SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant X
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement
X Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
VICORP Restaurants, Inc.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Stanley Ereckson, Jr.
------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
X $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
$500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3)
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
____________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
____________________________________________________________________________
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:<F1>
____________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
____________________________________________________________________________
[FN]
<F1> Set forth the amount on which the filing fee is calculated and state how
it was determined.
Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
__________________________________________________________________
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__________________________________________________________________
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__________________________________________________________________
(4) Date Filed:
__________________________________________________________________
VICORP RESTAURANTS, INC.
400 West 48th Avenue
Denver, Colorado 80216
PROXY STATEMENT
Annual Meeting of Shareholders
To Be Held April 11, 1995
GENERAL INFORMATION ON THE MEETING
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of VICORP Restaurants, Inc. (the "Company")
whose principal offices are located at 400 West 48th Avenue, Denver, Colorado
80216, telephone number (303) 296-2121, to be used at the Annual Meeting of
Shareholders of the Company (the "Meeting") to be held on Tuesday, April 11,
1995 at 11:00 A.M. New York time, at 777 Westchester Avenue, White Plains,
New York and at any adjournment thereof.
This Proxy Statement, the form of Proxy and the 1994 Annual Report to
Shareholders are first being sent to shareholders on approximately March 2,
1995.
SHAREHOLDER PROPOSALS
Any shareholder proposal to be considered for presentation at the 1996
Annual Meeting of Shareholders must be received by the Company at its executive
offices on or before November 2, 1995 to be considered for inclusion in the
Company's proxy materials under the rules of the Securities and Exchange
Commission.
REVOCABILITY OF PROXY
Any shareholder giving a proxy has the power to revoke it at
any time prior to the voting of the shares represented by the proxy, by either
(1) filing with the Secretary of the Company at 400 West 48th Avenue, Denver,
Colorado 80216, an instrument revoking the proxy or a duly executed proxy
bearing a later date, or (2) attending the meeting and, after notifying the
Secretary of the Company, voting the shares covered by the proxy in person.
Officers and other employees of the Company, for no additional
compensation, may solicit proxies by telephone or personal interview as well as
by mail. The cost of soliciting proxies will be borne entirely by the Company.
Only shareholders of record at the close of business on the record date,
February 22, 1995, will be entitled to notice of and to vote at the Meeting.
There were outstanding on the record date 9,518,093 shares of the Company's $.05
par value Common Stock ("Stock").
Each share of Stock is entitled to one vote on each matter to come before
the Meeting. In the election of Directors, cumulative voting is not allowed.
Shares represented by all valid proxies will be voted in accordance with the
instructions contained in the proxies. In the absence of instructions, shares
represented by valid proxies will be voted in accordance with the best judgment
of the persons named in the solicited proxy. Shares of the Company representing
one-third of the votes entitled to be cast by all outstanding shares of Stock
will constitute a quorum for the transaction of business at the Meeting. The
affirmative vote of the holders of shares of Stock representing a majority of
the votes represented at the Meeting will be sufficient for approval of the
matters to come before the Meeting. Abstentions and broker non-votes are
counted for the purpose of determining the presence or absence of a quorum.
Broker non-votes are not counted for the purpose of determining whether a
proposal has been approved. Since the affirmative vote of the holders of shares
of Stock representing a majority of the votes represented at the meeting is
required for approval of the matters to come before the meeting, abstentions
will have the effect of a negative vote.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
STOCK
The following table sets forth information as of February 22, 1995 with
respect to the beneficial ownership of VICORP's Stock by all persons known by
the Company to be the beneficial owners of 5% or more of the outstanding shares,
each director of the Company, each of the executive officers named in the
Summary Compensation Table (See Compensation of Directors and Executive
Officers) and all directors and executive officers of the Company as a group.
Name and Amount and
Address of Nature of
Title of Beneficial Beneficial Percent
Class Owner Ownership of Class
-------- ---------- ---------- --------
Stock First Manhattan Co. 987,145<F1> 10.37%
(par value $.05 437 Madison Avenue
per share) New York, NY 10022
Sound Shore Management 867,600<F2> 9.12%
8 Sound Shore Drive
Greenwich, CT 06836
Southeastern Asset 571,000<F3> 6.00%
Management, Inc.
6075 Poplar Avenue,
Suite 900
Memphis, TN 38119
Carole Lewis Anderson 12,000<F4> <F6>
3616 Reservoir Road NW
Washington, DC 20007
Robert S. Benson 168,658<F4> 1.76%
32177 Highway 103
Evergreen, CO 80439
Bruce B. Brundage 23,000<F4> <F6>
5290 DTC Parkway
Suite 160
Englewood, CO 80111
James F. Caruso 50,100<F4> <F6>
80 S. Eudora
Denver, CO 80222
Charles R. Frederickson 217,654<F4> 2.25%
400 West 48th Avenue
Denver, CO 80216
John C. Hoyt 53,868<F4> <F6>
500 East Sixth Street
Bartlesville, OK 74003
Robert E. Kaltenbach 12,925<F4> <F6>
400 West 48th Avenue
Denver, CO 80216
Dennis L. Kuper 38,376<F4> <F6>
400 West 48th Avenue
Denver, CO 80216
Robert T. Marto 16,000<F4> <F6>
White Plains Office Park
777 Westchester Avenue
White Plains, NY 10604
Dudley C. Mecum 15,500<F4> <F6>
540 Madison Avenue
New York, NY 10022
Dennis B. Robertson 20,000<F4> <F6>
520 Executive Drive
Willowbrook, IL 60521
Arthur Zankel 98,400<F5> 1.03%
437 Madison Avenue
New York, NY 10022
All directors 726,481<F4><F5> 7.32%
and executive officers
as a group (12 persons
including those named above)
[FN]
<F1> Of the 987,145 shares beneficially owned, the shareholder has sole
voting power over 251,500 shares, shared voting power over 710,970
shares, sole dispositive power over 251,500 shares and shared
dispositive power over 735,645 shares. Arthur Zankel, a director of
the Company, is a Co-Managing Partner of First Manhattan Co.
<F2> Of the 867,600 shares beneficially owned, the shareholder has sole
voting power over 804,600 shares and sole dispositive power over
867,600 shares.
<F3> Of the 571,000 shares beneficially owned, the shareholder has sole
voting power over 281,000 shares, shared voting power over 290,000
shares, sole dispositive power over 281,000 shares and shared
dispositive power over 290,000 shares.
<F4> Includes 12,000, 50,000, 18,000, 50,000, 152,000, 16,000, 12,000,
30,000, 16,000, 14,000, and 18,000 shares which Ms. Anderson, Messrs.
Benson, Brundage, Caruso, Frederickson, Hoyt, Kaltenbach, Kuper, Marto,
Mecum, and Robertson, respectively, have the right to purchase under
options that are presently exercisable.
<F5> Includes 79,600 shares owned directly by Mr. Zankel, 18,000 shares
which he has the right to purchase under options that are presently
exercisable and 800 shares held by or in trust for a family member.
<F6> Percent of class is less than 1%.
VICORP is unaware of any arrangement which would at a subsequent date
result in a change in the control of the Company.
ELECTION OF DIRECTORS
Directors are to be elected to hold office until the next Annual Meeting of
Shareholders and until their successors shall be elected and shall qualify.
Each of the persons nominated is currently a member of the Board of Directors.
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
Served as
a Director
Name and Age Position Since
- -------------------------- ------------------------- ------------
Carole Lewis Anderson, 50 Director of the Company April 1991
Bruce B. Brundage, 59 Director of the Company August 1988
Charles R. Frederickson, 57 Chairman of the Board and June 1968
Co-Chief Executive Officer
of the Company
John C. Hoyt, 67 Director of the Company October 1982
J. Michael Jenkins, 48 Director, Co-Chief Executive August 1994
Officer and President
of the Company
Robert T. Marto, 49 Director of the Company August 1989
Dudley C. Mecum, 60 Director of the Company December 1989
Dennis B. Robertson, 57 Director of the Company August 1988
Arthur Zankel, 62 Director of the Company October 1988
Carole Lewis Anderson, a director since April 1991, is currently the
President of MASDUN Capital Advisors, a private investment banking company which
engages in corporate and real estate finance. From June 1988 to November 1990,
Ms. Anderson was President of MNC Investment Bank. MNC Investment Bank, a
subsidiary of Maryland National Bank, provided corporate finance, real estate
finance, and financial advisory services to public and private companies.
Bruce B. Brundage became a director of the Company in August 1988. Since
1973, Mr. Brundage has been the President of Brundage & Company, a Denver based
company specializing in the private placement of long-term financing and the
negotiation, appraisal and arrangement of mergers and acquisitions.
Mr. Brundage is a director of Black Hills Corporation.
Charles R. Frederickson, a director of the Company since 1968, was
appointed to the position of Chairman of the Board in November 1986 and
Co-Chief Executive Officer in August 1994.
John C. Hoyt, a director since October 1982, has for more than the past
five years been an officer, director and principal shareholder of Midwest
Pancake Houses, Inc. which is a Village Inn franchisee. See Certain
Transactions.
J. Michael Jenkins became a Director of the Company and its Co-Chief
Executive Officer and President in August 1994. Immediately prior to his
joining the Company, he was the Chairman of the Board and Chief Executive
Officer of El Chico Restaurants, Inc., positions which he held since February
1992. From May 1989 to February 1992 Mr. Jenkins served as President and Chief
Executive Officer of Metromedia Steakhouses, Inc.
Robert T. Marto, a director since August 1989, is currently President and
Chief Executive Officer of White River Corporation. He served as Executive Vice
President and Chief Financial Officer of Fund American Enterprises Holdings,
Inc., and as President of its wholly owned subsidiary Fund American Enterprises,
Inc. from 1990 to December 1993. Mr. Marto is a director of White River
Corporation and Zurich Holdings.
Dudley C. Mecum became a director in December 1989. Since August 1989, he
has been a partner with G.L. Ohrstrom & Company, which acquires and manages
companies for investors. Mr. Mecum is also a director of The Travelers, Inc.,
Lyondell Petrochemical Co., Dyncorp, Fingerhut Companies, Inc. and Roper
Industries, Inc.
Dennis B. Robertson became a director of the Company in August 1988. Mr.
Robertson is currently the Chairman and Chief Executive Officer of DOCK'S Great
Fish, Inc., which operates seafood restaurants. Prior to his appointment as
Chairman, he was the President, a position he held since 1985.
Arthur Zankel became a director of the Company in October 1988. He is
currently the Co-Managing Partner of First Manhattan Co., a position which he
has held since 1979. First Manhattan Co. is a money management and
institutional research firm. Mr. Zankel is also a director of The Travelers,
Inc. and Fund American Enterprises, Inc.
The Board of Directors, while not having a nominating committee, does have
standing Audit and Compensation Committees. The Audit Committee met four times
in fiscal 1994, and consisted of Ms. Anderson and Messrs. Brundage, Hoyt, Marto,
Mecum, Robertson and Zankel. The function of the Committee is to recommend to
the Board of Directors the appointment of the Company's independent auditors,
review the fee arrangements and scope of the annual audit, and consider the
comments of the independent and internal auditors with respect to internal
controls.
The Compensation Committee, which also acts as the Regular Stock Option
Committee for the Company's 1982 Incentive and Non-Qualified Stock Option Plan,
was composed of Ms. Anderson and Messrs. Brundage, Marto, Mecum, Robertson and
Zankel. That committee met four times during the last fiscal year. The
Committee recommends to the Board of Directors officers' salaries, administers
executive compensation plans, grants options and approves bonuses for the
Company's executive employees.
During fiscal 1994, the Board of Directors met six times. Each of the
Directors attended at least 75% of the meetings of the Board of Directors and
the committees of which that person was a member.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table discloses compensation received by the Company's
Co-Chief Executive Officers and named executive officers for the three fiscal
years ended October 30, 1994.
Summary Compensation Table
--------------------------
<TABLE>
<CAPTION>
Annual Compensation
--------------------------
All Other
Compen-
Name and Principal Salary Bonus sation
Position Year ($) ($) ($)
- ------------------- ---- ------- ------- ---------
<S> <C> <C> <C> <C>
Charles R. Frederickson 1994 297,115 4,717<F4>
Co-Chief Executive Officer 1993 274,423 4,577<F5>
1992 267,692 125,000 4,444<F6>
Robert S. Benson 1994 302,077 6,217<F4>
President <F1> 1993 274,423 4,577<F5>
1992 267,692 105,000 23,194<F6>
J. Michael Jenkins 1994 55,192 1,000,000<F3>
Co-Chief Executive 1993
Officer and President 1992
James F. Caruso <F7> 1994 221,385 44,000 4,717<F4>
President/Bakers Square 1993 195,385 84,000
Division 1992 156,539 116,480
Robert E. Kaltenbach 1994 143,192 26,950 3,545<F4>
President/Village Inn
Division <F2>
Dennis L. Kuper 1994 136,538 20,550 3,537<F4>
Executive Vice 1993 132,654 16,156 2,982<F5>
President 1992 129,538 31,286 8,868<F6>
<FN>
<F1> Mr. Benson resigned as an executive officer and director of the
Company on June 28, 1994. Mr. Benson's employment with the Company
was terminated on July 15, 1994.
<F2> Mr. Kaltenbach first became an executive officer of the company during
1994.
<F3> See discussion of Mr. Jenkins' employment contract under Employment
Contracts and Termination of Employment and Change-of-Control
Arrangements.
<F4> The amounts shown represent $4,717 paid on behalf of each of Messrs.
Frederickson, Benson, and Caruso; $3,545 on behalf of Mr. Kaltenbach;
and $3,537 on behalf of Mr. Kuper as the Company's matching
contribution for the stated individuals to its 401(K) Plan; and $1,500
paid to Mr. Benson under the Company's 1989 Outstanding Stock Purchase
Plan. Under that plan, eligible employees could elect annually to use
up to the lesser of (i) 25% of that individual's total compensation
for that year; or (ii) 50% of that person's incentive compensation to
purchase VICORP's common stock in public transactions. If after two
years from the purchase date, the employee was still employed with
VICORP and continued to own the stock, VICORP would pay the employee a
cash bonus equal to 25% of the amount used to purchase it. The amount
stated is the 25% cash bonus paid to Mr. Benson in 1994 under that
plan.
<F5> Represents the Company's matching contribution for the stated
individuals to its 401(K) Plan during fiscal 1993.
<F6> The amounts shown represent $4,444 paid on behalf of each of Messrs.
Frederickson and Benson and $2,523 on behalf of Mr. Kuper as the
Company's matching contributions for the stated individuals to its
401(K) Plan. An additional $18,750 and $6,345 in cash were paid to
Messrs. Benson and Kuper under the Company's 1989 Outstanding Stock
Purchase Plan, representing the 25% cash bonus paid to these
individuals in 1992 under that plan.
<F7> Mr. Caruso resigned on February 17, 1995.
</TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Individual Grants Annual Rates of Stock
Price Appreciation
for Option Term
- -------------------------------------------------------------------------- ---------------------
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or Base
Options/SARs Employees in Price Expiration
Name Granted(#)<F1> Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- ------------------ -------------- ------------ ------- ---------- ------- --------
<S> <C> <C> <C> <S> <C> <C>
J. Michael Jenkins 50,000 92.4% 15.00 <F1> 167,500 407,500
50,000 17.25 55,000 295,000
50,000 19.84 165,500
50,000 22.81 17,000
50,000 26.26
50,000 30.17
<FN>
<F1> The options vest in their entirety on August 26, 1999 and are exercisable
until October 1, 2004, unless Mr. Jenkins dies, becomes permanently
disabled, resigns on Just Grounds (a material breach of the agreement by
the Company or a material diminution in his duties, authority or
responsibilities), or is terminated other than for Just Cause (a material
breach of the agreement by Mr. Jenkins, willful or gross neglect of his
duties, or willful misconduct in the performance of his duties), in which
case the options will be deemed to have vested in increments of 50,000
shares on September 1, 1994 and on October 1, 1995 and each year
thereafter through October 1, 1999 and will expire six (6) months after
the applicable event. (See Employment Contracts and Termination of
Employment and Change in Control Arrangements.)
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table provides information on option/SAR exercises in fiscal
1994 by the named executive officers and the value of such officers' unexercised
options/SARs at October 30, 1994.
<TABLE>
<CAPTION>
Value of
Number of Unexercised In-
Unexercised the-money
Options/SARs Options/SARs
at Fiscal at Fiscal
Year End Year End
(#) ($)
-------------------------------
Shares
Acquired on Value
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
- ----------------------- ----------- --------- ------------------------------
<S> <C> <C> <C> <C>
Charles R. Frederickson 6,779 0<F1> 152,000/0 $ 1,129,000/0
J. Michael Jenkins 0/300,000 0/87,500
Robert S. Benson 50,000/0 0/0
James F. Caruso 50,000/0 20,000/0
Robert E. Kaltenbach 12,000/0 75,000
Dennis L. Kuper 30,000/0 276,250
<FN>
<F1> The value received equaled the exercise price on the date of exercise.
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN
COMPENSATION DECISIONS
The members of the Compensation Committee for fiscal 1994 were
Carole Lewis Anderson, Bruce B. Brundage, Robert T. Marto, Dudley C. Mecum,
Dennis B. Robertson and Arthur Zankel.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-OF-
CONTROL ARRANGEMENTS
In August 1994 Mr. Jenkins entered into a five-year employment agreement.
Under that agreement, Mr. Jenkins received a $1 million cash payment upon the
execution of the contract and is to receive a base salary of $350,000 per year
for the first three years and $450,000 per year for the final two years of the
agreement's term. During the term of the employment agreement, he is entitled
to earn annual bonuses, not to exceed a cumulative total of $4 million through
fiscal year 1999. For the Company's 1995, 1996 and 1997 fiscal years, his
annual bonuses, if any, will be 20% of the amount by which the Company's
earnings before interest, taxes and the bonus itself exceed $25 million, and for
fiscal years 1998 and 1999, 20% of the amount by which such earnings exceed
$32 million. In no event, however, shall the cumulative bonus paid exceed
$4 million over the term of the contract or, except in the last year of the
agreement, $1.5 million in any one year.
Simultaneously with the execution of the employment agreement, and as a
part of it, Mr. Jenkins was granted the option to purchase a total of 300,000
shares of the Company's common stock at prices ranging from $15.00 to $30.17 per
share. The options vest on October 1, 1999 and are exercisable until October
1, 2004. In the event Mr. Jenkins dies, becomes permanently disabled, resigns
on Just Grounds or is terminated other than for Just Cause the vesting
accelerates in 50,000 share increments on September 1, 1994 and on October 1,
1995 and each year thereafter through October 1, 1999.
In the event the Board of Directors terminates Mr. Jenkins without Just
Cause or if he terminates his employment with Just Grounds, the agreement
provides that he is to receive the greatest of (i) two times his then current
base salary, (ii) $2 million, less the amount of any bonus previously paid or
(iii) any amount accrued but unpaid from bonuses in prior years in excess of
$1.5 million but in no event to exceed $4 million.
If there is a change in control (any person becomes the beneficial owner of
50% or more of the combined voting power of the Company's outstanding
securities; a majority of the members of the Board of Directors changes in any
period of 12 months, unless the nomination and election of each new director was
approved by a vote of at least a majority of the directors then still in office
and who were directors at the beginning of the period or any person acquires
gross assets of the Company that have an aggregate fair market value of 50% or
more of the fair market value of all the Company's gross assets immediately
prior to such acquisition) and Mr. Jenkins is terminated within 180 days
thereafter, he shall receive the greater of two times his then current salary or
$4 million, less the amount of any bonus previously paid to him.
In addition to the above, the employment agreement provides Mr. Jenkins
life, health, hospitalization, disability, vacation and other benefits
consistent with those provided to other Company officers. He is also entitled
to receive up to $35,000 in reimbursement for relocation costs to Denver.
In June 1994 an Employment Severance and Mutual Release Agreement was
executed by the Company and Mr. Benson. In that agreement, the parties executed
a mutual release of claims, VICORP accepted the resignation of Mr. Benson from
his position as an officer and director and agreed to pay him $300,000 over the
ensuing year, provide him with medical and dental benefits for one year and
extended his option exercise period to July 15, 1995.
Certain employees of the Company, including Messrs. Kaltenbach and Kuper
have entered into employment severance agreements with the Company. The term
of those agreements expires December 31 of each year; however, they are extended
automatically on January 1 of each year, unless ninety days' notice of
non-renewal is given by either party. The severance agreement provides that, in
the event a covered employee is terminated within one year following a change of
control in the Company, the terminated employee will be entitled to the
following described payments as applicable. If the employee's termination is by
reason of death, disability, retirement or is a voluntary action on the part of
the employee, the Company is required to pay the employee all earned, but
unpaid, compensation to the date of termination. If the employee is terminated
for cause, as defined in the agreement, the Company is required to pay the
employee his base salary through the date of termination. If the employee's
termination is for reasons other than those specified above, the employee is
entitled to all compensation earned and unpaid as of the date of termination; a
lump sum cash payment equal to one and one-half times the employee's annual base
salary; one year's life, health, hospitalization, dental and disability benefits
consistent with those provided by the Company prior to termination; and the
right to immediately exercise any granted stock options. Under the severance
agreements, a change of control is defined as a change in beneficial ownership
of 50% or more of the combined voting power of the Company; the first purchase
of stock in a non-Company sponsored tender or exchange offer; or upon
shareholder approval of certain merger consolidations, sales or disposition of
substantially all of the Company's assets, a plan of liquidation; or a change in
at least two-thirds of the members of the Board absent approval of the then
existing Board members.
In April 1989, Mr. Frederickson entered into an employment severance
agreement with the Company. The terms of that agreement are substantially the
same as described above for other Company employees except (i) if termination is
for reasons other than cause, disability, retirement or by the voluntary action
of the employee, the lump sum cash payment shall be equal to two and three-
quarters times his annual base salary plus the amount equal to the bonus
compensation to which he was entitled during the most recent fiscal year in
which he earned a bonus; and (ii) if he becomes employed within one year after
termination, he shall repay to the Company any cash compensation actually
received by him as a result of such employment during the one-year period up to
a specified amount.
REPORT OF THE COMPENSATION COMMITTEE
This report discusses the manner in which base salaries, incentive
compensation and stock option grants for the Company's Co-Chief Executive
Officers and other executives named in the Summary Compensation Table were
determined for the 1994 fiscal year.
The Company's compensation policies for the stated individuals are
administered by the Compensation Committee of the Board of Directors, all
members of which are outside directors. The compensation policies are intended
to enhance the financial performance of the Company by aligning the financial
interest of the Company's executives with those of its shareholders. The
Committee believes that the most effective executive compensation program is one
which serves to attract and retain talented individuals who are incented to
achieve both current and long-term management goals toward the end of enhancing
shareholder value.
The primary components of executive compensation are base salary, cash
bonus and longer-term incentives in the form of stock option grants.
BASE SALARIES:
The base salaries, which were in the median range of the companies included
in the survey described below, of Mr. Frederickson and each of the Named
Executives with the exception of Mr. Jenkins for the 1994 fiscal year were
determined by the Compensation Committee in December 1993. In making its
determinations, the Committee considered the recommendations from an independent
compensation consultant, reviewed the information contained in the 1993 Chain
Restaurant Compensation Association Survey and evaluated the competitiveness of
the entire compensation package.
The independently conducted Chain Restaurant Compensation Association
Survey was deemed to be an appropriate indicator of the competitiveness of the
Company's salaries when compared with other restaurant companies because of the
number and nature of companies participating. In excess of sixty companies
participated representing both publicly and privately owned businesses in
various segments of the restaurant industry. Included within that representation
were each of the restaurant companies on the Dow Jones Entertainment & Leisure--
Restaurant Index.
In August 1994 Mr. Jenkins joined the Company as Co-Chief Executive
Officer and President. The Compensation Committee, as ratified by the Board of
Directors, determined that Mr. Jenkins' compensation package, which was the
result of negotiations, was reasonable and necessary to attract him to join the
Company, while at the same time aligning a significant portion of his potential
compensation to shareholder interests.
BONUS AWARDS FOR 1994:
Executive bonuses for the 1994 fiscal year were determined by the
Compensation Committee on December 2, 1994. In making its determination, the
Committee considered the evolution the Company was experiencing throughout the
year. That evolution was occasioned by, among other things, the resignation of
the Company's President and the ensuing search for and appointment of a new
President; the uncertainties associated with the centralization and realignment
of many support functions within the Company; and, the reassignment of
responsibilities among officers within the Company's operating concepts. Given
those factors, the Committee decided that to determine bonuses for fiscal 1994
on specific performance criteria would be inappropriate. Accordingly, the
Committee awarded bonuses at a fixed percentage of the officer's target bonus
based upon the subjective judgment of the Committee.
1994 STOCK AWARDS:
Except with regard to Mr. Jenkins who was granted options to purchase
300,000 shares of the Company's common stock as part of his employment agreement
with the Company, no additional stock option grants were made nor existing
options repriced in 1994 to the named executive officers.
OTHER INFORMATION:
Recently enacted federal income tax legislation has limited the
deductibility of certain compensation paid to certain executive officers of the
Company. That legislation does not apply to the 1994 fiscal year of the Company
which began prior to January 1, 1994. The Committee intends to monitor the
regulations issued pursuant to Section 162(m) of the Internal Revenue Code and
to take such actions with respect to executive compensation as are reasonably
necessary to preserve the corporate tax deduction for executive compensation
paid.
COMPENSATION COMMITTEE MEMBERS:
This report is submitted by the members of the Compensation Committee of the
Board of Directors:
Dennis B. Robertson, Chairman
Carole Lewis Anderson
Bruce B. Brundage
Robert T. Marto
Dudley C. Mecum
Arthur Zankel
DIRECTORS' COMPENSATION
Non-employee directors are compensated for their services at the rate of
$2,000 per fiscal quarter, plus $1,000 per day for services rendered, and
reimbursement of actual expenses incurred. Each non-employee director is also
granted options to purchase shares of the Company's Stock pursuant to the terms
of its 1983 Non-Qualified Stock Option Plan ("1983 Plan"). The 1983 Plan, which
is mandatory in its operation, provides that each non-employee director when
first elected to the Board is granted an option to purchase 10,000 shares of the
Company's Stock, which vest 4,000, 4,000, and 2,000 shares over the ensuing
three years. Upon a director's election for the fourth consecutive term and
each year thereafter, the director is granted an additional 2,000 shares. All
options granted under the 1983 Plan are at 100% of the fair market value of the
Company's Common Stock on the date of grant.
PERFORMANCE GRAPH
The following performance graph reflects percentage change in the Company's
cumulative total shareholder return on common stock as compared with the
cumulative total return of the Dow Jones Equity Market Index and the Dow Jones
Entertainment & Leisure - Restaurant Index.
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
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<S> <C> <C> <C> <C> <C> <C>
VICORP Restaurants, Inc. 100.00 94.92 143.22 150.85 140.68 113.56
Dow Jones Restaurants Index 100.00 88.59 119.82 152.11 196.56 185.43
Dow Jones Equity Market Index 100.00 92.79 122.82 137.58 160.07 166.08
</TABLE>
CERTAIN TRANSACTIONS
John C. Hoyt, a director of the Company, and members of his family are the
principal shareholders of Midwest Pancake Houses, Inc. ("MPH"). MPH has been a
franchisee of the Company since 1970 and currently operates seven Village Inn
restaurants in Oklahoma. MPH paid an initial franchise fee of $1,000 each for
the operating units and pays franchise service fees equal to 1.5% of gross sales
at each of those locations. Total franchise service fees paid by MPH in fiscal
1994 were $113,938. MPH additionally was indebted to the Company on its open
account. The largest aggregate amount outstanding on that open account at any
time during fiscal 1994 was $51,161. As of February 19, 1995, MPH's open
account was current.
MPH is also the managing partner for a franchised Village Inn Restaurant
located in New Mexico. In fiscal 1994 the franchisee, 3155 Associates Limited
Partnership ("3155"), paid franchise service fees (4% of gross sales at that
location) in the amount of $52,986. It was also indebted to the Company on its
open account. The largest aggregate amount outstanding on that open account at
any time during fiscal 1994 was $5,174. As of February 19, 1995, 3155's open
account was current.
RATIFICATION OF CERTAIN TRANSACTIONS
The transactions described in the foregoing discussion have been approved
or ratified by the unanimous vote of those directors having no interest in those
transactions. The Company believes that the terms of those transactions are no
less favorable to the Company than those that could have been obtained from
independent third parties.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Based solely on a review of the written representation of the Company's
directors and executive officers and copies of the reports they have filed with
the Securities and Exchange Commission, the Company believes that all Section
16(a) filing requirements applicable to its executive officers, directors and
greater than ten percent (10%) beneficial owners were complied with.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen L.L.P. served as the Company's independent accountants for
the year ended October 30, 1994. The Board of Directors has selected Arthur
Andersen L.L.P. to serve as the Company's independent accountants for fiscal
1995. Representatives of Arthur Andersen L.L.P. are not expected to be present
at the Meeting.
1982 INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
The shareholders will be presented at the Annual Meeting with a proposal to
extend the term of the 1982 Incentive and Non-Qualified Stock Option Plan
(1982 Plan) by an additional five years. The 1982 Plan is currently due to
expire on June 29, 1997. All employees of the Company are eligible to
participate in the 1982 Plan. The Board of Directors believes that a meaningful
plan is important to aid the Company in encouraging employees to acquire a
proprietary interest in the Company, enabling such employees to realize benefits
from an increase in the value of the Stock, providing such employees with
greater incentive, encouraging their continuance in the Company's service, and
generally, promoting the interest of the Company and all of its shareholders.
The Board of Directors therefore recommends that the Plan be extended. No other
changes in the Plan are being made.
VICORP adopted the 1982 Plan in June 1982. The 1982 Plan was subsequently
amended to provide for the issuance of non-qualified stock options, extended the
term of non-qualified options granted on or after December 6, 1986 to ten years
and one day, removed the monetary cap on the number of options which can be
granted to an employee annually, eliminated the requirement that options granted
under the 1982 Plan be exercised in the order in which they are granted,
extended the time in which optionees subject to the reporting requirements under
Section 16 of Securities Exchange Act of 1934 ("1934 Act") have to exercise
their options upon termination and modified the vesting provisions of the 1982
Plan in the event certain employment severance agreements become effective.
The 1982 Plan is administered by two committees of at least three members
each appointed by the Board. The Regular Stock Option Committee administers the
1982 Plan as it relates to the participation of persons who are not directors of
the Company. The Special Stock Option Committee administers the 1982 Plan to
the extent it involves participation of directors who are also employees of the
Company and officers of the Company subject to the provisions of Section 16 of
the 1934 Act. The Special Stock Option Committee consists of individuals who
are disinterested as that term is defined in Rule 16b-3(c) under the 1934 Act.
Under the 1982 Plan, the appropriate committee determines from time to time the
employees of the Company or its subsidiaries who will receive options, the
number of shares issuable upon exercise of such options; the purchase price of
the shares subject to each option, which may not be less than 100% of the fair
market value of the shares on the date the options are granted; the time or time
when each option may be exercised; and the duration of options. The committees
in making their determinations evaluate the individual's performance and their
value to the Company. Those determinations are not governed by any specifically
defined criterion.
Upon the granting of an option under the 1982 Plan, no payment is made to
the Company. Upon exercise of a stock option granted under the 1982 Plan, the
full purchase price of the number of shares purchased is to be made in cash or
certified check unless the committee determines with respect to any option that
the payment may be made by the delivery of other shares of Stock of the Company
having a fair market value equal to the option price.
No option under the 1982 Plan is transferable other than by will or the
laws of descent and distribution. Options granted under the 1982 Plan will
terminate upon death or disability during employment, except that the employee's
estate or his heirs or devisees may exercise such options to the extent that
they were exercisable by the optionee at the time of death or disability for a
period of one year following the date of death or up to the option's expiration
date, if earlier. Upon termination of employment for any reason other than
death or disability, any option then exercisable shall terminate three months
after such date of termination or upon the option's expiration date, if earlier,
except for those individuals who are required to file reports with the
Securities and Exchange Commission under Section 16 of the 1934 Act. Those
individuals' options shall terminate seven months after the person ceases to be
a person required to file such reports.
The number of shares of Stock issuable under the 1982 Plan will be subject
to adjustment in the case of stock splits, combinations, stock dividends,
reorganizations and similar events.
The Board of Directors has the right to amend or discontinue the 1982 Plan
and, with the consent of the optionee, may change the terms and conditions of
outstanding options, provided that without shareholder approval, no amendment
may be made which would (i) increase the aggregate number of shares which may
be issued under the 1982 Plan, (ii) change the class of employee eligible to
receive options, or (iii) remove the administration of the 1982 Plan from the
committees.
Under the 1982 Plan, optionees granted incentive options would not have
taxable income at the time such option is granted or exercised. When the
optionee sells stock acquired under an incentive stock option, the optionee will
be taxed on the realized capital gain if the stock has been held for at least
one year and the option had been granted at least two years prior to the date of
sale; under these circumstances, the Company would receive no income tax
deduction. If the optionee sells the stock prior to the expiration of the one-
year or two-year periods, any excess of the sale price over the option exercise
price will be taxable to the optionee as ordinary income and the Company will be
entitled to a deduction equal to such excess. Options granted under the 1982
Plan subsequent to March 27, 1992 do not qualify for incentive tax treatment.
An optionee realizes no taxable income or loss upon the receipt of an
option but realizes ordinary income or loss upon the exercise of a non-qualified
option, to the extent of the difference between the aggregate market price of
the shares purchased and the aggregate option exercise price for such shares.
To the extent the optionee realizes ordinary income, the Company is entitled to
take a deduction against its gross income.
As of February 22, 1995, the closing sale price of the Company's stock, as
reported by NASDAQ was $16.00.
1983 NON-QUALIFIED STOCK OPTION PLAN
The shareholders will be presented at the Annual Meeting with a proposal to
approve amendments to the 1983 Plan. There are two amendments with respect to
the proposal. First, the 1983 Plan is being amended to extend the term by five
years. It is currently due to expire on June 29, 1997. The second amendment
increases the number of shares issuable under that Plan by 100,000 shares
raising the total number of shares issuable under that Plan to 300,000 shares.
Options on 178,000 of the 200,000 shares of Stock currently authorized by
shareholders to be granted under the 1983 Plan have been granted.
The 1983 Plan's purpose is to encourage directors who are not employees of
the Company to acquire a proprietary interest in the Company, and to provide
such directors with a greater incentive and to encourage their continuance in
the Company's service. The Board of Directors therefore recommends the approval
of the amendments to the Plan. Other than as discussed above, the terms of the
1983 Plan will remain the same.
The 1983 Plan, which is mandatory in its operation, provides that each non-
employee director when first elected shall be granted an option to purchase
10,000 shares of the Company's Stock. Each option vests according to the
following schedule: (1) 4,000 shares shall be vested upon the completion of the
fiscal year of the Company in which a non-employee director is first elected to
the Board; (2) an additional 4,000 shares shall be vested upon the completion of
the fiscal year of the Company in which such non-employee director is elected to
a second consecutive term on the Board; and (3) the final 2,000 shares shall be
vested upon the completion of the fiscal year of the Company in which such non-
employee director is elected to a third consecutive term on the Board.
The 1983 Plan was amended in May 1987 to provide that each non-employee
director of the Company would additionally receive annually an option to acquire
2,000 shares of the Company's Stock concurrently with the election of such
director by the shareholders of the Company, commencing with the director's
election to serve as a director for his fourth consecutive term.
The 1983 Plan requires that the exercise price of all options is to be 100%
of the fair market value of the Company's stock on the date the option is
granted. The duration of each option is to be ten years, unless terminated
earlier in accordance with the provisions of the 1983 Plan.
Upon the granting of an option under the 1983 Plan, no payment is made to
the Company. Upon exercise of a stock option, the full purchase price of the
number of shares purchased is to be made in cash or certified check or if
permitted by the Board of Directors, by the delivery of shares of Stock having a
fair market value equal to the option price.
No option under the 1983 Plan is transferable other than by will or the
laws of descent and distribution. Options granted under the 1983 Plan will
terminate seven months after the optionee ceases to be an individual required to
file reports with the Securities and Exchange Commission under Section 16 of the
1934 Act. Except that upon death or disability of a non-employee director, the
director's estate, or his heirs, devisee or personal representative may exercise
such option to the extent that it was exercisable by the optionee at the time of
death or the director may exercise such option to the extent that it was
exercisable at the time of disability for a period of one year following the
date of death or the incurrence of a disability.
The number of shares of Stock issuable under the 1983 Plan or upon the
exercise of any option granted under the 1983 Plan will be subject to adjustment
in the case of stock splits, combinations, stock dividends, reorganizations and
similar events.
Except on decisions relating to the grant, exercise or exercise price of
all the options, all of which are non-discretionary matters under the 1983 Plan,
the 1983 Plan is to be administered by the Board of Directors. The Board shall
have the right to modify, amend, suspend, or terminate the 1983 Plan in any
respect and with the consent of the optionee, may change the terms and
conditions of outstanding options, provided that without shareholder approval,
no amendment may be made which would (i) increase the aggregate number of shares
for which options may be granted under the 1983 Plan, (ii) increase the number
of shares which may be issued to any individual director under the 1983 Plan, or
(iii) enlarge the scope of the discretion invested in the Board of Directors in
administering the 1983 Plan.
An optionee realizes no taxable income or loss upon the receipt of an
option, but realizes ordinary income or loss upon the exercise of a non-
qualified option to the extent of the difference between the aggregate market
price of the shares purchased and the aggregate option exercise price for such
shares. To the extent the optionee realizes ordinary income, the Company is
entitled to take a deduction against its taxable income.
OTHER MATTERS
The Company knows of no other matters to be brought before the Meeting; if
other matters properly come before the Meeting, it is the intention of the
persons named in the solicited proxy to vote such proxy in accordance with their
judgment.
ANNUAL REPORTS AND FINANCIAL INFORMATION
A copy of the Company's Annual Report to Shareholders for the fiscal year
ended October 30, 1994 is being mailed with this Proxy Statement to each
shareholder of record as of February 22, 1995.
THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FILED WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION TO ANY PERSON REQUESTING A COPY IN WRITING AND STATING THAT HE/SHE
WAS THE BENEFICIAL OWNER OF SHARES OF STOCK OF THE COMPANY ON FEBRUARY 22, 1995.
REQUESTS AND INQUIRIES SHOULD BE ADDRESSED TO:
Peter F. Doane, Vice President
VICORP Restaurants, Inc.
400 West 48th Avenue
Denver, Colorado 80216
Neither the Company's Annual Report to Shareholders nor the Form 10-K is to
be regarded as proxy soliciting material or as a communication by means of which
a solicitation is to be made.
By Order of the Board of Directors
Stanley Ereckson, Jr.
Secretary
Dated: March 2, 1995.
VICORP RESTAURANTS, INC.
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints Charles R. Frederickson, J. Michael Jenkins,
or either of them, with full power of substitution, proxies to vote at the
Annual Meeting of Shareholders of VICORP Restaurants, Inc. (the "Company") to be
held on April 11, 1995 at 11:00 a.m., New York time, and at any adjournment or
adjournments thereof, hereby revoking any proxies heretofore given, to vote all
shares of common stock of the Company held or owned by the undersigned as
directed below, and in their discretion upon such other matters as may come
before the meeting.
<TABLE>
<CAPTION>
X Please mark your votes as in this example.
FOR WITHHELD FOR AGAINST WITHHELD
<S> <C> <C> <S> <C> <C> <C>
1. Election of Directors 2. Approval of Independent Accountants
3. To consider and vote upon an
amendment to the Company's 1982
Nominees: Carole Lewis Anderson, Bruce B. Brundage, Stock Option Plan.
Charles R. Frederickson, John C. Hoyt,
J. Michael Jenkins, Robert T. Marto, 4. To consider and vote upon an
Dudley C. Mecum, Dennis B. Robertson, amendment to the Company's 1983
Arthur Zankel Stock Option Plan.
For, except vote withheld from the following nominee(s);
- --------------------------------------------------------
SIGNATURE(S)______________________
DATE______________________________
NOTE: Please sign name exactly as it appears hereon, Joint Owners should
each sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
</TABLE>
