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 Rule 14a-11(c) or Rule 14(a)-12
Boston Restaurant Associates, Inc.
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(Name of Registrant as Specified In Its Charter)
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(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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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
August 14, 1998
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS OF
BOSTON RESTAURANT ASSOCIATES, INC.
TO BE HELD ON 14 SEPTEMBER, 1998
---------------
The Annual Meeting of Stockholders of Boston Restaurant Associates,
Inc., a Delaware corporation (the "Company"), will be held on Monday, 14
September, 1998 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 eight (8) directors to serve for the ensuing year and
until their successors are duly elected and qualified.
2. To consider and act upon a proposal to ratify the appointment
of BDO Seidman LLP as auditors for fiscal year 1999.
3. To consider and act upon a proposal to amend the Certificate
of Incorporation to authorize 10,000,000 shares of a new class
of Preferred Stock.
4. 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 foregoing items are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on 4 August,
1998 as the record date for determining the stockholders entitled to notice of,
and to vote at, the meeting and any continuation or adjournment thereof. Any
stockholder attending the meeting may vote in person even if he or she returned
a proxy.
By Order of the Board of Directors
GORDON R. PENMAN, Secretary
Boston, Massachusetts
14 August, 1998
YOUR VOTE IS IMPORTANT
YOU ARE URGED TO SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD, 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.
2
<PAGE>
BOSTON RESTAURANT ASSOCIATES, INC.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
To Be Held On 14 September, 1998
This proxy statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Boston Restaurant Associates,
Inc., a Delaware corporation (the "Company") with its principal executive
offices at 999 Broadway, Saugus, Massachusetts 01906, for use at the Annual
Meeting of Stockholders to be held on Monday, 14 September, 1998 at 10:00 a.m.,
local time, or at any continuation or adjournment thereof (the "Meeting"), for
the purposes set forth in the accompanying Notice of Annual Meeting of
Stockholders. The Meeting will be held at the offices of Brown, Rudnick, Freed &
Gesmer, 18th Floor, One Financial Center, Boston, Massachusetts 02111. Proxies
are being solicited on behalf of the Board of Directors of the Company and the
cost of such solicitation will be borne by the Company. Certain of the
directors, 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. It is expected that this proxy statement
and the accompanying proxy will be first mailed to stockholders on or about
August 14, 1998.
Only stockholders of record at the close of business on 4 August, 1998 will
be entitled to receive notice of, and to vote at, the Meeting. As of that date,
there were outstanding and entitled to vote 7,024,170 shares of Common Stock,
$.01 par value per share (the "Common Stock"), of the Company. Each such
stockholder is entitled to one vote for each share of Common Stock held on that
date and may vote such shares either in person or by proxy.
The enclosed proxy card, if executed and returned, will be voted as
directed on the proxy card or, in the absence of such direction, for the
election of the nominees as directors and in favor of each of Proposal No. 2 and
Proposal No. 3. The Company knows of no other matters to be submitted to the
Meeting. If any other matters properly come before the Meeting, the persons
named on the enclosed proxy card will vote the shares represented thereby on
such matters 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.
3
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Meeting, eight directors are to be elected to serve until the 1999
Annual Meeting of Stockholders and until their respective successors have been
duly elected and qualified. The persons listed in the table below have been
nominated by the Board of Directors for election as directors.
Seven of the nominees are currently serving as directors of the Company. In
the unanticipated event that any nominee should be unable or declines to stand
for election at the Meeting, the proxies will be voted for such substitute
nominees, 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.
<TABLE>
<CAPTION>
Director
Name Age Position Since
- ---- --- -------- -----
<S> <C> <C> <C>
George R. Chapdelaine 53 Chief Executive Officer, 1994
President and Director
Joseph J. Caruso (1) 55 Director 1994
Roger Lipton (2) 57 Director 1996
John P. Polcari, Jr. 67 Director 1994
Richard J. Reeves (1) (2) 51 Director 1989
Lucille Salhany 51 Director 1996
Terrance Smith (2) 53 Director 1990
Kathleen Mason 49 Nominee for Director --
</TABLE>
- -------------
(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. Mr. Chapdelaine joined a predecessor of
the Company in 1982 and served as its President, Chief Executive Officer and a
director until it was acquired by the Company in April 1994. Prior to 1982, 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
4
<PAGE>
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.
Mr. Caruso has been the President of Bantam Group, Inc., a business
advisory firm he founded, since its inception in 1986. Mr. Caruso is presently a
member of the boards of directors of Audiofile, Inc., Corion Corporation,
Holometrix, Inc. and Tytronics, Inc. and 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.
Since February 1995, Mr. Lipton has been Managing Director of Axiom Capital
Management Inc., an investment banking firm specializing in the restaurant,
franchising and retailing industries and a NASD broker/dealer. From 1981 until
February 1995 he was Managing Director of Ladenburg, Thalmann & Co., Inc., also
an investment banking firm.
John P. Polcari, Jr. was a founder of Pizzeria Regina, Inc. He is a
recipient of the National Restaurant Association's state restaurateur of the
year award for the Commonwealth of Massachusetts.
Mr. Reeves has been engaged in restaurant development as a franchisee of
various restaurants not competitive with those owned and operated by the Company
since 1991. From September 1988 to March 1989, Mr. Reeves served as an executive
officer and principal stockholder of RSMG, Inc. and from March 1985 until April
1989 occupied similar positions with Reeves Associates, Inc., both of which were
privately held restaurant development companies.
Mr. Smith has been President of Chi-Chi's International Operations, Inc.,
since 1988. Currently Mr. Smith is also President of Tumbleweeds International,
LLC, a member of the board of directors of Tumbleweeds International, LLC and a
member of the board of directors of Oldenberg, Inc.
Ms. Salhany is the spouse of Mr. Polcari and former President and CEO of
United Paramount Network. She is currently engaged in the Consulting Business.
Kathleen Mason was Chairman, President, and CEO of Cherry & Webb from 1992
through 1997. Presently Ms. Mason is President of Home Goods, Inc., a subsidiary
of TJ Maxx Companies.
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 duly elected and
qualified.
5
<PAGE>
Meetings of the Board of Directors
The Board of Directors held four meetings during the fiscal year ended
April 26, 1998. The Board of Directors also acted on several occasions by
unanimous written consent in lieu of special meetings. Each current director,
other than Mr. Polcari and Ms. Lucille Salhany, attended at least 75% of the
aggregate number of all meetings of the Board of Directors and committees of
which he or she was a member during such fiscal year.
The Board of Directors has an Audit Committee, currently composed of
Messrs. Reeves, Smith and Lipton. 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 and Reeves. 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. Each
of those committees held one meeting during the fiscal year ended April 26,
1998.
The Board of Directors does not have a nominating committee. Nominations of
directors are considered by the whole Board of Directors.
Compensation of Directors
Six 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 them 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 1998 under the Nonemployee Directors Stock Option Plan.
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 15 July, 1998 by (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 for director
of the Company, (iii) each person named in the Summary Compensation Table below,
and (iv) all current executive officers and directors of the Company, as a
group. This information is based upon information provided by the named
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<PAGE>
person. 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.
<TABLE>
<CAPTION>
- ----------------------------------------- --------------------------- -----------------------------
Name and Address Number of Shares Percentage of Outstanding
Beneficially Owned Shares
- ----------------------------------------- --------------------------- -----------------------------
<S> <C> <C>
George R. Chapdelaine (1) (2)
c/o Boston Restaurant
Associates, Inc.
999 Broadway
Saugus, MA 01906 1,097,063 14.8%
- ----------------------------------------- --------------------------- -----------------------------
- ----------------------------------------- --------------------------- -----------------------------
Joseph J. Caruso (6)
c/o Boston Restaurant
Associates, Inc.
999 Broadway
Saugus, MA 01906 60,000 *
- ----------------------------------------- --------------------------- -----------------------------
- ----------------------------------------- --------------------------- -----------------------------
Roger Lipton (8)
983 Park Avenue
New York, NY 10028 1,143,517 15.88%
- ----------------------------------------- --------------------------- -----------------------------
- ----------------------------------------- --------------------------- -----------------------------
John P. Polcari, Jr. (1)(3)
c/o Boston Restaurant
Associates, Inc.
999 Broadway
Saugus, MA 01906 1,133,503 15.6%
- ----------------------------------------- --------------------------- -----------------------------
- ----------------------------------------- --------------------------- -----------------------------
Richard J. Reeves (4)
c/o Boston Restaurant
Associates, Inc.
999 Broadway
Saugus, MA 01906 150,500 2.13%
- ----------------------------------------- --------------------------- -----------------------------
- ----------------------------------------- --------------------------- -----------------------------
Terrance A. Smith (5)
c/o Boston Restaurant
Associates ,Inc.
999 Broadway
Saugus, MA 01906 72,200 1.03%
- ----------------------------------------- --------------------------- -----------------------------
- ----------------------------------------- --------------------------- -----------------------------
Kathleen Mason 0 *
- ----------------------------------------- --------------------------- -----------------------------
- ----------------------------------------- --------------------------- -----------------------------
Lucille Salhany (1)(7)
- ----------------------------------------- --------------------------- -----------------------------
7
<PAGE>
- ----------------------------------------- --------------------------- -----------------------------
c/o Boston Restaurant
Associates, Inc.
999 Broadway
Saugus, Ma 01906 137,984 2.0%
- ----------------------------------------- --------------------------- -----------------------------
- ----------------------------------------- --------------------------- -----------------------------
Dolphin Management, Inc. (9)
129 East 17th Street 1,025,000 14.5%
New York, NY 10003
- ----------------------------------------- --------------------------- -----------------------------
- ----------------------------------------- --------------------------- -----------------------------
Jordan American Holdings, Inc.
(10)
1875 Ski Time Square Dr.,
Suite 1
Steamboat Springs, CO 80487 1,451,721 19.3%
- ----------------------------------------- --------------------------- -----------------------------
- ----------------------------------------- --------------------------- -----------------------------
All current directors and Chief
Executive Officer as a group
(7 persons) 3,905,161 49.2%
- ----------------------------------------- --------------------------- -----------------------------
</TABLE>
*Less than one percent
(1) Mr. Chapdelaine and Mr. Polcari were the Voting Trustees of a Voting Trust
that held 1,265,150 shares pursuant to a certain Amended and Restated
Voting Trust Agreement dated April 28, 1994 (the "Voting Trust Agreement").
On July 13, 1998, the Voting Trust was dissolved and its assets were
distributed to the beneficiaries of the Voting Trust. Mr. Chapdelaine and
Mr. Polcari were each issued 522,390 shares of the Company's Common Stock.
Ms. Lucille Salhany, spouse of Mr. Polcari, received 54,988 shares and
Anthony and Mary Polcari, as Joint Tenants with Right of Survivorship,
received 165,382 shares.
(2) Includes options to purchase 366,673 shares issuable pursuant to currently
exercisable stock options.
(3) Includes approximately 125,243 shares issued to Lucille Salhany, Mr.
Polcari's wife, and Mr. Polcari, as joint tenants with rights of
survivorship and 12,741 shares held by Ms. Salhany, for the benefit of
certain family members. Includes option to purchase 264,173 shares issuable
pursuant to currently exercisable stock options.
(4) Includes options to purchase 32,000 shares issuable pursuant to currently
exercisable stock options.
(5) Includes options to purchase 40,000 shares issuable to pursuant to
currently exercisable stock options.
(6) Includes 10,000 shares held by Bantam Group, Inc., a business advisory firm
controlled
8
<PAGE>
by Mr. Caruso and options to purchase 32,000 shares issuable pursuant to
currently exercisable stock options.
(7) Includes 12,741 shares held by Ms. Salhany for the benefit of certain
family members.
(8) Based upon a Schedule 13D provided to the Company and information provided
by Mr. Lipton. Includes 178,000 shares issuable pursuant to currently
exercisable warrants.
(9) Based upon information provided to the Company. Includes 30,000 shares
issuable pursuant to currently exercisable warrants.
(10) Based upon information provided to the Company. Includes 500,000 shares
issuable pursuant to currently exercisable warrants.
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:
Anthony A. Buccieri, 43, was appointed Vice President of Operations for the
Pizzeria Regina operations in April 1994. Mr. Buccieri joined a predecessor of
the Company in 1974 and has served in various capacities since that date,
including as operations supervisor, assisting in the opening of all Pizzeria
Regina outlets since 1983. Mr. Buccieri attended the University of
Massachusetts.
Fran Ross, 51, was appointed the Company's Vice President of Corporate
Marketing in February 1995 and Vice President of Corporate Administration in
October 1996. 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. Ms. Ross holds a degree from the
Culinary Institute of America, a B.S. in Biochemistry 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 the Chief Executive Officer . No executive
officer other than the Chief Executive Officer received total annual salary and
bonus in excess of $100,000 during the last fiscal year.
9
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- --------------------------- -------------------------------------- ------------------------------------- ------------
Annual Compensation Long-Term Compensation
- --------------------------- -------------------------------------- ------------------------------------- ------------
Name and Fiscal Salary Bonus Other Restricted Securities LTIP All other
Principal Year Ended Annual Stock Under- Payouts Compen-
Position Compen- Awards Lying sation
sation Options
($) ($) ($) ($) (#)(3) ($) ($)
- --------------- ----------- ------------ ------------ ------------ ------------ ----------- ------------ ------------
- --------------- ----------- ------------ ------------ ------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
George R. 4/26/98 132,795 0 50,000
Chapdelaine 4/27/97 116,000 35,000
President and 4/28/96 183,600 35,000
CEO (1)(2)
- --------------- ----------- ------------ ------------ ------------ ------------ ----------- ------------ ------------
</TABLE>
(1) Mr. Chapdelaine was entitled to a salary of $190,484 plus a cash bonus of
$35,000 in fiscal year 1998. However, for the fiscal year 1998 only he
elected to receive $132,795 in cash plus options to purchase 50,000 shares
of common stock of the Company.
(2) Does not include stock options granted to Mr. Chapdelaine for his personal
guarantee of certain financial obligations of the Company. See "Certain
Relationships and Related Transactions - Guarantee of Indebtedness of the
Company; Stock Options."
(3) Value on 26 April, 1998.
Employment Contract
The Company and Mr. Chapdelaine, the Chief Executive Officer and President
of the Company, have entered into a five year employment agreement dated April
29, 1994 which provides for an initial annual salary of $165,000 in 1994,
subject to increase after the first year of employment at 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 concerning his fiscal 1998
compensation ).
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.
10
<PAGE>
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,
selected by the Compensation Committee, will be paid cash bonuses. The aggregate
amount of these bonuses will be based upon a formula related 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.
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 similar to that adopted by many other companies and 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 reasonable incurred by him in connection with any civil
or criminal action or administrative proceeding arising out of the performance
of his duties.
11
<PAGE>
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 Chief Executive Officer during the last
fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- ------------------------ ---------------------- ---------------------- ----------------------- ----------------------
Name Number of Securities Percent of Total
Underlying Options Options Granted to
Granted (#) Employees in Fiscal Exercise of Base
Year Price Expiration Date
($/Sh)
- ------------------------ ---------------------- ---------------------- ----------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C>
George R. Chapdelaine, 50,000 71.7% 1.168 4/27/07
CEO (1)
- ------------------------ ---------------------- ---------------------- ----------------------- ----------------------
</TABLE>
(1) Excludes 54,173 stock options granted to Mr. Chapdelaine in consideration
for his personal guarantee of certain financial obligations of the Company.
See "Certain Relationships and Related Transactions - Guarantee of
Indebtedness of the Company."
12
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
- ------------------------ ---------------------- ---------------------- ----------------------- ----------------------
Name Shares Acquired on Value Realized Number of Shares of Value of
Exercise (#) ($) Common Stock Unexercised In-the-
Underlying Money Options at
Unexercised Options April 26, 1998 ($)
At April 26, 1998 Exercisable/
(#) Unexercisable
Exercisable /
Unexercisable
- ------------------------ ---------------------- ---------------------- ----------------------- ----------------------
- ------------------------ ---------------------- ---------------------- ----------------------- ----------------------
<S> <C> <C> <C> <C>
George R. Chapdelaine, 0 0 366,673/0 N/A
CEO
- ------------------------ ---------------------- ---------------------- ----------------------- ----------------------
</TABLE>
PROPOSAL 2
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 either the Company or its predecessor as independent public
accountants for more than 14 years. The Board of Directors believes it is
desirable and in the best interest 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 have
an opportunity to make a statement, if so desired. The representative will be
available to respond to appropriate questions.
PROPOSAL 3
PROPOSAL TO AMEND AND RESTATE ARTICLE III OF THE CERTIFICATE OF INCORPORATION OF
THE CORPORATION TO AUTHORIZE 10,000,000 SHARES OF A NEW CLASS OF PREFERRED STOCK
WITH AUTHORITY VESTED IN THE
13
<PAGE>
BOARD OF DIRECTORS TO FIX ITS RIGHTS AND PRIVILEGES.
The Board of Directors of the Company has adopted a resolution unanimously
approving, and recommending to the Company's stockholders for their approval, an
amendment to the Company's Certificate of Incorporation to authorize the
issuance of up to 10,000,000 shares of Preferred Stock, the terms of which may
be fixed by the Board of Directors. The text of the proposed amendments is
attached hereto as Appendix A.
The Board of Directors believes the creation of the Preferred Stock is in
the best interests of the Company and its stockholders and believes it advisable
to authorize such shares in order to have them available for, among other
things, issuance in connection with public or private offerings of shares for
cash, dividends payable in stock of the Company, acquisitions of other
companies, implementation of employee benefit plans, and otherwise.
The proposed Preferred Stock would be "blank check" preferred stock, which
means that the designations, preferences, conversion rights, cumulative,
relative, participating, optional or other rights, including voting rights,
qualifications, limitations or restrictions thereof (collectively, the "Rights
and Restrictions") would be determined by the board of directors of the Company
from time to time. In the event of the approval of this proposal by the
stockholders, the Company's Board of Directors would be entitled to authorize
the issuance of up to 10,000,000 shares of Preferred Stock, in one or more
series, with each series having such Rights and Restrictions as may be
determined by the Board in its sole discretion, with no further authorization by
stockholders required for the creation or issuance of the shares.
In making any determination to establish a series of Preferred Stock and
fix its Rights and Restrictions, the Board of Directors has a legal duty to base
its judgment on the best interests of the stockholders and the Company. Although
the Board of Directors has no present intention of doing so, it could issue
shares of Preferred Stock that could, depending on the Rights and Restrictions
of such series, make more difficult or discourage an attempt to obtain control
of the Company by means of a merger, tender offer, proxy contest or other means.
When in the judgment of the Board of Directors this action will be in the best
interest of the stockholders and the Company, such shares could be used to
create voting or other impediments or to discourage persons seeking to gain
control of the Company. Such shares could be privately placed with purchasers
favorable to the Board of Directors in opposing such action. In addition, the
Board of Directors could authorize holders of a series of Preferred Stock to
vote either separately as a class or with the holders of the Company's Common
Stock on any extraordinary corporate transaction. The existence of the
additional authorized shares could also have the effect of discouraging
unsolicited takeover attempts. The issuance of new shares also could be used to
dilute the stock ownership of a person or entity seeking to obtain control of
the Company should the Board of Directors consider the action of such entity or
person not be in the best interest of the stockholders and the Company.
While the Company may consider effecting an offering of Preferred Stock in
the future for purposes of raising additional working capital or otherwise, as
of the date hereof, the
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Company has no agreements or understandings with any third party to effect any
such offering, or to purchase any shares offered in connection therewith, and no
assurances are given that any offering will in fact be effected. Therefore, the
terms of any Preferred Stock subject to this proposal cannot be stated or
estimated with respect to any or all of the securities authorized.
The Board of Directors recommends a vote "FOR" the amendment to the
Company's Certificate of Incorporation to authorize 10,000,000 shares
of a new class of Preferred Stock.
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") 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 balance due on the subscription price, 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 26, 1998 was $121,336.
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 and maturing in January 2017.
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 initially provided
that the Company could 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 operation in fiscal
1996 ("Phase Two"). During fiscal 1997 the parties amended Phase Two of the
credit facility and the Company borrowed an additional $380,750. The interest
rate on Phase One of this credit facility is the bank's prime rate plus 2%. 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
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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
26, 1998, the Company had an outstanding balance of $625,000 under this credit
facility.
Guarantee of Indebtedness of the Company; Stock Options
In addition to the other security for loans under the Company's long term
credit facility 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. In
addition, the Company has issued to each of Messrs. Chapdelaine and Polcari
options to purchase 54,173 shares of Common Stock in consideration for their
personal guarantees of certain financial obligations of the Company.
Convertible Subordinated Debentures
During fiscal 1998, the Company completed the placement of $1,500,000 of
convertible subordinated debentures. Subordinated debentures outstanding at
April 26, 1998 consisted 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. The debentures are due December 2011. A
member of the board of directors of the Company received 5% of the proceeds as
compensation for services in connection with this transaction.
Franchising
In 1997, the Company formed Boston Restaurant Associates International,
Inc. ("BRAII"), a wholly owned subsidiary, for the purpose of offering Pizzeria
Regina franchise opportunities both domestically and internationally. BRAII has
filed a Uniform Franchise Offering Circular in Connecticut, Florida, Georgia,
Kentucky, New Hampshire, Pennsylvania and Texas and is actively seeking
franchisees with operational experience.
In addition, in January, 1998, the Company entered into an International
Development Agreement with Regina International, Inc., ("Regina International")
a Gibraltar corporation controlled by Terrance Smith, a Company director, to
pursue and develop franchise territories outside the Americas, anticipated to be
principally in Europe, the Far East and the Pacific Rim. Under that agreement,
which has an initial term of 5 1/2 years, Regina International agrees to use its
best efforts to market and promote the Company's franchise system within its
development Territory and to sell a minimum number of franchises during the
initial term of the Agreement. The Company is obligated to pay Regina
International a development fee of $7,000 per month for the 60 months of the
agreement. This monthly fee accrues but is not payable until the month
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following the month in which BRAII's positive cash flow equals or exceeds $7,000
after payment of all accrued but unpaid direct costs and expenses incurred in
connection with marketing and promotion of the Company's franchise system, and
is payable thereafter only to the extent there continues to be a positive cash
flow. The Company will expense the monthly fee as incurred, regardless of when
payment is required to be made. BRAII must pay Regina International a royalty of
40% of the excess of gross revenues from Regina International's activities over
the expenses incurred by either BRAII or Regina International in the marketing
and promotion of the Company's franchise system within the development areas,
with royalty percentage subject to adjustment based upon the ratio of revenues
to expenses. Either party has the right to seek renegotiation of the agreement
upon 180 days written notice at the end of the term, and if they cannot reach
agreement upon mutually agreeable terms, each has the right to buy out the
balance of the agreement's term for a one-time buy out fee equal to the excess
of the revenues of BRAII over the marketing and promotional expenses. The buy
out fee is payable by the Company in cash or its common stock, subject to
certain requirements.
Franchising operations present numerous risks, and the Company faces
vigorous competition from other similar type restaurant chains in attracting and
retaining suitable franchisees. The Company is subject to regulation by the
Federal Trade Commission and must comply with certain state laws that govern the
offering, sale, and termination of franchises and the refusal to renew
franchises. The Company has limited experience in franchising restaurants.
Franchisees' failure to maintain the Company's high standards could adversely
affect customer attitudes towards the Company's restaurants. Granting exclusive
territory agreements may also limit future expansion opportunities for
Company-owned restaurants. Franchise developers or franchisees may leave the
franchise system at the end of the term of their development or franchise
agreements or may attempt to terminate their agreements before the end of their
terms, thereby reducing royalty revenues. Further, while franchising permits the
Company to increase the geographic coverage of its restaurant system without
substantial investments of capital, it also means that the Company may not have
direct operational control over the Company's franchised restaurants.
OTHER MATTERS
Joint Venture for New Restaurant Concept
The Company is presently negotiating with Italian Ventures LLC, a company
owned by Richard Reeves, one of the Company directors, to form a joint venture
to develop and exploit a new restaurant concept. It is presently contemplated
that the Company would hold a 51% interest in the joint venture. The two venture
partners would jointly develop the restaurant concept and once developed,
Italian Ventures LLC would be primarily responsible for the operation of the
restaurants. If the parties did not agree on a particular site proposed for a
joint venture restaurant, the proponent could develop that site on its own as a
franchisee of the joint venture on the joint venture's standard franchising
terms. The Company would have a call option on Italian Ventures LLC's interest
in the joint venture and Italian Ventures LLC would have a put
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option to the Company to buy out its interest in the joint venture at a formula
price under certain circumstances. The Company would have the option of paying
the buy out price in stock or in cash. However, the joint venture's terms are
still being negotiated, and there can be no assurance that any agreement will be
reached or, if agreement is reached, that it will not be different from those
described.
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 the Board of Directors of the Company who receive the
greatest number of votes cast at the Meeting 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 represented in person or by proxy at the
Meeting is required for approval of each of Proposal No. 2 and Proposal No. 3.
Abstentions will have the effect of a vote against Proposal No. 2 and Proposal
No. 3, but a broker non-vote will have no effect.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who beneficially 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
National Association of Securities Dealers. Such reporting persons are also
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 which 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 directors, executive officers, and greater than 10%
stockholders complied with all Section 16(a) filing requirements applicable to
them during the Company's fiscal year ended April 26, 1998.
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Other Proposed Action
The Board of Directors knows of no matters to be submitted at the Meeting
other than Proposals No. 1, 2 and 3. However, if any other matters should
properly be presented at the Meeting, the persons named in the enclosed proxy
card shall have discretionary authority to vote the shares represented thereby
in accordance with their own judgment.
Stockholder Proposals
Proposals which stockholders intend to present at the Company's 1999 Annual
Meeting of Stockholders pursuant to Rule 14a-8 promulgated under the Securities
Exchange Act of 1934, as amended, and wish to have included in the Company's
proxy materials must be received by the Company no later than 12 April 1999. If
a proponent fails to notify the Company by June 26, 1999 of a non-Rule 14a-8
shareholder proposal which it intends to submit at the Company's 1999 Annual
Meeting of Stockholders, the proxy solicited by the Board of Directors with
respect to such meeting may grant discretionary authority to the proxies named
therein to vote with respect to such matter.
Incorporation by Reference
The Company's Annual Report on Form 10-KSB for the fiscal year ended April
26, 1998, is being mailed with this proxy statement to stockholders entitled to
notice of the meeting. The consolidated financial statements, unaudited selected
quarterly data and management's discussion and analysis of financial condition
and results of operations included in the annual report are incorporated by
reference herein.
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.
By Order of the Board of Directors
GORDON R. PENMAN, Secretary
Boston, Massachusetts
14 August, 1998
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APPENDIX A
TEXT OF PROPOSED ARTICLE III
OF THE CERTIFICATE OF INCORPORATION
OF
BOSTON RESTAURANT ASSOCIATES, INC.
(a) The maximum amount of shares of preferred stock that this corporation shall
be authorized to issue shall be 10,000,000:
10,000,000 shares of Preferred Stock.
The Preferred Stock may be created and issued from time to time in one or
more series with such designations, preferences, limitations, conversion rights,
cumulative, relative, participating, optional or other rights, including voting
rights, qualifications, limitations or restrictions thereof as determined by the
Board of Directors of the Corporation and set forth in the resolution or
resolutions providing for the creation and issuance of the stock in such series.
<PAGE>
PROXY BOSTON RESTAURANT ASSOCIATES, INC. PROXY
ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints George R. Chapdelaine attorney and proxy to
represent the undersigned at the Annual Meeting of Stockholders (the "Meeting")
of Boston Restaurant Associates, Inc. (the "Company") to be held on Monday,
September 14, 1998, 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>
[Down Arrow] Please Detach and Mail in the Envelope Provided [Down Arrow]
- --------------------------------------------------------------------------------
A [X] Please mark your
votes as in this
example.
WITHHOLD
FOR (all nominees AUTHORITY
except as marked to vote for
to contrary) 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
Kathleen Mason
John P. Polcari, Jr.
Richard J. Reeves
Lucille Salhany
Terrance A. Smith
FOR AGAINST ABSTAIN
2. To ratify the appointment of BDO Seidman LLP [ ] [ ] [ ]
auditors for fiscal year 1999.
3. To adopt and approve the amendment to the [ ] [ ] [ ]
Certificate of Incorporation authorizing
10,000,000 shares of a new class of
Preferred Stock.
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.)
