SHELLS SEAFOOD RESTAURANTS INC, DEF 14A, 2000-04-21

SHELLS SEAFOOD RESTAURANTS INC
DEF 14A, 2000-04-21
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SCHEDULE 14A
(RULE 14A-101)

---------------------------------------
INFORMATION REQUIRED IN PROXY STATEMENT
---------------------------------------

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )

Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-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)(4) and 0-11.

1) Title of each class of securities to which transaction applies:
--------
2) Aggregate number of securities to which transaction applies:
---------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----
4) Proposed maximum aggregate value of transaction:
-----
5) Total fee paid:
-----
( ) Fee paid previously with preliminary materials.

( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

1) Amount Previously Paid:
-----
2) Form, Schedule, or Registration Statement No.:
-----
3) Filing Party:
-----
4) Date Filed:
-----
<PAGE>

SHELLS SEAFOOD RESTAURANTS, INC.

16313 N. DALE MABRY HIGHWAY
SUITE 100
TAMPA, FLORIDA 33618

April 19, 2000

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 Wednesday, May 17, 2000, at The
University Club, 1 West 54th Street, New York, New York.

At the Annual Meeting of Stockholders, you are being asked to vote on (i)
electing six directors to the Company's Board of Directors, (ii) a proposal to
amend the 1995 Employee Stock Option Plan to increase the number of shares
available for issuance thereunder, (iii) a proposal to amend the Non-employee
Director Stock Option Plan to increase the annual grant provided for
thereunder, and (iv) if presented, a stockholder proposal regarding the
location of future annual stockholders meetings. 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.

---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------
April 19, 2000

Notice is hereby given that the Annual Meeting of Stockholders of Shells
Seafood Restaurants, Inc. will be held on Wednesday, May 17, 2000, at 2:00
p.m., at The University Club, 1 West 54th 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 amend the Company's 1995
Employee Stock Option Plan to increase the number of shares eligible
for issuance thereunder.

(3) To consider and vote upon a proposal to amend the Company's
Non-employee Director Stock Option Plan to increase the annual grant
provided for thereunder.

(4) To vote on a stockholder proposal regarding the location of future
annual meetings of stockholders.

(5) 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 10, 2000 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

-------------------------
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 Wednesday, May 17, 2000 or at any adjournment thereof, pursuant to the
accompanying Notice of Annual Meeting of Stockholders. The purpose 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 20, 2000 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 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; in favor of the amendment to the Company's 1995 Employee Stock Option
plan; in favor of the amendment to the Non-employee Director Stock Option Plan;
"against" the stockholder proposal, to the extent that
<PAGE>

it is presented; 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 10, 2000 are
entitled to notice of and to vote at the Annual Meeting or any and all
adjournments thereof. On April 10, 2000, there were 4,454,015 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 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 rules
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 April 1, 2000
(except as otherwise noted in the footnotes) regarding the beneficial ownership
(as defined by the Securities and Exchange Commission (the "SEC")) of the
Common Stock of: (i) each person known by the Company to own beneficially more
than five percent of the outstanding Common Stock; (ii) each current director
of the Company, including those who are 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, and has an address c/o the Company,
16313 N. Dale Mabry Highway, Suite 100, Tampa, FL 33618.

2
<PAGE>

<TABLE>
<CAPTION>
BENEFICIAL PERCENT
OWNERSHIP OF
NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT CLASS
- -------------------------------------------------------------- ----------- ---------
<S> <C> <C>
1,357,026 28.2%
Frederick R. Adler ...........................................
1520 South Ocean Blvd.
Palm Beach, FL 33480 (1), (2)
William E. Hattaway (3) ...................................... 482,574 10.7%
Warren R. Nelson (4) ......................................... 82,609 1.8%
John R. Ritchey (5) .......................................... 63,659 1.4%
Frank C. Roehl, III .......................................... 56,182 1.3%
Philip R. Chapman ............................................ 37,000 *
c/o Venad Administrative Services, Inc.
342 Madison Ave., Suite 807
New York, NY 10173 (2), (6)
Christopher D. Illick ........................................ 4,000 *
c/o Brean Murray & Company, Inc.
570 Lexington Avenue
New York, NY 10022 (7)
Richard A. Mandell ........................................... 4,000 *
245 East 19th Street
New York, NY 10003 (7)
Kamal Mustafa ................................................ 7,000 *
7 Wildwood Drive
North Caldwell, NJ 07006 (2)
Jay S. Nickse ................................................ 13,000 *
c/o Venad Administrative Services, Inc.
342 Madison Ave., Suite 807
New York, NY 10173 (2), (8)
Arthur J. DeAngelis (9) ...................................... 13,334 *
Frederick R. Adler Intangible Asset Management Trust ......... 953,926 21.4%
175 East 64th Street
New York, NY 10021
Adler Children Trust ......................................... 350,000 7.3%
1520 South Ocean Blvd.
Palm Beach, FL 33480 (10)
Longview Partners, L.P. ...................................... 318,059 7.0%
175 East 64th Street
New York, NY 10021 (11)
Elizabeth A. Wertheimer ...................................... 325,000 6.8%
124 East 93rd Street
New York, NY 10128 (12)
All directors and executive officers
as a group (11 persons) (1-9) .............................. 2,120,384 42.5%
</TABLE>

3
<PAGE>

- ----------------
* Less than 1%
(1) Consists of 953,926 shares of Common Stock held in the name of the
Frederick R. Adler Intangible Asset Management Trust (the "Asset Trust"),
10,100 shares of Common Stock held in the name of 1520 Partners Limited
("1520 Partners") and 350,000 shares of Common Stock which may be acquired
through the exercise of warrants which are in the name of the Adler
Children Trust (the "Children Trust"). Mr. Adler is a general partner of
1520 Partners. Mr. Adler may be deemed to beneficially own the shares and
warrants to purchase shares of Common Stock held by the Asset Trust, 1520
Partners and the Children Trust for federal securities laws purposes. Mr.
Adler disclaims beneficial ownership of the securities held by the Asset
Trust, 1520 Partners and the Children Trust.
(2) Includes 7,000 shares of Common Stock which may be acquired through the
exercise of stock options. Does not include 2,000 shares of Common Stock
issuable upon the exercise of options which are not exercisable within 60
days of April 1, 2000.
(3) Includes 65,651 shares of Common Stock which may be acquired through the
exercise of stock options. Does not include 3,333 shares of Common Stock
issuable upon the exercise of options which are not exercisable within 60
days of April 1, 2000.
(4) Includes 45,659 shares of Common Stock which may be acquired through the
exercise of stock options. Does not include 3,333 shares of Common Stock
issuable upon the exercise of options which are not exercisable within 60
days of April 1, 2000.
(5) Includes 37,659 shares of Common Stock which may be acquired through the
exercise of stock options.
(6) Does not include 244,726 shares of Common Stock and 73,333 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 R. Chapman, is general partner; nor 953,926 shares of Common Stock
owned by the Asset Trust, of which Susan R. Chapman is trustee.
(7) Includes 4,000 shares of Common Stock which may be acquired through the
exercise of stock options. Does not include 3,000 shares of Common Stock
issuable upon the exercise of options which are not exercisable within 60
days of April 1, 2000.
(8) Includes an aggregate of 3,000 shares of Common Stock owned by Mr. Nickse's
minor children. Mr. Nickse disclaims beneficial ownership of the shares
owned by his minor children.
(9) Includes 13,334 shares of Common Stock which may be acquired through the
exercise of stock options. Does not include 26,666 shares of Common Stock
issuable upon the exercise of options which are not issuable within 60 days
of April 1, 2000.
(10) Consists of 350,000 shares of Common Stock which may be acquired through
the exercise of warrants.
(11) Consists of 244,726 shares of Common Stock and 73,333 shares of Common
Stock issuable upon the exercise of warrants owned by Longview Partners,
L.P., a Delaware limited partnership.
(12) Consists of 325,000 shares of Common Stock issuable upon the exercise of
warrants owned by 2001 Partners, L.P.

4
<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:

5
<PAGE>

<TABLE>
<CAPTION>
YEAR FIRST
BECAME
DIRECTOR AGE DIRECTOR PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
- ------------------------------- ----- ----------- ---------------------------------------------------------
<S> <C> <C> <C>
William E. Hattaway ........... 56 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.
Christopher D. Illick ......... 61 1998 Senior officer of Brean Murray & Co., Inc., an
investment bank, since 1997; General Partner of Illick
Brothers, a real estate and management concern, since
1965; Limited partner in the investment banking firm of
Oakes, Fitzwilliams & Co. from 1995 to 1997; Chairman
and Chief Executive Officer of National Transaction
Network, an electronic payment systems integrator from
1992 to 1995.
Richard A. Mandell ............ 57 1998 Private investor. Vice President -- Private Investments
at Clariden Asset Management (New York) Inc., a
subsidiary of Clariden Bank, a private Swiss bank, from
January 1996 to February 1998. Managing Director of
Investment Banking for Prudential Securities
Incorporated from 1982 to June 1995.
Jay S. Nickse ................. 40 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 business
advisory group at Price Waterhouse from September
1990 through July 1993.
</TABLE>

Mr. Adler is chairman of the Executive Committee and a director of USA
Detergents, Inc., a manufacturer of laundry and household cleaning products.
Mr. Adler is also a director of Prime Cellular Inc., a software company; and
various private companies and non-profit organizations.

Mr. Chapman is a director of Integrated Packaging Assembly Corp., a
semiconductor company; Cambio Inc., a provider of network documentation
systems; and various private companies. Mr. Chapman is the son-in-law of Mr.
Adler.

6
<PAGE>

Mr. Illick is a director of Biomune Systems Inc., a manufacturer of
neutrochemicals, and of USA Detergents, Inc.

Mr. Mandell is a director of Sbarro, Inc., a food service company,
Trend-Lines, Inc., a specialty retailer of woodworking tools and accessories
and golf equipment and supplies, and USA Detergents, Inc.

In May of 1997, the Company established an Audit Committee to review the
internal accounting procedures of the Company and to consult with and review
the services provided by the independent auditors. Messrs. Chapman, Mandell,
Mustafa, and Nickse are the current members of the Audit Committee. During the
1999 fiscal year, the Audit Committee held three meetings. The Audit Committee
has received from the independent accountants the disclosures and letter
required by Independence Standards Board No.1 and has discussed with the
independent auditors the matters required to be discussed by SAS 61. The Audit
Committee has reviewed and discussed the 1999 audited financial statements and
recommended to the Board of Directors that they be included in the Company's
Annual Report. The Board of Directors has not adopted a written charter for the
Audit Committee. All of the members of the Audit Committee are "independent" as
that term is defined by Rule 4200(a)(15) of the Nations Association of
Securities Dealers' Listing Standards.

In May of 1997, the Company established a Stock Option and Compensation
Committee to review compensation policies and practices, to recommend
compensation for executives and key employees and to administer the Company's
stock option plans. Messrs. Adler, Chapman and Illick are the current members
of the Stock Option and Compensation Committee. During the 1999 fiscal year,
the Stock Option and Compensation Committee acted by unanimous written consent
twice.

In May of 1997, the Company established an Executive Committee to
exercise, to the extent authorized by law, all powers and authority of the
Board in the management of the business and affairs of the Company. Messrs.
Adler, Chapman, and Hattaway are the current members of the Executive
Committee. During the 1999 fiscal year, the Executive Committee held one
meeting and acted once by unanimous written consent.

In June of 1996, the Company established a Finance Committee. The Finance
Committee is made up of the following directors: Messrs. Adler, Chapman,
Hattaway, Illick, Mandell, Mustafa and Nickse. The purpose of the Finance
Committee is to approve major capital expenditures, including new restaurant
development, relocation and remodeling of restaurants, as well as the purchase
of restaurant equipment and system requirements. 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

7
<PAGE>

building and leasehold improvements, equipment leases and sale/leaseback
transactions. During the 1999 fiscal year, the Finance Committee acted twice by
unanimous written consent.

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 or her 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. Non-employee directors receive
stock options pursuant to the Company's Stock Option Plan for Non-employee
Directors, (the "Non-employee Directors' Plan"), which vest over the two years
following the date of grant, to acquire 2,000 shares of Common Stock upon the
date of their election to the Board, and stock options to acquire 2,000 shares
of Common Stock on each anniversary of their election to the Board (to the
extent they are then still directors of the Company). To date, Messrs. Adler,
Chapman, Mustafa, and Nickse have each received options to acquire 6,000 shares
of Common Stock pursuant to the Non-employee Directors' Plan. Messrs. Illick
and Mandell each received options to acquire 2,000 shares of Common Stock. In
addition, on November 3, 1998, the Board of Directors approved, subject to
stockholder approval, which was obtained at the 1999 Annual Meeting of
Stockholders, a supplemental grant of options to purchase 3,000 shares of
Common Stock to each of the non-employee directors.

In November 1998, the Board of Directors adopted a policy to compensate
directors for their attendance at meetings of the Board of Directors. Each
director is entitled to receive $1,000 for each meeting that they attend in
person and $500 for each telephonic meeting, in addition to reimbursement for
all out-of-pocket expenses incurred by such director in connection with the
attendance of such meeting.

MEETINGS OF THE BOARD OF DIRECTORS

During the fiscal year ended January 2, 2000, the Board of Directors held
four meetings, acted by unanimous written consent once and acted by committee
action nine times. Each director currently standing for re-election attended,
either in person or telephonically, at least 75% of meetings, in the aggregate,
of the Board of Directors and 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

8
<PAGE>

own more than 10% of the Common Stock, to file initial reports of ownership and
reports of changes in ownership with the SEC. Executive officers, directors and
greater than 10% 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 1999 all Section 16(a)
filing requirements applicable to its executive officers, directors and greater
than 10% beneficial owners were complied with on a timely basis.

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.

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.

9
<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 January 2, 2000.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION
------------------------- -------------------
FISCAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1) AWARDS OPTIONS
- --------------------------------------- ------- ----------- ----------- -------- --------
<S> <C> <C> <C> <C> <C>
William E. Hattaway, Chief 1999 $192,808 -- -- 5,000
Executive Officer, President and 1998 $184,462 $ 8,500 -- --
Director (2) 1997 $167,731 $17,000 -- 63,984

Warren R. Nelson, Vice President 1999 $128,166 -- -- 5,000
of Finance, Chief Financial Officer, 1998 $121,339 $ 6,000 -- --
Secretary and Treasurer (2) 1997 $ 96,862 $13,500 -- 43,922

John R. Ritchey, Vice President of 1999 $135,294 -- -- 1,667
Operations (2)(3) 1998 $126,462 $ 7,000 -- --
1997 $ 97,519 $13,500 -- 43,992

Frank C. Roehl, III, Vice President 1999 $122,285 -- -- --
of Marketing (2)(3) 1998 $114,339 $ 5,000 -- --
1997 $100,657 $ 9,000 -- 43,992

Arthur J. DeAngelis, Vice 1999 $109,537 -- -- 40,000
President of Operations (4)
</TABLE>

- ----------------
(1) Bonuses paid during the fiscal year are for the prior fiscal year.
(2) Each of Messrs. Hattaway, Nelson, Ritchey and Roehl was, during fiscal
1999, a party to an employment agreement with the Company. See " --
Employment Agreements."
(3) Messrs. Ritchey and Roehl ceased to be employed by the Company in November
1999.
(4) Mr. DeAngelis became Vice President of Operations in April, 1999.

The following table sets forth information with respect to (i) options
exercised during fiscal 1999 by the persons named in the Summary Compensation
Table and (ii) unexercised options held by such individuals at January 2, 2000.

10
<PAGE>

AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED,
OPTIONS IN-THE-MONEY OPTIONS
SHARES HELD AT FISCAL YEAR END AT FISCAL YEAR END (1)
ACQUIRED VALUE ----------------------------- -----------------------------
NAME ON EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- ----------------- ---------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
William E. Hattaway .. 0 -- 63,984 5,000 -- --
Warren R. Nelson ..... 0 -- 43,992 5,000 -- --
Frank C. Roehl, III .. 0 -- 0 0 -- --
John R. Ritchey ...... 0 -- 37,659 0 -- --
Arthur J. DeAngelis .. 0 -- 0 40,000 -- --
</TABLE>

- ----------------
(1) Based on a closing stock price of the Common Stock on Friday, December 31,
1999, the last trading date of fiscal 1999, of $2.19.

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with each of Messrs.
Hattaway, Nelson, and DeAngelis. The employment agreement between the Company
and Mr. Hattaway scheduled to expire in August 1999, provides for annual base
compensation of $195,000 per year and supplemental discretionary bonuses, as
determined by the Compensation Committee of the Company's Board of Directors.
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 and
DeAngelis has a one-year employment agreement that provides for a base annual
salary of $137,500 and $160,000, respectively, during fiscal 1999. 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.

STOCK OPTION PLANS

See "Proposal No. 2 and Proposal No. 3" for descriptions of the terms of
the plans.

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.

11
<PAGE>

On March 1, 1994, the Company's wholly-owned subsidiary, Shells of
Melbourne, Inc. ("Shells of Melbourne"), entered into a joint venture agreement
(the "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. The Joint Venture Agreement provides
that WLH Investments receives 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 paid $60,000 to WLH Investments for its fiscal 1999 preferred
returns. In addition, as of January 2, 2000, the Company owed WLH Investments
approximately $189,583 for the remaining net income allocation. The Company
paid $100,000 of the amount owed to WLH Investments during February, 2000.

The Joint Venture Agreement, as amended in September 1995, provides both
the Company and WLH Investments with the option (the "WLH Option") to exchange
WLH Investments' interest in the joint venture for shares of Common Stock
having a value of $750,000, based upon the greater of $20 per share or the per
share market price of the Common Stock on the date the WLH Option is exercised.
The WLH Option is exercisable at any time following the date that the value of
the Common Stock equals or exceeds $20 per share for a period of 20 consecutive
trading days. 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.

On March 23, 1999 the Company entered into a consulting agreement (the
"Consulting Agreement") with Richard A. Mandell, a member of the Company's
Board of Directors. Pursuant to the terms of the Consulting Agreement, Mr.
Mandell, provides services as an executive consultant to management as
requested from time to time by the Company, for which he is paid $20,000 per
annum. This agreement was amended on February 7, 2000 to increase Mr. Mandell's
compensation to $30,000 per annum. In addition, Mr. Mandell received options to
purchase 20,000 shares of Common Stock pursuant to the 1995 Employee Stock
Option Plan. (See Proposal No. 2 for a description of the terms of the plan).

12
<PAGE>

STOCK OPTION AND COMPENSATION COMMITTEE REPORT TO STOCKHOLDERS REGARDING
EXECUTIVE COMPENSATION

The report of the Stock Option and Compensation Committee 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
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 1999 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 average.
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.

13
<PAGE>

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
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 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 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 THE PRESIDENT

Mr. Hattaway was compensated in accordance with his employment agreement
which provides for an annual base compensation of $195,000 for 1999. In
connection with Mr. Hattaway's employment, the Board reviewed the performance
of Mr. Hattaway relative to the Company's performance.

14
<PAGE>

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 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 initial public
offering of its common stock) in each of the 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

<TABLE>
<CAPTION>
4/23/96 12/29/96 12/28/97 1/3/99 1/2/00
<S> <C> <C> <C> <C> <C>
Shells Seafood Restaurants, Inc. 100 175 188 83 44
Russell 2000 100 105 124 124 148
Nations Restaurant News Stock Index 100 94 98 128 122
</TABLE>

15
<PAGE>

PROPOSAL NO. 2 -- APPROVAL OF AN AMENDMENT TO THE 1995 EMPLOYEE STOCK OPTION
PLAN TO INCREASE THE NUMBER OF SHARES WHICH
MAY BE ISSUED THEREUNDER

The Board of Directors has unanimously adopted, subject to stockholder
approval, an amendment to the Company's 1995 Employee Stock Option Plan which
would increase the aggregate number of shares that may be issued under the plan
from 340,000 to 540,000 shares. The Board of Directors believes that the
approval of this amendment will serve the best interests of the Company and its
stockholders.

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 Common Stock, and the 1995 Plan provides for the
issuance of options to purchase a total of 340,000 shares of 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 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 Stock Option and Compensation Committee
(the "Committee") of the Board of Directors. Subject to the provisions of the
Plans, the Committee 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 Committee) in
cash, by promissory note or other such form of payment acceptable to the
Committee, including shares of Common Stock.

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 holder remains in the

16
<PAGE>

continuous employ of the Company. The options may be exercised for 10 years
following the date the Company agreed to grant these options. As of February 7,
2000, the Company had granted options to purchase 277,043 of the 340,000 shares
of Common Stock available for issuance under the 1995 Plan.

FEDERAL INCOME TAX CONSEQUENCES

An optionee will not realize taxable income upon the grant of an option.
In general, the holder of a Non-ISO will realize ordinary income when the
option is exercised equal to the excess value of the stock over the exercise
price (i.e. the option spread), and the Company receives a corresponding
deduction in the same amount, subject to deduction limits of Section 162(m) of
the Code. (If an optionee is subject to the six month restrictions on sale of
Common Stock under Section 16(b) of the Exchange Act, ordinary income
recognition generally will be postponed until the date the restrictions lapse,
unless an early income recognition election is made.) Upon a later sale of the
stock, an 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 the ordinary income is recognized with
respect to the shares received upon exercise).

The holder of an ISO will not realize taxable income upon the exercise of
the option (although the option spread is an adjustment to the taxable income
that may result in alternative minimum tax (the adjustment, if any, is also
added to the basis of the shares for purposes of determining adjusted gain or
loss under the alternative minimum tax when the shares are sold)). If the stock
acquired upon exercise of the Incentive Stock Option is sold or otherwise
disposed if within two years from the option 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 in the same amount, subject to
the limitations of Section 162(m) of the Code. Any remaining gain is treated as
short-term or long-term capital gain depending on the holding period. If the
stock is held for at least two years from the grant date and one year from the
exercise date, then the gain or loss realized upon the sale will be capital
gain or loss and the Company will not be entitled to a deduction.

VOTE REQUIRED

17
<PAGE>

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.

BOARD RECOMMENDATION

The Board of Directors believes that approval of the amendment to increase
the aggregate number of shares which may be issued under the 1995 Employee
Stock Option Plan will serve the best interests of the Company and its
stockholders by permitting the Committee to exercise the needed flexibility in
the administration of the plan and the granting of options thereunder. In
addition, the Board of Directors believes that the ability to grant additional
options will help attract, motivate and retain key employees who are in a
position to contribute to the successful conduct of the business and affairs of
the Company as well as stimulate in such individuals an increased desire to
render greater service to the Company.

Accordingly, the Board of Directors recommends that the stockholders
approve the following resolution:

RESOLVED, that the first sentence of 1995 Employee Stock Option Plan
be amended to read as follows: "The Company may issue and sell a total
of 540,000 shares of its common stock, $.01 par value (the "Common
Stock"), pursuant to the Plan."

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 -- APPROVAL OF AN AMENDMENT TO THE NON-EMPLOYEE DIRECTOR STOCK
OPTION PLAN TO INCREASE THE ANNUAL GRANT PROVIDED FOR THEREUNDER

The Board of Directors has unanimously adopted, subject to stockholder
approval, an amendment to the Company's Non-employee Director Stock Option Plan
which would increase the annual grant to the non-employee directors from
options to purchase 2,000 shares of Common Stock to options to purchase 4,000
shares of Common Stock. The

18
<PAGE>

Board of Directors believes that the approval of this amendment will serve the
best interests of the Company and its stockholders.

On May 20, 1997, the stockholders approved the Non-employee Director Stock
Option Plan whereby each non-employee director is granted options to acquire
2,000 shares of Common Stock upon the date of their election to the Board and
stock options to acquire 2,000 shares of Common Stock on each anniversary of
their election to the Board (to the extent they are then still directors of the
Company) at the market price of the Common Stock on the date of grant. These
options vest over a two year period. In each of 1997, 1998, and 1999, Messrs.
Adler, Chapman, Mustafa, and Nickse were each granted options to purchase 2,000
shares of Common Stock pursuant to the Non-employee Director Stock Option Plan.
In 1998, in connection with their election to the Board, and in 1999, Messrs.
Illick and Mandell, each were granted options to purchase 2,000 shares of
Common Stock pursuant to the Non-employee Director Stock Option Plan. The Board
also approved, subject to stockholder approval, which was obtained at the 1999
Annual Meeting of Stockholders, a supplemental grant of options to purchase
3,000 shares of Common Stock pursuant to the Non-employee Director Stock Option
Plan to each of the Non-employee directors. The income tax consequences to
option holders are similar to those consequences described in Proposal No. 2.

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 "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.

BOARD RECOMMENDATION

The Board of Directors believes that approval of the amendment to increase
the annual grant to non-employee directors under the Non-employee Director
Stock Option Plan will serve the best interests of the Company and its
stockholders by permitting the Committee to

19
<PAGE>

exercise the needed flexibility in the administration of the plan and the
granting of options thereunder. In addition, the Board of Directors believes
that the ability to grant additional options will help attract and retain
highly qualified directors who are in a position to contribute to the
successful conduct of the business and affairs of the Company as well as
stimulate in such individuals an increased desire to render greater service to
the Company.

Accordingly, the Board of Directors recommends that the stockholders
approve the following resolution:

RESOLVED, that Paragraphs (i) and (ii) of Section 5 of the Non-employee
Director Stock Option Plan be amended to read as follows:

(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
4,000 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 the 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
4,000 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 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.

20
<PAGE>

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.

PROPOSAL NO. 4 -- STOCKHOLDER PROPOSAL ON ANNUAL MEETING LOCATION

Scott E. Pautler, M.D., 4600 North Habana Avenue, Suite 3, Tampa, Florida
33614, who is the beneficial owner of 2,650 shares of Common Stock, has advised
the Company that he plans to present the following proposal at the annual
meeting:

WHEREAS, Shells Seafood Restaurants, Inc. maintains its corporate office
in Tampa, Florida; and

WHEREAS, a significant proportion of stockholders reside in Florida; and

WHEREAS, past annual meetings have been held in New York City;

RESOLVED, that the Board of Directors of the Company plan to hold upcoming
annual meetings in Tampa, Florida.

STATEMENT IN OPPOSITION TO THE PROPOSAL:

Under the Company's By-Laws, the Board of Directors has the discretion to
determine the location of the Company's annual meeting. The determination as to
the location of the Company's annual meetings is one in which management should
have flexibility, after consideration of the facts and circumstances existing
at that time. The Company has chosen the location of New York City for the
upcoming annual meeting, because of the ease of access to this location by the
financial analysts and institutional investors who traditionally attend
corporate annual meetings.

The stockholder proposal presupposes that stockholder business and
communications are limited to the annual meeting. On the contrary, however, the
Company distributes annual reports to its stockholders and many stockholders
correspond with the Company during the year. These avenues of communication
provide information in a way that is convenient and virtually cost-free to
stockholders. In addition, stockholders residing in the vicinity of the
Company's headquarters have potentially greater access to the Company's
officers, employees and facilities than more distant stockholders.

21
<PAGE>

VOTE REQUIRED

BOARD RECOMMENDATION

THE BOARD OF DIRECTORS RECOMMENDS THAT, TO THE EXTENT PROPOSAL NO. 4 IS
PRESENTED AT THE ANNUAL MEETING, THE STOCKHOLDERS VOTE "AGAINST" THE PROPOSAL.

RELATIONSHIP WITH INDEPENDENT AUDITORS

Deloitte & Touche LLP have been the independent auditors for the Company
since December, 1994 and are expected to serve in that capacity for the 2000
fiscal year. A representative of Deloitte & Touche LLP is expected to be
available to respond to appropriate questions from stockholders, and will have
an opportunity to make a statement if he or she desires to do so.

STOCKHOLDER PROPOSALS

All stockholder proposals which are intended to be presented at the 2001
Annual Meeting of Stockholders of the Company must be received by the Company
no later than December 23, 2000 for inclusion in the Board of Directors' proxy
statement and form of proxy relating to that meeting.

22
<PAGE>

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.

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 19, 2000

A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K

WILL SE 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

23
<PAGE>

********************************************************************************
APPENDIX

SHELLS SEAFOOD RESTAURANTS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 17, 2000

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 10, 2000, at the Annual Meeting of Stockholders to be held
at 2:00 p.m., Wednesday, May 17, 2000, at The University Club, 1 West 54th
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, 3 AND AGAINST 4.

Proposal No. 1--Election of Directors--Nominees are:
Frederick R. Adler, Philip R. Chapman, William E. Hattaway,
Christopher D. Illick, Richard A. Mandell and Jay S. Nickse.

[ ] 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--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

Proposal No. 3--Amendment to the Company's Non-employee Director Stock Option
Plan to increase the annual grant provided for thereunder.
[ ] FOR [ ] AGAINST [ ] ABSTAIN

Proposal No. 4--Stockholder proposal, if presented, regarding the location of
future annual meetings.
[ ] FOR [ ] AGAINST [ ] ABSTAIN

(CONTINUED AND TO BE SIGNED ON REVERSE)
<PAGE>

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 signer is a corporation, please give full corporate name by duly authorized
officer. If a partnership, please sign in partnership name by authorized
person.

Dated __________________________, 2000

______________________________________
Signature

______________________________________
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.