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 [Sec.] 240.14a-11(c) or [Sec.] 204.14a-12
BOSTON RESTAURANT ASSOCIATES, INC.
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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[ ] 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:
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<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS OF
BOSTON RESTAURANT ASSOCIATES, INC.
TO BE HELD ON 12 SEPTEMBER, 1997
---------------
The Annual Meeting of Stockholders of Boston Restaurant Associates,
Inc. will be held on 12 September, 1997 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
Employee Stock Option Plan.
3. To ratify the appointment of BDO Siedman LLP auditors for fiscal
year 1998.
4. To consider and act upon any matter 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 4 August, 1997 as the record date for
determining the stockholders entitled to notice of, and to vote at, the Meeting.
By Order of the Board of Directors
GORDON R. PENMAN, Secretary
Boston, Massachusetts
7 August, 1997
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.
<PAGE>
BOSTON RESTAURANT ASSOCIATES, INC
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
To Be Held On 12 September, 1997
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 a 999
Broadway, Saugus, Massachusetts 01906, for use at the Annual Meeting of
Stockholders to be held on 12 September, 1997 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 August 7, 1997
Certain of the officers and 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 the securities held by them.
Only stockholders of record at the close of business on 4 August, will
be entitled to receive notice of, and to vote at, the Meeting. As of that date,
there were outstanding and entitled to vote 5,015,693 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 and proposal No. 2 and No. 3. 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.
2
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Meeting, seven directors are to be elected to serve until the
1998 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 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.
The following table sets forth certain information with respect to the
nominees.
Director
Name Age Position Since
- ---- --- -------- -----
George R. Chapdelaine 52 Chief Executive Officer, 1994
President, and Director
John P. Polcari, Jr. 66 Treasurer and Director 1994
Terrance Smith (2) 51 Director 1990
Richard J. Reeves(1)(2) 50 Director 1989
Joseph J. Caruso(1) 54 Director 1994
Roger Lipton (1) 56 Director 1996
Lucille S. Salhany 51 Director 1996
- -------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
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
3
<PAGE>
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 BS 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.
Lucille Salhany has been the President and Chief Executive Officer of
the United Paramount Network since September 1994. 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.
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.
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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 (BRAI has a credit facility with 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.
Roger Lipton was elected a director of the Company in July 1996. 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.
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.
Meetings of the Board of Directors
The Board of Directors held five meetings during the fiscal year ended
April 27, 1997. The Board of Directors also acted on occasions by unanimous
written consent in lieu of special meetings. Each current director, other than
Mr. Polcari and Ms. Salhany, 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. Reeves, and Smith. 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. Caruso, Lipton and Reeves. The functions of the Compensation
Committee include determining salaries, incentive plans, benefits and overall
compensation.
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<PAGE>
The Audit and Compensation Committees were established in June 1994.
The Compensation Committee held one meeting during the fiscal year ended April
27, 1997 and the Audit Committee met on one occasion with the Company's
independent auditors during the fiscal year ended April 27, 1997.
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. Messrs. Caruso, Reeves, and Smith each received options to purchase 20,000
shares of common stock in fiscal l997 under Non-employee Director Stock Option
Plan. In addition, Mr. Smith, having served five years as a director, received
options to purchase 10,000 shares of common stock. The Company also enters into
indemnification agreements with each of its directors. 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 25 July, 1997 and (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.
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<PAGE>
Percentage
Number of Shares of Outstanding
Name and Address Beneficially Owned Shares
- ---------------- ------------------ --------------
George R. Chapdelaine (1)(2) 1,577,650 29.89%
c/o Boston Restaurant
Associates, Inc.
999 Broadway
Saugus, MA 01906
John P. Polcari, Jr. (1)(3) 1,498,312 28.67%
c/o Boston Restaurant
Associates, Inc.
999 Broadway
Saugus, MA 01906
Richard J. Reeves(4) 90,300 1.80%
c/o Boston Restaurant
Associates, Inc.
999 Broadway
Saugus, MA 01906
Terrance A. Smith (5) 9,000 *
c/o Boston Restaurant
Associates, Inc.
999 Broadway
Saugus, MA 01906
Joseph J. Caruso(6) 27,000 *
c/o Boston Restaurant
Associates, Inc.
999 Broadway
Saugus, MA 01906
Lucille Salhany(7) 78,150 1.56%
c/o Boston Restaurant
Associates, Inc.
999 Broadway
Saugus, MA 01906
Anthony Buccieri (11) 10,000 *
c/o Boston Restaurant
Associates, Inc.
999 Broadway
Saugus, MA 01906
7
<PAGE>
Fran V. Ross (11) 10,000 *
c/o Boston Restaurant
Associates, Inc.
999 Broadway
Saugus, MA 01906
Roger Lipton(8) 713,155 13.76%
983 Park Avenue
New York, NY 10028
Dolphin Management, Inc.(9) 453,000 8.98%
129 East 17th Street
New York, NY 10003
Jordan American Holdings, Inc.(10) 1,259,545 23.48%
1875 Ski Time Square Dr., Ste. 1
Steamboat Springs, CO 80487
All current executive officers and
directors as a group
(9 persons)(1)(2)(3)(4)(5)(6)(7) (2,337,730 total) 38.47%
(8)(11)
- ----------------------
*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 41.2% 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)(54,988 Lucille Salhany) and (165,382 Anthony and Mary Polcari). 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
8
<PAGE>
April 28, 2004 unless earlier dissolved pursuant to the Voting Trust
Agreement.
(2) Includes options to purchase 262,500 shares issuable pursuant to stock
options exercisable within 60 days of 25 July, 1997. Also includes 50,000
option to purchase common stock subject to shareholder approval of the
proposed amendment to the Employee Plan.
(3) Includes approximately 68,670 shares issued to Lucille Salhany, 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 7,000 shares issuable pursuant to current
exercisable stock options.
(5) Includes options to purchase 9,000 shares issuable to pursuant to current
exercisable stock options.
(6) Includes 10,000 shares held by Bantam Group, Inc., a business advisory firm
controlled by Mr. Caruso and options to purchase 7,000 shares issuable
pursuant to currently exercisable stock options.
(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.
(8) Based on 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. F/K/A Equity Asset
Management. Also includes 350,000 warrants issued by Boston Restaurant
Associates, Inc. 31 December, 1996.
(11) Includes 9,900 shares issuable to executive officers pursuant to currently
exercisable stock options.
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<PAGE>
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
- ---- --- -----
Anthony A. Buccieri 42 Vice President Operations
Fran Ross 50 Vice President of Corporate
Administration, Chief
Financial Officer
Anthony A. Buccieri was appointed Vice President of 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 and Vice President of Corporate Administration and
Chief Financial Officer in October 1996. Ms. Ross was Vice President of
Marketing for Back Bay Restaurant Group from December 1993 until December 1994
and for Legal Seafoods from November 1992 until December 1993. Ms. Ross holds an
A.S. from the Culinary Institute of America, AB 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 $100,000 for services in all capacities to the Company during the
last fiscal year.
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation(2)
Awards Payouts
Other Securities All
Annual Restrict Under- Other
Name and Fiscal Compen- Stock Lying LTIP Compen-
Principal Year Salary Bonus sation Award(s) Options Payouts sation
Position Ended ($) ($) ($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
George R. 4/27/97 116,900 0
Chapdelaine 4/28/96 183,600 35,000
President and 4/30/95 177,000 35,000
CEO(1)
</TABLE>
(1) Mr. Chapdelaine was entitled to a salary of $190,464 plus a bonus of
$35,000 in FY 1997. However, he elected not to receive $73,564 of his
salary and his $35,000 bonus in FY 1997 only.
(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. (See note (1) above regarding FY 1997, as a singular, one-time
event).
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.
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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 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 of 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
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<PAGE>
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 reasonable 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
reasonably 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.
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 table sets 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.
13
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number of Percent of
Securities Options
Underlying Granted to
Options Employees Exercise of
Granted (1) in Fiscal Base Price
Name (#) Year ($/Sh) Expiration Date
- ---- ----------- ---------- ------------ ---------------
<S> <C> <C> <C> <C>
George R. Chapdelaine 84,000 40.1% 1.125 10/18/01
</TABLE>
(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 Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
April 27, April 27,
Shares Value 1997(#) 1997($)
Acquired on Realized Exercisable/ Exercisable/Un-
Name Exercise(#) ($)(1) Unexercisable exercisable(1)
- ---- ----------- ----------- ------------- --------------
<S> <C> <C> <C> <C>
George R. Chapdelaine 0 0 262,500/0 328,125/0
</TABLE>
- --------------
(1) Based upon the closing price of the Company's Common Stock on April 27,
1997 as reported on the NASDAQ Small-Cap Market of $1.25 the respective
option exercise price.
PROPOSAL NO. 2
PROPOSAL TO AMEND THE 1994 EMPLOYEE
EMPLOYEE STOCK OPTION PLAN
In March 1997, the Board of Directors adopted, pending approval by the
stockholder on 12 September, 1997, an amendment to the 1994 Employee Stock
Option Plan (the "Employee Plan"). The employees Plan was initially adopted in
May 1994. As set
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<PAGE>
forth in further detail below, the proposed amendment to the Employee Plan
increases the number of shares reserved for issuance under the Employees Plan
from 135,000 to 500,000 shares and provides for the issuance of additional
options to the Company's employees.
1994 EMPLOYEE COMBINATION STOCK OPTION PLAN
In 1994, the Company adopted the Employee Plan. The purposes of the
Employee Plan is to provide long-term incentives and rewards to the Company's
employees, officers, directors, advisors and consultants by granting them a
permanent stake in the growth and prosperity of the Company. The Employee Plan,
as amended in 1996, permits the issuance of options to purchase up to 135,000
shares of common stock (net of cancellations).
Under the Employee Plan, the Company may grant both incentive stock
options intended to qualify under Section 422 of the Internal Revenue Code of
1986, as amended ("incentive stock options"), and other options which are not
qualified as incentive stock options ("nonqualified stock options"). Incentive
stock options may only be granted to persons who are key employees of the
Company at the time of grant, which may include officers and directors who are
also employees. Nonqualified stock options may be granted to persons who are
officers, directors or key employees of or consultants or advisors to, the
Company at the time of grant, provided that directors who are not employees of
the Company are not eligible to participate in the Employee Plan. Currently,
there are approximately 150 employees of the Company who may determined to be
key employees entitled to grants of options under the Employee Plan.
The Employee Plan will be administered by the Compensation Committee of
the Board of Directors. Subject to the terms of the Employee Plan, the
Compensation Committee determines the persons to whom options are granted, the
number of shares covered by the option, the term of any option, and the time
during which any option is exercisable.
If approved, a total of 500,000 shares of Common Stock will be reserved
for issuance under the Employee Plan. Currently 135,000 shares are reserved for
issuance. The shares issued may include treasury shares, authorized but unissued
shares and shares previously reserved for issuance upon exercise of options
which have expired or terminated. Shares subject to an option that ceases to be
exercisable for any reason will be available for subsequent option grants.
Nonqualified stock options may be granted at an exercise price greater
than or lesser than the fair market value of the Common Stock on the date of
grant, at the discretion of the
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<PAGE>
Compensation Committee. Incentive stock options, however, may not be granted at
less than the fair market value of the Common Stock and may be granted to
holders of more than 10% of the Common Stock only at an exercise price of at
least 110% of the fair market value of the Common Stock on the date of grant.
The exercise price may be paid in cash or, in the discretion of the Compensation
Committee, (i) in shares of Common Stock (valued at the fair market value at the
date of exercise), (ii) by delivery of any other property valued at its fair
market value at the time of exercise or (iii) by any combination of cash, Common
Stock and other property.
With respect to incentive stock options, to the extent that the
aggregate fair market value of the Common Stock (measured at the time of grant)
with respect to which incentive stock options are first exercisable by an
employee during any calendar year under the 1994 Plan and any other plan of the
Company providing incentive stock options exceeds $100,000, such incentive stock
options shall be treated as nonqualified options.
These options generally become exercisable at 20% per year over five
years. Options under the Employee Plan may not be granted after ten years from
the date of stockholder approval of the 1994 Plan. No option under the Employee
Plan may be exercised subsequent to ten years from the date of grant (five years
after the date of grant for incentive stock options granted to holders of more
than 10% of the Common Stock). No incentive stock option granted pursuant to the
Employee Plan may be exercised more than three months after the option holder
ceases to be an employee of the Company, except that in the event of death or
permanent and total disability (as defined in the Internal Revenue Code of 1986
(the "Code") of the option holder, the option may be exercised by the holder of
his estate for a period of up to one year after the date of such death or
permanent total disability. Options granted under the 1994 Plan may not be
assigned or transferred except as permitted in the discretion of the
Compensation Committee.
The Employee Plan may be amended by the Board of Directors or the
Compensation Committee, subject to certain limitations (i) with respect to
certain matters for which stockholder approval may be required, and (ii)
provided by any applicable law, rule or regulation. No amendment, suspension or
termination of the Employee Plan, except as described in the Employee Plan, may
adversely affect the rights of an option holder under the Employee Plan without
the holder's consent.
In fiscal 1997 Mr. Buccieri and Ms. Ross each received options to
purchase 30,000 shares under the Employee Plan with an exercise price of $1.094,
subject to stockholder approval of the amendment to the Employee Plan. On 30
April, 1997 Mr.
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<PAGE>
Chapdelaine received options to purchase 50,000 shares under the Employee Plan
with an exercise price of 1.168 (110% of market value on 30 April, 1997) in lieu
of cash compensation of $58,400 for fiscal 1998.
If the stockholders do not approve the amendment to the Employee Plan,
the options granted to Messrs. Chapdelaine, Buccieri, and Ms. Ross on 30 April
and 7 March respectively, will be rescinded. An aggregate of 243,000 options to
purchase shares of common stock have been granted,110,000 of which are subject
to shareholder approval of the proposed amendment to the Employee Plan.
The following table sets forth the amounts allocated to each of the
following under the Employee Plan.
NEW PLAN BENEFITS
1994 Employee Combination Stock Option Plan
-------------------------------------------
<TABLE>
<CAPTION>
Number of Shares
Name Dollar Value ($)(1) Subject to Options
---- ------------------- ------------------
<S> <C> <C>
George R. Chapdelaine - 50,000
President and Chief
Executive Officer (2)
Executive Officers as a group (2)(3) - 110,000
Current Nonemployee Not Eligible 0
Directors as a group
All Employees who are - 0
Not Executive Officers
as a group
</TABLE>
- ------
(1) Based upon the difference between the market value of the underlying shares
on the date of grant and the exercise price of the 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.
(2) Subject to stockholder approval of the proposed amendment to the Employee
Plan, on 30 April, 1997, the Company granted an option to purchase 50,000
shares to George R. Chapdelaine at an exercise price of $1.25 per share. If
the proposal to amend the Employee Plan is not approved by the
shareholders, all of these options will be rescinded.
(3) Subject to stockholder approval of the proposed amendment to the Employee
Plan on 7 March, 1997, the Company granted an
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<PAGE>
option to purchase 30,000 shares to each of Mr. Buccieri and Ms. Ross at an
exercise price of $1.25 per share. If the proposal to amend the Employee
Plan is not approved by the stockholders, all these options will be
rescinded.
Options to purchase an aggregate of 243,000 shares of common Stock have
been granted to all current employees as a group. At July 25, 1997, the market
value of the Common Stock underlying the outstanding options under the Employees
Plan was $303,750, based upon the closing price per share of the Common Stock
$1.25 on the NASDAQ Small-Cap Market on that date.
Federal Tax Consequences of the Employee Plan
The following discussion of the federal income tax consequences of the
issuance and exercise of options granted under the Employee Plan and the 1994
Plan is based upon the provisions of the Code as in effect on the date of this
proxy statement, current regulations thereunder, and existing administrative
rulings of the Internal Revenue Service. It is not intended to be a complete
discussion of all of the federal income tax consequences of either plan or of
all of the requirements that must be met in order to qualify for the described
tax treatment.
Nonqualified Options
This section discusses the treatment of nonqualified options offered
under the 1994 Combination Stock Option Plan.
A recipient of a nonqualified option will not recognize any income for
federal tax purposes with respect to the option until the option is exercised.
At that time, subject to certain limited exceptions, the recipient will
recognize ordinary income in an amount equal to the excess of the fair market
value of the shares on the date acquired over the option exercise price.
When an option recipient recognizes income, the Company may be required
to withhold income taxes with respect to that income. If the Company satisfies
its withholding obligation, 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 recipient.
Upon a subsequent sale of shares acquired by the exercise of a
nonqualified stock option, a recipient will recognize gain or loss equal to the
difference between the selling price of the shares and their fair market value
on the date of exercise. The gain or loss will be short-term or long-term
depending upon how long the shares were held.
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<PAGE>
Incentive Stock Options
Incentive stock options granted under the 1994 Combination Stock Option
Plan are intended to qualify as incentive stock options under Section 422 of the
Code.
A participant will not recognize taxable income upon the grant or
exercise of an incentive stock option. If an option holder does not make a
"disqualifying disposition" (as defined below), then the option holder will not
recognize any taxable income until shares are sold or exchanged, and any gain
recognized upon distribution of shares will be taxable as long term capital
gain. A "disqualifying disposition" means any disposition of shares acquired on
the exercise of an incentive stock option within two years of the date the
option was granted or within one year of the date the shares were transferred to
the option holder.
If the option holder makes a disqualifying disposition, then the
difference between (a) the option exercise price and (b) the lesser of (i) the
fair market value of the shares on the date of exercise or (ii) the price
received upon disposition of the shares, will be taxable to the option holder as
ordinary income. In the case of a gift or certain other transfers, the amount of
taxable ordinary income is not limited to the gain that would have resulted from
a sale. Instead , it is equal to the excess of the fair market value of the
shares on the date of exercise over the option exercise price.
In the case of a disqualifying disposition, if the amount realized on
disposition of the shares exceeds the fair market value of the shares on the
date of exercise, the excess will be taxed as either long-term or short-term
capital gain depending on the option holder's holding period for the shares.
In general, the fair market value of the shares on the date of
exercise, less the exercise price, will be included in the option holder's
alternative minimum taxable income in the year the option is exercised. However,
if in the same year, the shares are disposed of at a lower price, then
alternative minimum taxable income is calculated using this lower price instead
of the shares' fair market value on the date of exercise.
The Company will not be entitled to any deduction with respect to the
grant or exercise of incentive stock options. In addition, no deduction will be
allowed to the Company upon the disposition of stock acquired upon the exercise
of an incentive stock option, unless the disposition is a disqualifying
disposition. In the case of a disqualifying disposition, the Company generally
will be entitled to a deduction equal to the amount of compensation income that
is recognized by the employee as a result of the disqualifying disposition.
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<PAGE>
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors recommends that the stockholders ratify the
selection of BDO Seidman, LLP as independent public accountants to examine the
consolidated financial statements of the Company and its subsidiaries for the
fiscal year ending April 26, 1998. BDO Seidman, LLP has audited the Company's
financial statements annually since 1994. 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 continued in that capacity for more than 12 years. The Board of
Directors believes it is desirable and in the best interests of the Company to
continue employment of that firm. The affirmative vote of a majority of the
Company's Common Stock present in person or represented by proxy is required to
ratify the appointment of BDO Seidman, LLP as the Company's independent public
accountants. Action by stockholders is not required by law in the appointment of
independent public accountants, but their appointment is submitted by the Board
of Directors in order to give the stockholders a voice in the designation of
accountants. If the appointment is not ratified by the stockholders, the Board
of Directors will reconsider its choice of BDO Seidman, LLP as the Company's
independent public accounts.
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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Stockholder Loans
In 1986, Anthony A. Polcari, the brother of John P. Polcari, Jr. and a
stockholder and employee 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
20
<PAGE>
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 27, 1997 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 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.
The Haymarket Credit Facility
In December 1995, the Company obtained a long-term credit facility with
Haymarket Co-Operative Bank. The terms of the credit facility provide that the
Company may initially draw upon a $500,000 credit line ("Phase One"), and that,
at the Bank's discretion, an additional $500,000 would be made available to the
Company based upon the Company's results of operations in fiscal 1996("Phase
Two"). During fiscal 1997 the company amended the 12% note and borrowed an
additional $380,750. The interest rate on Phase One of this credit facility is
2% above the bank's prime rate. The interest rate on Phase Two of the credit
facility is a fixed rate of 12% per annum. The Company is obligated to make
monthly principal payments of $8,333 on Phase One of the loan, commencing May
1996, with all outstanding amounts due and payable on or before April 1, 2001.
The Company is obligated to make monthly principal payments of $8,333 on Phase
Two of the loan, commencing August 1996. The credit facility is secured by all
of the assets of the Company and its subsidiaries, including the Company's
Pizzeria Regina restaurant located in the North End of Boston, Massachusetts.
The credit facility also contains certain covenants. The President and the
Treasurer of the Company and each of the Company's subsidiaries have guaranteed
the Company's obligations to the bank. A member of the Board of Directors of the
Company also serves as a member of the bank's board of directors. As of April
27, 1997, the Company had an outstanding balance of $825,000 under this credit
facility.
21
<PAGE>
Convertible Subordinated Debentures
During fiscal 1997, the Company issued $1,118,750 of convertible
subordinated debentures. Subordinated debentures outstanding at April 27, 1997
consist of convertible debentures bearing interest at 8% through 31 December,
1997; 10% through 31 December, 1998; 12% through 31 December 1999; 14% through
2011 (this is straight-lined at 13.2% annually) payable semi-annually and
convertible into the Company's common stock at a conversion rate of $1.25 per
share. The Company can redeem the convertible debentures under certain
conditions, as defined. The debentures are due December 2011. The Company is
authorized to issue an additional $381,250 of subordinated debentures. A member
of the board of directors of Boston Restaurant Associates, Inc. received $55,623
for services in connection with this transaction.
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. As of year-end this loan was payed in full by Mr.
Chapdelaine. This note was guaranteed by the Company.
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 employees 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 employees
of the Company. Abstentions, including broker non-votes, will have no effect on
the outcome of the vote for the election of employees. 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. 1 and 2. Abstentions
will have the effect of a vote against Proposal 2, but a broker non-vote will
have no effect.
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 employees, and persons who own more than 10% of
the Company's Common Stock, to
22
<PAGE>
file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
Securities and Exchange Commission and 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, employees 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 know 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 1998
Annual Meeting of Stockholders and wish to have included in the Company's proxy
materials must be received by the Company no later than 9 April, 1998.
Annual Report on Form 10-KSB
Copies of the Company's Annual Report on Form 10-KSB for the fiscal
year ended April 27, 1997 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 999 Broadway, Suite
400, Saugus, Massachusetts 01906.
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.
23
<PAGE>
PROXY BOSTON RESTAURANT ASSOCIATES, INC. PROXY
ANNUAL MEETING OF STOCKHOLDERS
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, September 12, 1997, 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>
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
BOSTON RESTAURANT ASSOCIATES, INC.
September 12, 1997
Please Detach and Mail in the Envelope Provided
A [X] Please mark your
votes as in this
example.
FOR (all nominees WITHHOLD
except as marked AUTHORITY
to contrary) to vote for all nominees
1. Election of [ ] [ ]
Directors:
(INSTRUCTION: To withhold authority to vote
for any individual nominee, write that nominee's
name in the space provided below.)
- -----------------------------------------------
Nominees: George R. Chapdelaine
Joseph J. Caruso
Roger Lipton
John P. Polcari, Jr.
Richard J. Reeves
Lucille S. Salhany
Terrance A. Smith
FOR AGAINST ABSTAIN
2. To adopt and approve the amendment to the 1994 [ ] [ ] [ ]
Employee Stock Option Plan as described in the
accompanying Proxy Statement.
3. To ratify the appointment of BDO Seidman LLP [ ] [ ] [ ]
auditors for fiscal year 1996.
Signature ____________ Date: ________ Signature ____________ Date: ________
NOTE: (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.)
