<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM 10-QSB
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT
OF 1934.
FOR THE QUARTERLY PERIOD ENDED JULY 25, 1999.
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT
OF 1934.
FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER
0-18369
------------------------
BOSTON RESTAURANT ASSOCIATES, INC.
(Name of Small Business Issuer as Specified in its Charter)
<TABLE>
<S> <C>
DELAWARE 61-1162263
(State or Other Jurisdiction of I.R.S. Employer Identification No.
Incorporation or Organization)
999 BROADWAY
SAUGUS - MASSACHUSETTS
(Address of Principal Executive Offices)
(781) 231-7575 01909
(Issuer's Telephone Number (Zip Code)
Including area code)
</TABLE>
------------------------
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes /X/ No / /.
As of September 3, 1999, 7,060,170 shares of the issuer's Common Stock, par
value $.01 per share, were outstanding.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
BOSTON RESTAURANT ASSOCIATES, INC.
INDEX
<TABLE>
<CAPTION>
PART I--FINANCIAL INFORMATION PAGE
-----
<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of July 25, 1999 and April 25,
1999....................................................................... 3
Condensed Consolidated Statements of Operations for the thirteen weeks ended
July 25, 1999 and July 26, 1998............................................ 4
Condensed Consolidated Statements of Cash Flows for the thirteen weeks ended
July 25, 1999 and July 26, 1998............................................ 5
Notes to Condensed Consolidated Financial Statements......................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations................................................................. 8
PART II--OTHER INFORMATION.............................................................. 14
SIGNATURES................................................................... 15
</TABLE>
2
<PAGE>
BOSTON RESTAURANT ASSOCIATES, INC. AND SUBSIDIARIES
PART 1--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JULY 25 APRIL 25
1999 1999
------------- -------------
<S> <C> <C>
ASSETS
Current:
Cash and cash equivalents.................................................................... $ 2,194,258 $ 1,863,299
Accounts receivable.......................................................................... $ 30,888 $ 32,121
Inventories.................................................................................. $ 225,378 $ 214,657
Prepaid expenses and other................................................................... $ 25,422 $ 51,085
------------- -------------
Total current assets....................................................................... $ 2,475,946 $ 2,161,162
------------- -------------
Property and equipment:
Building..................................................................................... $ 512,500 $ 512,500
Leasehold improvements....................................................................... $ 3,428,201 $ 3,220,587
Equipment, furniture and fixtures............................................................ $ 2,477,263 $ 2,290,488
------------- -------------
$ 6,417,964 $ 6,023,575
Less accumulated depreciation and amortization............................................... $ 2,696,687 $ 2,567,084
------------- -------------
Net property and equipment................................................................. $ 3,721,277 $ 3,456,491
------------- -------------
Other assets................................................................................... $ 1,229,123 $ 1,270,041
------------- -------------
Total assets............................................................................... $ 7,426,346 $ 6,887,694
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................................................. $ 247,294 $ 236,770
Accrued expenses............................................................................. $ 613,709 $ 651,089
Current maturities:
Notes payable-stockholder.................................................................. $ 4,802 $ 4,740
Long-term debt............................................................................. $ 241,942 $ 122,076
Obligations under capital leases........................................................... $ 126,855 $ 102,200
------------- -------------
Total current liabilities.................................................................. $ 1,234,602 $ 1,116,875
Long-term obligations:
Notes payable-stockholder, less current maturities........................................... $ 115,345 $ 116,569
Long-term debt, less current maturities...................................................... $ 753,528 $ 362,925
Obligations under capital leases, less current maturities.................................... $ 376,233 $ 331,403
Subordinated debentures...................................................................... $ 1,500,000 $ 1,500,000
Deferred rent................................................................................ $ 111,963 $ 106,513
------------- -------------
Total liabilities.......................................................................... $ 4,091,671 $ 3,534,285
------------- -------------
Minority interest in consolidated subsidiary................................................... $ 23,291 $ 29,009
------------- -------------
Commitments and contingencies
Stockholders' equity :
Preferred stock, $.01 par value, 10,000,000 shares authorized in 1999; none issued........... $ 0 $ 0
Common stock, $.01 par value, 25,000,000 shares authorized, 7,060,170
shares issued.............................................................................. $ 70,602 $ 70,602
Additional paid in capital................................................................... $ 10,938,897 $ 10,922,636
Accumulated deficit.......................................................................... $ (7,698,115) $ (7,668,838)
------------- -------------
Total stockholders' equity................................................................... $ 3,311,384 $ 3,324,400
Total liabilities and stockholders' equity................................................... $ 7,426,346 $ 6,887,694
------------- -------------
------------- -------------
</TABLE>
3
<PAGE>
BOSTON RESTAURANTS ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
JULY 25 JULY 26
1999 1998
------------ ------------
<S> <C> <C>
Revenues:
Restaurant sales.................................................................... $ 3,201,508 $ 2,956,700
Franchise Fees...................................................................... $ 0 $ 0
Royalties........................................................................... $ 1,548 $ 0
------------ ------------
Total revenues.................................................................... $ 3,203,056 $ 2,956,700
------------ ------------
Costs and expenses:
Cost of food, beverages and liquor.................................................. $ 632,320 $ 597,671
Payroll............................................................................. $ 916,507 $ 870,031
Other operating expenses............................................................ $ 938,898 $ 891,945
General and administrative.......................................................... $ 437,967 $ 330,328
Depreciation and amortization....................................................... $ 154,323 $ 134,335
------------ ------------
Total costs and expenses.......................................................... $ 3,080,015 $ 2,824,310
------------ ------------
Operating income before pre-opening costs............................................. $ 123,041 $ 132,390
Pre-opening costs................................................................... $ 126,586 $ 0
------------ ------------
Operating income (loss)............................................................... $ (3,545) $ 132,390
Other income.......................................................................... $ (954) $ (967)
Interest income....................................................................... $ (14,501) $ (16,269)
Interest expense...................................................................... $ 81,763 $ 84,623
------------ ------------
Income (loss) before minority interest............................................ $ (69,853) $ 65,003
Minority interest in net loss of subsidiary........................................... $ 40,576 $ 0
------------ ------------
Net income (loss)..................................................................... $ (29,277) $ 65,003
------------ ------------
------------ ------------
Income (loss) per share--basic........................................................ $ 0.00 $ 0.01
------------ ------------
------------ ------------
Income (loss) per share--diluted...................................................... $ 0.00 $ 0.01
------------ ------------
------------ ------------
Weighted average number of common shares outstanding--basic........................... 7,060,170 7,023,445
------------ ------------
------------ ------------
Weighted average number of dilutive common shares outstanding......................... 7,060,170 7,424,825
------------ ------------
------------ ------------
</TABLE>
See accompanying notes
4
<PAGE>
BOSTON RESTAURANT ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
--------------------
JULY 25 JULY 26
1999 1998
--------- ---------
<S> <C> <C>
Cash flows provided by operating activities.......................... $ 95,498 $ 109,441
--------- ---------
Cash flows from investing activities:
Capital expenditures............................................... $(282,805) $(211,877)
--------- ---------
Cash flows used for investing activities....................... $(282,805) $(211,877)
--------- ---------
Cash flows from financing activities:
Repayments of long-term debt....................................... $ (29,531) $ (50,000)
Repayments of capital lease obligations............................ $ (25,899) $ (17,528)
Repayments of stockholder loans.................................... $ (1,162) $ (1,120)
Proceeds from subordinated debentures.............................. $ 0 $ 0
Proceeds from long-term debt....................................... $ 540,000 $ 0
Minority interest investment in subsidiary......................... $ 34,858 $ 0
--------- ---------
Cash flows provided by (used for) financing activities......... $ 518,266 $ (68,648)
--------- ---------
Increase (decrease) in cash and cash equivalents..................... $ 330,959 $(171,084)
Cash and cash equivalents at beginning of period................... $1,863,299 $1,788,361
--------- ---------
Cash and cash equivalents at end of period......................... $2,194,258 $1,617,277
--------- ---------
--------- ---------
</TABLE>
See accompanying notes.
5
<PAGE>
BOSTON RESTAURANT ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 26, 1998
(UNAUDITED)
NATURE OF BUSINESS AND BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the thirteen-week period ended July 25, 1999 are not
necessarily indicative of the results that may be expected for the year ending
April 30, 2000. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on Form
10-KSB for the year ended April 25, 1999. The balance sheet at April 25, 1999
has been derived from the audited financial statements at that date.
The accompanying statements of operations and cash flows for the fiscal 2000
period reflect the consolidated operations and cash flow of one casual dining
Italian restaurant and ten Pizzeria Regina restaurants for the entire period and
one additional Pizzeria Regina restaurant for part of the period. The
accompanying statements of operations and cash flows for the fiscal 1999 period
reflect the consolidated operations and cash flows of one casual dining Italian
restaurant, and nine Pizzeria Regina restaurants for the entire period and one
additional Pizzeria Regina restaurant for part of the period.
NET INCOME (LOSS) PER SHARE
The Company follows Statement of Financial Accounting Standards No. 128,
"Earnings per Share" ("SFAS 128").
The following is a reconciliation of the denominator (number of shares) used
in the computation of earnings per share. The numerator (net income or loss) is
the same for the basic and diluted computations.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
--------------------
JULY 25 JULY 26
1999 1998
--------- ---------
<S> <C> <C>
Basic Shares........................................... 7,060,170 7,023,445
Effect of Dilutive Securities:
Options.............................................. 14,410 401,380
--------- ---------
Diluted Shares......................................... 7,074,580 7,424,825
--------- ---------
--------- ---------
</TABLE>
The following table summarizes securities that were outstanding as of July
25, 1999 and July 26, 1998, but not included in the calculation of net income
per share because such securities are anti-dilutive:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
--------------------
JULY 25 JULY 26
1999 1998
--------- ---------
<S> <C> <C>
Options................................................ 721,656 47,000
Warrants............................................... 2,633,000 2,843,000
Convertible Debentures................................. 1,200,000 1,200,000
</TABLE>
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
OVERVIEW
The Company had net income before pre-opening expenses of $97,309 for the
first quarter of fiscal 2000 (the thirteen weeks ended July 25, 1999), compared
to net income of $65,000 for the corresponding quarter last fiscal year.
However, because of pre-opening expenses of $126,586, the Company recorded a net
loss of $29,277 for the quarter. The Company's loss was substantially
attributable to pre-opening expenses with Regina Ventures' Polcari's North End
Restaurants, the new food kiosk at the Independence Mall, Kingston, MA (which
opened in June of 1999), and the two franchise Pizzeria Reginas, one located in
Louisville, Kentucky (which opened in May of 1999), and one located in Las
Vegas, Nevada (which is scheduled to open in the fall of fiscal 2000).
THIRTEEN WEEKS ENDED JULY 25, 1999 AS COMPARED TO THIRTEEN WEEKS ENDED JULY 26,
1998
RESTAURANT SALES.
Restaurant sales in the most recent quarter were $3,202,000, compared to net
sales in the prior year's period of $2,957,000. The increase in restaurant sales
in the fiscal 2000 period compared to the fiscal 1999 period was partially
attributable to the opening of the new Kingston, Massachusetts Pizzeria Regina
food court kiosk in June of 1999.
Sales for the restaurants open throughout both fiscal 2000 and 1999 periods
increased by approximately 8.3%.
Net sales at the Company's Pizzeria Regina restaurants increased to
$2,402,000 from $2,266,000 principally due to the additional sales from the new
Kingston, MA. Pizzeria Regina food court kiosk and an increase in aggregate same
store sales for existing Pizzeria Regina restaurants.
Net sales at the Company's full service casual dining restaurant, Polcari's
North End increased approximately 15.7% to $795,000 from $687,000.
ROYALTIES
During fiscal 2000, the Company recognized $2,000 in royalties related to
the first franchise Pizzeria Regina opened in Louisville, Kentucky in May of
1999.
COSTS AND EXPENSES
COST OF FOOD, BEVERAGES AND LIQUOR.
Cost of food, beverages and liquor as a percentage of restaurant sales was
20% in both fiscal 2000 and fiscal 1999 periods.
The cost of food, beverages and liquor as a percentage of restaurant sales
at the Pizzeria Regina restaurants was 16% and 17% in the fiscal 2000 and 1999
periods, respectively. This decrease as a percentage of restaurant sales was
principally due to menu price increases and cost control systems.
The cost of food, beverages and liquor as a percentage of restaurant sales
at the Company's full service casual dining restaurant was 31% and 32% in the
fiscal 2000 and 1999 periods, respectively. The decrease in cost as a percentage
of restaurant sales was due to improved cost controls.
7
<PAGE>
OTHER OPERATING EXPENSES
PAYROLL EXPENSES.
Payroll expenses were $917,000 (29% of sales) in the current period compared
to $870,000 (29% of sales) in the prior year's period.
Payroll expenses at the Pizzeria Regina restaurants increased to $633,000
(26% of sales) in the current period from $605,000 (27% of sales) in the prior
year's period. The increase in payroll expenses at the Pizzeria Regina
restaurants was primarily attributable to the opening of the new Kingston, MA
Pizzeria Regina food court kiosk in June of 1999.
Payroll expenses at the Company's full service casual dining restaurants
increased to $232,000 (29% of sales) in the current period from $217,000 (32% of
sales) in the prior year's period with the decline as a percentage of sales due
to increased restaurant revenue. Payroll expenses at the Company's Commissary
were $52,000 for the fiscal 2000 period as compared to $48,000 in the fiscal
1999 period.
OTHER OPERATING EXPENSES, EXCLUSIVE OF PAYROLL.
Other operating expenses exclusive of payroll for the Company in the current
period were $940,000 (29% of sales), compared to $894,000 (30% of sales) in the
prior year's period. The increase was primarily attributable to the opening of
the new Kingston, MA Pizzeria Regina food court kiosk.
Other operating expenses for the Pizzeria Regina restaurants increased to
$713,000 (30% of sales) in the current period from $693,000 (31% of sales) in
the prior year's period. This increase was primarily attributable to the
addition of the new Kingston, MA Pizzeria Regina food court kiosk.
Other operating expenses at the Company's full service casual dining
restaurants increased to $210,000 (26% of sales) in the current period from
$183,000 (27% of sales) in the prior year's period. This increase was primarily
attributable to increased restaurant revenue. Other operating expenses also
include commissary expenses, which was $13,000 in the current period, as
compared to $14,000 in the prior year's period. In addition, the Company
realized operating expenses of $2,000 in the period which related to the Regina
Ventures, LLC.
GENERAL AND ADMINISTRATIVE EXPENSES.
General and administrative expenses were $438,000 (14% of sales) in the
current period, as compared to $330,000 (11% of sales) in the prior year's
period. The increase in general and administrative expenses was due principally
to an increase in development costs.
DEPRECIATION AND AMORTIZATION EXPENSES.
Depreciation and amortization expense was $154,000 (5% of sales) in the
current period, compared to $134,000 (5% of sales) in the prior year's period.
The increase in depreciation and amortization expense was attributable to the
opening of the new Kingston, MA Pizzeria Regina food court kiosk and higher
depreciation expenses related to the Polcari's North End Restaurant and the
Company's Commissary.
PRE-OPENING COSTS.
Pre-opening costs were $127,000 in the current period. Pre-opening costs
consisted primarily of costs associated with Regina Venture's North End
Restaurants, and costs associated with the new food court kiosk at the
Independence Mall, Kingston, MA which opened in June of 1999. Pre-opening costs
also included costs associated with the two franchise Pizzeria Reginas, one
located in Louisville, Kentucky which opened in May of 1999 and the second
located in Las Vegas, Nevada which is scheduled to open in the fall of fiscal
2000.
8
<PAGE>
INTEREST EXPENSE AND INTEREST INCOME.
Interest expense was $82,000 in the current period as compared to $85,000 in
the prior year's period. This decrease in interest expense was primarily
attributable to lower borrowing costs on the Company's outstanding debt.
Interest income was $15,000 in fiscal 2000, as comparable to $16,000 in
fiscal 1999. The interest income was attributable to the proceeds from the March
1998 Rights Offering.
LIQUIDITY AND CAPITAL RESOURCES.
At July 25, 1999, the Company had net working capital of approximately
$1,241,000 and cash and cash equivalents of approximately $2,194,000.
During the thirteen weeks ended July 25, 1999, the Company had a net
increase in cash and cash equivalents of $331,000 reflecting net cash provided
by operating activities of $95,000, net cash used for investing activities of
$283,000 and net cash provided by financing activities of $518,000.
Net cash provided by operating activities included an increase in accounts
payable of $11,000, a decrease in prepaid expenses of $26,000, and an increase
in deferred rent of $5,000, partially offset by an increase in inventories of
$11,000, and a reduction in accrued expenses of $37,000. Net cash used for
investing activities reflects costs associated with the opening of the new
Kingston, MA Pizzeria Regina location and site expansion costs incurred to date.
Net cash used by financing activities of $518,000 consisted of net repayments of
long-term debt, lease obligations and stockholder loans in the aggregate amount
of $57,000, offset by Italian Ventures' minority interest contribution to Regina
Ventures of $35,000 and proceeds from the BankBoston credit line of $540,000.
At July 25, 1999, the Company had current liabilities of $1,235,000,
including $247,000 of accounts payables, $614,000 of accrued liabilities and
current maturities of long term obligations in the amount of $374,000. At July
25, 1999, the Company had long-term obligations, less current maturities, in the
amount of $2,857,000, including $754,000 due under its new credit facility with
BankBoston, $115,000 of notes payable to a stockholder, $376,000 due under the
capital lease obligations, $1,500,000 of convertible subordinated debentures,
and $112,000 of deferred rent.
On November 23, 1998, the Company discharged its credit facility with
Haymarket Bank and entered into a new $2,000,000 line of credit facility with
BankBoston. As of July 25, 1999, the Company has accessed this line in the
amount of $1,078,000. Subsequently, on August 6, 1999, the company accessed an
additional $305,000 to be used for the expansion of Company stores located in
Holyoke, MA and Providence, RI.
The Company believes that its existing resources, cash flow from operations,
and BankBoston credit facility will be sufficient to allow it to meet its
obligations over the next twelve months. The Company intends to fund its current
obligations and operating expenses through cash generated from operations. There
can be no assurance that cash flows will improve or that the Company will be
able to obtain additional financing upon favorable terms, if at all. Failure of
the Company to do so could result in the Company's failure to be able to meet
its cash flow requirements.
YEAR 2000 SYSTEMS
Many currently installed computer systems and software are coded to accept
only two digit entries in the date code fields. Beginning in the year 2000,
these date code fields will need to accept four digit entries to distinguish
twenty-first century dates from twentieth century dates. As a result, within the
next year, computer systems and/or software used by many companies may need to
be upgraded to comply with such "Year 2000" requirements.
9
<PAGE>
The Company has been assessing the potential impact of Year 2000 on the
processing of date-sensitive information by the Company's automated information
and point-of-sale systems and computerized information systems. While there can
be no assurance that Year 2000 matters will be satisfactorily identified and
resolved, the Company currently believes that most of its computer hardware and
software systems are already Year 2000 compliant and that Year 2000 issues will
not have a material adverse effect on the Company. As of July 25, 1999, the
estimated remaining cost for Year 2000 compliance is $50,000 to $60,000.
The Company's Year 2000 initiative is being managed by an internal staff
member and is designed to ensure that there are no adverse effects on the
Company's ability to conduct business at the restaurant level and to process and
support restaurant activity at the corporate level. Under its current Year 2000
plan, the Company has brought a number of its systems into Year 2000 compliance,
subject to additional Year 2000 testing and responsive actions.
As part of its Year 2000 initiative, the Company is also evaluating
scenarios that may occur and developing contingency and business continuity
plans tailored for Year 2000-related occurrences. The Company believes that the
most reasonably likely, worst case scenario of a Year 2000 problem would result
from a third party's failure to adequately resolve Year 2000 issues, leading to
a complete failure of its point-of-sale and ordering systems. This failure would
require the Company to resort to "non-computerized" means to undertake such
restaurant functions as placing customer orders, preparing customer checks,
accounting of restaurant receipts, recording and ordering restaurant inventory
and supplies, evaluating menu mix and analyzing other operating statistics.
While the Company believes that it is equipped to operate in such a
"non-computerized" mode, it could suffer lost revenues, increased operating
costs, loss of customers or other business interruptions of a material nature.
The above information is based on the Company's current best estimates,
which were derived using numerous assumptions of future events, including the
availability and future costs of certain technological advancements. Given the
complexity of these issues and possible as yet unidentified risks, actual
results may vary materially from those anticipated and discussed above.
"SAFE HARBOR" STATEMENT, UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
Forward-looking statements in this report, including without limitation
statements relating to the adequacy of the Company's resources and the timing of
the Company's expansion are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Investors are cautioned that,
such forward-looking statements involve risks and uncertainties, including
without limitation: potential quarterly fluctuations in the Company's operating
results; seasonality of sales; competition; risks associated with expansion; the
Company's reliance on key employees; risks generally associated with the
restaurant industry; risks associated with geographic concentration of the
Company's restaurants; risks associated with serving alcoholic beverages; and
other risks and uncertainties indicated from time to time in the Company's
filings with the Securities and Exchange Commission.
10
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
No material litigation.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Employment Contract for George R. Chapdelaine
(27) Financial Data Schedule
(b) Reports On Form 8-K.
None.
11
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
<TABLE>
<S> <C> <C>
BOSTON RESTAURANT ASSOCIATES, INC.
DATE: SEPTEMBER 3, 1999 BY: /S/ GEORGE R. CHAPDELAINE
----------------------------------------
George R. Chapdelaine, President and
Chief Executive Officer
</TABLE>
12
<PAGE>
EXHIBIT A
EMPLOYMENT AGREEMENT
Agreement made effective as of the 1st day of July, 1999 by and among
Boston Restaurant Associates, Inc. (the "Company"), a Delaware corporation with
its principal place of business in Saugus, Massachusetts and George R.
Chapdelaine (the "Employee") of Essex County, Massachusetts.
WHEREAS, Employee has served as President and Chief Executive Officer
of the Company since April 1994;
WHEREAS, in order to assure itself of the benefits to be obtained from
the special talents and abilities of Employee resulting from Employee's
involvement and knowledge of the business of the Company and relative to the
continued operation of the business of the Company, the Company desires to
continue Employee's employment as an executive officer of the Company on the
terms and conditions contained herein;
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein contained, the receipt and sufficiency of which is acknowledged, and
intending to be legally bound, it is hereby agreed by and between the parties as
follows:
1. EMPLOYMENT. The Company hereby continues to employ Employee as
President and Chief Executive Officer of the Company. Employee shall have
general management and control of the business, affairs and property of the
Company and its direct and indirect subsidiaries and shall perform such duties
of such offices as are provided for in the bylaws of the Company subject to the
general supervision and direction of, and any policies and procedures
established from time to time by, the Board of Directors of the Company.
Employee hereby accepts such employment.
2. TERM. Employee's employment pursuant to the terms of this Agreement
shall commence on the date hereof and shall continue for a period of one (1)
year or until earlier terminated in accordance with the termination provisions
provided for in Section 10 herein (the "Initial Term"). Unless earlier
terminated in accordance with the termination provisions provided for in Section
10 herein, Employee's employment pursuant to this Agreement shall automatically
renew for additional periods of one (1) year each (each an "Additional Term") at
the expiration of the Initial Term and at the expiration of each Additional Term
(the Initial Term and Additional Terms are collectively referred to herein as
the "Term").
3. SALARY. The Company shall pay Employee, during the Term of this
Agreement, an annual salary of not less than $185,000, payable in installments
no less often than monthly. A salary review shall be conducted by the
Compensation Committee of the Board of Directors of the Company no later than
twelve (12) months after the commencement date of this Agreement with yearly
reviews thereafter on the anniversary date of such first review (each a
"Review"). In connection with such Review, the Compensation Committee may
increase, but not decrease, the then current salary of Employee by such amount
as it determines, in its sole discretion, provided however, that effective as of
the date of each Review, Employee's then current salary shall be
-1-
<PAGE>
adjusted to an amount at least equal to Employee's then current salary
multiplied by a fraction, the numerator of which shall be the Consumer Price
Index (as hereinafter defined) for the month immediately prior to the applicable
Review date, and the denominator of which shall be the Consumer Price Index of
162.8 for the month of June, 1999. The Consumer Price Index referred to above is
the Consumer Price Index of the United States Bureau of Labor Statistics (Urban
Wage Earners and Clerical Workers, U.S. City Average, all items) on the 1982-84
equals 100 standard.
4. AUTOMOBILE During the term of this Agreement, Employee shall be paid
the sum of $1,000 plus the amount necessary to pay insurance and parking each
month to defray the cost of the leasing or purchasing of, and gas, mileage,
insurance, repairs and parking for one automobile for his use in connection with
his employment hereunder.
5. BONUS. Following each Review date but in no event later than one
hundred (100) days after the Company's fiscal year end, Employee shall be paid a
performance bonus based on Company sales during the most recently completed
fiscal year (the "Sales Bonus") and a performance bonus based on Company profits
during the most recently completed fiscal year (the "Profits Bonus"), each as
more fully described below, payable to Employee in a lump sum. The Sales Bonus
or the Profits Bonus, or both, may be increased, but not decreased, by the
Compensation Committee, in its discretion. The target dollar amounts described
below for the Sales Bonus and Performance Bonus shall be adjusted annually for
each following fiscal year.
(i) Sales Bonus. The Sales Bonus shall equal seven-tenths percent
(0.7%) of Company Sales in excess of fifteen million dollars
($15,000,000) and less than or equal to nineteen million
dollars ($19,000,000), PLUS one percent (1.0%) of Company
sales in excess of nineteen million dollars ($19,000,000). For
example, the following amounts of Company sales would result
in the following Sales Bonus payments:
(ii) PROFITS BONUS. In the event the Company reports a loss or a
breakeven position (neither loss nor profit) for the most
recently completed fiscal year, the Profits Bonus shall equal
two percent (2%) of the amount by which such loss or such
breakeven position is more favorable than a two hundred fifty
thousand dollar ($250,000) loss. In the event the Company
reports a profit for the most recently completed fiscal year,
the Profits Bonus shall equal four percent (4%) of the amount
by which such profits are more favorable than a two hundred
fifty thousand dollar ($250,000) loss. For example, the
following Company loss/profit amounts would result in the
following Profits Bonus payments.
-2-
<PAGE>
For the purposes of calculating the Profits Bonus hereunder, the calculation of
Company loss or profit shall assume that pre-opening expenses are written off.
6. EXPENSES. Employee shall be reimbursed for all reasonable expenses
incurred by Employee in connection with his employment under this Agreement,
including expenses for travel and entertainment. Employee shall furnish the
Company with the appropriate documentation relating to such expenses.
7. FRINGE BENEFITS. Employee shall be entitled to the fringe benefits
generally made available to employees or officers of the Company of standing
comparable to that of Employee, on the same or more favorable terms and
conditions as such benefits are made available or furnished to those employees
or officers.
8. VACATION. Employee shall be entitled to at least four (4) weeks of
paid vacation during each year of employment with the Company, which vacation
may be taken by Employee at any time at the sole discretion of Employee.
9. FULL-TIME DUTIES. Employee shall devote all of his business time,
attention and efforts necessary and appropriate to fulfill his duties hereunder.
This provision shall not serve to prevent Employee from engaging in investment
activity that is passive in nature.
10. TERMINATION.
(a) TERMINATION BY THE COMPANY. At the election of the Company, this
Agreement shall terminate and any and all rights and obligations of
the Company and Employee hereunder shall cease and be completely
void except as specifically set forth in this Agreement, upon the
earliest to occur of the following: (i) the death or "long-term
disability" of Employee; or (ii) the termination of Employee by the
Company for "just cause" pursuant to written notice thereof; or
(iii) at any time, without cause, upon thirty (30) days prior
written notice.
For purposes of this Agreement, "long-term disability" shall mean
the disability of Employee which prevents Employee from devoting to the business
of the Company his full-time, best efforts, skill and attention, and such
condition continues for a period of one hundred eighty (180) consecutive days.
For purposes hereof, "just cause" shall include, without limitation,
the occurrence of any of the following events during the Term of this Agreement:
(A) habitual neglect of material duties assigned to Employee
hereunder which is not remedied within thirty (30) days of receipt
of written notice thereof from the Company;
(B) fraud, embezzlement or similar act of dishonesty committed
by Employee against the Company; and
-3-
<PAGE>
(C) conviction of a crime classified as a felony under any
Federal, state or local law with all appeals relating thereto
having been unsuccessfully exhausted and all appeal periods being
lapsed.
(b) TERMINATION BY EMPLOYEE. At the election of the Employee, this
Agreement shall terminate and any and all rights and obligations
of the Company and Employee under this Agreement shall cease and
be completely void except as specifically set forth in this
Agreement, upon the earlier to occur of (i) termination by
Employee of his employment with the Company, pursuant to thirty
(30) days prior written notice thereof to the Company for any
reason, or (ii) termination by Employee of his employment with the
Company at any time in the event the Employee has "good reason",
pursuant to written notice thereof, or (iii) a "change in control"
of the Company.
For purposes hereof, "good reason" shall mean (A) the Company has taken
action that serves to adversely change Employee's status by a reduction in title
or a reduction in duties without Employee's consent, or (B) without the
Employee's consent the Company's corporate offices are relocated to a place that
is more than thirty-five (35) miles from Boston, Massachusetts.
For purposes hereof a "change of control" of the Company shall be
deemed to have occurred if:
(I) any person (as defined in Section 13(d) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the
"Exchange Act") shall have become the beneficial owner of
20% or more of the combined voting power of the Company's
voting securities (other than any person who is a
beneficial owner of such 20% threshold as at the date of
this Agreement), not counting for purposes of such 20%
threshold any voting securities acquired from the
Employee;
(II) the stockholders or directors approve by the requisite
vote any Business Combination; or
(III) the stockholders or directors approve the complete
liquidation or dissolution of the Company.
"Business Combination" means any of the following transactions: (x)
a merger or consolidation of the Company (except for a merger that Employee
consents to and supports or a merger in respect of which, pursuant to Section
251(f) of the Delaware General Corporation law, as now in effect and as the same
may be amended from time to time, no vote of the stockholders of the Company is
required); (y) a sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions), whether as part of
a dissolution or otherwise, of assets of the Company or of any direct or
indirect majority-owned subsidiary of the Company (other than to any direct or
indirect wholly-owned subsidiary or to the Company) having an aggregate market
value equal to 50% or more of either that aggregate market value of all of the
-4-
<PAGE>
assets of the Company determined on a consolidated basis or the aggregate market
value of all the outstanding stock of the Company; or (z) a proposed tender or
exchange offer for 50% or more of the outstanding voting stock of the Company.
(C) EFFECT OF TERMINATION. (i) It is expressly acknowledged and agreed
that, if the Employee's employment shall terminate at any time
pursuant to paragraph (a) above, the Company will pay to Employee
or his estate any salary and bonus pursuant to Sections 3 and 5,
respectively, hereof, and any perquisites and fringe benefits,
which shall be paid proportionately to the time of termination
(which payment shall be made at the time it would be normally
paid) without further recourse or liability to the Company, except
that, in the event such termination of Employee by the Company is
pursuant to clause (a)(iii), above, or in the event such
termination is at the election of Employee and is pursuant to
clause (b)(ii) or (b)(iii), above then the Company shall pay to
Employee his then current annual base salary payable in equal
monthly installments on the first business day of each month
(prorated for any partial month) (the "Severance Payment") from
the date of such termination until the later of (A) June 30, 2001
or (B) the second business day of the month next following the
expiration of twelve (12) months following the date of such
termination (the "Severance Period"); provided, however, that
during such Severance Period Employee shall not, within the
Territory (as such term is defined in Section 12 hereof), whether
as owner, partner, shareholder (excluding as a passive shareholder
of not more than 1% in a class of securities of any business
enterprise registered under the Exchange Act), director,
consultant, agent, employee, or otherwise, or through any person,
engage in any employment, consulting or other activity which
competes, directly or indirectly with the business of the Company
(as such phrase is defined in Section 12 hereof); provided,
further that in the event the Company does not make any past due
portion of the Severance Payment hereunder within ten (10)
business days of written demand therefor by Employee, then the
entire remaining portion of the Severance Payment to be paid
hereunder shall become immediately due and payable and the
non-competition covenant set forth above shall cease and be of no
further effect against Employee. Notwithstanding the foregoing, if
Employee's employment is terminated in connection with a "change
in control" of Employer, as that term is used in Section 280G of
the Internal Revenue Code of 1986 as amended ("Section 280G"),
Employee is a "disqualified individual" as that term is used in
Section 280G, and such payment, or portion thereof, would
otherwise be considered an "excess parachute payment", as that
term is used in Section 280G, then the aggregate present value of
the payments or portion thereof, which are in the nature of
compensation to (or for the benefit of) Employee, which are
contingent on such change in control, and which would otherwise be
considered an excess parachute payment, shall be the lesser of (x)
the result of the proceeding sentence, or (y) one dollar ($1.00)
less than three (3) times Employee's annualized compensation which
was includable in Employee's income and which was paid by the
Company during the five (5) most recent taxable years ending
before the change in control. The foregoing calculations shall be
made by the Company,
-5-
<PAGE>
provided that if Employee provides the Company with a calculation
thereof reasonably prepared by an independent certified public
accountant then, within thirty (30) days of receipt thereof, the
Company shall pay Employee the amount of such calculation, reduced
by the amount, if any, previously paid by the Company as the
Severance Payment pursuant to this provision.
(ii) It is further expressly acknowledged and agreed that if the
Employee's employment shall terminate at any time pursuant to paragraph (b)
above, the Company will pay to Employee or his estate any salary and bonus
pursuant to Sections 3 and 5, respectively, hereof and any perquisites and
fringe benefits, which shall be paid proportionately to the time of termination
(which payment shall be made at the time it would be normally paid) without
further recourse or liability to the Company, except that, in the event such
termination is pursuant to clause (b)(ii) or (b)(iii) above, then the Employee
shall be entitled to receive the Severance Payment in accordance with paragraph
(c)(i) above.
(iii) For purposes of this subsection (c), Employee's bonuses will be
determined by the Compensation Committee of the Company's Board of Directors, in
good faith. To the extent any perquisite or fringe benefit that the Company is
obligated to continue hereunder after the termination of Employee's employment
cannot be so continued due to legal impediment then, in such event, the Company
shall, in lieu thereof, pay in cash to the Employee the equivalent cost to the
Company of such perquisite or fringe benefit, with any such payments to be made
at the time the payment of such perquisite or fringe benefit would normally be
paid. It is further expressly acknowledged and agreed that, notwithstanding the
termination of this Agreement pursuant to paragraph (a) or (b) above or
otherwise, the provisions of this Section 10 shall survive such termination for
the periods of time provided therein.
11. NOTICES. Any notice or other communication in connection with this
Agreement shall be deemed to be delivered if in writing (or in the form of a
telegram addressed as provided below) and if either (a) actually delivered
(electronically or physically) at said address, or (b) in the case of a letter,
three (3) business days shall have elapsed after the same shall have been
deposited in the United States mail, postage prepaid and registered or
certified, return receipt requested:
If to Employee, to:
Mr. George R. Chapdelaine
-------------------------
-------------------------
If to the Company to:
Boston Restaurant Associates, Inc.
999 Broadway
Saugus, Massachusetts 01906
and in any case at such other address as the addressee shall have specified by
written notice.
-6-
<PAGE>
12. Noncompetition and Confidentiality.
(a) As long as Employee is an employee of the Company or any successor
in interest and, if Employee's employment is terminated pursuant to
either clause 10(a)(ii) or 10(b)(i), then for an additional period
of twenty-four (24) months thereafter, Employee shall not, within
the Territory, whether as owner, partner, shareholder, director,
consultant, agent, employee, or otherwise, or through any person,
engage in any employment, consulting or other activity which
competes, directly or indirectly, with the business of the Company.
The "Territory" shall be each ten (10) mile radius surrounding any
Italian or pizza-style restaurant operated by the Company. The
"business of the Company" shall be limited to mean the operation of
Italian and pizza-style restaurants. The involvement of Employee
with a business or enterprise that operates restaurants that
specialize in foods other than Italian food or pizza shall not be
deemed to be competitive with the business of the Company.
(b) Nothing in this Agreement shall preclude Employee from making
passive investments of not more than 1% in a class of securities of
any business enterprise registered under the Exchange Act.
(c) Employee recognizes that the Company is and will be engaged in a
continuous program of research and development relating to its
business opportunities, operating procedures, products, methods,
service techniques, engineering and manufacturing data, machines,
devices, apparatus, "know-how", formulas, secret processes, plans,
designs, specifications, trade secrets, marketing and Company data
regarding costs, profits, markets, sales, customer lists, plans for
present and future development and acquisitions and other
proprietary information not available to the public (collectively,
the "Proprietary Information") which gives it a special competence
in its various fields of endeavor, all of which have been or may be
acquired or developed at considerable expense to the Company.
Employee understands that in connection with his employment with
the Company the Employee is expected to make contributions to the
development of Proprietary Information. Employee acknowledges that
his employment creates a relationship of confidentiality and trust
between Employee and the Company with respect to information of a
confidential or secret nature which is discovered, made known to,
or learned by Employee during his employment with the Company
including, without limitation, Proprietary Information.
(d) Employee will not, while he is or after he ceases to be an employee
of the Company, disclose any of the Proprietary Information
referred to above to any person, firm, corporation, association or
other entity for any reason or purpose whatsoever, other than in
furtherance of the business of the Company or in response to court
order.
-7-
<PAGE>
(e) Employee further agrees that in the event of the termination of his
employment with the Company, for any reason, or at any time upon
the request of the Company, Employee will deliver to the Company
all documents and other material items of any nature pertaining to
any Proprietary Information. When Employee terminates employment
with the Company, Employee will sign a certificate confirming that
he has complied with the requirements of this subparagraph.
(f) In the event of any breach or threatened breach by Employee of the
provisions of this Agreement, the Company shall be entitled to an
injunction restraining such breach. Nothing herein shall be
construed as prohibiting the Company from pursuing any other
remedies available to the Company for such breach or threatened
breach, including the recovery of damages from Employee.
13. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof, and all promises,
representations, understandings, warranties and agreements with reference to the
subject matter hereof and inducements to the making of this Agreement relied
upon by any party hereto have been expressed herein.
14. GOVERNING LAW. This Agreement shall be deemed a contract made and
entered into in the Commonwealth of Massachusetts and, together with the rights
and obligations of the parties hereunder, shall be construed under and governed
by the laws of such state.
15. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
16. EFFECT OF HEADINGS. Any title of an article or section heading
herein contained is for convenience of reference only, and shall not affect the
meaning of construction of any of the provisions hereof.
17. SUCCESSORS AND ASSIGNS. All covenants, promises and agreements by
or on behalf of the parties contained in this Agreement shall inure to the
benefit of, and be binding upon, the successors and assigns of the parties
hereto.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in multiple counterparts as of the date set forth above by their duly
authorized representative.
BOSTON RESTAURANT ASSOCIATES, INC.
By:
--------------------------------
Name:
Title:
EMPLOYEE
---------------------------------
George R. Chapdelaine
-9-
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEETS AS OF JULY 25, 1999 AND APRIL 25, 1999 (AUDITED) AND
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THIRTEEN WEEKS ENDED JULY
25, 1999 AND JULY 26, 1998 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS."
</LEGEND>
<CIK> 0000926295
<NAME> BOSTON RESTAURANT ASSOCIATES, INC.
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<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-START> APR-26-1999
<PERIOD-END> JUL-25-1999
<EXCHANGE-RATE> 1.00
<CASH> 2,194,258
<SECURITIES> 0
<RECEIVABLES> 30,888
<ALLOWANCES> 0
<INVENTORY> 225,378
<CURRENT-ASSETS> 2,475,946
<PP&E> 6,417,964
<DEPRECIATION> 2,696,687
<TOTAL-ASSETS> 7,426,346
<CURRENT-LIABILITIES> 1,234,602
<BONDS> 0
0
0
<COMMON> 70,602
<OTHER-SE> 3,240,782
<TOTAL-LIABILITY-AND-EQUITY> 7,426,346
<SALES> 3,201,508
<TOTAL-REVENUES> 3,203,056
<CGS> 632,320
<TOTAL-COSTS> 3,206,601
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 81,763
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<NET-INCOME> (29,277)
<EPS-BASIC> .00
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