<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] 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 14a-12
SHELLS SEAFOOD RESTAURANTS, INC.
(Name of Registrant as Specified in Its Charter)
--------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
...............................................................
(2) Aggregate number of securities to which transaction applies:
...............................................................
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
...............................................................
(4) Proposed maximum aggregate value of transaction:
...............................................................
(5) Total fee paid:
...............................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
...............................................................
(2) Form, Schedule or Registration Statement No.:
...............................................................
(3) Filing Party:
...............................................................
(4) Date Filed:
...............................................................
<PAGE>
SHELLS SEAFOOD RESTAURANTS, INC.
------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------
April 21, 1997
Notice is hereby given that the Annual Meeting of Stockholders of Shells
Seafood Restaurants, Inc., will be held on Tuesday, May 20, 1997, at 2:00
p.m., at The Metropolitan Club, 1 East 60th Street, New York, New York for
the following purposes:
(1) To elect six directors to serve for the ensuing year;
(2) To consider and vote upon a proposal to adopt the Shells Seafood
Restaurants, Inc. Stock Option Plan for Non-Employee Directors;
(3) To consider and vote upon a proposal to amend the Company's 1995
Employee Stock Option Plan to increase the number of shares which may be
issued thereunder; and
(4) To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Stockholders of record at the close of business on April 3, 1997 will be
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. Stockholders who are unable to attend the Annual Meeting in person
are requested to complete and date the enclosed form of proxy and return it
promptly in the envelope provided. No postage is required if mailed in the
United States. Stockholders who attend the Annual Meeting may revoke their
proxy and vote their shares in person.
Warren R. Nelson
Secretary
<PAGE>
SHELLS SEAFOOD RESTAURANTS, INC.
16313 N. DALE MABRY HIGHWAY
SUITE 100
TAMPA, FLORIDA 33618
April 21, 1997
Dear Fellow Stockholder:
You are cordially invited to attend the Company's Annual Meeting of
Stockholders to be held at 2:00 p.m., on Tuesday, May 20, 1997, at The
Metropolitan Club, 1 East 60th Street, New York, New York.
At the Annual Meeting of Stockholders, in addition to electing six
directors to the Company's Board of Directors, you are being asked to approve
the adoption of the Company's Stock Option Plan for Non-Employee Directors
and to approve an amendment to the Company's 1995 Employee Stock Option Plan
to increase the number of shares which may be issued thereunder. In addition,
I will be pleased to report on the affairs of the Company and a discussion
period will be provided for questions and comments of general interest to
stockholders.
We look forward to greeting personally those stockholders who are able to
be present at the meeting; however, whether or not you plan to be with us at
the meeting, it is important that your shares be represented. Accordingly,
you are requested to sign and date the enclosed proxy and mail it in the
envelope provided at your earliest convenience.
Thank you for your cooperation.
Very truly yours,
/s/ William E. Hattaway
William E. Hattaway
President
<PAGE>
SHELLS SEAFOOD RESTAURANTS, INC.
16313 N. DALE MABRY HIGHWAY
SUITE 100
TAMPA, FLORIDA 33618
------
PROXY STATEMENT
------
GENERAL INFORMATION
PROXY SOLICITATION
This Proxy Statement is furnished to the holders of Common Stock, par
value $.01 per share (the "Common Stock"), of Shells Seafood Restaurants,
Inc. (the "Company") in connection with the solicitation by the Board of
Directors of the Company of proxies for use at the Annual Meeting of
Stockholders to be held on Tuesday, May 20, 1997, or at any adjournment
thereof, pursuant to the accompanying Notice of Annual Meeting of
Stockholders. The purposes of the meeting and the matters to be acted upon
are set forth in the accompanying Notice of Annual Meeting of Stockholders.
The Board of Directors is not currently aware of any other matters which will
come before the meeting.
Proxies for use at the Annual Meeting are being solicited by the Board of
Directors of the Company. Proxies will be mailed to stockholders on or about
April 21, 1997 and will be solicited chiefly by mail; however certain
officers, directors, employees and agents of the Company, none of whom will
receive additional compensation therefor, may solicit proxies by telephone,
telegram or other personal contact. The Company will bear the cost of the
solicitation of the proxies, including postage, printing and handling, and
will reimburse the reasonable expenses of brokerage firms and others for
forwarding material to beneficial owners of shares of Common Stock.
REVOCABILITY AND VOTING OF PROXY
A form of proxy for use at the Annual Meeting of Stockholders and a return
envelope for the proxy are enclosed. Stockholders may revoke the authority
granted by their execution of proxies at any time before their effective
exercise by filing with the Secretary of the Company a written notice of
revocation or a duly executed proxy bearing a later date, or by voting in
person at the meeting. Shares of the Company's Common Stock represented by
executed and unrevoked proxies will be voted in accordance with the choice or
instructions specified thereon. If no specifications are given, the proxies
intend to vote the shares represented thereby "for" the election of all
listed nominees for director and "for" the approval of proposals Nos. 2 and
3, and in accordance with their best judgment on any other matters which may
properly come before the meeting.
RECORD DATE AND VOTING RIGHTS
Only stockholders of record at the close of business on April 3, 1997 are
entitled to notice of and to vote at the Annual Meeting or any and all
adjournments thereof. On April 3, 1997, there were 3,297,536 shares of Common
Stock outstanding; each such share is entitled to one vote on each of the
matters to be presented at the Annual Meeting. The holders of a majority of
the outstanding shares of Common Stock, present in person or by proxy and
entitled to vote, will constitute a quorum at the Annual Meeting. Abstentions
and broker non-votes will be counted for purposes of determining the presence
or absence of a quorum. "Broker non-votes" are shares
1
<PAGE>
held by brokers or nominees which are present in person or represented by
proxy, but which are not voted on a particular matter because instructions
have not been received from the beneficial owner. Under applicable Delaware
law, the effect of broker non-votes on a particular matter depends on whether
the matter is one as to which the broker or nominee has discretionary voting
authority under the applicable rule of the New York Stock Exchange. The
effect of broker non-votes on the specific items to be brought before the
Annual Meeting of Stockholders is discussed under each item.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of March 1, 1997
(except as otherwise noted in the footnotes) regarding the beneficial
ownership (as defined by the Securities and Exchange Commission (the "SEC")
of the Company's Common Stock of: (i) each person known by the Company to own
beneficially more than five percent of the Company's outstanding Common
Stock; (ii) each director of the Company who is standing for re-election and
each nominee for election as a director of the Company; (iii) each executive
officer named in the Summary Compensation Table (see "Executive
Compensation"); and (iv) all directors and executive officers of the Company
as a group. Except as otherwise specified, the named beneficial owner has the
sole voting and investment power over the shares listed.
<TABLE>
<CAPTION>
Amount and Nature of
Name and Address of Beneficial Owner Beneficial Ownership Percent of Class
----------------------------------- -------------------- ----------------
<S> <C> <C>
Frederick R. Adler ............................... 1,639,326 43.6%
1520 South Ocean Blvd.
Palm Beach, FL 33480 (1)
William E. Hattaway .............................. 438,251 12.9%
c/o Shells Seafood Restaurants, Inc.
16313 N. Dale Mabry Highway, Suite 100
Tampa, FL 33618 (2)
Frank C. Roehl, III .............................. 74,846 2.2%
c/o Shells Seafood Restaurants, Inc.
16313 N. Dale Mabry Highway, Suite 100
Tampa, FL 33618 (3)
Philip R. Chapman ................................ 30,000 *
c/o Venad Administrative Services, Inc.
100 First Stamford Place
Stamford, CT 06902 (4)
Kamal Mustafa .................................... 0 *
7 Wildwood Drive
North Caldwell, NJ 07006
Jay S. Nickse .................................... 6,000 *
c/o Venad Administrative Services, Inc.
100 First Stamford Place
Stamford, CT 06902 (5)
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of
Name and Address of Beneficial Owner Beneficial Ownership Percent of Class
- ------------------------------------ -------------------- ----------------
<S> <C> <C>
Edwin F. Russo ................................... 0 *
6650 Stratford Dr.
Parkland, FL 33067
Longview Partners, L.P. .......................... 318,059 9.2%
175 East 64th Street
New York, NY 10021
All directors and executive officers as a group
(10 persons) (6) 2,261,289 57.6%
==================== ================
</TABLE>
- ------
* Less than one percent
(1) Includes 462,442 shares of Common Stock which may be acquired through the
exercise of warrants and an aggregate of 529,600 shares of Common Stock
owned by Lee Heaton and Linn Heaton as to which Mr. Adler has been
granted the right to vote such shares until May 23, 1997.
(2) Includes 65,990 shares of Common Stock which may be acquired through the
exercise of warrants and 21,328 shares of Common Stock which may be
acquired through the exercise of stock options. Does not include 42,656
shares of Common Stock issuable upon the exercise of options which are
not exercisable within 60 days of March 1, 1997.
(3) Includes 16,094 shares of Common Stock which may be acquired through the
exercise of warrants and 18,664 shares of Common Stock which may be
acquired through the exercise of stock options. Does not include 25,328
shares of Common Stock issuable upon the exercise of options which are
not exercisable within 60 days of March 1, 1997.
(4) Includes 10,000 shares of Common Stock issuable upon the exercise of
warrants owned by Mr. Chapman. Does not include 164,784 shares of Common
Stock and 153,275 shares of Common Stock issuable upon the exercise of
warrants owned by Longview Partners, L.P., a Delaware limited partnership
of which Susan R. Chapman, wife of Philip Chapman, is general partner.
(5) Includes an aggregate of 2,000 shares of Common Stock owned by Mr.
Nickse's minor children, 1,000 shares of Common Stock which may be
acquired upon exercise of warrants owned by Mr. Nickse's minor children
and 1,000 shares of Common Stock which may be acquired upon exercise of
warrants owned by Mr. Nickse. Mr. Nickse disclaims beneficial ownership
of the shares and warrants owned by his minor children.
(6) Includes 549,837 shares of Common Stock which may be acquired through the
exercise of warrants and 77,320 shares of Common Stock which may be
acquired through the exercise of stock options. In addition, such amount
includes 529,600 shares of Common Stock as to which Mr. Adler has been
granted the right to vote and 2,000 shares of Common Stock owned by Mr.
Nickse's minor children and 1,000 shares of Common Stock which may be
acquired upon exercise of warrants owned by Mr. Nickse's minor children.
Furthermore, such amount includes shares of Common Stock beneficially
owned by current directors who are not standing for re-election (John P.
Collins -- 326 shares of Common Stock and 462 shares of Common Stock
which may be acquired upon exercise of warrants; Robert V. Gisselbeck --
0 shares of Common Stock). Does not include shares or warrants to
purchase shares of Common Stock beneficially owned by Philip R. Chapman,
a nominee for election as a director.
3
<PAGE>
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
Six directors (constituting the entire Board) are to be elected at the
Annual Meeting. Unless otherwise specified, the enclosed proxy will be voted
in favor of the persons named below to serve until the next annual meeting of
stockholders and until their successors shall have been duly elected and
shall qualify. In the event any of these nominees shall be unable to serve as
a director, the shares represented by the proxy will be voted for the person,
if any, who is designated by the Board of Directors to replace the nominee.
All nominees have consented to be named and have indicated their intent to
serve if elected. The Board of Directors has no reason to believe that any of
the nominees will be unable to serve or that any vacancy on the Board of
Directors will occur.
The nominees, their ages, the year in which each first became a director
and their principal occupations or employment during the past five years are:
<TABLE>
<CAPTION>
Year First Principal Occupation During
Director Age Became Director the Past Five Years
-------------------- ----- --------------- ----------------------------------------------
<S> <C> <C> <C>
Frederick R. Adler . 71 1994 Chairman of the Board of Directors of the Company
since October 1994; Managing Director of Adler &
Company since 1968; Of Counsel to the law firm of
Fulbright & Jaworski L.L.P. since January 1, 1996
and prior thereto a retiring senior partner of
Fulbright & Jaworski L.L.P. since 1991 and prior
thereto a senior partner thereof. The Company
retained Fulbright & Jaworski L.L.P. for legal
services during the 1996 fiscal year.
William E. Hattaway 53 1993 President and director of the Company since April
1993; President, Chief Executive Officer and
director of Shells, Inc., a wholly owned subsidiary
of the Company, since February 1993; Principal in
Todays Food Service Concepts from December 1989
through January 1993; Executive Vice President of
General Mills' Restaurant Group and President of
General Mills' International Restaurant Operations
from April 1987 through December 1989; Chairman
and Chief Executive Officer of Red Lobster from
March 1986 to April 1987.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Year First Principal Occupation During
Director Age Became Director the Past Five Years
-------------------- ----- --------------- ----------------------------------------------
<S> <C> <C> <C>
Philip R. Chapman .. 35 Not Applicable General Partner in Adler & Company since 1995 and
prior thereto a principal in Adler & Company since
1991; President of Venad Administrative Services,
Inc. since 1996; Senior Consultant at Booz Allen
& Hamilton International from 1989 until 1991;
Executive Vice President and President of Global
Pharmaceutical Corporation in a temporary capacity
during a portion of 1995.
Kamal Mustafa ...... 49 1994 Director of the Company since August 1994; Managing
Director of Hamilton Capital Partners, Inc. since
October 1991; President, Chief Executive Officer
and Portfolio Manager of The MicroCap Fund, Inc.
from April 1994 until July 1996 and prior thereto
a Managing Director from January 1993 to August
1993.
Jay S. Nickse ...... 37 1995 Vice President and Chief Financial Officer of Venad
Administrative Services, Inc., a corporation which
provides administrative services for a number of
venture funds, including funds in which Frederick
R. Adler is a partner, since July 1993; Senior Manager
audit and business advisory group at Price Waterhouse
from September 1990 through July 1993.
Edwin F. Russo ..... 71 1994 Of Counsel to the law firm of Edwards & Angell from
July 1994 to July 1995; Of Counsel to the law firm
of Fine Jacobson Schwartz Nash & Block from April
1991 to June 1994.
</TABLE>
Mr. Adler is chairman of the Executive Committee and a director of Data
General Corporation, a computer company. Mr. Adler is also a director of
Global Pharmaceutical Corporation, a manufacturer of generic pharmaceuticals;
Prime Cellular Inc., a software company; USA Detergents, Inc., a manufacturer
of laundry and household cleaning products; and a director of various private
companies. Mr. Chapman is a director of Global Pharmaceutical Corporation, a
manufacturer of generic pharmaceuticals; Integrated Packaging Assembly Corp.,
a semiconductor company; and a director of various private companies. Mr.
Chapman is the son-in-law of Mr. Adler. Mr. Mustafa is the Chairman of the
Board of Directors of Bluestone Capital Partners and a director of First
Colony Coffee & Tea Company.
5
<PAGE>
Pursuant to a shareholders agreement between Mr. Adler, the Company and
various other parties (the "Shareholders Agreement"), the Company has agreed
to nominate and the Company and the other parties to the Shareholders
Agreement have agreed to use their best efforts to cause an individual
nominated by Mr. Adler to be elected a director of the Company until the
earlier of (i) April 29, 1999 or (ii) the date that 300,000 shares of the
Company represent less than 5% of the Company's issued and outstanding shares
of Common Stock. To date, Mr. Adler has not exercised such right.
In June of 1996, the Company established a Finance Committee. The Finance
Committee is made up of the following directors: Frederick R. Adler, William
E. Hattaway, Kamal Mustafa and Jay S. Nickse. The purpose of the Finance
Committee is to approve all capital expansion projects, including the
development, relocation and remodeling of restaurants, as well as the
purchase of restaurant equipment and system requirements. The Finance
Committee also acted as the Company's Audit Committee during the past fiscal
year. The Finance Committee is expected to review future third party
financing proposals, which includes, but is not limited to, bank lines of
credit, real estate mortgages, the financing of building and leasehold
improvements, equipment leases and sale/leaseback transactions. The Finance
Committee acted six times by written consent during the fiscal year ended
December 29, 1996.
Each director of the Company is elected for a term of one year which
expires at the next annual meeting of the Company's stockholders or at such
other time as his successor is duly elected and qualified. Each executive
officer is appointed by the Board of Directors and serves at the pleasure of
the Board, subject to the terms of employment agreements between the Company
and each of the executive officers. To date, directors have not been
compensated for their services on the Board of Directors. See "Proposal No.
2" for a proposal to adopt a Stock Option Plan for Non-Employee Directors.
The Company has been advised by George Heaton, a person who may be deemed
a promoter of the Company, that in 1988, a lawsuit was filed in Minnesota
federal district court against various parties including George Heaton
claiming, among other claims, that Mr. Heaton had violated federal and state
securities laws. Mr. Heaton was an officer, director and control person of
each of Southbridge Development Co. ("Southbridge"), Camelot Associates, Inc.
("Camelot") and Florestra Associates, Inc. ("Florestra") in 1985 when these
companies sold various condominiums to three separate limited partnerships
(the "Partnerships"). The Partnerships, structured as "tax shelters," sold
limited partnership units therein to various investors (the "Limited
Partners"). The Partnerships subsequently went out of business and the
Limited Partners lost their investment in the Partnerships. The Limited
Partners filed a lawsuit against, among others, the promoter of the
Partnerships, the accountants and attorneys of the Partnerships, the
appraiser of the condominiums purchased by the Partnerships, the banks that
loaned money to the Partnerships in order to purchase the condominiums,
Southbridge, Camelot, Florestra and George Heaton. A default judgment was
entered against Mr. Heaton and Mr. Heaton subsequently settled the judgment.
MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended December 29, 1996, the Board of Directors
held four meetings. Each director attended at least 75% of the meetings of
the Board of Directors held when he was a director and of all committees of
the Board of Directors on which he served.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors, and
persons who beneficially own more than ten percent of the Compa-
6
<PAGE>
ny's Common Stock, to file initial reports of ownership and reports of
changes in ownership with the SEC. Executive officers, directors and greater
than ten percent beneficial owners are required by the SEC to furnish the
Company with copies of all Section 16(a) forms they file.
Based upon a review of the copies of such forms furnished to the Company
and written representations from the Company's executive officers and
directors, the Company believes that during fiscal 1996 all Section 16(a)
filing requirements applicable to its executive officers, directors and
greater than ten percent beneficial owners were complied with on a timely
basis, except for the late filing of one Form 4 and one Form 5 by Kamal
Mustafa, a director of the Company, relating to a single transaction.
VOTE REQUIRED
The six nominees receiving the highest number of affirmative votes of the
shares present in person or represented by proxy and entitled to vote, a
quorum being present, shall be elected as directors. Only votes cast for a
nominee will be counted, except that the accompanying proxy will be voted for
all nominees in the absence of instructions to the contrary. Abstentions,
broker non-votes and instructions on the accompanying proxy card to withhold
authority to vote for one or more nominees will result in the respective
nominees receiving fewer votes. However, the number of votes otherwise
received by the nominee will not be reduced by such action.
THE BOARD OF DIRECTORS DEEMS THE ELECTION AS DIRECTORS OF THE SIX NOMINEES
LISTED ABOVE TO BE IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS
AND RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THESE NOMINEES.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table shows all the cash compensation paid by the Company or
its subsidiaries as well as certain other compensation paid during the fiscal
years indicated to the Chief Executive Officer of the Company and to each
other executive officer of the Company whose total annual salary and bonus
exceeded $100,000 for the fiscal year ended December 29, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
---------------------- -------------------------------------
Restricted
Stock Securities Underlying
Name and Principal Position Year Salary($) Bonus($) Award(s) ($) Options (1)
---------------------------------- ------ ---------- -------- ------------ ---------------------
<S> <C> <C> <C> <C> <C>
William E. Hattaway .............. 1996 $154,078 -- -- 63,984
Chief Executive Officer, 1995 $149,100 -- -- --
President and Director 1994 $149,100 -- -- --
Frank C. Roehl, III, ............. 1996 $103,289 -- -- 43,992
Vice President of Marketing 1995 $ 99,428 -- -- --
1994 $ 99,428 -- -- --
</TABLE>
- ------
(1) Consist of options to purchase Common Stock of the Company at the initial
public offering price, $5.00 per share.
The following table sets forth information with respect to option grants
during fiscal 1996 to the persons named in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Number of % of Total for Option Term(2)
Securities Options Granted ------------------------
Underlying to Employees in Exercise Expiration
Name Options Granted Fiscal Year (1) Price ($/Sh) Date 5% ($) 10% ($)
-------------------- --------------- --------------- ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
William E. Hattaway 63,984 (3) 24.5% $5.00 04/29/06 $201,196 $509,870
Frank C. Roehl, III 43,992 (4) 16.9% $5.00 04/29/06 $138,334 $350,560
</TABLE>
- ------
(1) Based upon options to purchase 260,960 shares granted to all employees in
1996.
(2) These amounts represent assumed rates of appreciation in the price of the
Company's Common Stock during the terms of the options in accordance with
rates specified in applicable federal securities regulations. Actual
gains, if any, on stock option exercises will depend on the future price
of the Common Stock and overall stock market conditions. The 5% rate of
appreciation over the 10 year option term of the $5.00 stock price on the
date of grant would result in a stock price of $8.14. The 10% rate of
appreciation over the 10 year option term of the $5.00 stock price on the
date of grant would result in a stock price of $12.97. There is no
representation that the rates of appreciation reflected in this table
will be achieved.
(3) These options will become exercisable as to 21,328 shares of Common Stock
on each of April 29, 1997, April 29, 1998, and April 29, 1999.
(4) Presently exercisable as to 8,000 shares of Common Stock, and will become
exercisable as to 4,000 shares of Common Stock on December 15, 1997 and
as to 10,664 shares of Common Stock on each of April 29, 1997, April 29,
1998, and April 29, 1999.
8
<PAGE>
The following table sets forth information with respect to (i) stock
options exercised in fiscal 1996 by the persons named in the Summary
Compensation Table and (ii) unexercised stock options held by such
individuals at December 29, 1996.
AGGREGATED OPTION EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised,
Unexercised Options Held at in-the-Money Options
Shares Fiscal Year End at Fiscal Year End $ (1)
Acquired on Value -------------------------------- --------------------------------
Name Exercise (#) Realized Exercisable Unexercisable Exercisable Unexercisable
-------------------- ------------- ---------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
William E. Hattaway -- -- 0 63,984 -- $239,940
Frank C. Roehl, III -- -- 8,000 35,992 $30,000 $134,970
</TABLE>
- ------
(1) Based on a closing stock price of the Company's Common Stock on Friday,
December 27, 1996 of $8.75.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of Messrs.
William E. Hattaway, Warren R. Nelson, John R. Ritchey and Frank C. Roehl,
III. The employment agreement between the Company and Mr. Hattaway expires in
August 1998 and provides for annual base compensation of $170,000 per year
and supplemental discretionary bonuses, as determined by the Company's Board
of Directors from time to time. In the event Mr. Hattaway's employment is
terminated by the Company at any time for any reason other than justifiable
cause (as defined in the employment agreement), disability or death, the
Company has agreed to pay Mr. Hattaway an amount equal to the lesser of (i)
the amount that would be paid to Mr. Hattaway during the remainder of the
term of the employment agreement or (ii) an amount equal to 100% of his
annual base compensation. Each of Messrs. Nelson, Ritchey and Roehl has a
one-year employment agreement that provides for a base annual salary of
$98,500, $99,500 and $101,800, respectively, during Fiscal 1997. Each of the
employment agreements is renewed automatically at the end of its respective
initial term, and annually thereafter, unless either party gives notice to
the other of an intent not to renew. In accordance with their employment
agreements, upon the consummation of the initial public offering of the
Company's Common Stock (the "Offering") on April 29, 1996, Messrs. Hattaway,
Nelson, Ritchey and Roehl received options to purchase 63,984, 31,992, 31,992
and 31,992 shares of Common Stock, respectively, at the offering price per
share of Common Stock. In addition, in 1993, Mr. Hattaway received 260,000
shares and each of Messrs. Nelson, Ritchey and Roehl received 26,000 shares
of the Company's Common Stock in consideration of services to be rendered to
the Company.
STOCK OPTION PLANS
On September 11, 1995, the Company's Board of Directors approved the
Company's 1996 Employee Stock Option Plan (the "1996 Plan") and the 1995
Employee Stock Option Plan (the "1995 Plan" and together with the 1996 Plan,
the "Plans"). The 1996 Plan provides for the issuance of options to purchase
a total of 101,000 shares of the Company's Common Stock, and the 1995 Plan
provides for the issuance of options to purchase a total of 240,000 shares of
the Company's Common Stock. The Plans authorize the Board of Directors to
issue incentive stock options ("ISOs"), as defined in Section 422 of the
Internal Revenue Code (the "Code"), and stock options that do not conform to
the requirements of that Code section ("Non-ISOs"). The exercise price of
each ISO may not be less than 100% of the fair market value of the Common
Stock at the time of grant, except that in the case of a grant to an employee
who owns (within the meaning of Code Section 422) 10% or more of the
outstanding stock of the Company (a "10% Stockholder"), the exercise price
shall not be less than 110% of such
9
<PAGE>
fair market value. The exercise price of each Non-ISO may not be less than
the par value of the Common Stock. Options may not be exercised prior to the
first anniversary, or on or after the tenth anniversary (fifth anniversary in
the case of an ISO granted to a 10% Stockholder), of their grant. Options may
not be transferred during the lifetime of an optionholder.
The Plans are administered by the Board of Directors. Subject to the
provisions of the Plans, the Board of Directors has the authority to
determine the individuals to whom the stock options are to be granted, the
number of shares to be covered by each option, the option price, the type of
option, the option period, the restrictions, if any, on the exercise of the
option, the terms for the payment of the option price and other terms and
conditions. Payment by optionholders upon exercise of an option may be made
(as determined by the Board of Directors) in cash, by promissory note or
other such form of payment acceptable to the Board of Directors, including
shares of Common Stock.
As of December 29, 1996, the Company has granted options to purchase all
101,000 shares of Common Stock available for issuance under the 1996 Plan.
Messrs. Nelson, Ritchey and Roehl each received options to purchase 12,000
shares at an exercise price of $5.00 per share. These options vest as to
one-third of the shares on each of the anniversary dates of the date the
Company agreed to grant these options, so long as the executive officer
remains in the continuous employ of the Company. The options may be exercised
for ten years following the date the Company agreed to grant these options
(the initial public offering price of the Company's Common Stock). As of
December 29, 1996, the Company has granted options to purchase 159,960 shares
of Common Stock available for issuance under the 1995 Plan. Messrs. Hattaway,
Nelson, Ritchey and Roehl received options to purchase 63,984, 31,992, 31,992
and 31,992 shares of Common Stock at an exercise price of $5.00 per share.
See "Proposal No. 3" for a proposal to increase the number of shares
available for issuance under the 1995 Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth below briefly describes certain transactions
between the Company and certain parties who or which may be deemed to be
affiliated with the Company.
1993 Loan. On September 20, 1993, the Company entered into a Note and
Stock Purchase Agreement with The MicroCap Fund, Inc. ("MicroCap"), whereby
MicroCap loaned the Company $1,310,000 (the "1993 Loan") and purchased from
the Company 300,000 shares of Common Stock for a purchase price of $90,000.
The 1993 Loan bore interest at an annual rate of 9%, which accrued and was
paid in full upon the completion of the Offering. The 1993 Loan was
originally scheduled to mature on October 30, 1995. In October 1995, MicroCap
agreed to extend the term of the 1993 Loan until the earlier of February 29,
1996 or the consummation of a public offering of the Company's Common Stock.
In consideration for granting this extension, the Company issued to MicroCap
a warrant to purchase 75,000 shares of the Company's Common Stock at a
purchase price of $3.75 per share. In February 1996, MicroCap agreed to
extend the term of the 1993 Loan until the earlier of March 30, 1996 or the
consummation of the Offering. In March 1996, the term of the 1993 Loan was
further extended to mature upon the earlier of May 15, 1996 or the
consummation of the Offering. During 1996, MicroCap sold its Common Stock and
warrants to purchase the Company's Common Stock to Mr. Adler, the Company's
Chairman of the Board, and certain individuals or entities associated with
Mr. Adler.
1994 Loan. On December 29, 1994, Frederick R. Adler, Chairman of the Board
of the Company, and MicroCap, each agreed to loan the Company $500,000 (the
"1994 Loans"), which loans were funded in January 1995. The 1994 Loans bear
interest at an annual rate of prime plus 2%, payable on a monthly basis, and
originally were scheduled to mature on June 30, 1995. In consideration for
making the 1994 Loans, the Com-
10
<PAGE>
pany granted to each of MicroCap and Mr. Adler warrants to purchase 10,000
shares of preferred stock. In June 1995, the 1994 Loans were extended by
MicroCap and Mr. Adler until the earlier of the consummation of the Offering
or February 29, 1996. In connection with such extension each of MicroCap and
Mr. Adler had their warrants to purchase preferred stock converted into
warrants to purchase 175,000 shares of the Company's Common Stock at a
purchase price of $3.15 per share. In February 1996, MicroCap and Mr. Adler
agreed to further extend the term of the 1994 Loans until 18 months from the
consummation of the Offering. As compensation for granting this extension,
the Company issued to each of MicroCap and Mr. Adler warrants to purchase
75,000 shares of Common Stock at an exercise price of $3.50 per share. During
1996, MicroCap sold this loan and such warrants to purchase the Company's
Common Stock to Mr. Adler and certain individuals or entities associated with
Mr. Adler. Borrowings under the 1994 Loans are collateralized by
substantially all of the Company's assets, subject to prior liens.
1995 Line of Credit. In September 1995, certain lenders (the "1995
Lenders") made available to the Company $750,000 for borrowing (the "1995
Line of Credit"). Of the $750,000 principal amount borrowed, Mr. Adler and
certain individuals or entities associated with Mr. Adler loaned the Company
$650,000. During March 1996, an entity associated with Mr. Adler purchased
the remaining $100,000 of indebtedness owed by the Company under the 1995
Line of Credit from a third party. The 1995 Line of Credit bore interest at
an annual rate of 12% and was payable upon the earlier of March 30, 1996 or
the consummation of the Offering. In partial consideration for the 1995 Line
of Credit, the Company granted to the 1995 Lenders, pro rata to the amount of
their loan, warrants to purchase 200,000 shares of Common Stock at an
exercise price of $3.50 per share. In March 1996, the term of the 1995 Line
of Credit was extended to the earlier of May 15, 1996 or the consummation of
the Offering. Upon the consummation of Offering, the Company issued to Mr.
Adler and an entity associated with Mr. Adler 165,016 shares of Common Stock
and 82,508 warrants to purchase shares of Common Stock as repayment of the
1995 Line of Credit (the "Debt Conversion"). In connection with the Debt
Conversion, the Company granted to Mr. Adler and the associated entity the
right to purchase in the aggregate up to 24,752 shares of Common Stock and
warrants to purchase up to 12,376 shares of Common Stock at an exercise price
of $6.00 per share, at a purchase price of $4.50 per share and $0.09 per
warrant. Mr. Adler and the entity associated with Mr. Adler exercised such
right on May 13, 1996. The Company granted to Mr. Adler and the associated
entity certain demand and "piggyback" registration rights with respect to
these shares of Common Stock and the shares of Common Stock issuable upon the
exercise of the such warrants.
Joint Venture. On March 1, 1994, the Company's wholly-owned subsidiary,
Shells of Melbourne, Inc. ("Shells of Melbourne"), entered into a joint
venture agreement with WLH Investments, Inc. ("WLH Investments"), a
corporation wholly-owned by Wanda L. Hattaway, wife of William E. Hattaway,
the Company's President. The joint venture owns and operates the Shells
restaurant located in Melbourne, Florida. WLH Investments contributed
$400,000 to the joint venture, which amount was used by the joint venture
primarily to repay the Company for the expenses incurred by the Company in
renovating and opening the Melbourne restaurant. Shells of Melbourne owns a
51% interest in the joint venture and WLH Investments owns a 49% interest.
The joint venture agreement provides that WLH Investments will receive a
cumulative annual preferred return of 15% on the $400,000 of capital
contributed to the joint venture by WLH Investments. Shells of Melbourne will
then be allocated an amount equal to such preferred return. The remaining net
income of the joint venture will be allocated 51% to Shells of Melbourne and
49% to WLH Investments. Based upon such allocations, the Company owed to WLH
Investments $174,291 as of December 31, 1995. Of this amount owed, the
Company paid $15,291 to WLH Investments in March 1996, and paid, upon the
consummation of the Offering, the remaining $159,000 by the issuance of
34,984 shares of Common Stock and warrants to purchase 17,492 shares of
Common Stock at an exercise price of $6.00 per share. The Company owed
$111,810 to WLH Investments as of December 29, 1996 pursuant to the joint
venture allocations.
11
<PAGE>
The Company granted WLH Investments the option (the "WLH Option") to cause
the Company to exchange WLH Investments' interest in the joint venture for
shares of Common Stock in connection with the Offering. The shares to be
received by WLH Investments upon exercise of the WLH Option originally were
to be valued at the initial public offering price and total the greater of
$750,000 or an amount equal to six times the net income allocated by the
joint venture to WLH Investments during the 12 months prior to such exercise.
The WLH Option was amended in September 1995 to provide that it be
exercisable at any time following the date that the value of the Company's
Common Stock equals or exceeds $20 per share for a period of 20 consecutive
trading days and that the $750,000 purchase price to be received by WLH
Investments is to be payable in a number of shares of the Company's Common
Stock based upon the greater of $20 per share and the market price of the
Common Stock on the date the WLH Option is exercised. The Company has granted
WLH Investments certain registration rights with respect to the shares of
Common Stock issuable upon exercise of the WLH Option.
Although the Company believes that the foregoing transactions were on
terms no less favorable than would have been available from unaffiliated
third parties in arm's length transactions, there can be no assurance that
this is the case. All future transactions between the Company and its
officers, directors and 5% shareholders will be on terms no less favorable
than could be obtained from independent third parties, and will be approved
by a majority of the independent and disinterested members of the Board of
Directors.
BOARD OF DIRECTORS REPORT TO STOCKHOLDERS REGARDING EXECUTIVE COMPENSATION
The report of the Board of Directors shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933, as amended (the
"Securities Act"), or under the Exchange Act, except to the extent that the
Company specifically incorporates this information by reference, and shall
not otherwise be deemed filed under such Acts.
COMPENSATION PHILOSOPHY
The Company is engaged in the management and operation of full service,
mid-priced, casual dining seafood restaurants. One of the Company's strengths
contributing to its success is the strong management team--many of whom have
been with the Company for a significant period of time. A central goal of the
Board is to ensure that the Company's remuneration policy is such that the
Company is able to attract, retain and reward capable employees who can
contribute, both short- and longer-term, to the continued success of the
Company. Equity participation and a strong alignment to stockholders'
interests are key elements of the Company's compensation philosophy.
The Company's executive compensation program consists of three parts: base
salary, bonus and stock options. In awarding salary increases and bonuses,
the Board did not relate the various elements of corporate performance to
each element of executive compensation. Rather, the Board considered whether
the compensation package as a whole adequately compensated each executive for
the Company's performance during 1996 and that executive's contribution to
such performance.
BASE SALARY
Base salary represents the fixed component of the executive compensation
program. The Company's philosophy regarding base salaries is conservative,
maintaining salaries at approximately competitive industry aver-
12
<PAGE>
age. Determinations of base salary levels are established on an annual review
of marketplace competitiveness with similar restaurant companies, and on
internal relationships. Periodic increases in base salary relate to
individual contributions to the Company's overall performance, relative
marketplace competitiveness levels and length of service to the Company.
BONUS
Bonuses represent the variable component of the executive compensation
program that is tied to the Company's performance and individual achievement.
To the extent deemed appropriate, the Company's policy is to grant bonuses as
a portion of the compensation paid to its management personnel. In
determining bonuses, the Board considers factors such as relative performance
of the Company during the year and the individual's contribution to the
Company's performance.
STOCK OPTIONS
The Board, which administers the Company's stock option plans, believes
that one important goal of the executive compensation program should be to
provide executives and key employees--who have significant responsibility for
the management, growth and future success of the Company--with an opportunity
to increase their ownership in the Company and potentially gain financially
from the Company's stock price increases. This approach ensures that the best
interests of the stockholders, executives and employees will be closely
aligned. Therefore, executive officers and other key employees of the Company
are granted stock options from time to time, giving them a right to purchase
shares of the Company's Common Stock at a specified price in the future. The
grant of options is based primarily on an employee's potential contribution
to the Company's growth and financial results. In determining the size of
option grants, the Board also considers the number of options owned by such
officer, the number of options previously granted and currently outstanding,
and the aggregate size of the current option grants. Options generally are
granted at the prevailing market value of the Company's Common Stock and will
only have value if the Company's stock price increases. Generally, grants of
options vest in equal amounts over three years and the individual must be
employed by the Company for such options to vest.
COMPENSATION TO CHIEF EXECUTIVE OFFICER
During 1996, Mr. Hattaway was compensated in accordance with his
employment agreement which provided for an annual base compensation of
$150,000 for the 1996 calendar year. In addition, in accordance with his
employment agreement, Mr. Hattaway received an option to purchase 63,984
shares of Common Stock on April 29, 1996, the date of the Offering, with an
exercise price equal to the initial public offering price. In connection with
Mr. Hattaway's employment, the Board reviewed the accomplishments of Mr.
Hattaway and the Company's performance, as well as Mr. Hattaway's increased
duties and responsibilities as a result of the Offering and the Company's
business dealings thereafter.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not have a compensation committee for Fiscal 1996. Mr.
Hattaway, President of the Company, participated in deliberations of the
Board of Directors concerning executive officer compensation other than
deliberations concerning his own compensation. Mr. Hattaway's compensation
was determined by the entire Board, with Mr. Hattaway excluding himself from
such deliberations and decisions.
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THE COMPANY'S PERFORMANCE
The following Stock Price Performance Graph shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act or under the
Exchange Act, except to the extent the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
The following graph compares cumulative total return of the Company's
Common Stock with the cumulative total return of (i) the Russell 2000 Index
and (ii) the Nations Restaurant News Stock Index (the "Peer Index"). The
graph assumes (a) $100 was invested on April 23, 1996 (the date of the
Company's Offering) in each of the Company's Common Stock, the stocks
comprising the Russell 2000 Index and the stocks comprising the Peer Index,
and (b) the reinvestment of dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
SHELLS SEAFOOD RESTAURANTS, INC., RUSSELL 2000 INDEX,
AND NATIONS RESTAURANT NEWS STOCK INDEX
STOCK PERFORMANCE GRAPH
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100|-*&#----------------&#-------------------------$#---------------#-|
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0|--------------------|--------------------------|------------------|
4/23/96 6/30/96 9/29/96 12/29/96
<TABLE>
<CAPTION>
4/23/96 6/30/96 9/29/96 12/29/96
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shells Seafood Restaurants, Inc. * $100.00 $150.00 $139.00 $175.00
Nations Restaurant News Stock Index # $100.00 $100.00 $ 99.00 $ 94.00
Russell 2000 Index & $100.00 $102.00 $102.00 $105.00
</TABLE>
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PROPOSAL NO. 2 -- ADOPTION OF STOCK
OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
The Board of Directors adopted, subject to stockholder approval, a stock
option plan for non-employee directors of the Company (the "Directors'
Compensation Plan"). The Board of Directors believes that the continued
growth and success of the Company will depend, in large part, upon the
ability of the Company to retain on its Board of Directors knowledgeable
persons who, through their efforts and expertise, can make a significant
contribution to the success of the Company's business and to provide
incentive for such directors to work for the best interests of the Company
and its stockholders through ownership of its Common Stock. In assessing the
recommendation of the Board, stockholders should consider that all current
directors other than Mr. Hattaway who continue as directors of the Company
after the Annual Meeting of Stockholders, will benefit from the adoption of
the Directors' Compensation Plan and thus may be viewed to have a conflict of
interest. The full text of the Directors' Compensation Plan is set forth in
Appendix A to this Proxy Statement, and the following summary is qualified in
its entirety by reference thereto.
DESCRIPTION OF DIRECTORS' COMPENSATION PLAN
Pursuant to the Directors' Compensation Plan, each non-employee director
elected or appointed to the Board of Directors will automatically receive on
the later of the date of his or her initial election or appointment to the
Company's Board of Directors or the date the Directors' Compensation Plan was
adopted by the Board of Directors (the "Initial Grant Date"), an option to
purchase 2,000 shares of the Company's Common Stock (the "Initial Option") at
a per share exercise price equal to the fair market value of the Common Stock
on the Initial Grant Date. Furthermore, each non-employee director will
automatically receive on each anniversary of the Initial Grant Date for that
director, an option to purchase 2,000 shares of the Company's Common Stock at
a per share exercise price equal to the fair market value of the Common Stock
on the applicable additional grant date. A total of 100,000 shares will be
reserved for issuance under the Directors' Compensation Plan. The number of
shares which may be issued under the Directors' Compensation Plan is subject
to adjustment to reflect any increase or decrease in the number of shares of
Common Stock resulting from a stock split, stock dividend, consolidation or
other similar capital adjustment.
Except as set forth below, Options granted under the Directors'
Compensation Plan may be exercisable as to 50% of the total number of shares
issuable under such Option on each of the two successive anniversaries of the
grant date of such Option. In the event that a non-employee director ceases
to be a director of the Company, such person may exercise the Option, if it
is then exercisable by that director, within six months after the date he or
she ceases to be a director of the Company (one year by the survivors of a
non-employee director, if the director ceases to be a director by reason of
death). Options granted under the Directors' Compensation Plan shall have a
term of ten years from the applicable grant date and shall not be "incentive
stock options" within the meaning of Section 422 of the Code.
The Directors' Compensation Plan will be administered by the Board of
Directors of the Company. However, the Directors' Compensation Plan
prescribes the individuals who would be awarded options, the number of shares
subject to the options, and the terms and conditions of each award. The Board
of Directors may at any time terminate the Directors' Compensation Plan and
may from time to time alter or amend the Directors' Compensation Plan or any
part thereof, provided that the rights of a non-employee director with
respect to an option granted prior to such termination, alteration or
amendment may not be impaired.
15
<PAGE>
VOTE REQUIRED
The affirmative vote of holders of a majority of the shares of Common
Stock issued, outstanding and entitled to vote, present or represented at the
meeting, a quorum being present, is required for the adoption of this
proposal. Broker non-votes with respect to this matter will be treated as
neither a vote "for" or a vote "against" the matter, although they will be
counted in determining if a quorum is present. However, abstentions will be
considered in determining the number of votes required to attain a majority
of the shares present or represented at the meeting and entitled to vote.
Accordingly, an abstention from voting by a stockholder present in person or
by proxy at the meeting has the same legal effect as a vote "against" the
matter because it represents a share present or represented at the meeting
and entitled to vote, thereby increasing the number of affirmative votes
required to approve this proposal.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 2 TO BE IN THE BEST INTERESTS OF
THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL
THEREOF.
PROPOSAL NO. 3 -- AMENDMENT TO 1995 EMPLOYEE STOCK OPTION PLAN
The Board of Directors adopted, subject to stockholder approval, an
amendment to the Company's 1995 Employee Stock Option Plan (the "1995 Plan")
which would increase the aggregate number of shares of Common Stock which may
be issued thereunder from 240,000 to 340,000 shares, all of which would be
available for the grant of either "incentive stock options," as defined in
Section 422 of the Code, or options which do not qualify as incentive stock
options (restricted stock options). The primary features of the 1995 Plan are
summarized below. The full text of the 1995 Plan and the proposed amendment
thereto are set forth in Appendix B to this Proxy Statement and the following
discussion is qualified in its entirety by reference thereto.
The Board of Directors believes that approval of the amendments will serve
the best interests of the Company and its stockholders by permitting the
Company to continue to utilize stock options as a means to attract and retain
key employees who are in a position to contribute materially to the
successful conduct of the business and affairs of the Company and, in
addition, to stimulate in such individuals an increased desire to render
greater service to the Company and its subsidiaries. In addition, the
availability of shares for grant under the 1995 Plan is important in that it
provides the Company an alternative or additional means of compensating key
employees. As of March 31, 1997, there were 80,040 shares available for
future grants under the 1995 Plan, approximately 33,000 of which are
committed for issuance or are expected to be issued in the near future in
connection with the Company's expansion program.
The 1995 Plan is administered by the Board of Directors, which has the
authority to select optionees, designate the number of shares to be covered
by each option and, subject to certain restrictions, specify other terms of
the options. Options may be granted by the Board from time to time through
September 10, 2005, the termination date of the 1995 Plan, to key employees
of the Company or a subsidiary of the Company within the meaning of Section
424(f) of the Code. All employees are eligible to participate in the 1995
Plan and as of March 31, 1997 approximately 48 employees were participating
in the 1995 Plan.
The 1995 Plan, as currently in effect, permits the granting of options to
purchase up to an aggregate of 240,000 shares of Common Stock of the Company.
Under the 1995 Plan, the Company may grant ISO's and Non-ISO's. The exercise
price for shares covered by an ISO may not be less than 100% of the fair
market value (as defined in the 1995 Plan) of the Common Stock on the date of
grant (110% in the case of a grant to an employee who owns stock possessing
more than 10% of the combined voting power of all classes of stock of
16
<PAGE>
the Company or any subsidiary entitled to vote (a "10% Stockholder"). The
exercise price for shares covered by a Non-ISO may not be less than the par
value of the Common Stock at the date of grant. All options must expire no
later than ten years (five years in the case of an ISO granted to a 10%
Stockholder) from the date of grant.
Any option outstanding after September 10, 2005 will remain in effect
until it is exercised, terminates or expires in accordance with its terms.
The Plan also provides that, following termination of employment, (i) if an
optionee's employment is terminated for any reason other than death or
disability, he or she has three months to exercise his or her option to the
extent exercisable on the date of termination of employment, and (ii) if an
optionee shall cease to be employed by the Company as the result of his or
her death or disability (or if the optionee's employment is terminated by
reason of his or her disability and the optionee dies within one year after
such termination of employment), the optionee has one year to exercise his or
her option to the extent exercisable on the date he or she ceased to be
employed (or one year after the later death of a disabled optionee).
FEDERAL INCOME TAX CONSEQUENCES
Following is a summary of the salient Federal income tax consequences
associated with options granted under the Directors' Compensation Plan or the
1995 Plan.
An optionee will not realize taxable income upon the grant of an option.
In general, the holder of a Non-ISO will recognize ordinary income when the
option is exercised equal to the excess of the value of the stock over the
exercise price (i.e., the option spread), and the Company receives a
corresponding deduction. (If a Non-ISO is exercised within six months after
the date of grant and if the optionee is subject to the six-month
restrictions on sale of Common Stock under Section 16(b) of the Exchange Act,
the optionee generally recognizes ordinary income on the date the
restrictions lapse, unless an early income recognition election is made.)
Upon a later sale of the stock, the optionee will realize capital gain or
loss equal to the difference between the selling price and the value of the
stock at the time the option was exercised (or, if later, the time ordinary
income was recognized with respect to the exercise).
The holder of an ISO does not realize taxable income upon exercise of the
option, although the option spread is an item of tax preference income
potentially subject to the alternative minimum tax. If the stock acquired
upon exercise of the ISO is sold or otherwise disposed of within two years
from the ISO grant date or within one year from the exercise date, then, in
general, gain realized on the sale is treated as ordinary income to the
extent of the option spread at the exercise date, and the Company receives a
corresponding deduction. Any remaining gain is treated as capital gain. If
the stock is held for at least two years from the grant date and one year
from the exercise date, then gain or loss realized upon the sale will be
capital gain or loss and the Company will not be entitled to a deduction. A
special basis adjustment applies to reduce the gain for alternative minimum
tax purposes.
In general, if an optionee delivers previously-owned shares in payment of
the exercise price of an option, no gain or loss will be recognized on the
exchange of the previously-owned shares for an equivalent number of newly
issued shares. However, if the previously-owned shares delivered in payment
of the exercise price were acquired pursuant to the exercise of an ISO and if
the requisite ISO holding periods are not satisfied (see the preceding
paragraph), then the optionee will realize ordinary income on the delivery of
the previously-owned shares as in the case of any other "early" disposition
of ISO-acquired shares. If the option being exercised is a Non-ISO, the
optionee will realize ordinary income equal to the amount by which the fair
market value of the Common Stock received exceeds the exercise price (as if
the exercise price were paid in cash).
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The Code imposes certain limitations on the deductibility of executive
compensation paid by public companies. In general, the Company will not be
able to deduct annual compensation paid to certain executive officers in
excess of $1,000,000 except to the extent that such compensation qualifies as
"performance-based compensation" (or meets other exceptions not here
relevant). Non-deductibility would result in additional tax cost to the
Company. It is contemplated that the individual grant limitations on options
which may be made to any employee in any calendar year under the 1995 Plan
will enable the Board to grant options which would qualify for the
"performance-based compensation" exclusion under the new deduction limitation
provisions. Nevertheless, although the Board considers the net cost to the
Company in making all compensation decisions (including, for this purpose,
the potential limitation on deductibility of executive compensation), there
is no assurance that compensation realized with respect to any particular
award under the 1995 Plan would qualify for the deduction limitation
exclusion.
VOTE REQUIRED
The affirmative vote of holders of a majority of the shares of Common
Stock issued, outstanding and entitled to vote, present or represented at the
meeting, a quorum being present, is required for the adoption of this
proposal. Broker non-votes with respect to this matter will be treated as
neither a vote "for" nor a vote "against" the matter, although they will be
counted in determining if a quorum is present. However, abstentions will be
considered in determining the number of votes required to attain a majority
of the shares present or represented at the meeting and entitled to vote.
Accordingly, an abstention from voting by a stockholder present in person or
by proxy at the meeting has the same legal effect as a vote "against" the
matter because it represents a share present or represented at the meeting
and entitled to vote, thereby increasing the number of affirmative votes
required to approve this proposal.
THE BOARD OF DIRECTORS DEEMS PROPOSAL NO. 3 TO BE IN THE BEST INTERESTS OF
THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL
THEREOF.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Deloitte & Touche LLP have been the independent auditors for the Company
since December 15, 1994 and will serve in that capacity for the 1997 fiscal
year. A representative of Deloitte & Touche LLP will be present at the Annual
Meeting and will have an opportunity to make a statement if he or she desires
to do so, and will respond to appropriate questions from stockholders.
STOCKHOLDER PROPOSALS
All stockholder proposals which are intended to be presented at the 1998
Annual Meeting of Stockholders of the Company must be received by the Company
no later than December 23, 1997 for inclusion in the Board of Directors'
proxy statement and form of proxy relating to that meeting.
OTHER BUSINESS
The Board of Directors knows of no other business to be acted upon at the
Annual Meeting. However, if any other business properly comes before the
Annual Meeting, it is the intention of the persons named in the enclosed
proxy to vote on such matters in accordance with their best judgment.
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<PAGE>
The prompt return of your proxy will be appreciated and helpful in
obtaining the necessary vote. Therefore, whether or not you expect to attend
the Annual Meeting, please sign the proxy and return it in the enclosed
envelope.
By Order of the Board of Directors
Warren R. Nelson
Secretary
Dated: April 21, 1997
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K WILL BE SENT
WITHOUT CHARGE TO ANY STOCKHOLDER REQUESTING IT IN WRITING FROM:
SHELLS SEAFOOD RESTAURANTS, INC.
16313 N. DALE MABRY HIGHWAY, SUITE 100
TAMPA, FLORIDA 33618
ATTENTION: SECRETARY
19
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APPENDIX A
SHELLS SEAFOOD RESTAURANTS, INC.
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE.
The purpose of this Stock Option Plan for Non-Employee Directors (the
"Plan") of Shells Seafood Restaurants, Inc. (the "Corporation") is to
strengthen the Corporation's ability to attract and retain the services of
knowledgeable and experienced persons who, through their efforts and
expertise, can make a significant contribution to the success of the
Corporation's business by serving as members of the Corporation's Board of
Directors and to provide additional incentive for such directors to continue
to work for the best interests of the Corporation and its stockholders
through ownership of its Common Stock, $.01 par value (the "Common Stock").
Accordingly, the Corporation will grant to each non-employee director options
to purchase shares of the Corporation's Common Stock on the terms and
conditions hereafter established.
2. STOCK SUBJECT TO PLAN.
The Company may issue and sell a total of 100,000 shares of its Common
Stock pursuant to the Plan. Such shares may be either authorized and unissued
or held by the Company in its treasury. New options may be granted under the
Plan with respect to shares of Common Stock which are covered by the
unexercised portion of an option which has terminated or expired by its
terms, by cancellation or otherwise.
3. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Board of Directors of the
Corporation (the "Board"). The interpretation and construction by the Board
of any provisions of the Plan or of any other matters related to the Plan
shall be final. The Board may from time to time adopt such rules and
regulations for carrying out the Plan as it may deem advisable. No member of
the Board shall be liable for any action or determination made in good faith
with respect to the Plan.
The Board of Directors may at any time amend, alter, suspend or terminate
the Plan; provided, however, that any such action would not impair any option
to purchase Common Stock theretofore granted under the Plan; and provided
further that without the approval of the Corporation's stockholders, no
amendments or alterations would be made which would (i) increase the number
of shares of Common Stock that may be purchased by each non-employee director
under the Plan (except as permitted by Paragraph 10), (ii) increase the
aggregate number of shares of Common Stock as to which options may be granted
under the Plan (except as permitted by Paragraph 10), (iii) decrease the
option exercise price (except as permitted by Paragraph 10), or (iv) extend
the period during which outstanding options granted under the Plan may be
exercised; and provided further that Paragraph 5 of the Plan shall not be
amended more than once every six months other than to comply with changes in
the Internal Revenue Code of 1986, as amended, or the Employee Retirement
Income Security Act of 1974, as amended, or the rules thereunder.
4. ELIGIBILITY.
All non-employee directors of the Corporation shall be eligible to receive
options under the Plan. Receipt of stock options under any other stock option
plan maintained by the Corporation or any subsidiary shall not, for that
reason, preclude a director from receiving options under the Plan.
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5. GRANTS.
(i) Each person who is a non-employee director at the time the Plan is
adopted by the Board, and any person who is not a non-employee director at
such time but who later becomes a non-employee director, shall on the date of
such adoption of the Plan or appointment to the Board, as applicable (the
"Initial Grant Date"), be issued an option to purchase 2,000 shares of the
Corporation's Common Stock (the "Initial Option") at the following price for
the following term and otherwise in accordance with the terms of the Plan:
(a) The option exercise price per share of Common Stock shall be the
Fair Market Value (as defined below) of the Common Stock covered by such
Initial Option on the Initial Grant Date.
(b) Except as provided herein, the term of an Initial Option shall be
for a period of ten (10) years from the Initial Grant Date.
(ii) In addition, each non-employee director shall, on each anniversary of
the Initial Grant Date (the "Additional Grant Date"), if he is still a
non-employee director on such date, be granted an option to purchase 2,000
shares of the Corporation's Common Stock (the "Additional Option"; and
together with the Initial Option, being referred to herein as an "Option") at
the following price for the following term and otherwise in accordance with
the terms of the Plan:
(a) The option exercise price per share of Common Stock shall be the
Fair Market Value (as defined below) of the Common Stock covered by such
Additional Option on the Additional Grant Date.
(b) Except as provided herein, the term of an Additional Option shall
be for a period of ten (10) years from the Additional Grant Date.
(iii) "Fair Market Value" shall mean, for each Grant Date, (A) if the
Common Stock is listed or admitted to trading on the New York Stock Exchange
(the "NYSE") or the American Stock Exchange (the "ASE"), the average of the
high and low sale price of the Common Stock on such date or, if no sale takes
place on such date, the average of the highest closing bid and lowest closing
asked prices of the Common Stock on such exchange, in each case as officially
reported on the NYSE or the ASE, or (B) if no shares of Common Stock are then
listed or admitted to trading on the NYSE or the ASE, the average of the high
and low sale prices of the Common Stock on such date on the NASDAQ National
Market System or, if no shares of Common Stock are then quoted on the NASDAQ
National Market System, the average of the closing bid and highest asked
prices of the Common Stock on such date on NASDAQ or, if no shares of Common
Stock are then quoted on NASDAQ, the average of the highest bid and lowest
asked prices of the Common Stock on such date as reported in the
over-the-counter system. If no closing bid and highest asked prices thereof
are then so quoted or published in the over-the-counter market, "Fair Market
Value" shall mean the fair value per share of Common Stock (assuming for the
purposes of this calculation the economic equivalence of all shares of
classes of capital stock), as determined on a fully diluted basis in good
faith by the Board, as of a date which is 15 days preceding such Grant Date.
(iv) Options granted hereunder shall not be "incentive stock options"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended.
6. REGULATORY COMPLIANCE AND LISTING.
The issuance or delivery of any Option may be postponed by the Corporation
for such period as may be required to comply with the Federal securities
laws, any applicable listing requirements of any applicable secur-
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ities exchange and any other law or regulation applicable to the issuance or
delivery of such Options, and the Corporation shall not be obligated to issue
or deliver any Options if the issuance or delivery of such options would
constitute a violation of any law or any regulation of any governmental
authority or applicable securities exchange.
7. RESTRICTIONS ON EXERCISABILITY AND SALE.
Each Option granted under the Plan may be exercisable as to 50% of the
total number of shares issuable under such Option on each of the two
successive anniversaries of the Initial Grant Date or Additional Grant Date,
as applicable, of such Option.
8. CESSATION AS DIRECTOR.
In the event that the holder of an Option granted pursuant to the Plan
shall cease to be a director of the Corporation for any reason such holder
may exercise any portion of the Option that is exercisable by him or her at
the time he or she ceases to be a director of the Corporation, but only to
the extent such Option is exercisable as of such date, within six months
after the date he or she ceases to be a director of the Corporation.
9. DEATH.
In the event that a holder of an Option granted pursuant to the Plan shall
die, his or her estate, personal representative or beneficiary may exercise
any portion of the Option that was exercisable by the deceased Optionee at
the time of his or her death, but only to the extent such Option is
exercisable as of such date, within twelve months after the date of his or
her death.
10. STOCK SPLITS, MERGERS, ETC.
In the event of any stock split, stock dividend or similar transaction
which increases or decreases the number of outstanding shares of Common
Stock, appropriate adjustment shall be made by the Board of Directors, whose
determination shall be final, to the number and option exercise price per
share of Common Stock which may be purchased under any outstanding Options.
In the case of a merger, consolidation or similar transaction which results
in a replacement of the Corporation's Common Stock for stock of another
corporation, the Corporation will make a reasonable effort, but shall not be
required, to replace any outstanding Options granted under the Plan with
comparable options to purchase the stock of such other corporation, or will
provide for immediate maturity of all outstanding Options, with all Options
not being exercised within the time period specified by the Board of
Directors being terminated.
11. TRANSFERABILITY.
Options are not assignable or transferable, except upon the optionholder's
death to a beneficiary designated by the optionee in accordance with
procedures established by the Board or, if no designated beneficiary shall
survive the optionholder, pursuant to the optionholder's will or by the laws
of descent and distribution, to the extent set forth in Section 9 and during
the optionholder's lifetime, may be exercised only by him or her.
12. EXERCISE OF OPTIONS.
An optionholder electing to exercise an Option shall give written notice
to the Corporation of such election and of the number of shares of Common
Stock that he or she has elected to acquire. An optionholder shall have no
rights of a stockholder with respect to shares of Common Stock covered by his
or her Option until after the date of issuance of a stock certificate to such
optionholder upon partial or complete exercise of his or her Option.
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13. PAYMENT.
The Option exercise price shall be payable in cash, check or in shares of
Common Stock upon the exercise of the Option. If the shares of Common Stock
are tendered as payment of the Option exercise price, the value of such
shares shall be the Fair Market Value as of the date of exercise. If such
tender would result in the issuance of fractional shares of Common Stock, the
Corporation shall instead return the difference in cash or by check to the
electing optionee.
14. OBLIGATION TO EXERCISE OPTION.
The granting of an Option shall impose no obligation on the director to
exercise such option.
15. CONTINUANCE AS DIRECTOR.
Nothing in the Plan shall be deemed to create any obligation on the part
of the Board to nominate any director for re-election by the Corporation's
stockholders.
16. TERM OF PLAN.
The Plan shall be effective as of the date on which it is adopted by the
Board, subject to the approval of the stockholders of the Company within one
year from the date of adoption by the Board. The Plan will terminate on the
date ten years after the date of adoption by the Board, unless sooner
terminated by the Board. The rights of optionees under Options outstanding at
the time of the termination of the Plan shall not be affected solely by
reason of the termination and shall continue in accordance with the terms of
the Option (as then in effect or thereafter amended).
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APPENDIX B
Below is the text of the Company's 1995 Employee Stock Option Plan as
proposed to be amended pursuant to proposal No. 3. Proposed language to such
plan is set forth in bold print and the language to be deleted is set forth
in brackets.
SHELLS SEAFOOD RESTAURANTS, INC.
1995 EMPLOYEE STOCK OPTION PLAN
1. Purpose. The purpose of the Shells Seafood Restaurants, Inc. 1995
Employee Stock Option Plan (the "Plan") is to enable Shells Seafood
Restaurants, Inc. (the "Company") and its stockholders to secure the benefits
of common stock ownership by executive officers of the Company and its
subsidiaries. The Board of Directors of the Company (the "Board") believes
that the granting of options under the Plan will foster the Company's ability
to attract, retain and motivate those individuals who will be largely
responsible for the profitability and long-term future growth of the Company.
2. Stock Subject to the Plan. The Company may issue and sell a total of
340,000 [240,000] shares of its common stock, $.01 par value (the "Common
Stock"), pursuant to the Plan. Such shares may be either authorized and
unissued or held by the Company in its treasury. New options may be granted
under the Plan with respect to shares of Common Stock which are covered by
the unexercised portion of an option which has terminated or expired by its
terms, by cancellation or otherwise.
3. Administration. The Plan will be administered by the Board or a
committee (the "Committee") consisting of at least two directors appointed by
and serving at the pleasure of the Board. Unless the Board determines
otherwise, the members of the Committee are to be "disinterested directors"
within the meaning and for the purposes of Rule 16(b)-3 under the Securities
Exchange Act of 1934. Subject to the provisions of the Plan, the Committee,
acting in its sole and absolute discretion, will have full power and
authority to grant options under the Plan, to interpret the provisions of the
Plan, to fix and interpret the provisions of option agreements made under the
Plan, to supervise the administration of the Plan, and to take such other
action as may be necessary or desirable in order to carry out the provisions
of the Plan. A majority of the members of the Committee will constitute a
quorum. The Committee may act by the vote of a majority of its members
present at a meeting at which there is a quorum or by unanimous written
consent. The decision of the Committee as to any disputed question, including
questions of construction, interpretation and administration, will be final
and conclusive on all persons. The Committee will keep a record of its
proceedings and acts and will keep or cause to be kept such books and records
as may be necessary in connection with the proper administration of the Plan.
4. Eligibility. Options may be granted under the Plan to present or future
executive officers of the Company or a subsidiary of the Company (a
"Subsidiary") within the meaning of Section 424(f) of the Internal Revenue
Code of 1986 (the "Code"). Subject to the provisions of the Plan, the
Committee may from time to time select the persons to whom options will be
granted, and will fix the number of shares covered by each such option and
establish the terms and conditions thereof (including, without limitation,
exercise price and restrictions on exercisability of the option or on the
shares of Common Stock issued upon exercise thereof and whether or not the
option is to be treated as an incentive stock option within the meaning of
Section 422 of the Code (an "Incentive Stock Option").
5. Terms and Conditions of Options. Each option granted under the Plan
will be evidenced by a written agreement in a form approved by the Committee.
Each such option will be subject to the terms and conditions set forth in
this paragraph and such additional terms and conditions not inconsistent with
the Plan (and, in the case of an Incentive Stock Option, not inconsistent
with the provisions of the Code applicable thereto) as the Committee deems
appropriate.
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(a) Option Exercise Price. In the case of an option which is not treated
as an Incentive Stock Option, the exercise price per share may not be less
than the par value of a share of Common Stock on the date the option is
granted; and, in the case of an Incentive Stock Option, the exercise price
per share may not be less than 100% of the fair market value of a share of
Common Stock on the date the option is granted (110% in the case of an
optionee who, at the time the option is granted, owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company or a Subsidiary (a "ten percent shareholder"). For purposes hereof,
the fair market value of a share of Common Stock on any date will be equal to
the closing sale price per share as published by a national securities
exchange on which shares of the Common Stock are traded on such date or, if
there is no sale of Common Stock on such date, the average of the bid and
asked prices on such exchange at the closing of trading on such date or, if
shares of the Common Stock are not listed on a national securities exchange
on such date, the closing price or, if none, the average of the bid and asked
prices in the over the counter market at the close of trading on such date,
or if the Common Stock is not traded on a national securities exchange or the
over the counter market, the fair market value of a share of the Common Stock
on such date as determined in good faith by the Committee.
(b) Option Period. The period during which an option may be exercised will
be fixed by the Committee and will not exceed 10 years from the date the
option is granted (5 years in the case of an Incentive Stock Option granted
to a "ten percent shareholder").
(c) Exercise of Options. No option will become exercisable unless the
person to whom the option was granted remains in the continuous employ or
service of the Company or a Subsidiary for at least one year (or for such
other period as the Committee may designate) from the date the option is
granted. Subject to earlier termination of the option as provided herein,
unless the Committee determines otherwise, the option will become exercisable
in accordance with the following schedule based upon the number of full years
of the optionee's continuous employment or service with the Company or a
Subsidiary following the date of grant:
<TABLE>
<CAPTION>
Full Years of Continuous Incremental Percentage of Cumulative Percentage of
Employment/Service Option Exercisable Option Exercisable
---------------------------- ----------------------------- ----------------------------
<S> <C> <C>
Less than 1 0 % 0 %
1 33.3% 33.3%
2 33.3% 66.6%
3 or more 33.3% 100%
</TABLE>
All or part of the exercisable portion of an option may be exercised at any
time during the option period, except that, without the consent of the
Committee, no partial exercise of an option may be for less than 100 shares.
An option may be exercised by transmitting to the Company (1) a written
notice specifying the number of shares to be purchased, and (2) payment of
the exercise price (or, if applicable, delivery of a secured obligation
therefor), together with the amount, if any, deemed necessary by the
Committee to enable the Company to satisfy its income tax withholding
obligations with respect to such exercise (unless other arrangements
acceptable to the Company are made with respect to the satisfaction of such
withholding obligations).
(d) Payment of Exercise Price. The purchase price of shares of Common
Stock acquired pursuant to the exercise of an option granted under the Plan
may be paid in cash and/or such other form of payment as may be permitted
under the option agreement, including, without limitation, previously-owned
shares of Common Stock. The Committee may permit the payment of all or a
portion of the purchase price in installments (together with interest) over a
period of not more than 5 years.
(e) Rights as a Stockholder. No shares of Common Stock will be issued in
respect of the exercise of an option granted under the Plan until full
payment therefor has been made (and/or provided for where all or a por-
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tion of the purchase price is being paid in installments). The holder of an
option will have no rights as a stockholder with respect to any shares
covered by an option until the date a stock certificate for such shares is
issued to him or her. Except as otherwise provided herein, no adjustments
shall be made for dividends or distributions of other rights for which the
record date is prior to the date such stock certificate is issued.
(f) Nontransferability of Options. No option shall be assignable or
transferrable except upon the optionee's death to a beneficiary designated by
the optionee in accordance with procedures established by the Committee or,
if no designated beneficiary shall survive the optionee, pursuant to the
optionee's will or by the laws of descent and distribution. During an
optionee's lifetime, options may be exercised only by the optionee or the
optionee's guardian or legal representative.
(g) Termination of Employment or Other Service. If an optionee ceases to
be employed by or to perform services for the Company and any Subsidiary for
any reason other than death or disability (defined below), then each
outstanding option granted to him or her under the Plan will terminate on the
date three months after the date of such termination of employment or service
or on such other date as may be specified in the option agreement. If an
optionee's employment or service is terminated by reason of the optionee's
death or disability (or if the optionee's employment or service is terminated
by reason of his or her disability and the optionee dies within one year
after such termination of employment or service), then each outstanding
option granted to the optionee under the Plan will terminate on the date one
year after the date of such termination of employment or service (or one year
after the later death of a disabled optionee) or on such other date as may be
specified in the option agreement. For purposes hereof, the term "disability"
means the inability of an optionee to perform the customary duties of his or
her employment or other service for the Company or a Subsidiary by reason of
a physical or mental incapacity which is expected to result in death or be of
indefinite duration.
(h) Other Provisions. The Committee may impose such other conditions with
respect to the exercise of options, including, without limitation, any
conditions relating to the application of federal or state securities laws,
as it may deem necessary or advisable.
6. Capital Changes, Reorganization, Sale.
(a) Adjustments Upon Changes in Capitalization. The aggregate number and
class of shares for which options may be granted under the Plan, the number
and class of shares covered by each outstanding option and the exercise price
per share shall all be adjusted proportionately for any increase or decrease
in the number of issued shares of Common Stock resulting from a split-up or
consolidation of shares or any like capital adjustment, or the payment of any
stock dividend.
(b) Cash, Stock or Other Property for Stock. Except as otherwise provided
in this subparagraph, in the event of an Exchange Transaction (as defined
below), all optionees will be permitted to exercise their outstanding options
(whether or not otherwise exercisable) subject to and effective upon the
consummation of the Exchange Transaction, and any outstanding options not so
exercised before the consummation of the Exchange Transaction will thereupon
terminate. Notwithstanding the preceding sentence, if, as part of the
Exchange Transaction, the shareholders of the Company receive capital stock
of another corporation ("Exchange Stock"), and if the Board, in its sole
discretion, so directs, then all outstanding options will be converted into
options to purchase shares of Exchange Stock. The amount and price of the
converted options will be determined by adjusting the amount and price of the
options granted hereunder on the same basis as the determination of the
number of shares of Exchange Stock the holders of Common Stock will receive
in the Exchange Transaction.
(c) Definition of Exchange Transaction. For purposes hereof, the term
"Exchange Transaction" means a merger (other than a merger of the Company in
which the holders of Common Stock immediately prior to the
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merger have the same proportionate ownership of Common Stock in the surviving
corporation immediately after the merger), consolidation, acquisition of
property or stock, separation, reorganization (other than a mere
reincorporation or the creation of a holding company) or liquidation of the
Company, as a result of which the Shareholders of the Company receive cash,
stock or other property in exchange for or in connection with their shares of
Common Stock.
(d) Fractional Shares. In the event of any adjustment in the number of
shares covered by any option pursuant to the provisions hereof, any
fractional shares resulting from such adjustment will be disregarded and each
such option will cover only the number of full shares resulting from the
adjustment.
(e) Determination of Board to be Final. All adjustments under this
paragraph 6 shall be made by the Board, and its determination as to what
adjustments shall be made, and the extent thereof, shall be final, binding
and conclusive.
7. Amendment and Termination of the Plan. The Board may amend or terminate
the Plan. Except as otherwise provided in the Plan with respect to equity
changes, any amendment which would increase the aggregate number of shares of
Common Stock as to which options may be granted under the Plan, materially
increase the benefits under the Plan, or modify the class of persons eligible
to receive options under the Plan shall be subject to the approval of the
holders of a majority of the Common Stock issued and outstanding. No
amendment or termination may affect adversely any outstanding option without
the written consent of the optionee.
8. No Rights Conferred. Nothing contained herein will be deemed to give
any individual any right to receive an option under the Plan or to be
retained in the employ or service of the Company or any Subsidiary.
9. Governing Law. The Plan and each option agreement shall be governed by
the laws of the State of Delaware.
10. Decisions and Determinations of Committee to be Final. Except to the
extent rights or powers under this Plan are reserved specifically to the
discretion of the Board, all decisions and determinations of the Committee
are final and binding.
11. Term of the Plan. The Plan shall be effective as of September 11,
1995, the date on which it was adopted by the Board, subject to the approval
of the stockholders of the Company, which approval was granted during March,
1996. The Plan will terminate on September 10, 2005, the date ten years after
the date of adoption by the Board, unless sooner terminated by the Board. The
rights of optionees under options outstanding at the time of the termination
of the Plan shall not be affected solely by reason of the termination and
shall continue in accordance with the terms of the option (as then in effect
or thereafter amended).
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SHELLS SEAFOOD RESTAURANTS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 1997
William E. Hattaway and Warren R. Nelson, as the true and lawful
attorneys, agents and proxies of the undersigned, with full power of
substitution, are hereby authorized to represent and to vote all shares of
Common Stock of Shells Seafood Restaurants, Inc. held of record by the
undersigned on April 3, 1997, at the Annual Meeting of Stockholders to be
held at 2:00 p.m., Tuesday, May 20, 1997, at The Metropolitan Club, 1 East
60th Street, New York, New York, and at any adjournment thereof. Any and all
proxies heretofore given are hereby revoked.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED BY THE
UNDERSIGNED. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED FOR PROPOSAL
NOS. 1, 2 AND 3
Proposal No. 1 -- Election of Directors -- Nominees are:
Frederick R. Adler, William E. Hattaway, Philip R. Chapman, Kamal Mustafa,
Jay S. Nickse and Edwin F. Russo.
[ ] FOR all listed nominees (except do not vote for the nominee(s) whose
name(s) appears(s) below):
-----------------------------------
[ ] WITHHOLD AUTHORITY to vote for the listed nominees.
Proposal No. 2 -- Adoption of the Stock Option Plan for Non-Employee
Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Proposal No. 3 -- Amendment to the Company's 1995 Employee Stock Option Plan
to increase the number of shares of Common Stock which may
be issued thereunder.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Discretionary authority is hereby granted with respect to such other matters
as may properly come before the meeting.
IMPORTANT: Please sign exactly as name appears below. Each joint owner shall
sign. Executors, administrators, trustees, etc. should give full title as
such. If signor is a corporation, please give full corporate name by duly
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Dated____________________, 1997
-------------------------------
Signature
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Signature if held jointly
The above-signed acknowledges
receipt of the Notice of Annual
Meeting of Stockholders and the
Proxy Statement furnished
therewith.
PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
