16(b), recognition of income by the option holder will
be postponed. The IRS regulations have not yet been amended to conform with the
recently revised rules under Section 16(b). However, it is generally anticipated
that the date of recognition (the "Recognition Date") will be the earlier of (i)
six months after the date the option was granted, or (ii) the first day on which
the sale of the shares would not subject the individual to liability under
Section 16(b). It is possible that the six month period will instead run from
the option holder's most recent grant or purchase of Common Stock prior to his
or her exercise of the option. The option holder will generally recognize
ordinary taxable income on the Recognition Date in an amount equal to the excess
of the fair market value of the shares at that time over the exercise price.
Despite this general rule, if the Recognition Date is after the date of
exercise, then the option holder may make an election pursuant to Section 83(b)
of the Code. In this case, the option holder will recognize ordinary taxable
income at the time the option is exercised and not on the later date. In order
to be effective, the 83(b) election must be filed with the Company and the
Internal Revenue Service within 30 days of exercise.
The Company will generally be entitled to a compensation deduction for
Federal income tax purposes in an amount equal to the taxable income recognized
by the option holder, provided the Company reports the income on a form W-2,
W-2c, or 1099, whichever is applicable, that is timely provided to the option
holder and filed with the IRS.
When an option holder subsequently disposes of the shares of Common
Stock received upon exercise of an option, he or she will recognize long-term or
short-term capital gain or loss (depending upon the holding period), in an
amount equal to the difference between the sale price and the fair market value
on the date on which the option holder recognized ordinary taxable income as a
result of the exercise of the option.
An option holder who pays the exercise price, in whole or in part, by
delivering shares of Common Stock already owned by him or her will recognize no
gain or loss for Federal income tax purposes on the shares surrendered, but
otherwise will be taxed according to the rules described above. To the extent
the shares acquired upon exercise are equal in number to the shares surrendered,
the basis of the shares received will be equal to the basis of the shares
surrendered. The basis of shares received in excess of the
-14-
<PAGE>
shares surrendered upon exercise will be equal to the fair market value of the
shares on the date of exercise, and the holding period for the shares received
will commence on that date.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Stockholder Loans
In 1986, Anthony A. Polcari, the brother of John P. Polcari, Jr. and a
stockholder and director of Pizzeria Regina, Inc. ("PRI") prior to the 1994
acquisition of PRI by the Company, sold real estate to PRI and provided
financing for a portion of the purchase price. In 1988, Anthony Polcari and his
wife, Mary Polcari, subscribed for preferred stock of PRI for an aggregate
subscription price of $695,500 to be paid on an installment basis. During the
year ended April 30, 1993, Mr. and Mrs. Polcari consented to the offset of the
outstanding balance of the purchase price for the real estate against the
$610,863 remaining balance of the subscription receivable, resulting in a net
amount owing by the Company to Mr. and Mrs. Polcari of approximately $147,000.
The outstanding balance of this obligation as of April 28, 1996 was $134,110.
This amount is represented by two notes bearing interest at 7.18% and 8% per
annum payable in aggregate monthly installments of principal and interest of
$810 maturing January 2017.
Guarantee of Stockholder Debt
George R. Chapdelaine is personally indebted to BayBank in the original
principal amount of $171,000, pursuant to a promissory note dated May 8, 1992,
as amended on April 29, 1994. The outstanding principal balance of this note
(plus accrued but unpaid interest thereon) as of April 28, 1996 was $46,312.
This note is guaranteed by the Company.
Guarantee of Indebtedness of the Company; Stock Options
In addition to other security for the Company's loan arrangements with
Haymarket Co-Operative Bank, George R. Chapdelaine and John P. Polcari, Jr.
jointly and severally unconditionally guaranteed the payment of all principal,
interest and premium, if any, payable on such loans. In connection with these
guarantees, the Company has issued each of Messrs. Chapdelaine and Polcari
options to purchase 210,000 shares of Common Stock.
OTHER MATTERS
Voting Procedures
The votes of stockholders present in person or represented by proxy at the
Meeting will be tabulated by an inspector of elections appointed by the Company.
The seven (7) nominees for directors of the Company who receive the greatest
number of votes cast by stockholders present in person or represented by proxy
at the Meeting and entitled to vote thereon will be elected directors of the
Company. Abstentions, including broker non-votes, will have no effect on the
outcome of the vote for the election of directors. The affirmative vote of a
majority of the shares of common stock present or represented by proxy at the
Meeting is required for approval of each of Proposal No. 2. Abstentions will
have the effect of a vote against Proposal 2, but a broker non-vote will have no
effect.
-15-
<PAGE>
Independent Auditors
The certifying accountants of PRI (BDO Seidman, LLP) remained as the
certifying accountants of the Company after consummation of the 1994 acquisition
of PRI by the Company. BDO Seidman, LLP and its predecessor have served PRI and,
giving effect to the 1994 acquisition of PRI by the Company (which for
accounting purposes was treated as a reverse acquisition), the Company
continuously in that capacity for more than ten years. The Board of Directors
has appointed BDO Seidman, LLP as the independent auditors to audit the
Company's consolidated financial statements for the fiscal year ending April 27,
1997.
A representative of BDO Seidman, LLP will be at the Meeting and will be
given an opportunity to make a statement, if so desired. The representative will
be available to respond to appropriate questions.
Reporting Under Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than 10% of the
Company's Common Stock, to file reports of ownership and changes in ownership on
Forms 3, 4 and 5 with the Securities and Exchange Commission and the National
Association of Securities Dealers. Executive officers, directors and greater
than 10% stockholders are required to furnish the Company with copies of all
Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such Forms it has
received and written representations from certain reporting persons that they
were not required to file Forms 5 for specified fiscal years, the Company
believes that all of its executive officers, directors and greater than 10%
stockholders complied with all Section 16(a) filing requirements applicable to
them during the Company's fiscal year ended April 28, 1996.
Other Proposed Action
The Board of Directors knows of no matters which may come before the
Meeting other than the election of directors. However, if any other matters
should properly be presented to the Meeting, the persons named as proxies shall
have discretionary authority to vote the shares represented by the accompanying
proxy in accordance with their own judgment.
Stockholder Proposals
Proposals which stockholders intend to present at the Company's 1997 Annual
Meeting of Stockholders and wish to have included in the Company's proxy
materials must be received by the Company no later than May 19, 1996.
-16-
<PAGE>
Annual Report on Form 10-KSB
Copies of the Company's Annual Report on Form 10-KSB for the fiscal year
ended April 28, 1996 as filed with the Securities and Exchange Commission are
available to stockholders without charge upon written request addressed to
Investor Relations, Boston Restaurant Associates, Inc., at 205 Portland Street,
Boston, Massachusetts 02114
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, STOCKHOLDERS
ARE URGED TO FILL IN, SIGN AND RETURN THE ACCOMPANYING FORM OF PROXY IN THE
ENCLOSED ENVELOPE.
-17-
<PAGE>
PROXY BOSTON RESTAURANT ASSOCIATES, INC. PROXY
The undersigned hereby appoints George R. Chapdelaine and John P.
Polcari, Jr. and each of them, acting singly, with full power of substitution,
attorneys and proxies to represent the undersigned at the Annual Meeting of
Stockholders (the "Meeting") of Boston Restaurant Associates, Inc. (the
"Company") to be held on Friday, October 18, 1996, and at any adjournment or
adjournments thereof, with all power which the undersigned would possess if
personally present, and to vote all shares of stock which the undersigned may be
entitled to vote at said meeting upon the matters set forth in the Notice of and
Proxy Statement for the Meeting in accordance with the instructions on the
reverse side and with discretionary authority upon such other matters as may
come before the Meeting. All previous proxies are hereby revoked.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. IT WILL BE VOTED AS
DIRECTED BY THE UNDERSIGNED AND IF NO DIRECTION IS INDICATED, IT WILL BE VOTED
FOR THE PROPOSALS DESCRIBED IN THE NOTICE OF AND PROXY STATEMENT FOR THE
MEETINGS.
Continued, and to be signed, on reverse side
(Please fill in the reverse side and mail in enclosed envelope)
<PAGE>
[X] Please mark votes as in this example.
ANNUAL MEETING OF STOCKHOLDERS
1. Election of Directors:
Nominees: George R. Chapdelaine, John P. Polcari, Jr.
Richard J. Reeves, Terrance A. Smith, Joseph J. Caruso,
Lucille Salhany and Roger Lipton
[ ] For [ ] WITHHOLD AUTHORITY
(all nominees except to vote for all nominees
as marked to contrary)
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
---------------------------------------
FOR AGAINST ABSTAIN
2. To adopt and approve the amendment to the [ ] [ ] [ ]
1994 NonEmployee Director Stock Option Plan as
described in the accompanying Proxy Statement.
MARK HERE FOR
ADDRESS CHANGE
AND NOTE AT LEFT [ ]
MARK HERE IF YOU
PLAN TO ATTEND THE
STOCKHOLDERS MEETING [ ]
(Signatures should be the same as the name printed hereon. Executors,
administrators, trustees, guardians, attorneys, and officers of corporations
should add their titles when signing.)
Signature: Date:
------------------------------ -----------
Signature: Date:
------------------------------ -----------
