Former eUniverse CEO Wages Proxy Battle to Replace Board

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Former eUniverse CEO Wages Proxy Battle to Replace Board

WALL STREET WEST

Former eUniverse Inc. Chairman and Chief Executive Brad Greenspan has escalated his battle against the company he ran until stepping down in October by launching a proxy fight to replace the eUniverse board.

In a filing with the Securities and Exchange Commission, Greenspan nominated his own slate of candidates for the board, which is up for re-election at the annual meeting on Jan. 29.

Last month, Greenspan resigned from the board after he wasn’t re-nominated for a seat. He then filed suit against eUniverse in Delaware Chancery Court, claiming that an $8 million investment in the company by VantagePoint Venture Partners was really an “entrenchment scheme” to shift control from existing shareholders.

VantagePoint’s investment, in the form of preferred shares that are convertible into a 30 percent stake in eUniverse, would dilute Greenspan’s 22.3 percent holding if they were converted.

In last week’s filing, Greenspan said the board offered him a new contract if he supported the VantagePoint deal. But when he refused to give his backing and tried to negotiate another cash infusion package, current president and longtime Greenspan lieutenant Brett Brewer and other directors forced him out.

Greenspan declined to comment beyond the filings.

EUniverse officials also declined to discuss the feud. In a press release, the company defended itself against Greenspan’s charges, accusing him of trying to “derail” efforts to clean up the firm and return to Nasdaq, which delisted the stock in August. Last May, eUniverse disclosed a slew of accounting errors that led to a restatement of earnings that were reported during Greenspan’s tenure.

In its press release, the company said Greenspan turned against the VantagePoint deal when the possibility arose that he would lose his job, then tried to wrangle a long-term contract that would have doubled his salary. When eUniverse decided to go forward with the deal without feathering Greenspan’s nest he threatened to resign, the company said.

Greenspan did not designate himself for election to eUniverse’s board. Among his roster of nominees: TDK Mediactive Chief Executive Vincent Bitteti and Ken Shapiro, president of Artisan Entertainment until its purchase by Lions Gate Entertainment last month.

RiShawn Biddle

Falling Flat

Could the sweet taste of success be spoiling Calabasas-based Cheesecake Factory Inc. and Century City-based California Pizza Kitchen Inc.?

Andrew M. Barish, an analyst with Banc of America Securities in San Francisco, seems to think so. Barish dropped BofA’s ratings on Cheesecake Factory and California Pizza Kitchen to sell from hold last week on fears the companies’ stock is overvalued and will likely come down in the next several months.

Barish also lowered his ratings on several other restaurant chains, citing concerns of “ebullient expectations” and “a high potential for increased costs in 2004.” He wrote in his Jan. 6 report that Cheesecake and CPK shares are selling at more than 20 percent above 2004 target prices.

For CPK, Barish noted concerns about “a loss of focus” because founders Larry Flax and Richard Rosenfield retook the reigns as co-chief executives and are pursuing several new initiatives.

“It could be a year with many new initiatives such as menu, prototype design, new growth vehicles such as ASAP and LA Food Show and infrastructure changes and development,” Barish wrote. “We worry that all of this activity could cause some operating dislocations and/or expenses that are not fully anticipated.”

As for Cheesecake Factory, Barish said the focus on opening new restaurants could prove too expensive to maintain, and he said the Grand Luxe Caf & #233; concept isn’t the solution the company hoped it would be for its growth challenges.

“We believe, given the complexity in opening the Cheesecake Factory’s large and customized restaurants, it is becoming more apparent that the traditional means of growth for the company could be more challenging going forward,” Barish wrote.

Still, when it comes to Cheesecake, there doesn’t seem to be full agreement on Wall Street. Smith Barney Citigroup analyst Mark Kalinowski on Jan. 5 raised Cheesecake to hold from sell because of the chain’s success in opening 14 new restaurants in 2003.

As of Jan. 7, Cheesecake Factory’s stock was trading at $42.97, down 2.4 percent year-to-date but up 16.7 percent over the previous 52 weeks.

California Pizza Kitchen stock stood at $19.31, down 4 percent year-to-date and 26.1 percent below its year-ago level.

Andy Fixmer

Rear Guard Effort

Efforts by executives of Staar Surgical Co. to put to rest questions about its implantable contact lenses failed to reassure investors last week, as the company’s stock remained at depleted levels.

On Jan. 6, the Monrovia-based company disclosed it had received a warning letter from the Food and Drug Administration about quality control procedures and problems with one of its lenses.

The stock fell 18 percent on the news.

In a conference call Jan. 7, Chief Executive David Bailey said steps had been taken to resolve some of the problems, and to find out why patients were experiencing blurry vision, tears and other vision problems.

He also said he expected the company to be fully able to address the agency’s concerns and believed Staar was still on track to gain approval to sell a mass market version of its implantable contact lens later this year.

Bailey’s efforts failed to calm investors, who continued to drive the stock down. By the Jan. 8 close, it had fallen to $8.92, a 20 percent cumulative decline. The stock reached a high of $15.44 on July 7, 2003.

Laurence Darmiento

Retail Expansion

Froley Revy Investment Co., a long-time

convertible bond specialist, has created a new four-member group to sell convertible securities to investors through broker-dealers.

Previously, Los Angeles-based Froley Revy had concentrated mainly on institutional clients. The money management firm had doubled its funds under management in the past year to $4.1 billion after being picked as a sub-adviser for two funds managed by Nuveen Institutional Advisory Corp. of Chicago.

Convertible securities offer investors a fixed rate of return, along with the added possibility of conversion if the value of the company’s common stock increases.

Kate Berry

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