SCHEDULE 14A INFORMATION
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 <section> 240.14a-11(c) or
<section> 240.14a-12
SPENCER'S 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(l)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously by written preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-1 1(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form Schedule or Registration Statement No.
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3) Filing Party:
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4) Date Filed:
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<PAGE>
Spencer's Restaurants, Inc.
106 Federal Road
Danbury, CT 06810
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 9, 2000
We will hold the 2000 annual meeting of stockholders of Spencer's
Restaurants, Inc. (the "Company") at the Hartford Marriott
Hotel/Farmington, 15 Farm Springs Road, Farmington, Connecticut, on
February 9, 2000, at 1:00 p.m., local time, for the following purposes:
1. To elect the Company's directors;
2. To approve the 1999 Stock Option Plan and the 1999 Non-Employee
Directors Stock Option Plan; and
3. To act on such other matters as may be properly brought before the
meeting or any adjournments, postponements or continuations of the meeting.
Your Board of Directors has fixed the close of business on December 15,
1999 as the record date for the meeting. Only stockholders of record at
the close of business at this time are entitled to notice of and to vote at
the meeting or any adjournments, postponements or continuations of the
meeting. A complete list of stockholders entitled to vote at the meeting
will be available for examination by any stockholder for any purpose
germane to the meeting during ordinary business hours at the Hartford
Marriott Hotel/Farmington for at least ten (10) days before the meeting and
also at the meeting.
All stockholders are invited to attend the meeting. To ensure your
representation at the meeting, however, you are urged to mark, sign and
return the enclosed proxy in the accompanying envelope, whether or not you
expect to attend the meeting. No postage is required if you mail it in the
United States. In the event that you attend the meeting, you may vote in
person even if you have returned a proxy.
To vote your shares, please sign, date and complete the enclosed proxy and
mail it promptly in the enclosed return envelope.
Dated: January 21, 2000.
By Order of the Board of Directors
Kenneth Berry
President, Chief Executive Officer
and Director
<PAGE>
Spencer's Restaurants, Inc.
106 Federal Road
Danbury, CT 06810
PROXY STATEMENT
This proxy statement is furnished to you in connection with the
solicitation of proxies by your Board of Directors to be used at the 2000
annual meeting of stockholders of Spencer's Restaurants, Inc., a Delaware
corporation.
Date, Time and Place of Meeting
We will hold the 2000 annual meeting of stockholders on February 9, 2000 at
1:00 p.m., local time, or at any adjournment or postponement thereof, at
the Hartford Marriott Hotel/Farmington, 15 Farm Springs Road, Farmington,
Connecticut, for the purposes set forth in the accompanying Notice of
Annual Meeting of Stockholders.
Matters to be Considered at the Meeting
At the meeting, we will ask our stockholders to consider and vote upon the
election of directors and to approve the 1999 Stock Option Plan and the
1999 Non-Employee Directors Stock Option Plan.
The stockholders will also consider and vote upon such other matters as may
properly be brought before the meeting or any adjournment or postponement
thereof.
Vote Required
A plurality of the votes cast by the stockholders present in person or by
proxy and entitled to vote will elect directors, provided that a majority
of the outstanding shares of the Company's common stock (the "Common
Stock") are represented at the meeting. This means that the directors
receiving the greatest number of votes cast will be elected. With regard
to the election of directors, you may vote in favor of or withhold your
vote from each nominee; and votes that are withheld will be excluded
entirely from the vote and will have no effect. There is no cumulative
voting with respect to the election of directors.
With respect to the approval of the proposed 1999 Stock Option Plan and the
1999 Non-Employee Directors Stock Option Plan, a majority of the votes cast
by the stockholders present in person or by proxy and entitled to vote for
the proposal is required for approval, provided that a majority of the
outstanding shares of the Company's Common Stock are represented at the
meeting.
Pursuant to applicable law, broker non-votes and abstentions will not be
counted in favor of any proposal presented at the meeting or the election
of any nominee for director. Abstentions and broker non-votes will also
not count against the proposal to elect directors.
Voting of Proxies
Shares of the Common Stock represented by properly executed proxies
received in time for the meeting, unless previously revoked, will be voted
at the meeting as specified by the stockholders on the proxies. If no
specification is made, shares represented by these proxies will be voted in
favor of the election of directors and in favor of the 1999 Stock Option
Plan and the 1999 Non-Employee Directors Stock Option Plan as recommended
by your Board of Directors.
If any other matters properly come before the meeting for consideration,
the person or persons named in the form of proxy enclosed herewith and
acting thereunder will have discretion to vote on the matters in accordance
with their best judgment, unless the proxy indicates otherwise. We have no
knowledge of any matters to be presented at the meeting other than those
matters referred to and described in this proxy statement.
Revocability of Proxies
If you give a proxy, you have the power to revoke it at any time before it
is voted. You can do so in one of three ways. First, you can send written
notice stating that you would like to revoke your proxy to our Secretary at
the address given below. Second, you can complete a new proxy card and
send it to our Secretary at the address given below. Third, you can attend
the meeting and vote in person. You should send any written notice or new
proxy card to:
Stephan A. Stein
Secretary
Spencer's Restaurants, Inc.
106 Federal Road
Danbury, CT 06810
You may request a new proxy card by calling Stephan A. Stein at (203) 798-
1390.
Record Date; Stockholders Entitled to Vote; Quorum
Only stockholders of record at the close of business on December 15, 1999
will be entitled to receive notice of and to vote at the meeting. As of
the record date, 31,643,126 shares of Common Stock were issued and
outstanding. Each share of Common Stock is entitled to one vote on each
matter on which the holders of common stock are entitled to vote. A
majority of the outstanding shares of Common Stock entitled to vote must be
represented in person or by proxy at the meeting in order for a quorum to
be present.
Solicitation of Proxies
Your Board of Directors is soliciting proxies, the form of which is
enclosed, for the meeting. The cost of this solicitation will be borne by
us. Our officers, directors and regular employees may communicate with
stockholders personally or by mail, telephone, telegram or otherwise for
the purpose of soliciting proxies. We and our authorized agents will
request brokers and other custodians, nominees and fiduciaries to forward
proxy soliciting material to the beneficial owners of shares held of record
by these persons and will reimburse their reasonable out-of-pocket expenses
in forwarding the material. This proxy statement is being mailed on or
about January 21, 2000.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
Nominees for Directors
The Certificate of Incorporation of the Company provides for a Board of
Directors which is divided into three classes, with a different class
elected each year for a three-year term to hold office until the end of
such term and until successors have been elected. In accordance with our
bylaws, the Board of Directors has fixed the number of directors at three,
one of whom will be in the class whose term will expire in 2001, one whose
term will expire in 2002 and one whose term will expire in 2003. In the
course of the Company's recent management changes, the Company did not
observe the precise procedures that would enable the Company to determine
which current director belongs in each of the three classes of directors.
As a result, the Board is recommending that all of the three current
directors stand for election at this meeting, to be elected to respective
terms of one, two and three years. Directors chosen after the end of those
respective one, two and three-year terms will be elected for three-year
terms. The Board is recommending that the nominees listed in the chart
below be elected to serve as directors for the term set forth next to that
person's name.
The election of directors is decided by a plurality of the votes cast by
the shares entitled to vote in the election. In the absence of
instructions to the contrary, the persons named in the proxy intend to vote
the proxies for the election as directors of the persons nominated below.
Although the Board of Directors has no reason to believe that any of the
nominees set forth below will not serve, in the event that vacancies occur,
the proxies will be voted for the election of the nominees, if any, the
Board of Directors or a duly authorized committee of it may designate.
<PAGE>
<TABLE>
<CAPTION>
NOMINEES
- --------------------------------------------------------------------------------
Names, Principal Director Number of Shares of Percent Proposed
Position Occupation Since Common Stock Owned of Term
with for Past Beneficially, Directly Class**
Company and Five or Indirectly, on
Age Years/Other December 15, 1999 *
(as of Directorships
December
15, 1999)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Kenneth Briad Group, 1999 30,000,000 (1)
Berry Director of 25.3% 3 years
President, Operations
CEO and (1997-1999)
Director, Kerry
46 Organization,
Principal
(1989-1996)
Nicolo Ottomanelli 1998 5,415,749 (2) 18.1% 1 year
Ottomanelli Bros., Member
Senior Vice
President
and
Director,
57
Stephan A. Commonwealth 1996 6,151,224 (3) 18.1 2 years
Stein Associates,
Consultant, Managing
Secretary Director
and Corporate
Director, Finance
47
</TABLE>
* The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in the
regulations of the Securities and Exchange Commission. Accordingly, they
may include securities owned by or for, among others, the spouse and/or
minor children of the individual and any other relative who has the same
home as such individual, as well as other securities as to which the
individual has or shares voting or investment power or has the right to
acquire under outstanding stock options within 60 days after the date of
this table. Beneficial ownership may be disclaimed as to certain of the
securities.
** In computing the "Percentage of Class" figures as to each person, there
is added to the numerator and denominator, for such person, the number of
shares of Common Stock such person could acquire within 60 days by the
conversion of a convertible security owned by such person or the exercise
of an option or warrant held by such person. This presentation maximizes
the percentage of each person, since it assumes that no other holder of
rights to convert or purchase preferred stock or warrants or notes is then
exercising the same, and often results in a combined listing percentage of
ownership that exceeds 100%.
(1) Includes warrants to purchase 30,000,000 shares of Common Stock at an
exercise price of $.05.
(2) Does not include any shares beneficially owed by Mr. J. Ottomanelli, Mr.
Nicolo Ottomanelli's brother, of which Mr. Nicolo Ottomanelli disclaims
beneficial ownership.
(3) Includes warrants to purchase 3,920,548 shares of Common Stock at an
exercise price of $.05 per share.
<PAGE>
PROPOSAL NO. 2 - APPROVAL OF 1999 STOCK OPTION PLAN
The Board of Directors has adopted, subject to stockholder
approval and ratification, the Company's 1999 Stock Option
Plan (the "Plan"). The summary of the Plan set forth below
is qualified in its entirety by the full text of the Plan
set forth in Exhibit A attached hereto.
Material Terms of the 1999 Stock Option Plan
Purpose: The Plan is intended to provide Stock Options ("Options")
and Stock Appreciation Rights ("SARs") to induce officers
and other employees to remain in the employ of the Company
or its subsidiaries and to encourage such employees to
secure or increase on reasonable terms their stock
ownership in the Company. The Board of Directors believes
that the Plan will promote continuity of management and
increased incentive and personal interest in the welfare of
the Company by those who are responsible for shaping and
carrying out the long-range plans of the Company and
securing its continued growth and financial success.
Stock Subject The total number of shares of the Company's Common Stock
to the Plan: available for awards under the Plan will be up to
25,000,000 shares of the Company's Common Stock. This
number will be subject to adjustment in the event of a
stock dividend, stock split or similar change in
outstanding shares. In addition, any outstanding Option
under the Plan that for any reason expires or is terminated
will be available for subsequent grants of Options and SARs
under the Plan.
Eligibility: The Company may grant Options or SARs to officers and other
employees of the Company and its subsidiaries, including
the named executive officers (the "Participants"). In
determining the persons to whom Options shall be granted
and the number of shares to be covered by each Option, the
Administrators of the Plan shall take into account the
duties of the respective persons, their present and
potential contributions to the success of the Company and
such other factors as the Administrators shall deem
relevant to accomplish the purpose of the Plan. A director
of the Company or of a subsidiary who is not also an
employee of the Company or of a subsidiary will not be
eligible to receive any Option or SAR under the Plan, but
will be eligible to participate in the Directors' Plan, as
discussed below.
Administration: The Plan will be administered by the Board of Directors,
the Stock Option and Compensation Committee of the Board of
Directors or such other Committee of directors as the Board
may establish or designate (each, the "Committee"). The
Committee will have complete authority to establish rules
and regulations for the administration of the Plan and to
determine the individuals to whom, and the time or times at
which, Options or SARs shall be granted, the types of
Options, the Option Periods, limitations on exercise and
the number of shares to be subject to each Option. The
Committee will also have authority to interpret the Plan,
to prescribe, amend and rescind rules and regulations
relating to it, to determine the terms and provisions of
the respective Option agreements and to make all other
determinations necessary or advisable for the
administration of the Plan.
Options: Some Options issued under the Plan are intended to be
Incentive Stock Options ("ISOs") within the meaning of
Section 422 of the Internal Revenue Code and the remainder
of the Options issued pursuant to the Plan will constitute
nonqualified Options.
Option Price: The per share Option price will be determined by the
Committee and shall be an amount not less than 100% of the
fair market value of the stock on the date the Option is
granted. The consideration received by the Company for the
award of any Option shall be in cash or in the Company's
Common Stock having a fair market value equal to the Option
price for the shares being purchased. In the case of an
ISO granted to a holder of 10% or more of the Company's
Common Stock at the date of grant, the Option price shall
be not less than 110% of the fair market value at the date
of grant.
Option Period: The Committee will determine the term of each Option.
However, the term of an ISO may not exceed a period of ten
(10) years from the date of its grant. In the case of an
ISO granted to a 10% stockholder, the exercise period may
not exceed a period of five (5) years from the date of
grant. Unless the Option expires earlier under the terms
of the Participant's Option Agreement, Options may be
exercised no later than one (1) year after termination of
employment by reason of death, retirement or disability.
If employment terminates for other reasons, Options may be
exercised within three (3) months after termination.
However, if employment terminates because of embezzlement
from the Company or conviction of a felony, Options will
terminate immediately upon termination of employment.
Exercise of Options shall be exercisable over the exercise period at
Options: the times and upon the conditions that the Committee may
determine, and the Committee may accelerate the
exercisability of any outstanding Option as the Committee
deems appropriate. Payment of the Option price may be made
in cash or by delivery of shares of Common Stock equivalent
in fair market value, or partly in cash and partly in
shares of Common Stock.
Withholding: If the Committee requires, as a condition to exercise of
any Option or SAR, a Participant must satisfy the Company's
withholding tax requirements by permitting the Company to
withhold shares of Common Stock otherwise issuable under
the Option, or by delivering to the Company cash payment or
shares of Common Stock having a fair market value on the
date income is recognized on the exercise of an Option,
equal to the minimum amount required to be withheld for
federal, state or local taxes.
Maximum Value The aggregate fair market value of the stock for which an
of ISOs: ISO is exercisable for the first time by a Participant
during any calendar year under the Plan or any other plan
of the Company or any subsidiary may not exceed $100,000.
To the extent the fair market value of the shares of Common
Stock attributable to ISOs first exercisable in any
calendar year exceeds $100,000, the excess portion of the
ISO will be treated as nonqualified Options.
SARs: The Company may grant SARs separate from any Option granted
under the Plan to any Participant. SARs entitle the
Participant to receive an amount equal to the excess of the
fair market value of one share of Common Stock on the date
of exercise over the per share grant price multiplied by
the number of shares in respect of which the SARs have been
exercised.
Termination and The Plan will terminate on April 18, 2009. The Board of
Amendment: Directors may amend or terminate the Plan earlier, but the
Company's shareholders must approve any modifications for
which shareholder approval is required by applicable law.
Transferability A Participant may not transfer an Option or SAR during his
of Options and or her lifetime other than by will or by the laws of
SARs: descent or distribution. Options may be exercised, during
the lifetime of the Participant, only by the Participant or
by his guardian or legal representative.
Change of The Options and SARs will become immediately exercisable in
Control: the event of certain changes of control of the Company.
The Committee shall cancel all outstanding Options upon
such a change of control, and the Participant shall receive
in lieu thereof cash in the amount by which the value per
share on the date of such change in control exceeds the
Option price per share.
Federal Income Tax Consequences
The Federal income tax consequences described in this section
are based on laws and regulations in effect on the date of
this proxy statement and future changes in those laws and
regulations may affect the tax consequences described below.
No discussion of state income tax treatment has been included.
Incentive Options granted under the Plan which constitute ISOs will, in
Stock general, be subject to the following Federal income tax
Options: treatment.
-- The grant of an ISO does not give rise to any income tax
consequences to either the Company or the Participant.
-- No deduction is allowed to the Company on a Participant's
exercise of an ISO.
-- A Participant's exercise of an ISO does not result in ordinary
income to the Participant for regular tax purposes, but may
result in the imposition of or an increase in alternative
minimum tax. If shares acquired upon exercise of an ISO are
not disposed of within the same taxable year of the ISO
exercise, the excess of the fair market value of the shares
at the time the ISO is exercised over the Option exercise
price is included in the Participant's computation of
alternative minimum taxable income in the year of exercise.
-- If shares acquired upon the exercise of an ISO are disposed
of within two years of the date of the Option grant, or within
one year of the date of the Option exercise, the Participant
will recognize ordinary taxable income at the time of the
disposition to the extent that the fair market value of the
shares at the time of exercise exceeds the Option price, but
not in an amount greater than the excess, if any, of the amount
realized on the disposition over the Option price. Capital
gain (long-term or short-term depending upon the holding period)
is recognized by the Participant at the time of such a disposition
to the extent that the amount of proceeds from the sale exceeds
the fair market value at the time of the exercise of the ISO.
Capital loss (long-term or short-term depending upon the holding
period) is recognized by the Participant at the time of such a
disposition to the extent that the fair market value at the time
of the exercise of the ISO exceeds the amount of proceeds from
the sale. The Company is entitled to a deduction in the taxable
year in which the disposition is made in an amount equal to the
amount of ordinary income recognized by the Participant.
-- If shares acquired upon the exercise of an ISO are disposed of
after the later of two years from the date of the Option grant
or one year from the date of the Option exercise in a taxable
transaction, the Participant recognizes long-term capital gain
or loss at the time of the disposition in an amount equal to
the difference between the amount realized by the Participant
on the disposition and the Participant's basis in the shares.
The Company will not be entitled to any income tax deduction
with respect to the ISO.
Nonqualified Options granted under the Plan which do not qualify as ISOs
Stock will, in general, be subject to the following Federal income
Options: tax treatment:
-- The grant of a nonqualified option does not give rise to any
income tax consequences to either the Company or the
Participant, unless the option is actively traded on an
established market.
-- The exercise of a nonqualified option generally results in
ordinary taxable income to the Participant in the amount equal
to the excess of the fair market value of the shares at the
time of exercise over the Option price. A deduction from
taxable income is allowed to the Company in an amount equal to
the amount of ordinary income recognized by the Participant.
-- Upon a subsequent taxable disposition of shares, a Participant
recognizes short-term or long-term capital gain (or loss)
depending on the holding period, equal to the difference
between the amount received and the tax basis of the shares,
usually the fair market value at the time of exercise.
Stock
Appreciation Any SAR granted under the Plan, will in general, be subject to
Rights: the following Federal income tax treatment:
-- The grant of an SAR does not give rise to any income tax
consequences to either the Company or the Participant.
-- Upon the exercise of an SAR, the Participant recognizes
ordinary income equal to the amount of any cash plus the fair
market value of any shares of Common Stock received. The
Company is generally allowed a deduction in an amount equal
to the ordinary income recognized by the Participant.
Other Disclosures
Market The average of the closing bid and asked prices for the Company's
Price of Common Stock, which determines the fair market value of the Common
Common Stock under the Plan, was approximately $0.11 per share as of
Stock: January 3, 2000.
Required The affirmative vote of a majority of the votes cast on the
Vote: proposal by shareholders of the Company's Common Stock is required
for approval and ratification of the Plan, provided that a
majority of the outstanding shares of the Company's Common Stock
are voted on the proposal. Assuming such provision is met, any
shares not voted (whether by abstention, broker nonvote or
otherwise) have no impact on the vote. Proxies solicited by the
Board of Directors will be voted "FOR" approval and ratification
of the proposed 1999 Stock Option Plan unless a shareholder
specified otherwise.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE RATIFICATION OF THE
1999 STOCK OPTION PLAN.
<PAGE>
PROPOSAL NO. 3 - APPROVAL OF
1999 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
The Board of Directors has adopted, subject to stockholder
approval and ratification, the Company's 1999 Non-Employee
Directors' Stock Option Plan (the "Directors' Plan"). The
summary of the Directors' Plan set forth below is qualified
in its entirety by the full text of the Directors' Plan set
forth in Exhibit B attached hereto.
Material Terms of the 1999 Non-Employee Directors' Stock Option
Plan
Purpose: The Directors' Plan is intended to provide Stock Options
("Options") to create a long-term mutuality of interest
between the Company's non-employee directors and the
Company's stockholders, to induce non-employee directors to
remain with the Company and to provide a means through
which the Company may attract able persons to serve as
directors of the Company.
Stock Subject The total number of shares of the Company's Common Stock
to the available for awards under the Directors' Plan will be up
Directors' to 5,000,000 shares of the Company's Common Stock. This
Plan: number will be subject to adjustment in the event of a
stock dividend, stock split or similar change in
outstanding shares. In addition, any outstanding Option
under the Directors' Plan that for any reason expires or is
terminated will be available for subsequent grants of
Options and Rights under the Directors' Plan.
Eligibility: The Company shall, on the third business day following each
annual meeting of the Company's stockholders, grant an
Option to each of the Company's directors who is not then
an employee of the Company or a subsidiary, to purchase
2,500 shares of the Company's Common Stock. A director of
the Company who also is an employee of the Company or of a
subsidiary will not be eligible to receive any Option under
the Directors' Plan, but will be eligible to participate in
the Company's 1999 Stock Option Plan, as discussed above.
Administration: The Directors' Plan will be administered by a Committee of
the Board of Directors consisting of not less than two
members of the Board (the "Committee"). The Committee will
have complete authority to establish rules and regulations
for the administration of the Directors' Plan and to
determine questions of interpretation and application of
the Directors' Plan. The Committee shall have no
discretion with regard to the directors to whom, and the
time or times at which, Options shall be granted, the types
of Options, the Option Periods, the exercise price,
limitations on exercise and the number of shares to be
subject to each Option. Such matters shall be only as
provided in the Directors' Plan.
Options: All Options issued under the Directors' Plan are intended
to be nonqualified Options, not intended to qualify under
Sections 422 or 423 of the Internal Revenue Code.
Option Price: The per share Option price shall be an amount equal to 100%
of the fair market value of the stock on the date the
Option is granted. The consideration received by the
Company for the award of any Option shall be in cash or in
the Company's Common Stock having a fair market value equal
to the Option price for the shares being purchased.
Option Period: Each Option granted under the Directors' Plan shall be
exercisable for a period of ten (10) years from the date of
its grant. Unless the Option expires earlier, the Option
will terminate within three (3) years from the date of a
director's removal for any reason other than death,
resignation or removal for cause. Unless the Option
expires earlier, the Option may be exercised no later than
one (1) year after the death of the director. Unless the
Option expires earlier, the Option may be exercised no
later than three (3) months after resignation or removal
from office for cause.
Exercise of No Option shall be exercisable during the first six (6)
Options: months after the date of grant except in the case of death
of a director or certain changes of control of the Company.
Payment of the Option price may be made in cash or by
delivery of shares of Common Stock equivalent in fair
market value, or partly in cash and partly in shares of
Common Stock.
Termination and The Board of Directors may amend or terminate the
Amendment: Directors' Plan at any time, but the consent of the
directors holding Options under the Directors' Plan is
required for any amendment or termination that would
adversely affect outstanding Options. The Company's
shareholders must approve any modifications for which
shareholder approval is required by applicable law. The
Board may amend the Directors' Plan to qualify for the
exemption under Section 16(b) under the Securities Exchange
Act of 1934 without shareholder approval, unless such
exemption requires shareholder approval.
Transferability A Participant may not transfer an Option during his or her
of Options: lifetime other than by will or by the laws of descent or
distribution. Options may be exercised, during the
lifetime of the Participant, only by the Participant or by
his guardian or legal representative.
Change of The Options will become immediately exercisable in the
Control: event of certain changes of control of the Company.
Federal Income Tax Consequences
The Federal income tax consequences described in this section
are based on laws and regulations in effect on the date of
this proxy statement and future changes in those laws and
regulations may affect the tax consequences described below.
No discussion of state income tax treatment has been included.
Nonqualified Options granted under the Directors' Plan do not qualify as
Stock incentive stock options and will, in general, be subject to
Options: the following Federal income tax treatment:
-- The grant of a nonqualified option does not give rise to any
income tax consequences to either the Company or the director
receiving the nonqualified option, unless the option is
actively traded on an established market.
-- The exercise of a nonqualified option generally results
in ordinary taxable income to the director receiving the
nonqualified option in the amount equal to the excess of the
fair market value of the shares at the time of exercise over
the Option price. A deduction from taxable income is allowed
to the Company in an amount equal to the amount of ordinary
income recognized by the director.
-- Upon a subsequent taxable disposition of shares, a director
recognizes short-term or long-term capital gain (or loss)
depending on the holding period, equal to the difference
between the amount received and the tax basis of the shares,
usually the fair market value at the time of exercise.
Other Disclosures
Market The average of the closing bid and asked prices for the Company's
Price of Common Stock, which determines the fair market value of the Common
Common Stock under the Directors' Plan, was approximately $0.11 per share
Stock: as of January 3, 2000.
Required The affirmative vote of a majority of the votes cast on the
Vote: proposal by shareholders of the Company's Common Stock is required
for approval and ratification of the Directors' Plan, provided
that a majority of the outstanding shares of the Company's Common
Stock are voted on the proposal. Assuming such proviso is met,
any shares not voted (whether by abstention, broker nonvote or
otherwise) have no impact on the vote. Proxies solicited by the
Board of Directors will be voted "FOR" approval and ratification
of the 1999 Non-Employee Directors' Stock Option Plan unless a
shareholder specified otherwise.
PROJECTED BENEFITS UNDER THE DIRECTORS' PLAN FOR 2000
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
Name Number of Options Dollar Value (approximate)
- -----------------------------------------------------------------------------
<S> <C> <C>
Stephan A. Stein 2,500 $275
</TABLE>
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" THE RATIFICATION OF THE 1999 NON-
EMPLOYEE DIRECTORS' STOCK OPTION PLAN.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of shares of Common Stock as of December 15, 1999,
based on information obtained from the persons named below, by (i) each
person known to the Company to beneficially own more than 5% of the
outstanding shares of Common Stock, (ii) each executive officer and
director of the Company, and (iii) all officers and directors of the
Company as a group:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Name and Address of Amount and Percentage****
Beneficial Owner** Nature of of Class
Beneficial
Ownership***
- ----------------------------------------------------------------------------
<S> <C> <C>
Kenneth Berry 30,000,000(1) 25.3%
Nicolo Ottomanelli 5,415,749(2) 18.1%
Joseph Ottomanelli***** 4,271,029(3) 14.3%
Stephan A. Stein 6,151,224(4) 18.1%
Frank T. Ferro***** (5) *
Shelly Frank***** 45,000,000(6) 60.0%
16 Arrowhead Way
Weston, CT 06883
Andrew Silverman***** 2,000,000 6.7%
A.G. (Sandy) Rappaport***** 1,500,000(7) 4.8%
c/o Wellington Realty Advisors
11015 North Dale Mabry Highway
Tampa, FL 33618
Commonwealth Associates 15,650,000(8) 37.3%
830 Third Avenue
New York, New York 10022
Guy Snowden***** 2,254,126(9) 7.5%
4080 Ibis Point Circle
Boca Raton, FL 33431
- -------------------------------
All Directors and Officers 66,566,973 73.6%
as group (5 Persons)
</TABLE>
* Less than 1% of outstanding shares of Common Stock.
** Unless otherwise indicated, the beneficial owner's address is the
principal office of the Company.
*** The securities "beneficially owned" by an individual are determined
in accordance with the definition of "beneficial ownership" set forth
in the regulations of the Securities and Exchange Commission.
Accordingly,they may include securities owned by or for, among
others, the spouse and/or minor children of the individual and any
other relative who has the same home as such individual, as well as
other securities as to which the individual has or shares voting or
investment power or has the right to acquire under outstanding stock
options within 60 days after the date of this table. Beneficial ownership
may be disclaimed as to certain of the securities.
**** In computing the "Percentage of Class" figures as to each person,
there is added to the numerator and denominator, for such person,
the number of shares of Common Stock such person could acquire within
60 days by the conversion of a convertible security owned by such
person or the exercise of an option or warrant held by such person.
This presentation maximizes the percentage of each person, since it
assumes that no other holder of rights to convert or purchase
preferred stock or warrants or notes is then exercising the same, and
often results in a combined listing percentage of ownership that exceeds
100%.
***** Not a director at December 15, 1999.
(1) Includes warrants to purchase 30,000,000 shares of Common Stock at
an exercise price of $.05.
(2) Does not include any shares beneficially owed by Mr. Joseph
Ottomanelli, Mr. Nicolo Ottomanelli's brother, of which Mr. Nicolo
Ottomanelli disclaims beneficial ownership.
(3) Does not include any shares beneficially owned by Mr. Nicolo
Ottomanelli, Mr. Joseph Ottomanelli's brother, of which Mr.
Joseph Ottomanelli disclaims beneficial ownership.
(4) Includes warrants to purchase 3,920,548 shares of Common Stock at
an exercise price of $.05 per share.
(5) Does not include warrants to purchase up to 700,000 shares of Common
Stock at an exercise price of $.05, exercisable annually in
one-third increments beginning after year one of his employment by the
Company.
(6) Includes warrants to acquire 45,000,000 shares of common stock at
$.05 per share.
(7) Includes warrants granted in conjunction with Mr. Rappaport's
consulting agreement. See "Agreements of New Management."
(8) Includes warrants to purchase 12,000,000 shares of Common Stock at
an exercise price of $.05.
(9) Does not include 54,126 shares of Common Stock owned by Mr.
Snowden's spouse, of which Mr. Snowden disclaims any beneficial
ownership. Does not include 3,000 shares of Preferred B Shares owned
by Mr. Snowden.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid by the Company,
as well as any other compensation paid to or earned by the President of the
Company and those executive officers compensated at or greater than
$100,000 for services rendered to the Company in all capacities during the
three most recent fiscal years ended June 30, 1999:
Summary Compensation Table
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Name of Individual Year Salary Bonus Stock Long-Term
and Principal Position Compensation Compensation
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Kenneth Berry, 1999 $ 29,535 $30,000 --- ---
President 1998* $ --- --- --- ---
1997* $ --- --- --- ---
Nicolo Ottomanelli, 1999 $119,992 --- $ 75,236 ---
Senior Vice President 1998 $ 69,230 --- --- ---
1997** $ --- --- --- ---
Stephan A. Stein,
Secretary
1999 $ 90,550 --- $ 114,867 ---
1998 $ 53,519 --- --- ---
1997 $ 86,250 --- --- ---
</TABLE>
_________________
* Mr. Berry was not employed by the Company in fiscal years 1998 and 1997.
**Mr. Ottomanelli was not employed by the Company in fiscal year 1997
Executive Compensation
The following table sets forth information with respect to the compensation
of the Company's officers for the fiscal year ended June 30, 1999:
<TABLE>
<CAPTION>
Name Compensation
<S> <C>
Kenneth Berry (1) $ 59,535
Nicolo Ottomanelli (2) $ 195,238
Stephan A. Stein (3) $ 205,417
Frank Ferro (4) $ 12,633
Louis Malikow(5) $ 56,500
</TABLE>
1. Kenneth Berry is being compensated under a three year employment
agreement which commenced March 31, 1999, providing for payments of
$3,958.33 twice monthly. In addition, a signing bonus of $30,000 was
provided as part of his compensation package.
See "Agreements with New Management" below.
2. Nicolo Ottomanelli was compensated under an employment agreement entered
into in March 1998 and terminating in 2002 pursuant to which he was to
receive a salary of $150,000 per annum. The Company and Nicolo Ottomanelli
amended his employment agreement effective February 1999 to reduce the
fixed compensation to $85,000, to make him a participant in the Company's
incentive bonus program and to provide a payment of $25,000 in early 1999.
Mr. Ottomanelli received payments of $119,992 during fiscal 1999 for
current and deferred salary. The Company also issued 1,504,720 shares of
common stock with a value of $75,236 to satisfy other deferred salary not
compensated for in cash.
3. A corporation wholly owned by Mr. Stein, SAS Ventures, Inc. entered into
a 1996 consulting agreement with the Company under which it is to provide
his services to the Corporation. The agreement was amended in March 1997
and May 1998 and expires in 2001. The consulting fee under the agreement
is $6,250 per month. In addition, Mr. Stein was granted the common stock
and warrants described in "Security Ownership of Certain Beneficial Owners
and Management". Mr. Stein received approximately $90,550 in cash payments
for the current and deferred portion of his consulting contract. The
Company issued 500,000 shares of common stock with a value of $25,000 to
Mr. Stein for services rendered. Mr. Stein also received approximately
1,664,000 shares of common stock with a value of $83,200 to compensate him
for his deferred portion of consulting fees not paid in cash. The Company
issued warrants in the amount of $6,667 as part of his consulting
agreement.
4. Frank Ferro was being paid under a three year employment agreement which
called for an annual salary of $52,000 payable for year one. Mr. Ferro's
employment contract was terminated as of December 15, 1999, and he was
issued warrants as part of that settlement to purchase 1,000,000 shares of
the Company's Common Stock at $.05 per share. See "Agreements with New
Management" below.
5. Mr. Malikow, a Director since 1995, acted as Co-CEO with Mr. Stein during
the 1997 Cost Reduction Plan period authorized by the Board of Directors
and received cash and warrants in consideration of services provided. Mr.
Malikow resigned his position with the Company effective February 17, 1999.
Mr. Malikow received 880,000 shares of common stock with a value of $44,000
and $12,500 in cash.
<TABLE>
<CAPTION>
WARRANT GRANTS IN FISCAL YEAR 1999
INDIVIDUAL GRANTS
% of
Total
Warrants Exercise
Warrants Granted or
NAME GRANTED to Exercise Potential Realizable
Employees or Value at Assumed Annual
in Base Rates of Stock Price
Warrants FISCAL Price Expiration Appreciation for
Name Granted 1999* ($/Share) Date Full Option Term
- ------------- ------------ --------- --------- ---------- -----------------------
<S> <C> <C> <C> <C> <C>
Kenneth Berry 30,000,000 97.7% .05 2/16/06 $2,955,000 / $4,110,000
Frank Ferro 700,000(1) 2.3% .05 2/16/06 $ 68,950 / $ 95,900
Shelley Frank 45,000,000 ---- .05 2/16/06 $4,432,500 / $6,165,000
Stephan A. Stein 3,920,548 ---- .05 2/16/06 $ 386,174 / $ 537,115
</TABLE>
(1) When Mr. Ferro's employment contract was terminated in fiscal year
2000, his 700,000 warrants were terminated and replaced with
1,000,000 new warrants as part of that settlement, which new
warrants have an exercise price of $.05 and expire on December 31,
2005.
* Does not include Mr. Frank's and Mr. Stein's warrants because of their
current status as non-employee consultants.
WARRANT EXERCISES IN FISCAL YEAR 1999
No warrants, stock options or stock appreciation rights were exercised
in Fiscal Year 1999.
Agreements with New Management
In fiscal 1999, the Company entered into a three-year advisory service
agreement, as revised, with Mr. Shelly Frank. Mr. Frank's agreement does
not obligate him to also serve as a director or Chairman of the Board of
Directors until the Company obtains at least $10 million of
officer/director liability insurance and certain other conditions are
satisfied. Mr. Frank's agreement is terminable by Mr. Frank without
recourse by the Company. Mr. Frank will receive no regular compensation
but will be entitled to participate in the Company's performance bonus
plan. Mr. Frank may receive consulting compensation prior to commencing as
Chairman of the Board of Directors. In addition, Mr. Frank was granted the
warrants described in "Security Ownership of Certain Beneficial Owners and
Management".
In fiscal 1999, the Company entered into a three-year employment agreement,
as revised, with Kenneth Berry which commenced on March 31, 1999, providing
for fixed compensation of $95,000 a year, a signing bonus of $30,000,
participation in the Company's performance bonus plan, and receipt of
$250,000 of term life insurance coverage. In addition, Mr. Berry was
granted the warrants described in "Security Ownership of Certain Beneficial
Owners and Management".
In fiscal 1999, the Company entered into a three year employment agreement,
as revised, with Frank T. Ferro providing for fixed compensation of $52,000
in year one, with a time allowance in year one to complete certain
projects, and commercially standard compensation for full time services to
be determined for years two and three. Mr. Ferro also had been granted
options to purchase Common Stock that never vested because Mr. Ferro's
employment contract was terminated as of December 15, 1999. Mr. Ferro was
issued warrants as part of that settlement to purchase 1,000,000 shares of
the Company's Common Stock at $.05 per share.
In fiscal 1999, the Company entered into a three year advisory service
agreement with A. G. (Sandy) Rappaport providing for certain consultative
services on an as-needed basis and providing for compensation of $12,000
per year plus the warrants described in "Security Ownership of Certain
Beneficial Owners and Management".
The performance bonus plan for senior management creates a bonus pool based
on the yearly targeted number of restaurant openings, the aggregate
revenues and pre-tax (and pre-bonus) income of the Company. The plan
initially has a five year term. The pool, if created, would be allocated
by the Chairman of the Board, currently anticipated to be Shelly Frank,
including to himself. It is anticipated that the bonus pool could vary from
a maximum of approximately $100,000 in the first year to $1,000,000 (or
more) in the fifth year, based on meeting or exceeding targeted goals.
There can be no assurance as to the size of the bonus pool, if any, during
any year of operations.
Stock Option Plans
1994 Employees Stock Option Plan
In December 1994, the Company adopted the 1994 Employees Stock Option Plan
(the "Employees Plan"), which provides for the issuance of incentive stock
options (ISO's) and non-qualified options (Non-ISO's) to officers and key
employees. Up to 1,000,000 shares of the Company's common stock have been
reserved for issuance under the Plan. The Plan is currently administered
by the Board of Directors of the Company. The term of the options is
generally for a period of 5 years. The exercise price for non-qualified
options outstanding under the Employees Plan can be no less than 100% of
the fair market value, as defined, of the Company's common stock at the
date of the grant. For ISO's the exercise price can be generally no less
than the fair market value of the Company's common stock at the date of the
grant, with the exception of any employee who prior to the granting of the
option, is a 10% or greater stockholder as defined, for which the exercise
price can be no less than 110% of the fair market value of the Company's
common stock at the date of grant. There are presently approximately
1,000,000 shares available for option under the Employees Plan. The
Company anticipates terminating this plan during fiscal 2000.
1994 Director Plan
In December 1994, the Company adopted the non-Executive Director Stock
Option Plan (the "Director Plan"), which provides for the issuance of non-
ISO's to non-executive directors, as defined, and members of any advisory
board established by the Company who are not full-time employees of the
Company. The Company has reserved 500,000 shares for issuance under the
provisions of the Director Plan. The Director Plan provides that each non-
executive director will automatically be granted an option to purchase
25,000 shares upon joining the Board of Directors and 15,000 shares on each
December 1 thereafter, provided such person has served as a director for
the 12 months immediately prior to such December 1. The exercise price for
options granted under the Director Plan shall be 100% of the fair market
value of the Common Stock on the date of grant. There are presently
295,000 shares available for option under the Directors Plan. The Company
anticipates terminating this plan during fiscal 2000.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and persons who own more than ten (10%) percent of a
registered class of the Company's equity securities (collectively, the
"Reporting Persons") to file reports of ownership and changes in ownership
with the Securities and Exchange Commission and to furnish the Company with
copies of these reports. Based solely on the Company's review of the
copies of such forms received by it during its fiscal year ended June 30,
1999, the Company believes that all filing requirements applicable to the
Reporting Persons were complied with by its executive officers and
directors during such period.
RELATIONSHIP WITH INDEPENDENT AUDITORS
KPMG Peat Marwick LLP has served as our independent auditor for each of the
years in the three-year period ended June 30, 1999. In recent years, it
has been the practice of the Board of Directors to annually review and
select independent auditors of the Company. The Board of Directors intends
to continue this practice and to make the selection of the independent
auditors later in the year. The selection of the independent auditors has
not therefore been made for the current fiscal year. Representatives of
KPMG Peat Marwick LLP may be present at the meeting, will have an
opportunity to make a statement, if desired, and will be available to
respond to appropriate questions, if any, of our stockholders.
STOCKHOLDER PROPOSALS
Stockholders wishing to submit proposals for inclusion in our 2001 proxy
statement may do so prior to September 12, 2000 by letter addressed to us
in care of our corporate secretary. If we change the date of our 2001
annual meeting by more than 30 days from the date of our 2000 annual
meeting, then stockholders must submit proposals a reasonable time before
we begin to print and mail the proxy statement for our 2001 annual meeting.
Any such proposal must comply with Rule 14a-8 promulgated by the Securities
and Exchange Commission pursuant to the Securities Exchange Act of 1934, as
amended.
On May 21, 1998, the Securities and Exchange Commission adopted an
amendment to Rule 14a-4, as promulgated under the Exchange Act. The
amendment to 14a-4 (c)(1) governs our use of discretionary proxy voting
authority with respect to a stockholder proposal which the stockholder has
not sought to include in our proxy statement. The new amendment provides
that if a proponent of a proposal fails to notify us at least 45 days prior
to the month and day of mailing of the prior year's proxy statement, then
the management proxies will be allowed to use their discretionary voting
authority when the proposal is raised at that meeting, without any
discussion of the matter in the proxy statement. It also provides that if
the date of the 2001 annual meeting has changed more than 30 days from the
2000 annual meeting and if the proponent of a proposal fails to notify us a
reasonable time before we mail our proxy statement for the 2001 annual
meeting, then the management proxies will have the same discretionary
voting authority.
With respect to our 2001 annual meeting of stockholders, if we are not
provided notice of a stockholder proposal which the stockholder has not
previously sought to include in our proxy statement by November 26, 2001,
or within a reasonable time before we mail our proxy statement if we change
the date of our 2001 annual meeting by more than 30 days from the date of
this year's meeting, the management proxies will be allowed to use their
discretionary authority as outlined above.
OTHER MATTERS
As of the date of this proxy statement, we do not expect any matters other
than these described in this proxy statement will be brought before the
meeting. If any other business properly comes before the meeting, or any
adjournment of the meeting, the proxy holders will vote in regard to the
other business according to their discretion insofar as the proxies are not
limited to the contrary.
You should rely on the information contained or incorporated by reference
in this proxy statement to decide how to vote on the matters to be
considered at the annual meeting. We have not authorized anyone to provide
you with information that is different from or in addition to what is
contained in this proxy statement. Therefore, if anyone does give you
information of this sort, you should not rely on it. The information
contained in this proxy statement speaks only as of its date unless the
information specifically indicates that another date applies.
By Order Of The Board Of Directors
Kenneth Berry
President and Chief Executive Officer
January 21, 2000
<PAGE>
EXHIBIT A
SPENCER'S RESTAURANTS, INC.
1999 STOCK OPTION PLAN
1. Purpose.
This Stock Option Plan (the "Plan") is intended to encourage stock
ownership by employees of Spencer's Restaurants, Inc. ("Corporation"), its
divisions and Subsidiary Corporations, so that they may acquire or increase
their proprietary interest in the Corporation, and to encourage such
employees and directors to remain in the employ of the Corporation and to
put forth maximum efforts for the success of the business. It is further
intended that options granted by the Administrators pursuant to Section 6
of this Plan shall constitute "incentive stock options" ("Incentive Stock
Options") within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended, and the regulations thereunder ("Code"), and options
granted by the Administrators pursuant to Section 7 of this Plan shall
constitute "non-qualified stock options" ("Non-qualified Stock Options").
Options granted under the Plan ("Options") may be accompanied by stock
appreciation rights ("Rights") as hereinafter set forth.
2. Definitions.
As used in this Plan, the following words and phrases shall have the
meanings indicated:
(a) "Disability" shall mean an Optionee's inability to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or
that has lasted or can be expected to last for a continuous period of not
less than twelve (12) months.
(b) "Fair Market Value" per share as of a particular date shall
mean (i) the closing sales price per share of Common Stock on a national
securities exchange for the last preceding date on which there was a sale
of such Common Stock on such exchange, or (ii) if the shares of Common
Stock are then traded on an over-the-counter market, the average of the
closing bid and asked prices for the shares of Common Stock in such over-
the-counter market for the last preceding date on which there was a sale of
such Common Stock in such market, or (iii) if the shares of Common Stock
are not then listed on a national securities exchange or traded in an over-
the-counter market, such value as the Administrators in their discretion
may determine.
(c) "Parent Corporation" shall mean any corporation (other than
the Corporation) in an unbroken chain of corporations ending with the
employer corporation if, at the time of granting an Option, each of the
corporations other than the employer corporation owns stock possessing
fifty (50%) percent or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
(d) "Subsidiary Corporation" shall mean any corporation (other
than the Corporation) in an unbroken chain of corporations beginning with
the employer corporation if, at the time of granting an Option, each of the
corporations other than the last corporation in the unbroken chain owns
stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
(e) "Ten Percent Stockholder" shall mean an Optionee who, at the
time an Incentive Stock Option is granted, owns stock possessing more than
ten percent (10%) of the total combined voting power of all classes of
stock of the Corporation or of its Parent or Subsidiary Corporations.
3. Administration.
The Plan shall be administered by the Board of Directors of the
Corporation (the "Board") or the Stock Option and Compensation Committee of
the Board of Directors, or such other Committee of directors as the Board
may establish or designate (each, the "Committee"). The Committee is to be
composed of not less than two members, all of whom must be "non-employee
directors" within the meaning of Rule 16b-3 ("Rule 16b-3") promulgated
under Section 16 of the Securities Exchange Act of 1934 as amended (the
"Act"). Except as may otherwise be provided in the By-Laws or resolutions
of the Board, a majority of the members of the Committee shall constitute a
quorum and the acts of a majority of the members at any meeting at which a
quorum is present, and any acts approved in writing by all members of the
Committee without a meeting, shall be the acts of the Committee. Those
administering the Plan from time to time are referred to herein as the
"Administrators."
The Administrators shall have the authority in their discretion,
subject to and not inconsistent with the express provisions of the Plan, to
administer the Plan and to exercise all the powers and authorities either
specifically granted to them under the Plan or necessary or advisable in
the administration of the Plan, including, without limitation, the
authority to grant Options; to determine which Options shall constitute
Incentive Stock Options and which Options shall constitute Non-qualified
Stock Options; to determine which Options (if any) shall be accompanied by
Rights; to determine the purchase price of the shares of Common Stock
covered by each Option (the "Option Price"); to determine the persons to
whom, and the time or times at which, Options shall be granted; to
determine the number of shares to be covered by each Option; to interpret
the Plan; to prescribe, amend and rescind rules and regulations relating to
the Plan; to determine the terms and provisions of the Option Agreements
(which need not be identical) entered into in connection with Options
granted under the Plan; and to make all other determinations deemed
necessary or advisable for the administration of the Plan. The
Administrators may delegate or to one or more agents such administrative
duties as they may deem advisable, and the Administrators or any person to
whom they have delegated duties as aforesaid may employ one or more persons
to render advice with respect to any responsibility the Administrators or
such person may have under the Plan.
The Board may from time to time appoint additional Administrators and
substitute others. An Administrator shall be selected by the Board as
chairman. The Administrators shall hold their meetings at such times and
places as they shall deem advisable. All determinations of the
Administrators shall be made by a majority of the Administrators either
present in person or participating by conference telephone at any meeting
or by written consent. The Administrators may appoint a secretary and make
such rule and regulations for the conduct of their business as they shall
deem advisable, and shall keep minutes of their meetings.
No Administrator shall be liable for any action taken or determination
made in good faith with respect to the Plan or any Option or Right granted
hereunder.
4. Eligibility; Maximum Number
Options may be granted to employees (including, without limitation,
officers and directors who are employees) of the Corporation or its present
or future divisions and Subsidiary Corporations. In determining the
persons to whom Options shall be granted and the number of shares to be
covered by each Option and any accompanying Rights, the Administrators
shall take into account the duties of the respective persons, their present
and potential contributions to the success of the Corporation and such
other factors as the Administrators shall deem relevant in connection with
accomplishing the purpose of the Plan. A person to whom an Option has been
granted hereunder is sometimes referred to herein as an "Optionee."
An Optionee shall be eligible to receive more than one grant of an
Option during the term of the Plan, but only on the terms and subject to
the restrictions hereinafter set forth.
5. Stock
The stock subject to Options and Rights hereunder shall be shares of
the Corporation's Common Stock, par value of $.001 per share ("Common
Stock"). Such shares may, in whole or in part, be authorized but unissued
shares or shares that shall have been or that may be reacquired by the
Corporation. The aggregate number of shares of Common Stock as to which
Options and Rights may be granted from time to time under the Plan shall
not exceed twenty-five million (25,000,000) shares of Common Stock. The
limitation established by the preceding sentence shall be subject to
adjustment as provided in Section 8(i) hereof.
In the event that any outstanding Option under the Plan for any reason
expires or is terminated without having been exercised in full or
surrendered in full in connection with the exercise of a Right, the shares
of Common Stock allocable to the unexercised portion of such Option shall
(unless the Plan shall have been terminated) become available for
subsequent grants of Options and Rights under the Plan.
6. Incentive Stock Options.
Options granted pursuant to this Section 6 are intended to constitute
Incentive Stock Options and shall be subject to the following special terms
and conditions, in addition to the general terms and conditions specified
in Section 8 hereof.
(a) VALUE OF SHARES. In the event that the aggregate Fair
Market Value (determined as of the date the Incentive Stock Option is
granted) of the shares of Common Stock with respect to which Options
granted under this Plan and all other option plans of the Corporation and
any Subsidiary Corporation become exercisable for the first time by an
Optionee during any calendar year exceeds $100,000, Options granted in
excess of such limit shall constitute Non-qualified Stock Options for all
purposes.
(b) TEN PERCENT STOCKHOLDER. In the case of an Incentive Stock
Option granted to a Ten Percent Stockholder, (i) the Option Price shall not
be less than one hundred ten percent (110%) of the Fair Market Value of the
shares of Common Stock of the Corporation on the date of grant of such
Incentive Stock Option, and (ii) the exercise period shall not exceed five
(5) years from the date of grant of such Incentive Stock Option.
7. Non-qualified Stock Options.
Options granted pursuant to this Section 7 are intended to constitute
Non-qualified Stock Options and shall be subject only to Subsections (a),
(b), (d), (i), (j) and (k) of Section 8 hereof.
8. Terms and Conditions of Options.
Each Option granted pursuant to the Plan shall be evidenced by a
written Option Agreement between the Corporation and the Optionee, which
agreement shall comply with and be subject to the following terms and
conditions:
(a) NUMBER OF SHARES. Each Option Agreement shall state the
number of shares of Common Stock to which the Option relates.
(b) TYPE OF OPTION. Each Option Agreement shall specifically
identify the portion, if any, of the Option which constitutes an Incentive
Stock Option and the portion, if any, which constitutes a Non-qualified
Stock Option.
(c) OPTION PRICE. Each Option Agreement shall state the Option
Price, which, in the case of Incentive Stock Options, shall not be less
than one hundred percent (100%) of the Fair Market Value of the shares of
Common Stock of the Corporation on the date of grant of the Option. The
Option Price shall be subject to adjustment as provided in Section 8(i)
hereof. The date on which the Administrators adopt a resolution expressly
granting an Option shall be considered the day on which such Option is
granted.
(d) MEDIUM AND TIME OF PAYMENT. The Option Price shall be paid
in full, at the time of exercise, in cash or in shares of Common Stock
having a Fair Market Value equal to such Option Price or in a combination
of cash and such shares, and may be effected in whole or in part (i) with
monies received from the Corporation at the time of exercise as a
compensatory cash payment, or (ii) with monies borrowed from the
Corporation pursuant to repayment terms and conditions as shall be
determined from time to time by the Administrators, in their discretion,
separately with respect to each exercise of Options and each Optionee;
provided, however, that each such method and time for payment and each such
borrowing and terms and conditions of repayment shall be permitted by and
be in compliance with applicable law, and provided, further, in the event
the Option Price is paid with monies borrowed from the Corporation, such
fact shall be noted conspicuously on the certificate for such shares in
accordance with applicable law.
(e) TERM AND EXERCISE OF OPTIONS. Options shall be exercisable
over the exercise period as and at the times and upon the conditions that
the Administrators may determine, as reflected in the Option Agreement;
provided, however, that the Administrators shall have the authority to
accelerate the exercisability of any outstanding Option at such time and
under such circumstances as they, in their sole discretion, deem
appropriate. The exercise period shall be determined by the
Administrators; provided, however that in the case of an Incentive Stock
Option such exercise period shall not exceed ten (10) years from the date
of grant of such Option. The exercise period shall be subject to earlier
termination as provided in Sections 8(f) and 8(g) hereof. An Option may be
exercised, as to any or all full shares of Common Stock as to which the
Option has become exercisable, by giving written notice of such exercise to
the Administrators; provided, however, that an Option may not be exercised
at any one time as to fewer than 100 shares (or such number of shares as to
which the Option is then exercisable if such number of shares is less than
100).
(f) TERMINATION. Except as provided in this Section 8(f) and in
Section 8(g) hereof, an Option may not be exercised unless the Optionee is
then in the employ of the Corporation or a division or subsidiary
Corporation thereof (or a corporation or a Parent or subsidiary Corporation
of such corporation issuing or assuming the Option in a transaction to
which Section 425 (a) of the Code applies), and unless the Optionee has
remained continuously so employed since the date of grant of the Option.
In the event that the employment of an Optionee shall terminate (other than
by reason of death, disability or retirement), all Options of such Optionee
that are exercisable at the time of such termination may, unless earlier
terminated in accordance with their terms, be exercised within three (3)
months after such termination; provided, however, that if the employment of
an Optionee shall terminate because of embezzlement from the Corporation or
conviction of a felony, all Options theretofore granted to such Optionee
shall, to the extent not theretofore exercised, terminate forthwith.
Nothing in the Plan or in any Option granted pursuant hereto shall confer
upon an individual any right to continue in the employ of the Corporation
or any of its divisions or Subsidiary Corporations or interfere in any way
with the right of the Corporation or any such division or Subsidiary
Corporation to terminate such employment.
(g) DEATH, DISABILITY OR RETIREMENT OF OPTIONEE. If an Optionee
shall die while employed by the Corporation or a Subsidiary Corporation, or
within three (3) months after the termination of such Optionee's
employment, other than for cause, or if the Optionee's employment shall
terminate by reason of Disability or retirement, all Options theretofore
granted to such Optionee (to the extent otherwise exercisable) may, unless
earlier terminated in accordance with their terms, be exercised by the
Optionee or by the Optionee's estate or by a person who acquired the right
to exercise such Option by bequest or inheritance or otherwise by reason of
the death or Disability of the Optionee, at any time within one (1) year
after the date of death, Disability or retirement of the Optionee.
(h) NON-TRANSFERABILITY OF OPTIONS. Option granted under the
Plan shall not be transferable otherwise than by will or by the laws of
descent and distribution, and Options may be exercised, during the lifetime
of the Optionee, only by the Optionee or by his guardian or legal
representative.
(i) EFFECT OF CERTAIN CHANGES.
(1) If there is any change in the number of shares of
Common Stock through the declaration of stock dividends, or through
recapitalization resulting in stock splits or reverse stock splits, or
combinations or exchanges of such shares, the number of shares of Common
Stock available for Options and Rights, the number of such shares covered
by outstanding Options and Rights, and the price per share of such Options
or the applicable market value of Rights, shall be proportionately adjusted
by the Administrators to reflect any increase or decrease in the number of
issued shares of Common Stock; provided, however, that any fractional
shares resulting from such adjustment shall be eliminated.
(2) In the event of the proposed dissolution or liquidation
of the Corporation, in the event of any corporate separation or division,
including, but not limited to, split-up, split-off or spin-off, or in the
event of a merger or consolidation of the Corporation with another
corporation, the Administrators may provide that the holder of each Option
then exercisable shall have the right to exercise such Option (at its then
Option Price) solely for the kind and amount of shares of stock and other
securities, property, cash or any combination thereof receivable upon such
dissolution, liquidation, or corporate separation or division, or merger or
consolidation by a holder of the number of shares of Common Stock for which
such Option might have been exercised immediately prior to such
dissolution, liquidation, or corporate separation or division, or merger of
consolidation; or the Administrators may provide, in the alternative, that
each Option granted under the Plan shall terminate as of a date to be fixed
by the Administrators; provided, however, that not less than thirty (30)
days' written notice of the date so fixed shall be given to each Optionee,
who shall have the right, during the period of thirty (30) days preceding
such termination, to exercise the Options as to all or any part of the
shares of Common Stock covered thereby, including shares as to which such
Options would not otherwise be exercisable; provided, further, that failure
to provide such notice shall not invalidate or affect the action with
respect to which such notice was required.
(3) If while unexercised Options remain outstanding under
the Plan -
(A) the stockholders of the Corporation approve a
definitive agreement to merge or consolidate the Corporation with or into
another corporation or to sell or otherwise dispose of all or substantially
all of its assets, or adopt a plan of liquidation, or
(B) the "beneficial ownership" (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act") of securities representing more than 30% of the combined voting power
of the Corporation is acquired by any "person" as defined in sections 13(d)
and 14(d) of the Exchange Act, or
(C) during any period of two consecutive years,
individuals who at the beginning of such period were members of the Board
cease for any reason to constitute at least a majority thereof as a result
of a solicitation of proxies other than by the Board of Directors, then
from and after the date of the of any such stockholder approval or
adoption, or the date on which public announcement of the acquisition of
such percentage shall have been made, or the date on which the change in
the composition of the Board set forth above shall have occurred, whichever
is applicable (the applicable date being referred to herein as the
"Acceleration Date"), all Options shall be exercisable in full, whether or
not otherwise exercisable. Following the Acceleration Date, (a) the
Administrators shall, in the case of a merger, consolidation or sale or
disposition of assets, promptly make an appropriate adjustment to the
number and class of shares of Common Stock available for Options, and to
the amount and kind of shares or other securities or property receivable
upon exercise of any outstanding Options after the effective date of such
transaction, and the price thereof, and (b) the Administrators shall cancel
all outstanding Options in exchange for a cash payment in an amount per
share subject to any such Option equal to the amount that would be payable
pursuant to Section 10(b) hereof upon exercise of a Right under those
circumstances, subject to such terms and conditions as the Administrators
may determine.
(4) Paragraphs (2) and (3) of this Section 8(i) shall not
apply to a merger or consolidation in which the Corporation is the
surviving corporation and shares of Common Stock are not converted into or
exchanged for stock, securities of any other corporation, cash or any other
thing of value. Notwithstanding the preceding sentence, in case of any
consolidation or merger of another corporation into the Corporation in
which the Corporation is the surviving corporation and in which there is a
reclassification or change (including a change to the right to receive cash
or other property) of the shares of Common Stock (other than a change in
par value, or from par value to no par value, or as a result of a
subdivision or combination, but including any change in such shares into
two or more classes or series of shares), the Administrators may provide
that the holder of each Option then exercisable shall have the right to
exercise such Option solely for the kind and amount of shares of stock and
other securities (including those of any new direct or indirect parent of
the Corporation), property, cash or any combination thereof receivable upon
such reclassification, change, consolidation or merger by the holder of the
number of shares of Common Stock for which such Option might have been
exercised.
(5) In the event of a change in the Common Stock of the
Corporation as presently constituted, which is limited to a change of all
of its authorized shares with par value into the same number of shares with
a different par value or without par value, the shares resulting from any
such change shall be deemed to be the Common Stock within the meaning of
the Plan.
(6) To the extent that the foregoing adjustments relate to
stock or securities of the Corporation, such adjustments shall be made by
the Administrators, whose determination in that respect shall be final,
binding and conclusive, provided that each Incentive Stock Option granted
pursuant to this Plan shall not be adjusted in a manner that causes such
option to fail to continue to qualify as an Incentive Stock Option within
the meaning of Section 422 of the Code.
(7) Except as hereinbefore expressly provided in this
Section 8(i), the Optionee shall have no rights by reason of any
subdivision or consolidation of shares of stock of any class or the payment
of any stock dividend or any other increase or decrease in the number of
shares of stock of any class or by reason of any dissolution, liquidation,
merger, or consolidation or spin-off of assets or stock of another
corporation; and any issue by the Corporation of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
not affect, and no adjustment by reason thereof shall be made with respect
to, the number or price of shares of Common Stock subject to the Option.
The grant of an Option pursuant to the Plan shall not affect in any way the
right or power of the Corporation to make adjustments, reclassifications,
reorganizations or changes of its capital or business structures or to
merge or to consolidate or to dissolve, liquidate or sell, or transfer all
or part of its business or assets.
(j) RIGHTS AS STOCKHOLDER. An Optionee or a transferee of an
Option shall have no rights as a stockholder with respect to any shares
covered by the Option until the date of the issuance of a stock certificate
to him for such shares. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property)
or distribution of other rights for which the record date is prior to the
date such stock certificate is issued, except as provided in Section 8(i)
hereof.
(k) OTHER PROVISIONS. The Option Agreements authorized under
the Plan shall contain such other provisions, including, without
limitation, (i) the granting of Rights, (ii) the imposition of restrictions
upon the exercise of an Option, and (iii) in the case of an Incentive Stock
Option, the inclusion of any condition not inconsistent with such Option
qualifying as an Incentive Stock Option, as the Administrators shall deem
advisable.
9. Stock Appreciation Rights.
(a) The Administrators shall have authority to grant Rights to
the holder of any Option granted under the Plan (the "Related SAR Option")
with respect to all or some of the shares of Stock covered by such Related
SAR Option. A Right may be granted either at the time of the grant of the
Related SAR Option or any time thereafter during its term (except as
otherwise provided in Section 12 hereof). Each Right shall be exercisable
only if, and to the extent that, the Related SAR Option is exercisable and,
in the case of Rights granted in respect of Incentive Stock Options, only
when the Fair Market Value per share of Common Stock exceeds the Option
Price per share. Upon the exercise of a Right, the Related SAR Option
shall cease to be exercisable to the extent of the shares of Common Stock
with respect to which such Right is exercised, but shall be considered to
have been exercised to that extent for purposes of determining the number
of shares available for the grant of further Options and Rights pursuant to
the Plan. Upon the exercise or termination of a Related SAR Option, the
Right with respect to such Related SAR Option shall terminate to the extent
of the shares of Common Stock with respect to which the Related SAR Option
was exercised or terminated.
(b) Upon the exercise of a Right, the holder thereof, subject to
Paragraph (e) of this Section 9, shall be entitled at the holder's election
to receive either -
(i) that number of shares of Common Stock equal to the quotient
computed by dividing the Spread (as defined in Paragraph (c) hereof) by the
Fair Market Value per share of Common stock on the date of exercise of the
Right; provided, however, that in lieu of fractional shares, the
Corporation shall pay cash equal to the same fraction of the Fair Market
Value per share of Common Stock on the date of exercise of the Right, or
(ii) an amount in cash equal to the Spread, or
(iii) a combination of cash and a number of shares calculated as
provided in clause (10 of this Paragraph (b) (after reducing the Spread by
such cash amount), plus cash in lieu of any fractional shares as above
provided.
(c) the term "Spread" as used in this Section 9 shall mean an
amount equal to the product computed by multiplying (i) the excess of (A)
the Fair Market Value per share of Common Stock on the date the Right is
exercised over (B) the Option Price per share at which the Related SAR
Option is exercisable, by (ii) the number of shares with respect to which
such Right is exercised.
(d) Notwithstanding the provisions of this Section 9, a Right
granted to a holder who is subject to the reporting requirements of Section
16(a) of the Exchange Act may not be exercised until the expiration of six
(6) months from the date of grant of such Right unless, prior to the
expiration of such six (6) month period, the holder of such Right ceases to
be an employee of the Corporation or a division or subsidiary Corporation
thereof by reason of such holder's death or disability.
(e) Notwithstanding the provisions in Paragraph (b) in this
Section 9, the Administrators shall have sole discretion to consent to or
disapprove an election to receive cash in whole or in part ("Cash
Election") upon the exercise of a Right. A Cash Election and related
exercise may be made only during the period beginning on the third business
day following the date of release for publication of the quarterly and
annual summary statements of sales and earnings of the Corporation and
ending on the 12th business day following such date.
(f) A Right may be granted to an Optionee irrespective of
whether such Optionee is being granted or has been granted a Right.
(g) A Right shall not be transferable except by will or by the
laws of descent and distribution. During the lifetime of an Optionee, the
Right shall be exercisable only by such Optionee or by the Optionee's
guardian or legal representative.
(h) Each Right shall be granted on such terms and conditions not
inconsistent with the Plan as the Administrators may determine.
(i) To exercise a Right, the Optionee shall (i) give written
notice thereof to the Administrators in form satisfactory to the
Administrators specifying (A) the number of shares of Common Stock with
respect to which the Right is being exercised and (B) the amount the
Optionee elects to receive in cash and shares of Common Stock with respect
to the exercise of the Right, and (ii) if requested by the Administrators,
deliver the Option Agreement to the Administrators, who shall endorse
thereon a notation of such exercise and return the Option Agreement to the
Optionee. The date of exercise of a Right that is validly exercised shall
be deemed to be the date on which there shall have been delivered the
instruments referred to in the first sentence of this Paragraph (i).
(j) The Corporation intends that this Section 9 shall comply
with the requirements of Rule 16b-3 and any future rules promulgated in
substitution therefor (the "Rule") under the Act during the term of the
Plan. Should any provision of this Section 9 not be necessary to comply
with the requirements of the Rule, the Board may amend the Plan to add to
or modify the provisions of the Plan accordingly.
10. Agreement by Optionee Regarding Withholding Taxes.
If the Administrators shall so require, as a condition of exercise,
each Optionee shall agree that - -
(a) no later than the date of exercise of any Option or Right granted
hereunder, the Optionee will pay to the Corporation or make arrangements
satisfactory to the Administrators regarding payment of any federal, state
or local taxes of any kind required by law to be withheld upon the exercise
of such Option or Right, and
(k) the Corporation shall, to the extent permitted or required
by law, have the right to deduct federal, state and local taxes of any kind
required by law to be withheld upon the exercise of such Option or Right
from any payment of any kind otherwise due to the Optionee.
11. Term of Plan.
Options and Rights may be granted pursuant to the Plan from time to
time within a period of ten (10) years from the date the Plan is adopted by
the Board, or the date the Plan is approved by the stockholders of the
Corporation, whichever is earlier.
12. Amendment and Termination of the Plan.
The Board at any time and from time to time may suspend, terminate,
modify or amend the Plan; provided, however, that to the extent required by
Rule 16b-3 or Section 162 (m), such suspension, termination, modification
and amendment shall be subject to the approval of the holders of a majority
of the Common Stock issued and outstanding. Except as provided in Section
8 hereof, no suspension, termination, modification or amendment of the Plan
may adversely affect any Option or Right previously granted, unless the
written consent of the Optionee is obtained.
13. Interpretation.
The Plan is designed and intended to comply with Rule 16b-3 and, to
the extent practicable, with Section 162(m) of the Code, and all provisions
of the Plan shall be construed in accordance with such design and intent.
14. Approval of Stockholders.
The Plan shall take effect upon its adoption by the Board of Directors
but shall be subject to the approval of the holders of a majority of the
issued and outstanding shares of Common Stock of the Corporation, which
approval must occur within twelve months after the date the Plan is adopted
by the Board.
15. Effect of Headings.
The section and subsection headings contained herein are for
convenience only and shall not affect the construction hereof.
<PAGE>
EXHIBIT B
SPENCER'S RESTAURANTS, INC.
1999 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
The purpose of the 1999 Non-Employee Directors' Stock Option Plan (the
"Plan") is to promote the long-term success of Spencer's Restaurants, Inc.
(the "Corporation") by creating a long-term mutuality of interest between
the non-employee Directors and stockholders of the Corporation, to provide
an additional inducement for such Directors to remain with the Corporation
and to provide a means through which the Corporation may attract able
persons to serve as Directors of the Corporation.
SECTION 1
ADMINISTRATION
The Plan shall be administered by a Committee (the "Committee") appointed
by the Board of Directors of the Corporation (the "Board") and consisting
of not less than two members of the Board. The Committee shall keep
records of action taken at its meetings. A majority of the Committee shall
constitute a quorum at any meeting, and the acts of a majority of the
members present at any meeting at which a quorum is present, or acts
approved in writing by all the members of the Committee, shall be the acts
of the Committee.
The Committee shall interpret the Plan and prescribe such rules,
regulations and procedures in connection with the operations of the Plan as
it shall deem to be necessary and advisable for the administration of the
Plan consistent with the purposes of the Plan. All questions of
interpretation and application of the Plan, or as to stock options granted
under the Plan, shall be subject to the determination of the Committee,
which shall be final and binding.
Notwithstanding the above, the selection of the Directors to whom stock
options are to be granted, the timing of such grants, the number of shares
subject to any stock option, the exercise price of any stock option, the
periods during which any stock option may be exercised and the term of any
stock option shall be as hereinafter provided, and the Committee shall have
no discretion as to such matters.
SECTION 2
SHARES AVAILABLE UNDER THE PLAN
The aggregate number of shares which may be issued and as to which grants
of stock options may be made under the Plan is 5,000,000 shares of the
Common Stock, par value $.001 per share, of the Corporation (the "Common
Stock"), subject to adjustment and substitution as set forth in Section 5.
If any stock option granted under the Plan is cancelled by mutual consent
or terminates or expires for any reason without having been exercised in
full, the number of shares subject thereto shall again be available for
purposes of the Plan. The shares which may be issued under the Plan may be
either authorized but unissued shares or treasury shares or partly each.
SECTION 3
GRANT OF STOCK OPTIONS
On the third business day following the day of each annual meeting of the
stockholders of the Corporation, each person who is then a member of the
Board and who is not then an employee of the Corporation or any of its
subsidiaries (a "non-employee Director") shall automatically and without
further action by the Board or the Committee be granted a "non-statutory
stock option" (i.e., a stock option which does not qualify under Sections
422 or 423 of the Internal Revenue Code of 1986 (the "Code")) to purchase
2,500 shares of Common Stock, subject to adjustment and substitution as set
forth in Section 5. If the number of shares then remaining available for
the grant of stock options under the Plan is not sufficient for each non-
employee Director to be granted such an option (or the number of adjusted
or substituted shares pursuant to Section 5), then each non-employee
Director shall be granted an option for a number of whole shares equal to
the number of shares then remaining available divided by the number of non-
employee Directors, disregarding any fractions of a share.
SECTION 4
TERMS AND CONDITIONS OF STOCK OPTIONS
Stock options granted under the Plan shall be subject to the following
terms and conditions:
(A) The purchase price at which each stock option may be exercised
(the "Option Price") shall be one hundred (100%) percent of the fair market
value per share of the Common Stock covered by the stock option on the date
of grant, determined as provided in Section 4(G).
(B) The option price for each stock option shall be paid in full upon
exercise and shall be payable in cash in United States dollars (including
check, bank draft or money order); provided, however, that in lieu of such
cash the person exercising the stock option may pay the Option Price in
whole or in part by delivering to the Corporation shares of the Common
Stock having a fair market value on the date of exercise of the stock
option, determine as provided in Section 4(G), equal to the Option Price
for the shares being purchased; except that (i) any portion of the Option
Price representing a fraction of a share shall in any event be paid in
cash; and (ii) no shares of the Common Stock which have been held for less
than six (6) months may be delivered in payment of the Option Price of a
stock option. Delivery of shares may also be accomplished through the
effective transfer to the Corporation of shares held by a broker or other
agent. The Corporation will also cooperate with any person exercising a
stock option who participates in a cashless exercise program of a broker or
other agent under which all or part of the shares received upon exercise of
the stock option are sold through the broker or other agent or under which
the broker or other agent makes a loan to such person. Notwithstanding the
foregoing, the exercise of the stock option shall not be deemed to occur
and no shares of Common Stock will be issued by the Corporation upon
exercise of the stock option until the Corporation has received payment of
the Option Price in full. The date of exercise of a stock option shall be
determined under procedures established by the Committee, and as of the
date of exercise the person exercising the stock option shall be considered
for all purposes to be the owner of the shares with respect to which the
stock option has been exercised. Payment of the Option Price with shares
shall not increase the number of shares of the Common Stock which may be
issued under the Plan as provided in Section 2.
(C) No stock option shall be exercisable during the first six (6)
months of its term except in case of death as provided in Section 4(E) or
in case of a Section 6 Event as provided in Section 6. Subject to the
preceding sentence and subject to Section 4(E) which provides for earlier
termination of a stock option under certain circumstances, each stock
option shall be exercisable for ten (10) years from the date of grant and
not thereafter. A stock option to the extent exercisable at any time may
be exercised in whole or in part.
(D) No stock option shall be transferable by the grantee otherwise
than by Will, or if the grantee dies intestate, by the laws of descent and
distribution of the state of domicile of the grantee at the time of death.
All stock options shall be exercisable during the lifetime of the grantee
only by the grantee or the grantee's guardian or legal representative.
These restrictions on transferability shall not apply to the extent such
restrictions are not at the time required for the Plan to continue to meet
the requirements of Rule 16b-3 under the Securities Exchange Act of 1934
(the "1934 Act"), or any successor Rule.
(E) If a grantee ceases to be a Director of the Corporation for any
reason, any outstanding stock options held by the grantee shall be
exercisable according to the following provisions:
(i) If a grantee ceases to be a Director of the Corporation for
any reason other than resignation, removal for cause or death, any
outstanding stock option held by such grantee shall be exercisable by the
grantee (but only if exercisable by the grantee immediately prior to
ceasing to be a Director) at any time prior to the expiration date of such
stock option or within three (3) years after the date the grantee ceases to
be a Director, whichever is the shorter period;
(ii) If during his term of office as a Director a grantee resigns
from the Board or is removed from office for cause, any outstanding stock
option held by the grantee which is not exercisable by the grantee
immediately prior to resignation or removal shall terminate as of the date
of resignation or removal, and any outstanding stock option held by the
grantee which is exercisable by the grantee immediately prior to
resignation or removal shall be exercisable by the grantee at any time
prior to the expiration date of such stock option or within three (3)
months after the date of resignation or removal of the grantee, whichever
is the shorter period;
(iii) Following the death of a grantee during service as a
Director of the Corporation, any outstanding stock option held by the
grantee at the time of death (whether or not exercisable by the grantee
immediately prior to death) shall be exercisable by the person entitled to
do so under the Will of the grantee, or, if the grantee shall fail to make
testamentary disposition of the stock option or shall die intestate, by the
legal representative of the grantee at any time prior to the expiration
date of such stock option or within one (1) year after the date of death of
the grantee, whichever is the shorter period;
(iv) Following the death of a grantee after ceasing to be a
Director and during a period when a stock option is exercisable under
clause (ii) above, the stock option shall be exercisable by such person
entitled to do so under the Will of the grantee or by such legal
representative at any time prior to the expiration date of the stock option
or within one year after the date of death, whichever is the shorter
period; and
(v) Following the death of a grantee after ceasing to be a
Director and during a period when a stock option is exercisable under
clause (iii) above, the stock option shall be exercisable by such person
entitled to do so under the Will of the grantee or by such legal
representative at any time during the shorter of the following two periods:
(i) until the expiration date of the stock option; or (ii) until one (1)
year after the grantee ceased being a Director or one year after the date
of death of the grantee (whichever is longer).
A stock option held by a grantee who has ceased to be a Director of the
Corporation shall terminate upon the expiration of the applicable exercise
period, if any, specified in this Section 4(E).
(F) All stock options shall be confirmed by an agreement, or an
amendment thereto, which shall be executed on behalf of the Corporation by
the Chief Executive Officer (if other than the President), the President or
any Vice President and by the grantee.
(G) Fair market value of the Common Stock shall be the mean between
the following prices, as applicable, for the date as of which fair market
value is to be determined as quoted in The Wall Street Journal (or in such
other reliable publication as the Committee, in its discretion, may
determine to rely upon): (i) if the Common Stock is listed on the New York
Stock Exchange, the highest and lowest sales prices per share of the Common
Stock as quoted in the NYSE-Composite Transactions listing for such date,
(ii) if the Common Stock is not listed on such exchange, the highest and
lowest sales prices per share of Common Stock for such date on (or on any
composite index including) the principal United States securities exchange
registered under the 1934 Act on which the Common Stock is listed, or (iii)
if the Common Stock is not listed on any such exchange, the highest and
lowest sales prices per share of the Common Stock for such date on the
National Association of Securities Dealers Automated Quotations System or
any successor system then in use ("NASDAQ"). If there are no such sale
price quotations for the date as of which fair market value is to be
determined but there are such sale price quotations within a reasonable
period both before and after such date, then fair market value shall be
determined by taking a weighted average of the means between the highest
and lowest sales prices per share of the Common Stock as so quoted on the
nearest date before and the nearest date after the date as of which fair
market value is to be determined. The average should be weighted inversely
by the respective numbers of trading days between the selling dates and the
date as of which fair market value is to be determined. If there are no
such sale price quotations on or within a reasonable period both before and
after the date as of which fair market value is to be determined, then fair
market value of the Common Stock shall be the mean between the bona fide
bid and asked prices per share of Common Stock as so quoted for such date
on NASDAQ, or if none, the weighted average of the means between such bona
fide bid and asked prices on the nearest trading date before and the
nearest trading date after the date as of which fair market value is to be
determined, if both such dates are within a reasonable period. The average
is to be determined in the manner described above in this Section 4(G). If
the fair market value of the Common Stock cannot be determined on the basis
previously set forth in this Section 4(G) for the date as of which fair
market value is to be determined, the Committee shall in good faith
determine the fair market value of the Common Stock on such date. Fair
market value shall be determined without regard to any restriction other
than a restriction which, by its terms, will never lapse.
(H) The obligation of the Corporation to issue shares of the Common
Stock under the Plan shall be subject to (i) the effectiveness of a
registration statement under the Securities Act of 1933, as amended, with
respect to such shares, if deemed necessary or appropriate by counsel for
the Corporation, (ii) the condition that the shares shall have been listed
(or authorized for listing upon official notice of issuance) upon each
stock exchange, if any, on which the Common Stock may then be listed and
(iii) all other applicable laws, regulations, rules and orders which may
then be in effect.
Subject to the foregoing provisions of this Section 4 and the other
provisions of the Plan, any stock option granted under the Plan shall be
subject to such restrictions and other terms and conditions, if any, as
shall be determined, in its discretion, by the Committee and set forth in
the agreement referred to in Section 4(F), or an amendment thereto; except
that in no event shall the Committee or the Board have any power or
authority which would cause the Plan to fail to be a plan described in Rule
16b-3(c)(2)(ii), or any successor Rule.
SECTION 5
ADJUSTMENT AND SUBSTITUTION OF SHARES
If a dividend or other distribution shall be declared upon the Common Stock
payable in shares of the Common Stock, the number of shares of the Common
Stock set forth in Section 3, the number of shares of the Common Stock then
subject to any outstanding stock options and the number of shares of the
Common Stock which may be issued under the Plan but are not then subject to
outstanding stock options on the date fixed for determining the
stockholders entitled to receive such stock dividend or distribution shall
be adjusted by adding thereto the number of shares of the Common Stock
which would have been distributable thereon if such shares had been
outstanding on such date.
If the outstanding shares of the Common Stock shall be changed into or
exchangeable for a different number or kind of shares of stock or other
securities of the Corporation or another corporation, whether through
reorganization, reclassification, recapitalization, stock split-up,
combination of shares, merger or consolidation, then there shall be
substituted for each share of the Common Stock set forth in Section 3, for
each share of the Common Stock subject to any then outstanding stock option
and for each share of the Common Stock which may be issued under the Plan
but which is not then subject to any outstanding stock option, the number
and kind of shares of stock or other securities into which each outstanding
share of the Common Stock shall be so changed or for which each share shall
be exchangeable.
In case of any adjustment or substitution as provided for in the first two
paragraphs of this Section 5, the aggregate option price for all shares
subject to each then outstanding stock option prior to such adjustment or
substitution shall be the aggregate option price for all shares of stock or
other securities (including any fraction) to which such shares shall have
been adjusted or which shall have been substituted for such shares. Any
new option price per share shall be carried to at least three decimal
places with the last decimal place rounded upwards to the nearest whole
number.
If the outstanding shares of the Common Stock shall be changed in value by
reason of any spin-off, split-off or split-up, or dividend in partial
liquidation, dividend in property other than cash or extraordinary
distribution to holders of the Common Stock, the Committee shall make any
adjustments to any then outstanding stock option which it determines are
equitably required to prevent dilution or enlargement of the rights of
grantees which would otherwise result from any such transaction.
No adjustment or substitution provided for in this Section 5 shall require
the Corporation to issue or sell a fraction of a share or other security.
Accordingly, all fractional shares or other securities which result from
any such adjustment or substitution shall be eliminated and not carried
forward to any subsequent adjustment or substitution.
Except as provided in this Section 5, a grantee shall have no rights by
reason of any issue by the Corporation of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of
shares of stock of any class, the payment of any stock dividend or any
other increase or decrease in the number of shares of stock of any class.
SECTION 6
ADDITIONAL RIGHTS IN CERTAIN EVENTS
(A) Definitions.
For purposes of this Section 6, the following terms shall have the
following meanings:
(1) The term "Person" shall be used as that term is used in
Sections 13(d) and 14(d) of the 1934 Act as in effect on the effective date
of the Plan.
(2) "Beneficial Ownership" shall be determined as provided in
Rule 13d-3 under the 1934 Act as in effect on the effective date of the
Plan.
(3) A specified percentage of "Voting Power" of a company shall
mean such number of the Voting Shares as shall enable the holders thereof
to cast such percentage of all the votes which could be cast in an annual
election of directors (without consideration of the rights of any class of
stock other than the common stock of the company to elect directors by a
separate class vote); and "Voting Shares" shall mean all securities of a
company entitling the holders thereof to vote in an annual election of
directors (without consideration of the rights of any class of stock other
than the common stock of the company to elect directors by a separate class
vote).
(4) "Tender Offer" shall mean a tender offer or exchange offer
to acquire securities of the Corporation (other than such an offer made by
the Corporation or any Subsidiary), whether or not such offer is approved
or opposed by the Board.
(5) "Continuing Directors" shall mean a director of the
Corporation who either (a) was a director of the Corporation on the
effective date of the Plan or (b) is an individual whose election, or
nomination for election, as a director of the Corporation was approved by a
vote of at least two-thirds of the directors then still in office who were
Continuing Directors (other than an individual whose initial assumption of
office is in connection with an actual or threatened election contest
relating to the selection of directors of the Corporation which would be
subject to Rule 14a-11 under the 1934 Act, or any successor Rule).
(6) "Section 6 Event" shall mean the date upon which any of the
following events occurs:
(a) The Corporation acquires actual knowledge that any
Person other than the Corporation, a Subsidiary or any employee benefit
plan(s) sponsored by the Corporation or a Subsidiary has acquired the
Beneficial Ownership, directly or indirectly, of securities of the
Corporation entitling such Person to 30% or more of the Voting Power of the
Corporation;
(b) A Tender Offer is made to acquire securities of the
Corporation entitling the holders thereof to 30% or more of the Voting
Power of the Corporation; or
(c) A solicitation subject to Rule 14a-11 under the 1934
Act (or any successor Rule) relating to the election or removal of 50% or
more of the members of the Board or any class of the Board shall be made by
any person other than the Corporation or less than 51% of the members of
the Board shall be Continuing Directors; or
(d) The stockholders of the Corporation shall approve a
merger, consolidation, share exchange, division or sale or other
disposition of assets of the Corporation as a result of which the
stockholders of the Corporation immediately prior to such transaction shall
not hold, directly or indirectly, immediately following such transaction a
majority of the Voting Power of (i) in the case of a merger or
consolidation, the surviving or resulting corporation, (ii) in the case of
a share exchange, the acquiring corporation, or (iii) in the case of a
division or a sale or other disposition of assets, each surviving,
resulting or acquiring corporation which, immediately following the
transaction, holds more than 10% of the consolidated assets of the
Corporation immediately prior to the transaction;
provided, however, that (i) if securities beneficially owned by a grantee
are included in determining the Beneficial Ownership of a Person referred
to in paragraph 6(a), (ii) a grantee is required to be named pursuant to
Item 2 of the Schedule 14D-1 (or any similar successor filing requirement)
required to be filed by the bidder making a Tender Offer referred to in
paragraph 6(b) or (iii) if a grantee is a "participant" as defined in
Instruction 3 to Item 4 of Schedule 14A under the 1934 Act (or any
successor Rule) in a solicitation (other than a solicitation by the
Corporation) referred to in paragraph 6(c), then no Section 6 Event with
respect to such grantee shall be deemed to have occurred by reason of such
event.
(B) Acceleration of the Exercise Date of Stock Options
Notwithstanding any other provision contained in the Plan, in case any
"Section 6 Event" occurs all outstanding stock options (other than those
held by a person referred to in the provision to Section 6(A)(6)) shall
become immediately and fully exercisable whether or not otherwise
exercisable by their terms.
SECTION 7
EFFECT OF THE PLAN ON THE RIGHTS OF CORPORATION AND STOCKHOLDERS
Nothing in the Plan, in any stock option granted under the Plan, or in any
stock option agreement shall confer any right to any person to continue as
a Director of the Corporation or interfere in any way with the rights of
the stockholders of the Corporation or the Board of Directors to elect and
remove Directors.
SECTION 8
AMENDMENT AND TERMINATION
The right to amend the Plan at any time and from time to time and the right
to terminate the Plan at any time are hereby specifically reserved to the
Board, provided always that no such termination shall terminate any
outstanding stock options granted under the Plan, and provided further that
no amendment of the Plan shall (i) be made without stockholder approval if
stockholder approval of the amendment is at the time required for stock
options under the Plan to qualify for the exemption from Section 16(b) of
the 1934 Act provided Rule 16b-3, or any successor Rule, or by the rules of
any stock exchange on which the Common Stock may then be listed, (ii) amend
more than once every six months the provisions of the Plan relating to the
selection of the Directors to whom stock options are to be granted, the
timing of such grants, the number of shares subject to any stock option,
the exercise price of any stock options, the periods during which any stock
option may be exercised and the term of any stock option other than to
comport with changes in the Code or the rules and regulations thereunder or
(iii) otherwise amend the Plan in any manner that would cause stock options
under the Plan not to qualify for the exemption provided by Rule 16b-3, or
any successor Rule. No amendment or termination of the Plan shall, without
the written consent of the holder of a stock option therefore awarded under
the Plan, adversely affect the rights of such holder with respect thereto.
Notwithstanding anything contained in the preceding paragraph or any other
provision of the Plan or any stock option agreement, the Board shall have
the power to amend the Plan in any manner deemed necessary or advisable for
stock options granted under the Plan to qualify for the exemption provided
by Rule 16b-3 (or any successor rule relating to exemption from Section
16(b) of the 1934 Act), and any such amendment shall, to the extent deemed
necessary or advisable by the Board, be applicable to any outstanding stock
options theretofore granted under the Plan notwithstanding any contrary
provisions contained in any stock option agreement. In the event of any
such amendment to the Plan, the holder of any stock option outstanding
under the Plan shall, upon request of the Committee and as a condition to
the exercisability of such option, execute a conforming amendment in the
form prescribed by the Committee to the stock option agreement referred to
in Section 4(F) within such reasonable time as the Committee shall specify
in such request.
<PAGE>
Spencer's Restaurants, Inc.
106 Federal Road
Danbury, CT 06810
(203) 798-1390
January 21, 2000
2000 ANNUAL MEETING OF STOCKHOLDERS
Dear Stockholder:
On behalf of the Board of Directors, I cordially invite you to attend the
2000 annual meeting of Stockholders of Spencer's Restaurants, Inc. to be
held at 1:00 p.m., local time on February 9, 2000, at the Hartford Marriott
Hotel/Farmington, 15 Farm Springs Road, Farmington, Connecticut. A notice
of the meeting, a proxy statement and a proxy card accompany this letter.
At the meeting, you will be asked to consider and vote upon the election of
our directors and to approve the 1999 Stock Option Plan and the 1999 Non-
Employee Directors Stock Option Plan.
Your Board of Directors recommends that you vote FOR the election of the
nominees for director and FOR the approval of the 1999 Stock Option Plan
and the 1999 Non-Employee Directors Stock Option Plan.
Whether or not you plan to attend the meeting, please complete, sign and
date the accompanying proxy card and return it in the enclosed prepaid
envelope. If you attend the meeting, you my vote in person even if you
have previously returned your proxy card. Your prompt cooperation is
appreciated.
Sincerely yours,
Kenneth Berry
President, Chief Executive Officer
and Director
<PAGE>
SPENCER'S RESTAURANTS, INC.
Danbury, Connecticut
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS ON FEBRUARY 9, 2000
The undersigned hereby appoints as proxies, Kenneth Berry and Stephan A.
Stein, or either of them, each with the power to appoint his substitute,
and hereby authorizes them to vote, as designated on the reverse side, all
shares of capital stock of Spencer's Restaurants, Inc. (the "Company") held
of record by the undersigned on December 15, 1999 at the Annual Meeting of
Stockholders to be held on February 9, 2000 and any adjournments thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. IF NO DIRECTION IS GIVEN WITH RESPECT TO A PARTICULAR
PROPOSAL, THIS PROXY WILL BE VOTED FOR SUCH PROPOSAL. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSALS.
PLEASE MARK, SIGN, AND RETURN THIS PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES OF
AMERICA.
1. Election of Directors.
/ / FOR ALL NOMINEES / / WITHHOLD / / FOR ALL EXCEPT
NOMINEES: Kenneth Berry, Nicolo Ottomanelli, Stephan A. Stein
NOTE: If you do not wish your shares voted "For" a particular nominee,
mark the "For All Except" box and strike a line through the nominee(s)
name(s). Your shares will be voted for the remaining nominee(s).
2. To approve the Spencer's Restaurants, Inc. 1999 Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
3. To approve the Spencer's Restaurants, Inc. 1999 Non-Employee Directors
Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting.
Date: _____________________, 2000
__________________________________
Stockholder sign here
__________________________________
Co-owner sign here
Please sign exactly as your name appears on
the books of the Company. Joint owners
should each sign personally. Trustees and
other fiduciaries should indicate the
capacity in which they sign, and where more
than one name appears, a majority must sign.
If a corporation, this signature should be
that of an authorized officer who should
state his or her title.
