1
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INFORMATION REQUIRED IN PROXY STATEMENT(Rule 14a-101)
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OFProxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(AMENDMENT NO. )(Amendment No. 1)
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FAMILY STEAK HOUSES OF FLORIDA, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Itsin its Charter)
- --------------------------------------------------------------------------------FAMILY STEAK HOUSES OF FLORIDA, INC.
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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2
FAMILY STEAK HOUSES OF FLORIDA, INC.
2113 FLORIDA BOULEVARD
NEPTUNE BEACH, FLORIDA 32266[Letterhead of Family Steak Houses of Florida, Inc.]
NOTICE OF ANNUALSPECIAL MEETING OF SHAREHOLDERS
You are cordially invited to attend the Annual Shareholders' MeetingDecember 24, 1997
DEAR SHAREHOLDERS:
The Board of Directors of Family Steak Houses of Florida, Inc.
has called a special meeting of shareholders to be held at the Sea
Turtle Inn, One Ocean Boulevard, Atlantic Beach, Florida 32233, on
Wednesday, July 2,Tuesday, February 24, 1997 at 10:11:00 a.m., for the limited purpose
of:
1. Electing Directors;
2. Approving an amendment toAmending the Company's Articles of Incorporation to
increase
the number of shareseffect a one-for-five reverse stock split of the
Company's common stock authorized for issuance
by an additional ten million shares ("Proposal 2");
3. Considering a shareholder proposal to opt out of the Florida
"Control Share Act"; and
4. Transacting such other business as may properly come before the
meeting.stock.
The Board of Directors has fixed the close of business on
May 8,December 26, 1997 as the record date for determining shareholders
entitled to vote at the Meeting.this special meeting. Only shareholders of
record at the close of business on that date will beare entitled to vote
at the Meeting.
The vote of every shareholder is important.this special meeting.
Whether or not you plan to attend the Meeting,special meeting, please
complete the enclosed proxy and return it promptly so that your
shares will be represented. Sending in your proxy will not prevent
you from voting in person at the Meeting.
/s/ Lewis E. Christman, Jr.special meeting.
By order of the Board of Directors,
Lewis E. Christman, Jr.
President & CEO
Date: May 23,and Chief Executive Officer
December 24, 1997 3
FAMILY STEAK HOUSES OF FLORIDA, INC.
2113 FLORIDA BOULEVARD
NEPTUNE BEACH, FLORIDA 32266Florida Boulevard
Neptune Beach, Florida 32233
(904) 249-4197
PROXY STATEMENT
FOR
1997 ANNUALfor
FEBRUARY 1998 SPECIAL MEETING OF SHAREHOLDERS
GENERAL INFORMATION
The solicitation ofThis Proxy Statement (this "Statement") and the enclosed proxy
is madeare being furnished by and on behalf of the Board of Directors (the "Board") of
Family Steak Houses of Florida, Inc., a Florida corporation (the
"Company") to the holders of outstanding shares of the Company's
common stock, par value $.01 per share (the "Common Stock"), in
connection with the solicitation of proxies to be usedvoted at the 1997 Annual Meetinga
special meeting of Shareholders, which will be held at the Sea
Turtle Inn, One Ocean Boulevard, Atlantic Beach, Florida, at 10:00 a.m. on
Wednesday, July 2, 1997. The principal executive officesshareholders of the Company to be held Tuesday,
February 24, 1998 (the "Special Meeting") and any adjournments
thereof. This Statement and the accompanying proxy are locatedbeing
distributed to shareholders on or about January 15, 1998.
The sole purpose of the Special Meeting is to obtain a
shareholder vote on the following proposal:
To approve a one-for-five reverse split of the Common Stock
and amend the Company's Articles of Incorporation to implement
such a reverse split.
The Board unanimously supports this proposal and recommends that
the shareholders vote in favor of the proposal either in person or
by proxy.
PROPOSAL TO EFFECT A REVERSE SPLIT AND
AMEND THE COMPANY'S ARTICLES OF INCORPORATION
General
The Board of Directors has determined that it would be
advisable to amend the Company's Articles of Incorporation to
effect a one-for-five reverse stock split of the Company's issued
and outstanding Common Stock, at 2113par value of $0.01 (the "Reverse
Split").
Subject to shareholder approval, the Board of Directors has
approved an amendment to the Company's Articles of Incorporation
which would restate Article IV of the Articles of Incorporation and
result in one post-split share of Common Stock ("Post-Split Shares
of Common Stock") being issued in exchange for every five shares of
Common Stock issued and outstanding on the effective date of the
Reverse Split ("Pre-Split Shares of Common Stock"). The text of
such amendment is set forth in Appendix A hereto. The Reverse Split
will not affect the number or par value of the authorized shares of
the Company's preferred stock, which will remain at 10,000,000
shares of Preferred stock, $0.01 par value per share.
The Reverse Split will become effective on the date of filing
Articles of Amendment to the Articles of Incorporation of the
Company (the "Amendment") with the Secretary of State of Florida,
Boulevard, Neptune Beach,Division of Corporations (the "Effective Date"). Each share of
Common Stock then issued and outstanding would automatically,
without any action on the part of the holders of such Common Stock,
become and be converted into one-fifth of a share of Common Stock.
If the Amendment is approved and management determines to proceed
with the Reverse Split, management will use its discretion to
determine when to file the Amendment. Management expects to file
the Amendment immediately following the Special Meeting, provided
the Amendment is approved by the shareholders. See "Purposes of
the Reverse Split."
Principal Effects of Reverse Split
Based upon the 11,081,000 shares of Common Stock outstanding
as of December 26, 1997, the Reverse Split would decrease the
outstanding shares of Common Stock by approximately 80%, and, once
effective, the Reverse Split would result in approximately
2,216,200 Post-Split Shares of Common Stock outstanding. Fractional
shares will be settled by rounding up to the next whole share.
Similarly, the aggregate number of shares of Common Stock reserved
for issuance upon exercise of warrants and options would decrease
from approximately 1,425,947 shares to approximately 285,189.
Each outstanding option or warrant will automatically become
an option or warrant, as the case may be, to purchase 20% of the
number of shares subject to the option or warrant immediately prior
to the Reverse Split at an exercise price which is five times the
exercise price of the option or warrant immediately prior to the
Reverse Split. In addition, the shares available for issuance
under the Company's Incentive Stock Option Plan and Director Stock
Option Plan will be reduced by approximately 80% to reflect the
Reverse Split, and the other relevant terms and provisions of the
Company's stock option plans will be appropriately adjusted to
reflect the Reverse Split. The Company will obtain a new CUSIP
number for the Common Stock effective at the time of the Reverse
Split. Following the effectiveness of the Reverse Split, the
Company will provide each record holder of Common Stock information
to enable such holder to obtain replacement stock certificates.
The Reverse Split will not affect the par value of the
authorized Common Stock. The number of authorized shares of Common
Stock will be reduced by 80% to 4,000,000 shares. The Reverse
Split will not affect the number or par value of the authorized
shares of preferred stock. The terms of the Post-Split Shares of
Common Stock will be the same as the terms of the Pre-Split Shares
of Common Stock, and subject to the provisions for the settlement
of fractional shares, as described below, consummation of the
Reverse Split will not result in a change in the relative equity
interest in the Company or the voting power or the rights,
preferences or privileges of the holders of Common Stock.
Under the Rights Agreement dated as of March 18, 1997 (the
"Rights Agreement") between the Company and ChaseMellon Shareholder
Services, LLC, as rights agent (the "Rights Agent"), each share of
Common Stock also evidences a Right (as defined in the Rights
Agreement) until the occurrence of certain events as specified in
the Rights Agreement. If the shareholders approve the Amendment
and the Reverse Split occurs, the Rights Agreement provides that
the Rights associated with each share of Common Stock will be
proportionally adjusted so that each share of Common Stock will
then evidence five Rights under the Rights Agreement.
The following table illustrates the principal effects of the
Reverse Split discussed in the preceding paragraphs:
Number of Shares of Common Stock
BEFORE AFTER
REVERSE SPLIT REVERSE SPLIT
Authorized 20,000,000 4,000,000
Outstanding 11,081,000 2,216,200
Subject to Outstanding
Options and Warrants 928,700 185,740
Reserved for Issuance in
Connection with Future
Grants Under Option Plans 806,947 161,389
Available for Future
Issuance by Action of
the Board (after giving
effect to the above
reservations) 7,183,353 1,436,671
Assuming the Reverse Split is approved and management
determines to proceed with the Reverse Split, the Company will file
Articles of Amendment, with the Secretary of State of Florida,
32266.Division of Corporations, effecting the Reverse Split. See
"Purposes of the Reverse Split."
Purposes of the Reverse Split
The approximate
mailingCompany is currently quoted on the NASDAQ Stock Market as
a National Market Security ("NASDAQ/NMS"). Under new requirements
for NASDAQ/NMS securities that become effective on February
23,1998, the Common Stock must maintain a minimum $1 bid price to
be eligible for continued quotation on NASDAQ/NMS. On December 22,
1997, the closing bid price of the Pre-Split Shares of Common Stock
was $.625. If the Company fails to maintain such $1 minimum bid
price, the Common Stock will be subject to delisting. In that
event, the liquidity of the Common Stock could be impaired, through
delays in the timing of transactions, reduction in the news media's
coverage of the Company, lack of investment analyst interest in
covering the Company, applicability of certain sales practice
requirements on brokers-dealers, and the price of Common Stock may
be lower than might otherwise be obtained. See Record Date and
Voting Securities - Possible Delisting from The Nasdaq National
Stock Market.
The Reverse Split would decrease the number of shares of
Common Stock outstanding and presumably increase the per share
market price for the Post-Split Shares of Common Stock. The Board
believes that the relatively low market price per share of the
Common Stock may impair the marketability of the Common Stock to
institutional investors and members of the investing public. In
theory, the number of shares outstanding should not, alone affect
the marketability of the Common Stock, the type of investor who
acquires them, or the Company's reputation in the financial
community. In practice, however, this is often not the case,
because many investors look upon low-priced shares as speculative
in nature and, as a matter of policy, avoid investment in such
stocks. These factors may not only affect the liquidity of the
Common Stock, but may also impair the Company's ability to raise
additional capital through the sale of equity securities.
The Board also recognizes that many leading brokerage firms
are reluctant to recommend lower-priced securities to their
clients. In addition, a variety of brokerage house policies and
practices currently tend to discourage individual brokers within
firms from dealing in lower-priced stocks. Some of those policies
and practices relate to the payment of broker's commissions,
regulations regarding sales to certain types of investors and time-
consuming procedures that make the handling of lower priced stocks
economically unattractive to brokers. The structure of brokerage
commission tends to adversely impact holders of lower-priced stocks
because brokerage commissions on a sale of a lower-priced stock
generally represent a higher percentage of the sales price than the
commissions on higher-priced stocks.
The Board of Directors hopes that the decrease in the number
of shares of Common Stock outstanding resulting from the Reverse
Split and the anticipated corresponding increased price per share
will stimulate interest in the Common Stock, promote greater
liquidity for the Company's shareholders and result in a price
level for the Post-Split Shares of Common Stock that will better
assure that the Company will maintain its NASDAQ/NMS listing. The
Board also hopes that the Reverse Split will result in a price
level for the Post-Split Shares of Common Stock that will mitigate
the present reluctance, policies and practices of brokerage firms,
and diminish the adverse impact of trading commissions, on the
potential market for the Common Stock.
However, there is no assurance that the Reverse Split will
achieve the desired results, that the price per Post-Split Share of
Common Stock will increase proportionately with the decrease in the
number of shares, or that any price increase can be sustained for a
prolonged period of time. The market often "discounts" a stock
after a reverse split so that the price per share post-reverse
split is less than the proportionate decrease in the number of
shares. In addition, it is possible that the liquidity of the
Post-Split Shares of Common Stock may be adversely affected by the
reduced number of shares outstanding if the proposed Reverse Split
is effected. Further, the Reverse Split might leave some
shareholders with one or more "odd-lots" of the Common Stock (stock
in amounts less than 100 shares). These shares may become more
difficult to sell, or require a greater commission per share to
sell, than shares in even multiples of 100.
The Board of Directors believes that the Reverse Split is in
the best interest of the Company and its shareholders.
Exchange of Certificates and Elimination of Fractional Share
Interests
On the Effective Date, each five Pre-Split Shares of Common
Stock will automatically be combined and changed into one Post-
Split Share of Common Stock. No additional action on the part of
the Company or any shareholder will be required in order to effect
the Reverse Split and, beginning on the Effective Date, each
certificate representing Pre-Split Shares of Common Stock will
represent for all purposes one fifth of that number of Post-Split
Shares of Common Stock. Shareholders will be requested to exchange
their certificates representing shares of Common Stock held prior
to the Reverse Split for new certificates representing Shares of
Common Stock issued as a result of the Reverse Split. The
Company's Transfer Agent will act as the Company's exchange agent
in implementing the exchange of stock certificates.
Shareholders will be furnished the necessary materials and
instructions to effect such exchange promptly following the
Effective Date. Certificates representing Pre-Split Shares of
Common Stock subsequently presented for transfer will not be
transferred on the books and records of the Company but either will
be returned to the tendering person for exchange or processed as a
transfer of Post-Split shares of Common Stock. SHAREHOLDERS
SHOULD NOT SUBMIT ANY CERTIFICATE UNTIL REQUESTED TO DO SO.
No scrip or fractional Post-Split Shares of Common Stock will
be issued to any shareholder in connection with the Reverse Split.
In lieu of issuance of any fractional shares that would otherwise
result from the Reverse Split, the Company will issue to any
shareholder that would otherwise receive fractional shares one (1)
additional share of Common Stock.
Shareholders are encouraged to surrender their certificates
for certificates evidencing whole Post-Split Shares of Common Stock
as promptly as possible after receipt of instructions.
Federal Income Tax Consequences of the Reverse Split
The following general description of the federal income tax
consequences is based on the Internal Revenue Code of 1986, as
amended, the applicable treasury regulations promulgated
thereunder, judicial authority and current administrative rulings
and practices as in effect on the date of this Proxy Statement, all of
which are subject to change and any such change could apply
retroactively.
This discussion is May 23, 1997.
The proxyfor general information only and does not
purport to deal with all aspects of federal income taxation that
may be revokedrelevant to the holders of Common Stock and does not discuss
the consequences which may apply to special classes of taxpayers
(e.g., non-resident aliens, broker-dealers, tax exempt
organizations, banks or insurance companies). Shareholders are
urged to consult their own tax advisors to determine the particular
federal, state, local and foreign tax consequences to them.
The combination and exchange of each five Pre-Split Shares of
Common Stock into one Post-Split share of Common stock should be a
tax-free transaction, and no gain or loss will be recognized to the
Company or its shareholders as a result of the Reverse Split. The
holding period of the Pre-Split Shares of Common Stock will be
transferred to the Post-Split Shares of Common Stock received in
exchange therefor, provided that the shareholder held the Pre-Split
Shares of Common Stock as a capital asset at anythe time beforeof the
exchange.
This discussion should not be considered as tax or investment
advice, and the tax consequences of the Reverse Split may not be
the same for all shareholders. Shareholders should consult their
own tax advisors to ascertain their individual federal, state,
local and foreign tax consequences.
Recommendation of the Board
The Board believes that it is exercised by giving
notice of revocation toin the Secretarybest interest of the
Company. The shares representedCompany and its shareholders, that the Common Stock continue to be
listed for trading on the NASDAQ National Market System. Failure
to approve the proposed Amendment will likely subject the Common
Stock to delisting by proxies inNASDAQ for failure to comply with the
formrecently revised listing requirements.
YOUR BOARD OF DIRECTORS UNANIMOUSLY SUPPORTS THE
PROPOSAL AND RECOMMENDS A VOTE "FOR" APPROVAL OF THE
REVERSE SPLIT AND THE RELATED AMENDMENT.
Proxies solicited by the Board of Directors will be voted atfor
approval of the meeting. Where a choice is specified with respectamendment unless shareholders specify to a matterthe
contrary in their proxies or specifically abstain from voting on
this matter.
The Board of Directors reserves the right to be voted upon,abandon the
shares representedproposed Amendment and Reverse Split without further action by the
proxy will be voted in accordanceshareholders at any time before the filing of the Amendment with
such
specification. If no choice is specified, such shares will be voted for the electionSecretary of directors, Proposals 2State of Florida, Division of Corporations,
notwithstanding authorization of the proposed Amendment and 4 and againstReverse
Split by the shareholder proposal.shareholders.
RIGHTS OF DISSENTING SHAREHOLDERS
The proposed Amendment does not create dissenters' rights
under the Florida Business Corporation Act.
RECORD DATE AND VOTING SECURITIES
Record Date.
The Board of Directors has fixed the close of business on May 8,December 26,
1997 as the record dateDate for determination of shareholders entitled to vote at the meeting. Holders of the Company's common stock, par value $0.01 per share (the
"Common Stock") as of May 8, 1997 will be entitled to one vote for each share
held, with no shares having cumulative voting rights. No other class of the
Company's securities is entitled to vote at the meeting.Special Meeting. As of May 8,December
26, 1997, the Company had outstanding 11,030,00011,081,000 shares
of Common Stock. VOTING PROCEDURESEach share of Common Stock entitles its record
holder to one vote on each matter submitted to a vote at the
Special Meeting. The shares do not have cumulative voting rights.
Possible Delisting of Securities from The Nasdaq Stock Market
The Common Stock is currently quoted on the Nasdaq National Market.
On November 23, 1997, the Nasdaq National Market and the Securities
and Exchange Commission (the "Commission") approved changes to
the listing and maintenance requirements. Under the revised
maintenance requirements, the Company's qualification for
continued listing on the Nasdaq National Market after February 23,
1998 requires that (i) the Company maintain at least $4.0 million
in net tangible assets, (ii) the minimum bid price of the Common
Stock be $1.00 or more per share, (iii) there be at least 750,000
shares in the public float, valued at a minimum $5.0 million or
more, (iv) the Common Stock have at least two active market makers
and (v) the Common Stock be held by at least 400 holders.
If the Company is unable to satisfy the Nasdaq National
Market's maintenance requirements, the Company's securities may be
delisted from the Nasdaq National Market. In such event, trading,
if any, in the Common Stock would thereafter be conducted in the
over-the-counter markets in the so-called "pink sheets" or the
National Association of Securities Dealers, Inc.'s "Electronic
Bulletin Board." Consequently, the liquidity of the Company's
securities could be impaired, not only in the number of shares that
could be bought and sold, but also through delays in the timing of
the transactions and a reduction in the number and quality of
security analysts' and the news media's coverage of the Company.
In addition, if the Company's securities were to be delisted
from the Nasdaq National Market, the Company's securities could
become subject to Rule 15g-9 under the Securities Exchange Act of
1934, as amended (the "Exchange Act") relating to penny stocks,
which imposes additional sales practice requirements on
broker-dealers which sell such securities to persons other than
established customers and "accredited investors" (generally,
individuals with net worth in excess of $1,000,000 or annual
incomes exceeding $200,000, or $300,000 together with their
spouses). Commission regulations define a "penny stock" to be any
equity security that is not listed on The Nasdaq Stock Market or a
national securities exchange and that has a market price (as
therein defined) of less than $5.00 per share or with an exercise
price of less than $5.00 per share, subject to certain exceptions.
If the Company's securities were subject to the rules on penny
stocks, the market liquidity for the Company's securities could be
adversely affected.
The Company also faces a greater risk of delisting as a result
of increased ownership of its Common Stock by certain shareholders.
Glen F. Ceiley, Bisco Industries, Inc. and the Bisco Industries,
Inc. Profit Sharing and Savings Plan collectively own 11.8% of the
Company's outstanding shares of Common Stock. For purposes of
calculating the Company's compliance with the public float
requirement, described above, shareholders beneficially owning 10%
or more of the Company's Common Stock are considered insiders and
their holdings are excluded from the calculation of public float.
As a consequence, if the market discounts the Company's Common
Stock following the reverse split by approximately 17% from recent
trading prices, then the Company may fail to comply with the
minimum public float requirement and be subject to delisting for
that reason. The Company would not face delisting for these
reasons if the level of ownership by Ceiley and the Bisco entities
were reduced by two percent, to a level of ownership less than 10%.
There is a possibility that the Company's Common Stock will
fail to meet the revised maintenance requirements for the Nasdaq
National Market, but could continue to be listed and traded on the
Nasdaq's SmallCap Market. Although Nasdaq has not issued any final
rules which would permit such a transition, when Nasdaq has revised
its maintenance requirements in the past, it has permitted
companies which fail to meet certain maintenance requirements for the
Nasdaq National Market to drop down to the Nasdaq SmallCap Market.
There are certain disadvantages to trading on the SmallCap
Market as opposed to the National Market. Many local newspapers do
not carry listings of SmallCap issues, which is where the majority
of the Company's shareholders follow the stock. The Company would
lose the automatic Blue Sky exemption it currently enjoys from
being on a national market, which would result in additional
expenses to the Company for future stock offerings of any kind,
including distributions of the Rights. The stock would no longer
be automatically marginable for most shareholders. Also, the
Company would still be required to meet certain initial
requirements for membership on the SmallCap Market, including
payment of an entrance fee.
THE SPECIAL MEETING
The attendance, in person or by proxy, of the holders of a
majority of the outstanding Shares is necessary to constitute a
quorum at the Special Meeting. If a quorum exists at the Special
Meeting, the Amendment will be approved if a majority of the
outstanding shares of Common Stock vote in favor of the Amendment.
Under Florida law, abstentions and shares referred to as "broker
or nominee non-votes" (i.e., shares held by brokers or nominees as
to which instructions have not been received from the beneficial
owners or persons entitled to vote and the Amendedbroker or nominee does
not have discretionary authority to vote on a particular matter)
are treated as shares of Common Stock that are present and Restated Bylawsentitled
to vote for purposes of determining the Company (the
"Bylaws"),presence of a majorityquorum. For
purposes of determining the outcome of any matter as to which the
proxies reflect abstentions or broker or nominee non-votes, shares
of the Common Stock represented by such proxies are treated as not
present and not entitled to vote represented by person or proxy, constitutes a quorum at a meeting of
shareholders.
Under the Florida Business Corporation Act, directors are elected by a
plurality of the affirmativeon that subject matter and
therefore will not be considered when counting votes cast byon the
matter (even though those shares are considered entitled to vote
in the
election at a meeting at which afor quorum is present. Article IX of the Company's
Articles of Incorporation, as amended (the "Articles"), provides that an
amendmentpurposes and may be entitled to such Articles must be approved at a shareholders' meeting by at
leastvote on other matters.)
If less than a majority of the stock entitled to vote onoutstanding shares are represented
at the amendment. Accordingly,
Proposal 2 and the proposal by shareholder Glen F. Ceiley to opt out of the
Florida Control Share Act by amending the Articles (the "Ceiley Proposal") must
be approved by the affirmative vote ofSpecial Meeting, a majority of the shares of Common Stock
entitledso represented may
adjourn the Special Meeting from time to vote on these matters. Other matters are approved if a quorum exists
and the votes cast favoring the action exceed the votes opposing the action.
Under Florida law, abstentions and broker non-votes have no effect on the
election of directors. Abstentions will have the effect of a negative vote on
each of the proposed amendments to the Articles. A broker non-vote generally
occurs when a broker who holds shares in street name for a customer does not
have authority to vote on certain non-routine matters under the rules of the
market on which the stock is traded because the beneficial owner of the shares
held in street name has not provided voting instructions on the matter. Under
applicable market rules, brokers will not have authority to votetime without instruction from the beneficial owner on matters which are subject to a counter
solicitation, and thus a broker non-vote will have the same effect as a vote
against such proposals. With respect to other proposals on which brokers have
the authority to vote the shares without instruction from the beneficial owner,
a broker non-vote will have the same effect as a vote against such proposals.
4further
notice.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND OF MANAGEMENT
The table set forth below presents certain information regarding
beneficial ownership of the Company's Common StockShares (the Company's only voting
security), as of December 18, 1997, by
(i) each shareholder known to the
Company to own, or have the right to acquire within sixty (60)
days, more than five percent (5%) of the Common Stock
outstanding and (ii) all officers and director nominees of the Company as a
group. The shares of
Common Stock.
Amount of
Name and Address of Common Stock beneficially owned by each director nominee
are shown in the table beginning on page 4Percent
Beneficial Owner Beneficially Owned of this Proxy Statement.
AMOUNT OF
COMMON
NAME AND ADDRESS OF STOCK BENEFICIALLY PERCENT OF
BENEFICIAL OWNER OWNED CLASS
- ------------------- ------------------ ----------
Bisco Industries, Inc....................................... 1,070,890(1) 9.7%
704 W.Class
=====================================================================
Glen F. Ceiley 1,308,995 11.8%
C/o Bisco Industries, Inc.
704 West Southern Avenue
Orange, CA 92865
Heartland Advisors, Inc. 900,000(1) 8.1%
790 North Milwaukee Street
Milwaukee, WI 53202
Cerberus Partners, L.P. 700,000(3) 5.9%
950 Third Avenue,
Orange, CA 92865
Heartland Advisors, Inc..................................... 900,000(2) 8.2%
790 N. Milwaukee Street
Milwaukee, WI 53202
Cerberus Partners, L.P...................................... 700,000(3) 6.0%
950 Third Ave., 20th Floor
New York, New York 10022
All Officers and Director................................... 458,891(4) 4.1%
Nominees as a Group (6 Persons)
- ---------------
(1) Based on information set forth in Amendment No. 2 to Schedule 13D filed with
the Securities and Exchange Commission (the "Commission") on May 19,Form 4 dated December 8,
1997, Bisco Industries, Inc. ("Bisco") owns 457,100 shares;at least 682,335
Shares; Glen F. Ceiley, President and a director of Bisco,
owns 95,600 shares,108,470 Shares, individually; and the Bisco Industries,
Inc. Profit Sharing and Savings Plan (the "Bisco Plan") owns
518,190 shares. Mr.Shares. The amount does not include 15,000 Shares
owned individually by Stephen Catanzaro, an executive officer
of Bisco. According to the Schedule 13D of Ceiley as amended
on December 12, 1997, Ceiley has the sole power to vote and
dispose of the shares of Common StockShares he owns individually and the power to
vote and to dispose of the sharesShares owned by Bisco and the Bisco
Plan.
(2) Based on information contained in a Schedule 13G filed with
the Commission as of February 12, 1997, Heartland Advisors,
Inc. claimed sole voting and dispositive power with respect to
all 900,000 sharesShares and shared voting and dispositive power
with respect to none of the Common Stock.Shares.
(3) Represents shares of Common Stock issuable upon the exercise
of certain stock purchase warrants issued October 1, 1988, and
March 14, 1995, pursuant to which the holders thereof have the
right to purchase an aggregate of up to 700,000 sharesShares for
$.40 per share. None of such shares are outstanding.
(4) Includes an aggregate 262,250 of shares of Common Stock whichissuable under
are outstanding.
SECURITY OWNERSHIP OF MANAGEMENT
The table below presents certain information regarding
beneficial ownership of the Company'sShares as of December 18, 1997, by
each executive officer and director of the Company and all
executive officers and directors have the right to acquire
immediately or within sixty days (60) upon the exercise of certain options
granted pursuant to the Company's various stock option plans.
BOARD OF DIRECTORS AND STANDING COMMITTEES
The business of the Company is under the general management of a Board of
Directors as provided by the Florida Business Corporation Act. In accordance
with the Bylaws of the Company, which empower the Board of Directors to appoint
committees, the Board of Directors has appointed an Audit Committee and an
Executive Compensation Committee.
The Audit Committee's basic functions are to assist the Board of Directors
in discharging its fiduciary responsibilities to the shareholders and the
investment community in the preservation of the integrity of the financial
information published by the Company, to maintain free and open means of
communication between the Company's directors, independent auditors and
financial management, and to ensure the independence of the independent
auditors. Currently, the members of the Audit Committee are Directors Gray and
Glickstein, each of whom are non-employee Directors, and Director Christman. The
Audit Committee held one meeting during fiscal year 1996. All members of the
Audit Committee attended this meeting.
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The Executive Compensation Committee administers the Company's employee
stock option plans and is responsible for granting qualified stock options to
officers and managerial employees of the Company. The non-employee members of
the Executive Compensation Committee are responsible for establishing the salary
and annual bonuses paid to the Chief Executive Officer and, in consultation with
the CEO, the salaries of the other executive officers of the Company. The
current members of the Executive Compensation Committee are Directors Glickstein
and Gray, each of whom are non-employee Directors, and Director Christman. The
Executive Compensation Committee held three meetings during fiscal year 1996.
All members of the Committee attended these meetings.
The Board of Directors held 9 meetings during fiscal year 1996. Each of the
directors attended at least 75% of the meetings of the Board of Directors.
The Board of Directors does not have a Nominating Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Christman, the Company's Chief Executive Officer, served as a member of
the Executive Compensation Committee in 1996. He does not participate in any
discussions or decisions regarding his own compensation.
Director Glickstein is a partner with the law firm of Glickstein &
Glickstein, P.A. which was retained by the Company in fiscal year 1996 and may
be retained to provide legal advice to the Company from time to time in the
future.
DIRECTOR COMPENSATION
Three of the five director nominees are not employees of the Company. In
order to attract and retain highly qualified independent directors through an
investment interest in the Company's future success, the Company enacted in 1985
a non-qualified Stock Option Plan for Non-Employee Directors (the "Director's
Plan").
Each director eligible under the Directors Plan annually receives an option
to purchase 9,000 shares of Common Stock. Typically options are granted on the
first business day of each calendar year, at an option exercise price per share
equivalent to a price such that the aggregate fair market value on the date of
grant for all shares subject to the options exceeds the aggregate option
exercise price by the amount of $10,000. Options granted under the Director's
Plan are immediately exercisable and expire five years from the date of grant.
On January 1, 1997 options were granted to Directors Gray and Glickstein
for the purchase of 9,000 shares each at a purchase price of $.01 per share.
Since the price of the stock was $.5938 on January 2, 1997, the Company granted
an additional 8,130 shares to each eligible director at a purchase price of $.01
per share so that the market value of all options granted in 1997 exceeded the
option exercise price by $10,000.
Directors who are full-time employees of the Company receive $100 for each
Board of Directors meeting attended. Directors who are not employees of the
Company receive a fee of $500 for each Board of Directors meeting attended. No
fees are awarded directors for attendance at meetings of the Audit or Executive
Compensation Committees of the Board of Directors.
The Company has entered into a one-year consulting agreement with Mr.
Martin, a director of the Company, in connection with his retirement as an
officer of the Company, for a retainer of $13,500 and continued medical and
other insurance benefits. Under the consulting agreement, Mr. Martin also agreed
not to take certain actions to compete with the Company or to interfere with its
business relationships for a period of two years after termination of the
consulting agreement. If the consulting agreement is terminated by the Company
"without cause" (as defined in such agreement), the Company must pay the balance
of any consulting fee for the remaining term of the agreement.
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MATTERS TO BE ACTED UPON
Proposal 1: Election of Directors
The Board of Directors recommends that the shareholders vote for the
election of the five (5) nominees listed below to serve as directors until the
next Annual Meeting of Shareholders and until their successors are elected and
qualified. Each of the nominees presently is serving as a director of the
Company. Mr. Christman was appointed in February 1993 and elected by the
shareholders at the 1993 annual meeting. Directors Gray and Glickstein were
appointed in June 1994 and elected by the shareholders in August 1994. Director
Martin was elected by the shareholders in June 1995. Mr. Alexander was appointed
to the Board in July 1996. Should any one or more of the nominees become
unavailable to accept nomination or election as a director, the enclosed proxy
will be voted for such other person or persons as the Board of Directors may
recommend, unless the Board reduces the number of directors.group.
COMMON STOCK
BENEFICIALLY OWNED PERCENT
AS OF OF
NAME BUSINESS EXPERIENCE AND AGE MAY 8, 1997(1) CLASS(2)
---- --------------------------- ------------------ -----------Number of
Shares
which may
Number of be Acquired Total Shares
Shares within 60 Beneficially Percent of
Name Owned days(1) Owned Class
=========================================================================
Lewis E. Christman, Jr. President & CEO of the Company since 111,409 1.00%
April 1994. Purchasing consultant to the
Company from January 1994 to March 1994.
Partner, East Coast Marketing since 1990;
Chairman of the Board of Neptune
Marketing Inc. (food broker) from 1979 to
1989. Age 77.11,409 150,000 161,409 1.44%
Joseph M. Glickstein, Jr. Partner, Glickstein & Glickstein, law60,059 ------- 60,059 .54%
firm since 1950. Age 70.
Richard M. Gray Partner, Gray & Kelley, CPAs, since 1973.60,059 ------- 60,059 .54%
President & Director of Universal Marion
Corp. since 1973. Age 65.
Robert J. Martin Consultant to the Company since January 105,614(3) .95%
1997. Vice President of the Company from
April 1994 to January 1997. Vice
President of Steak House Construction
Corporation, the Company's wholly owned
construction subsidiary, since 1981. Age
68.52,614(2) 74,500 127,114 1.14%
Edward B. Alexander Vice President of Finance of the Company 94,500 .85%
since December 1996. Secretary/Treasurer
of the Company from November 1990 to
December 1996; Controller of the Company
from January 1989 to April 1990. Age 38.12,500 103,500 116,000 1.04%
All officers and directors
as a group (6 persons) 196,641 325,000 524,641 4.89%
- ---------------
(1) Included in such beneficial ownership areDoes not include options to purchase shares of Common Stock issuable
upon the exercise of certain optionsnot currently
exercisable immediately or within sixty (60) days of May 8,December 18, 1997,
as follows: Lewis E.including 50,000 shares subject to an option granted to Mr. Christman,
Jr., 100,000
shares; Robert J. Martin, 53,000 shares; Edward B.30,500 shares subject to options granted to Mr. Alexander,
82,000 shares.
(2) The percentages represent the total30,500 Shares subject to options granted to Mr.Martin and
15,250 shares subject to options granted to another executive
officer of the shares listed in the adjacent
column divided by the issued and outstanding shares of Common Stock as of
May 8, 1997, plus any stock options or warrants exercisable by such person
within 60 days following May 8, 1997.
(3)Company.
(2) Includes 5,800 shares owned by the spouse of Mr. Martin.
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There are no family relationships between anySOLICITATION OF PROXIES; REVOCATION
The cost of the nominees and executive
officerssolicitation of proxies will be borne by the
Company. There are no arrangements or understandings between any
directorIn addition to solicitation by mail, directors, officers
and any other person pursuant to which any of the nominees has been
nominated.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires certain officersemployees of the Company may, without additional
compensation, solicit proxies by mail, in person, by telephone and
its directors,facsimile or by other electronic means.
The Company plans to retain CIC, at an estimated fee of $5,000
plus reasonable disbursements, postage, filing reports, courier
charges, data transmissions and persons who beneficially own more than ten percent of any registered class of
the Company's equity securities, to file reports of ownership in such securities
and changes in ownership in such securities with the Commission and the Company.
Based solely on a review of the reports and written representations
provided to the Company by the above referenced persons, the Company believes
that during 1996 all filing requirements applicable to its reporting officers,
directors and greater than ten percent beneficial owners were timely satisfied.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The Executive Compensation Committee (the "Committee"), currently
consisting of Directors Christman, Glickstein and Gray, uses the following
objectives as guidelines for its executive compensation decisions: to provide a
compensation package that will attract, motivate and retain qualified
executives; to ensure a compensation mix that focuses executive behavior on the
fulfillment of annual and long-term business objectives; and to create a sense
of ownership in the Company that causes executive decisions to be aligned with
the best interests of the Company's shareholders.
The Company's compensation package in 1996 for its executive officers
consisted of base salary and stock option grants. The Committee (with Mr.
Christman abstaining) determined stock option awards and salary level for the
Company's Chief Executive Officer. The Chief Executive Officer, in consultation
with the Committee, made decisions regarding salary and annual bonuses and
recommendations regarding stock option grants to other executive officers of the
Company.
General Compensation Policies
In general, base salary levels are set at the minimum levels believed by
the Company's Chief Executive Officer to be sufficient to attract and retain
qualified executives when considered with the other components of the Company's
compensation structure.
The Company's Chief Executive Officer adjusts salary levels for executive
officers based on achievement of specific annual performance goals, including
personal, departmental and overall Company goals depending upon each officer's
specific job responsibilities. The Chief Executive Officer also uses his
subjective judgment, based upon such criteria as the executive's knowledge of
and importance to the Company's business, willingness and ability to accomplish
the tasks for which he or she was responsible, professional growth and
potential, the Company's operating earnings and an evaluation of individual
performance, in making salary decisions. Compensation paid to executive officers
in prior years is also taken into account. No particular weighting is applied to
these factors.
Each of the Committee and Chief Executive Officer may determine that the
Company's financial performance and individual achievements merit the payment of
annual bonuses. In recent years, no bonuses have been awarded to any officers of
the Company.
The non-employee members of the Committee determine stock option grants to
the Chief Executive Officer. The Committee determines annual stock option grants
to other executive officers and to other eligible employees based on
recommendations of the Chief Executive Officer. Stock options are intended to
encourage key employees to remain employedexpenses approved by the
Company, by providing them with
a long term interestto assist in the Company's overall performance as reflected by the
market pricesolicitation of proxies. The Company
will reimburse brokerage houses, banks, custodians and other
nominees and fiduciaries for out-of-pocket expenses incurred in
forwarding the Company's Common Stock. In making awards in 1996, the Chief
Executive Officerproxy materials to, and the Committee considered, without assigning a particular
weighting, the number of options previously granted to the executive, the
executive's salary, the Company's performance and the need for a long term focus
on improving shareholder value.
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The Committee will consider any federal income tax limitations on the
deductibility of executive compensation in reaching compensation decisions and
will seek shareholder approval where such approval will eliminate any
limitations on deductibility.
CEO Compensation
Mr. Christman has served as President and Chief Executive Officer of the
Company since April 1994. Considering the continued profitability of the Company
in 1996, the Company's successful debt refinancing, and the strategic vision for
the Company being developed and implemented by Mr. Christman, the Committee
(with Mr. Christman abstaining) recommended, and the Board of Directors
approved, an extension of Mr. Christman's Employment Agreement which maintains
his salary at $130,000 per year through June 1998.
Respectfully Submitted,
Lewis E. Christman, Jr.
Joseph M. Glickstein, Jr.
Richard M. Gray
EXECUTIVE PAY
The summary compensation table below sets forth a summary of the
compensation earned by the Company's chief executive officers from 1994 to 1996
(each a "Named Executive"). No disclosure of compensation paid to other
executive officers is required as the total salary and bonus paidobtaining
instructions relating to such executive officers does not exceed the reporting threshold of $100,000.
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
ANNUAL COMPENSATION ---------------------------------
------------------------------ SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) COMPENSATION(2) OPTIONS #(3) COMPENSATION($)(4)
--------------------------- ---- ------------ --------------- ------------ ------------------
Lewis E. Christman, Jr.......... 1996 $130,000 -0- -0- $ 1,625
President & CEO 1995 109,538 $20,000 200,000 488
1994 63,794 -0- 20,409 --
George F. Staudter.............. 1994 $ 38,654 -0- -0- $20,000
President & CEO, December 1993
to April 1994
Explanation of Columns:
(1) Salary: Total base salary paid during the year.
(2) Other Annual Compensation: Specific forms of cash and non-cash compensation
paid, awarded or earned not properly categorized as salary or bonus and
designated as Other Annual Compensation under the rules and regulations of
the Commission. The value of all personal benefits and perquisites received
by the Named Executives was less than the required reporting threshold,
except for an automobile allowance of $20,000 paid to Mr. Christman in 1995.
This automobile allowance is paid every other year under the terms of Mr.
Christman's Employment Agreement.
(3) Securities Underlying Options: Number of shares of Common Stock underlying
grants of options made during the year.
(4) All Other Compensation: All other compensation that does not fall under any
of the aforementioned categories. Amounts shown include $20,000 as severance
payment to Mr. Staudter upon his resignation,
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and contributions of $1,625 and $488 to the Company's 401(k) Plan on behalf
of Mr. Christman to match a portion of his deferred contributions in 1996
and 1995, respectively.
Option Exercises And Year-End Option Value
The following table sets forth information concerning the number and value
of unexercised options to purchase the Company's Common Stock held by the Named
Executive at fiscal year end.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR, AND YEAR-END OPTION VALUE
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FISCAL OPTIONS AT FISCAL
ACQUIRED YEAR-END (#) YEAR-END ($)
ON EXERCISE VALUE ----------------- -----------------
IN 1996 REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE (1)
---- ----------- -------- ----------------- -----------------
Lewis E. Christman, Jr..................... -- -- 100,000/100,000 $22,500/22,500
- ---------------
(1) Market value of underlying securities at year end ($.625 at December 31,
1996, the last trading day of the Company's fiscal year), minus the exercise
price of $.40.
EMPLOYMENT AGREEMENTS
In December 1996, the Company extended until June 19, 1998 its employment
agreement with Lewis E. Christman, Jr., providing for continued base
compensation of $130,000 per year, in addition to medical, disability and other
benefits in accordance with Company policy, such stock options as may be granted
by the Board of Directorsmaterials from, time to time and a bi-annual automobile
allowance. The agreement further provides that Mr. Christman will be entitled to
receive, in a lump sum, the salary due for the remaining term of the agreement
upon the Company's termination of his employment "without cause" (as defined in
such agreement).
INTERESTS OF CERTAIN PERSONS
In addition to other arrangements and agreements described elsewhere in
this Proxy Statement, the following arrangements and agreements between Company
and its officers and directors may be affected if the shareholder proposal
described below is duly approved by the shareholders and the partial tender
offer initiated by Bisco on March 6, 1997 is consummated.
On October 1, 1996, the Company entered into a two year employment
agreement with Edward B. Alexander pursuant to which he agreed to serve as the
Company's Chief Financial Officer and Treasurer for an annual salary of $90,000
plus benefits in accordance with Company policy and such stock options as may be
granted by the Board of Directors from time to time. The agreement further
provides that Mr. Alexander will be entitled to receive, in a lump sum, the
salary due for the remaining term of the agreement upon the Company's
termination of his employment "without cause" (as defined in such agreement).
The Company's Amended Employee Stock Option Plan and option agreements
executed thereunder provide that options granted thereunder become immediately
exercisable if a person acquires beneficial ownership of 33% or more of the
outstanding shares of the Company's Common Stock. Similarly, the Company's Long
Term Incentive Plan provides that options granted thereunder will become
immediately exercisable upon, among other events, any person's becoming the
beneficial owner directly or indirectly of 25% or more of the combined voting
power of the shares or the first purchase of the Company's shares pursuant to a
tender or exchange offer (other than a tender or exchange offer made by the
Company). The executive officers holding affected options, the number of
affected shares and the exercise price thereof were set forth in a table
included in the Company's Schedule 14D-9 previously provided to the
shareholders.
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COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
The Commission requires a five-year comparison of stock price performance
of the Company with both a broad equity market index and a published industry
index or peer group. The Company's total return compared with the NASDAQ market
index and the Media General Restaurant Index is shown on the following graph.
The Media General Restaurant Index includes 243 publicly held restaurant
companies.
This graph assumes that $100 was invested on January 1, 1992 and all
dividends were reinvested in the Company's Common Stock and the other indices.
Each of the indexes is weighted on a market capitalization basis at the time of
each reported data point.
Measurement Period Family Steak
(Fiscal Year Covered) Houses of Florida Industry Index NASDAQ Market
1991 100.00 100.00 100.00
1992 70.84 122.90 100.98
1993 66.67 134.29 121.13
1994 37.51 120.90 127.17
1995 104.17 165.23 164.96
1996 83.33 167.06 204.98
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Audit Committee has not yet recommended to the Board of Directors an
accounting firm to be engaged as independent auditor for the Company for 1997.
The firm of Deloitte & Touche, LLP, served as the independent accountants for
the Company for the fiscal year ending January 1, 1997. That firm has served as
the auditor for the Company since 1991. Representatives of Deloitte & Touche are
expected to be present at the Annual Meeting of Shareholders to respond to
appropriate questions.
Proposal 2. Amendment of Articles of Incorporation to Increase the Number
of Authorized Shares
The Board of Directors has voted unanimously to authorize an amendment to
the Company's Articles and to recommend such proposed amendment to the
shareholders for adoption. Proposal 2 would amend Part A of Article IV to
increase the number of shares of Common Stock authorized for issuance from 20
million to 30 million. The text of Proposal 2 is set forth in Appendix A and
will replace the current text of Part A of Article IV if approved.
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REASONS FOR AND EFFECTS OF THE ARTICLES AMENDMENT
As previously described in a mailing to shareholders on or about March 19,
1997, the Company has declared a distribution of Rights to each holder of Common
Stock as of March 19, 1997 under a Rights Agreement dated as of March 18, 1997
(the "Rights Agreement") with ChaseMellon Shareholder Services, Inc., as rights
agent (the "Rights Agent").
The Rights Agreement gives the Board of Directors the option of exchanging
one share of Common Stock for each Right or issuing additional shares of Common
Stock upon the exercise of the Rights upon the occurrence of certain events
described in the Rights Agreement.
The Board of Directors is seeking to amend the Articles to increase the
number of shares of Common Stock authorized for issuance so that it will have an
adequate number of shares of Common Stock to declare this one-for-one exchange
of Common Stock for Rights under the Rights Agreement. Currently, the number of
shares of Common Stock authorized for issuance is not sufficient to fully
implement this exchange under the Rights Agreement. In addition to having the
ability to issue the additional 10 million shares of Common Stock as part of an
exchange pursuant to the Rights Agreement, the Board may also issue these
additional shares from time to time for proper corporate purposes including
issuing shares under options and other incentive compensation plans, to declare
stock dividends, to make acquisitions and to raise additional capital. If the
shareholders approve Proposal 2, the Board of Directors may issue additional
shares of Common Stock without further shareholder approval except to the extent
required by the Articles, by Florida or federal securities laws, or by the
market on which the shares of Common Stock are listed at the time of the
issuance. In addition, any additional shares of Common Stock to be sold in a
public sale would have to be registered under the Securities Act of 1933, as
amended.
Prior to its obtaining shareholder approval of Proposal 2, if certain
triggering events outlined in the Rights Agreement occur, the Board may decide
to issue available shares upon exercise of the Rights or to exchange Rights on a
pro rata basis up to the number of shares of Common Stock currently available
for issuance with the remaining shares of Common Stock issuable subject to
shareholder approval of Proposal 2. If the shareholders do not approve Proposal
2, the Board will consider such other options as may be available to it under
the Rights Agreement and applicable law in light of the then current
circumstances.
The one-for-one exchange of shares of Common Stock or other issuance of
additional sharesowners of
the Common Stock underStock.
The giving of a proxy does not preclude the Rights Agreement orright to vote in
person at the issuance
of additional shares of Common Stock in certain other circumstances could render
it more difficult or discourage an attempt to gain control ofSpecial Meeting should any shareholder giving the
Company, even
if the takeover attemptsproxy so desire. Shareholders may be considered desirable by some of the Company's
shareholders. Tender offers are often maderevoke their proxy at prices higher than the prevailing
market price of the corporation's stock. Similarly, accumulations of the
Company's shares in the open market by persons seeking to acquire control of the
corporation may increase the market price to levels that are higher than might
otherwise be the case. Accordingly, the deterrence of such takeover attempts may
deprive shareholders of opportunities to sell their shares at temporarily higher
market prices. As the shareholders are aware, the Company has recently been the
target of an unsolicited tender offer by Bisco commenced on March 6, 1997 and
currently scheduled to expire on May 23, 1997. If Proposal 2 is approved and the
Board issues additional shares under the Rights Agreement, Bisco may decide not
to acquire any shares of the Common Stock pursuant to its tender offer.
The Board believes that adopting Proposal 2 is prudent, advantageous and in
the best interests of shareholders because it will enable the Board to fully
implement the protections provided by the Rights Agreement. If the circumstances
change and the Board determines that the Bisco offer is in the best interests of
the Company and its shareholders, it may decide not to issue any additional
shares, redeem the Rights as provided by the Rights Agreement and take other
action it deems advisable. The Board also believes the advantages of having the
ability to fully implement the Rights Agreement and to issue additional shares
from time
to time for general corporate purposes outweigh any disadvantage
relating to discouraging potential acquirors from attempting to obtain control
of the Company.
The foregoing summary description of Proposal 2 is not intended to be
complete and is qualified by referenceprior to the complete text ofexercise thereof, either in person at the amendment,
which appears as Appendix A. In addition, the foregoing
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description of the Rights Agreement is not intended to be complete and is
qualifiedSpecial
Meeting or by reference to the full text of the Rights Agreement which has been
filedfiling with the Commission as an exhibit to the Company's Registration Statement
on Form 8-A dated March 19, 1997. A copy of the Rights Agreement can be obtained
by writing the Secretary of the Company at itsthe
Company's principal executive offices.
Proposal 2 mustoffice a written revocation or duly
executed proxy bearing a later date; however, no such revocation
will be approvedeffective until written notice of the revocation is
received by the affirmative vote of a majority of the
shares of Common Stock entitled to vote on the matter.
THE BOARD OF DIRECTORS BELIEVES THAT THE PROPOSED AMENDMENT IS IN THE BEST
INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS A VOTE
FOR APPROVAL OF PROPOSAL 2.
Proposal 3. Shareholder Proposal to Opt Out of the Florida Control Share
Act
Glen F. Ceiley, the President, a director and sole shareholder of Bisco,
has notified the Company that he will present the following amendmentat or prior to the Company's Articles for consideration at the Company's 1997 Annual Meeting of
Shareholders. The address and number of shares of the Company's Common Stock
beneficially owned by Mr. Ceiley are set forth above under "Security Ownership
of Certain Beneficial Owners and Management." The Ceiley Proposal to amend the
Articles is as follows:
WHEREAS, the Florida "Control Share Act" eliminates the right of
a holder of a significant percentage of the Company's voting
securities from voting all such shares unless, subject to certain
exceptions, such rights are approved by the shareholders or Board of
Directors.
WHEREAS, the Company is permitted to "opt out" of the provisions
of the "Control Share Act" by an amendment to its Articles of
Incorporation or Bylaws;
NOW, THEREFORE, be it
RESOLVED, that the Articles of Incorporation of the Company be
amended to provide that Section 607.0902 of the Florida Business
Corporation shall not apply to control-share acquisitions of shares of
the Company.
Adoption of the Ceiley Proposal will make the provisions of Section
607.0902 of the Florida Business Corporation Act (the "Control Share Act")
inapplicable to control share acquisitions of shares of the Company's Common
Stock. As the shareholders are aware, Mr. Ceiley through his company Bisco
commenced an unsolicited tender offer on March 6, 1997 which is currently
scheduled to expire on May 23, 1997. He is also seeking shareholder consent to a
number of proposals, including a proposal to opt out of the Control Shares Act
through an amendment to the Company's Bylaws. The Board unanimously opposes each
of the proposals set forth in the Bisco consent solicitation and has mailed to
each shareholder a Revocation of Consent Statement outlining the reasons for its
opposition.
Approval of the Ceiley Proposal requires the affirmative vote of a majority
of the shares of Common Stock entitled to vote on the matter.
BACKGROUND ON THE CONTROL SHARE ACTSpecial Meeting.
OTHER MATTERS
Pursuant to the Control Share Act, an "acquiring person" who makes a
"control share acquisition" of shares of an "issuing public corporation" may not
exercise voting rights for any "control shares" unless (1) the corporation's
articles of incorporation or bylaws provide that the Control Share Act does not
apply to control share acquisitions of the corporation's shares, (2) the
acquisition is consummated in certain circumstances including an acquisition of
shares approved by the issuing public corporation's board of directors, or (3)
such voting rights are conferred by the affirmative vote of a majority of the
issuing public corporation's disinterested shareholders at a meeting or by
written consent of such shareholders.
A "control share acquisition" is defined as the acquisition, directly or
indirectly, by any person of ownership of, or the power to direct the exercise
of voting power with respect to, issued and outstanding control shares. "Control
shares" are shares that, except for the Control Share Act, would have voting
power
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with respect to shares of an issuing public corporation that, when added to allSection 607.0702, Florida Statutes, no business
other shares of the issuing public corporation owned by a person or in respect
to which that person may exercise or direct the exercise of voting power, would
entitle that person, immediately after acquisition of the shares, directly or
indirectly, alone or as part of a group, to exercise or direct the exercise of
the voting power of the issuing public corporation in the election of directors
within any of the following ranges of voting power: (i) one-fifth or more but
less than one-third of all voting power; (ii) one-third or more but less than a
majority of all voting power; and (iii) a majority or more of all voting power.
All shares, the beneficial ownership of which is acquired within ninety (90)
days before or after the date of acquisition of beneficial ownership of shares
which result in a control share acquisition, and all shares the beneficial
ownership of which is acquired pursuant to a plan to make a control share
acquisition, are deemed to have been acquired in the same acquisition.
An "issuing public corporation" means a corporation that has (i) 100 or
more shareholders, (ii) its principal place of business, principal office or
substantial assets in Florida, and (iii) either (a) more than 10% of its
shareholders resident in Florida, (b) more than 10% of its shares owned by
residents of Florida, or (c) 1,000 shareholders resident in Florida. The Company
qualifies as an "issuing public corporation."
The above provisions do not apply to a control share acquisition of shares
of an issuing public corporation whose articles of incorporation or bylaws in
effect before such control share acquisition provide that the Control Share Act
does not apply to control share acquisitions of its shares. The Company's
Articles and Bylaws currently do not exclude the Company from the protections
provided by the Control Share Act. If the Ceiley Proposal is adopted, the
Control Share Act will no longer apply to control share acquisitions of the
shares of the Company's Common Stock, whether by Mr. Ceiley, his company, Bisco,
or otherwise.
SUPPORTING STATEMENT
Mr. Ceiley submitted the following statement in support of the Ceiley
Proposal:
"The Company currently is subject to the provisions of Section
607.0902 of the Florida Business Corporation Act, also known as the
'Control Share Act'. Under this law, except in certain limited
circumstances, the right of a shareholder to vote shares of the Company's
common stock acquired above certain specified thresholds of ownership (20%,
33%, and 50%) is eliminated, unless voting rights for such shares have been
approved by either the shareholders of the corporation or its board of
directors. The 'Control Share Act' permits a corporation to "opt out" of
its provisions by amending its articles of incorporation or bylaws to
provide that the act shall not apply to control-share acquisitions of
shares of the corporation. The proponent of this proposal encourages all
shareholders to vote for this resolution and affirm the rights of all
shareholders to vote their shares regardless of the percentage of the
outstanding shares of the Company's common stock owned by them.
The proponent of this proposal believes that all shareholders of a
public corporation should have equal voting rights, regardless of the
number of shares owned. The proponent believes that the possibility of
owning shares without voting rights decreases the attractiveness of the
Company's shares to an investor who might be interested in paying a premium
price for a significant number of shares, since such an investor would not
be likely to do so if such shares could not be voted on matters submitted
to the shareholders for approval. In addition, the proponent believes that
requiring a shareholder to seek approval from the shareholders or Board of
Directors to vote shares acquired above certain thresholds, the Florida
'Control Share Act' erects an unnecessary barrier to a shareholder seeking
to obtain a significant interest in the Company's shares. In summary, it
decreases potential purchases which in turn decreases share price and
shareholder value.
The proponent urges all shareholders to vote for this resolution."
RECOMMENDATION OF THE BOARD
The Board recommends AGAINST the Ceiley Proposal to opt out of the Control
Share Act for a number of reasons. The Board believes the Control Share Act was
enacted to protect Florida corporations and their shareholders from a person
seeking to acquire a substantial block of shares of a public company and to
limit
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such person's ability to control the corporation. Without the Control Share Act,
a person could acquire a controlling block of a corporation's stock through
periodic purchases at current market prices without paying a premium to
shareholders for such control. The Control Share Act also encourages a person
interested in acquiring control of a public corporation to negotiate with its
board of directors. The Company's Board believes that its ability to negotiate
with a potential acquiror is significantly greater than that of the
shareholders, individually. While a bidder may make an offer that is higher than
the current market price, without negotiations with the corporation's board of
directors, the premium may not compensate for the long-term prospectsdescribed in this notice and other
factors affecting the corporation's value. The Board is also in a better
position to discuss and evaluate other aspects of the offer with the acquiror,
such as the acquiror's experience, future strategies for the corporation,
financial resources, and other matters that can affect the value of the offer.
The Board also objects to Mr. Ceiley's use of the shareholder proposal
process to obtain voting rights for shares of the Company's stock he seeks to
acquire. The Control Share Act provides that voting rightsstatement may
be granted by a
shareholder resolution. If voting rights are accorded by shareholder resolution,
rather than an amendment to the Articles as proposed by Mr. Ceiley, and if the
acquiror acquired a majority or more of the Common Stock and certain other
conditions are met, the shareholders would have the right to assert dissenters'
rights and obtain the "fair value" of their shares of the Company's Common
Stock. By seeking an amendment to the Articles rather than using the process
specified in the Control Share Act, Ceiley may deprive the shareholders of their
dissenters' rights to obtain the "fair value" of their shares which, under the
Control Share Act, may not be less than the highest price paid per share in a
control share acquisition.
Furthermore, the Control Share Act provides that in approving a shareholder
resolution to accord voting rights to control shares, "interested shares" are
excluded from the votes entitled to be cast. As defined under the Control Share
Act, interested shares are those held by (1) an acquiring person or a member of
a group with respect to a control share acquisition, (2) the Company's officers,
and (3) directors who are also employees of the Company. By proposing an
amendment to the Articles rather than a shareholder resolution, Mr. Ceiley
retains the ability to vote his shares and those of Bisco on his proposal and
circumvents the protection provided by Florida law of excluding interested
shares from the vote.
The Board believes that approval of the Ceiley Proposal will facilitate
further acquisitions of the Company's stock by Mr. Ceiley, Bisco and their
affiliates. As previously noted in the Schedule 14d-9 which was mailed to each
shareholder on or about March 19, 1997 and in the Company's Revocation of
Consent Statement mailed to the shareholders on or about May 1, 1997, the Board
has serious concerns about Mr. Ceiley's and Bisco's acquisition of control of
the Company. These concerns include, without being limited to, the Board's
uncertainty regarding Mr. Ceiley's motive for seeking to acquire effective
control of the Company, the lack of information provided about his strategies
for the Company, his stated potential strategy to dispose of the Company's
restaurant operations which could lead to the Company's loss of its exclusive
franchise rights in North and Central Florida, the disruptive influence of Mr.
Ceiley and Bisco on the Company's relationships with its franchisor and lender,
the lack of depth in Bisco's management team, Mr. Ceiley's lack of experience
and expertise in the franchised restaurant industry and with public companies,
Bisco's apparently limited financial resources and the relatively slight premium
offered in the tender offer compared to the trading price of the Company's
common stock immediately prior to announcement of the tender offer.
The Board has also learned that Mr. Ceiley has a history of unsuccessful
hostile offers, including an offer to acquire Bell Industries, Inc., a large
distributor of electronic components, which was rejected by Bell as not being
credible, and a second unsolicited offer to acquire RB&W Corporation ("RB&W"),
an Ohio-based maker and distributor of fasteners and metal parts. RB&W also
rejected the offer citing Bisco's failure to identify the source and viability
of its financing. Mr. Ceiley then submitted a shareholder proposal recommending
the active and immediate solicitation of offers to sell RB&W. Mr. Ceiley's
proposal was included in RB&W's proxy statement for the 1992 annual meeting of
shareholders and was overwhelmingly rejected by the RB&W shareholders. In both
of these situations, Mr. Ceiley's offer likely resulted in additional costs to
these companies and diversion of management time without Mr. Ceiley paying any
amounts to these companies' shareholders through his offers. The Board believes
that the Bisco tender offer and the Ceiley
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Proposal also waste the Company's time and money and urges its shareholders to
vote against the Ceiley Proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY OPPOSES THE CEILEY PROPOSAL AND
RECOMMENDS A VOTE AGAINST THE CEILEY PROPOSAL.
Proposal 4. Other Matters
In its Revocation of Consent Statement, the Company stated its intention to
propose an amendment to the Company's Articles to divide the Board of Directors
into three classes, permit removal of directors only for cause, and require an
80% vote of directors then in office to fill vacancies occurring in the Board of
Directors. The Board of Directors has given serious, thoughtful consideration to
the number and complexity of choices to be made by the shareholders and in an
effort to reduce the amount of time required for shareholders to properly
consider the issues, has decided to postpone consideration of this amendment to
the Articles of Incorporation.
The Board of Directors is not aware of any other matters to comebrought before the meeting.Special Meeting. If any other business should
come before the meeting,Special Meeting, the persons named onin the enclosed proxy
will have discretionary authority to vote such proxy in accordance with
their best judgment.
SHAREHOLDER PROPOSALS
Proposals of shareholders to be presented at the 1998 Annual
Meeting of Shareholders must be received by the Company (addressed
to the attention of the Secretary) not later than January 23, 1998,
to be considered for inclusion in the Company's proxy materials
relating to that meeting. To be submitted at the meeting, any such
proposal must be a proper subject for shareholder action under the
laws of the State of Florida, and must otherwise conform to
applicable regulations of the Commission. Excluding shareholder
proposals to be included in the Company's proxy materials, a
shareholder is required to comply with the Company's Bylaws with
respect to any proposal to be brought before an annual meeting.
The Amended and Restated Bylaws currentlygenerally require that each written
proposal be delivered to or mailed and received by the Secretary of
the Company at its principal executive office not less than sixty
(60) days nor more than ninety (90) days prior to the anniversary
date of the prior year's annual meeting, among other conditions.
The notice must include certain additional information as specified
in the Amended and Restated Bylaws.
SOLICITATIONWe appreciate your support and encouragement.
PROXY
SOLICITED ON BEHALF OF PROXIES
This proxy is solicitedTHE BOARD OF DIRECTORS OF
FAMILY STEAK HOUSES OF FLORIDA, INC.,
TO BE VOTED AT THE FEBRUARY 24, 1998 SPECIAL MEETING OF SHAREHOLDERS
The undersigned, a holder of shares of common stock, par value $.01 per
share (the "Shares"), of Family Steak Houses of Florida, Inc. (the
"Company"), acting with respect to all of the Shares held by the Boardundersigned
at the close of Directorsbusiness on the Record Date, hereby acts as follows
concerning the proposal set forth below:
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") RECOMMENDS A
VOTE FOR THE FOLLOWING PROPOSAL:
PROPOSAL TO APPROVE THE REVERSE SPLIT AND AMEND THE ARTICLES OF
INCORPORATION Resolution that the Articles of the Company. The cost
of soliciting proxies will be borne by the Company. The Company has retained
Corporate Investor Communications ("CIC") to assist in the solicitation of the
revocation of shareholder consents, proxies for the 1997 Annual Meeting and
other shareholder communications for a fee of $25,000 plus reasonable
disbursements, postage, filing fees, courier charges, data transmissions and
other expenses approved by the Company. Following the original mailing of the
proxy solicitation material, regular employeesIncorporation of the Company may solicit
proxies by mail, telephone, facsimile and other electronic means. The Company
may request brokerage houses and other nominees or fiduciariesbe
amended to forward copies
of its proxy material and Annual Report to beneficial owners of stock held in
their names, and the Company will reimburse them for reasonable out-of-pocket
expenses incurred with respect to such action.
By Ordereffect a one-for-five reverse split of the BoardCompany's issued and
outstanding Common Stock.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
(IMPORTANT INSTRUCTIONS -- PLEASE READ CAREFULLY)
Please indicate your support of Directors
/s/ Lewis E. Christman, Jr.
Lewis E. Christman, Jr.
Presidentthe proposal by marking the box beside "FOR"
and CEOsigning, dating and mailing this proxy card promptly, using the enclosed,
postage paid envelope. If you need additional proxy cards or assistance,
call CIC toll free at (800) 932-8498.
UNLESS OTHERWISE INDICATED ABOVE, THIS PROXY CARD REVOKES ALL PRIOR PROXIES
GIVEN WITH RESPECT TO THE PROPOSAL SET FORTH HEREIN.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE PROXY STATEMENT OF
THE COMPANY, DATED ___________, 1997, IN CONNECTION WITH THE FEBRUARY 24, 1998
SPECIALMEETING OF SHAREHOLDERS. UNLESS YOU SPECIFY OTHERWISE, BY SIGNING AND
DELIVERING THIS PROXY CARD TO THE COMPANY, YOU WILL BE DEEMED TO HAVE VOTED
FOR THE PROPOSAL.
Date:
May 23, 1997
13
16Signature (title, if any)
Signature (if held jointly)
Please sign your name above exactly as it appears hereon and date your card.
When shares are registered in the name of more than one person, the proxy card
should be signed by all named holders. When signing as attorney,
executor, administrator, trustee or guardian, please given full title as
such. If a corporation, please sign in full corporate name by president or
authorized officer. If a partnership, please sign in partnership name by
authorized person.
APPENDIX A
TEXT OF PROPOSED REVISION TO PART A OF ARTICLE IV OF THE ARTICLES OF
INCORPORATION:The full text of the proposed Amendment to Company's Articles
of Incorporation is set forth below:
A. Common Stock. ThirtyFour Million (30,000,000)(4,000,000) shares of Common
Stock having a par value of one cent ($.01) per share.
The whole or any part of the Common Stock of this
corporation shall be payable in lawful money of the
United States of America, or in property, labor or
services at a just valuation to be fixed by the Board of
Directors.
A-1
17
APPENDIX B
FAMILY STEAK HOUSES OF FLORIDA, INC.
2113 Florida Boulevard, Neptune Beach, Florida 32266
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Michael Walters and Patrick Fekula
(the "Proxy Agents"), and each of them individually, the attorneys, agents, and
proxies of the undersigned with full power of substitution, to vote all of the
shares of stock of Family Steak Houses of Florida, Inc. (the "Company"), owned
by the undersigned on May 8, 1997, at the 1997 Annual Meeting of Shareholders of
the Company, to be held at 10:00 a.m. on July 2, 1997 and any adjournment
thereof, with all powers that the undersigned would possess if personally
present, pursuant to the following directions:
(Continued and to be signed on the reverse side)
FOLD AND DETACH HERE
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THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY PLEASE MARK [X]
THE UNDERSIGNED. IF NO DIRECTION IS GIVEN THIS PROXY WILL BE VOTED FOR YOUR VOTES AS
PROPOSALS 1, 2, AND 4 AND AGAINST PROPOSAL 3. THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1,2, AND 4 AND AGAINST PROPOSAL 3.
1. ELECTION OF DIRECTORS 2. AMENDMENT TO COMPANY ARTICLES TO 3. PROPOSAL TO OPT OUT OF FLORIDA CONTROL SHARE ACT
INCREASE AUTHORIZED COMMON SHARES FOR proposal to Opt out of Florida Control Share Act
FOR all nominees listed FOR the proposal to amend Articles AGAINST proposal to Opt out of Florida Control
(except as marked in the increase authorized common shares Share Act.
contrary, see instruction AGAINST the proposal to amend
below [ ] Articles to increase authorized
common shares.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ] [ ]
WITHHOLD AUTHORITY to vote 4. OTHER MATTERS
for all nominees listed FOR Proxy Agents to vote in their
below [ ] comcretion as to such other materials
may properly come before the meeting
Edward B. Alexander, WITHHOLD AUTHORITY for Proxy Agents
Lewis E. Christman, Jr. to vote in their discretion as to
Joseph M. Glickstein, Jr. such other matters as may presently
Richard M. Gray and come before the meeting
Robert J. Martin
WITHHOLD
FOR AUTHORITY
[ ] [ ]
(To withhold authority to vote for any
individual nominee, strike out that
nominee's name)
The undersigned hereby revokes any proxy
heretofore given with respect to said
stock and acknowledges receipt of the
Notice of Annual Meeting and Proxy
Statement dated May 8, 1997.
----------------------------------------
Signature(s)
-----------------------------------------
Signature(s)
-----------------------------------------
Title or Capacity
DATED: , 1997
---------------------------
IMPORTANT: Please date this proxy and
sign exactly as your name or names appear
hereon. If the shares are held jointly,
signatures should include both names.
Personal representatives, executors,
guardians and others signing in a
representative capacity should give full
title. PLEASE RETURN PROMPTLY IN THE
ACCOMPANYING ENVELOPE