SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant X
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
X Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
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) or Item 22(a)(2) of Schedule 14A
$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:
(Set forth the amount on which the filing fee is calculated
and state how it was determined.)
_____________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________________
Fee paid previously with preliminary materials
Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount Previously Paid:
________________________________________________________________
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________________________________________________________________
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________________________________________________________________
4) Date Filed:
________________________________________________________________
VICORP RESTAURANTS, INC.
400 West 48th Avenue
Denver, Colorado 80216
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 9, 1998
------------------------
The Annual Meeting of the Shareholders of VICORP Restaurants,
Inc., will be held at the Company's offices at 400 West 48th
Avenue, Denver, Colorado 80216, on Thursday, April 9, 1998,
at 9:00 a.m., Denver time, for the following purposes.
(1) To elect directors to serve until the next Annual
Meeting of Shareholders and until their successors are duly
elected and qualified;
(2) To consider and vote upon a proposal to ratify the
appoint of Arthur Andersen LLP as independent auditors for
the Company for fiscal year 1998;
(3) To transact such other business as may properly
come before the Meeting.
The Board of Directors has fixed the close of business on
February 19, 1998, as the record date for the determination of
shareholders of record who are entitled to notice of and to vote
at the Meeting and any adjournment thereof.
SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING
IN PERSON. IF YOU CANNOT ATTEND, PLEASE FILL IN, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE SO THAT YOUR
SHARES MAY BE VOTED AT THE MEETING. YOUR VOTE IS IMPORTANT.
YOUR PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS EXCERCISE.
By Order of the Board of Directors
Stanley Ereckson, Jr.,
Secretary
Denver, Colorado
February 27, 1998
VICORP RESTAURANTS, INC.
400 West 48th Avenue
Denver, Colorado 80216
____________________
PROXY STATEMENT
___________________
Annual Meeting of Shareholders
To Be Held April 9, 1998
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
Thursday, April 9, 1998, at 9:00 a.m., Denver time, at the
Company's offices at 400 West 48th Avenue, Denver, Colorado
80216, and at any adjournment thereof.
This Proxy Statement, the form of Proxy, and the 1997 Annual
Report to Shareholders are first being sent to shareholders on
approximately February 27, 1998.
Shareholder Proposals
Any shareholder proposal to be considered for presentation at
the 1999 Annual Meeting of Shareholders must be received by the
Company at its executive offices on or before October 31, 1998,
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 19, 1998, will be entitled to notice of and
to vote at the Meeting. There were outstanding on the record
date 9,164,019 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
purposes of determining the presence or absence of a quorum.
Broker non-votes are not counted for purposes 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 12,
1998, 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.
<TABLE>
<CAPTION>
Name and Amount and
Address of Nature of
Title of Beneficial Beneficial Percent
Class Owner Ownership of Class
_______ __________ __________ ________
<S> <C> <C> <C>
Stock Southeastern Asset 1,279,900 <F1> 13.96%
(par value $.05 Management, Inc.
per share) 6410 Poplar Avenue, Suite 900
Memphis, TN 38119
First Manhattan Co. 741,902 <F2> 8.09%
437 Madison Avenue
New York, NY 10022
Quaker Capital 735,500 <F3> 8.02%
Management Corporation
1300 Arrott Building
401 Wood Street
Pittsburgh, PA 15222
Strong Capital Management 601,200 <F4> 6.56%
100 Heritage Reserve
Menomonee Falls, WI 53051
Heartland Advisors 500,000 <F5> 5.45%
790 North Milwaukee Street
Milwaukee, WI 53202
Dimensional Fund Advisors, Inc. 492,800 <F6> 5.37%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401-1038
The TCW Group, Inc. 481,000 <F7> 5.24%
865 South Figueroa Street
Suite 1800
Los Angeles, CA 90017
Carole Lewis Anderson 19,000 <F8> *
3616 Reservoir Road NW
Washington, DC 20007
Bruce B. Brundage 29,000 <F8> *
5290 DTC Parkway
Suite 160
Englewood, CO 80111
Charles R. Frederickson 163,654 <F8> 1.77%
400 West 48th Avenue
Denver, CO 80216
John C. Hoyt 59,868 <F8> *
500 SE Sixth Street
Bartlesville, OK 74003
J. Michael Jenkins 120,000 <F8> 1.29%
400 West 48th Avenue
Denver, CO 80216
Robert E. Kaltenbach 12,025 <F8> *
400 West 48th Avenue
Denver, CO 80216
Robert T. Marto 22,000 <F8> *
White Plains Office Park
777 Westchester Avenue
White Plains, NY 10604
Dudley C. Mecum 21,500 <F8> *
33 Khakum Wood Road
Greenwich, CT 06831
Dennis B. Robertson 26,000 <F8> *
1987 West 111th Street
Chicago, IL 60643
Richard E. Sabourin 28,544 <F8> *
400 West 48th Avenue
Denver, CO 80216
Hunter Yager 8,000 <F8> *
RR2, Box 3190
Manchester, VT 05255-9517
Arthur Zankel 166,100 <F9> 1.80%
437 Madison Avenue
New York, NY 10022
All directors 675,691 7.12%
and executive officers
as a group (12 persons
including those
named above)
</TABLE>
_______________________
* Percent of class is less than 1%
[FN]
<F1> Of the 1,279,900 shares beneficially owned, the
shareholder has sole voting power over 281,000 shares, shared
voting power over 982,400 shares, no voting power over 16,500
shares, sole dispositive power over 297,500 shares, and shared
dispositive power over 982,400 shares.
<F2> Of the 741,902 shares beneficially owned, the shareholder
has sole voting power over 354,500 shares, shared voting power
over 384,202 shares, sole dispositive power over 354,500 shares,
and shared dispositive power over 387,402 shares. Arthur Zankel,
a director of the Company, is a Partner of First Manhattan Co.
<F3> Of the 735,500 shares beneficially owned, the shareholder
has sole voting power over 153,200 shares, shared voting power
over 582,350 shares, sole dispositive power over 153,200 shares,
and shared dispositive power over 582,350 shares.
<F4> Of the 601,200 shares beneficially owned, the shareholder
has sole voting power over 229,900 shares, shared voting power
over no shares, sole dispositive power over 601,200 shares, and
shared dispositive power over no shares.
<F5> Of the 500,000 shares beneficially owned, the shareholder
has sole voting and dispositive power over all the shares.
<F6> Of the 492,800 shares beneficially owned, the shareholder
has sole voting power over 329,500 shares, no shared voting
power, sole dispositive power over 492,800 shares, and no shared
dispositive power.
<F7> Of the 481,000 shares beneficially owned, the shareholder
has sole voting and dispositive power over all the shares.
<F8> Includes 18,000, 24,000, 52,000, 20,000, 100,000, 12,000,
22,000, 20,000, 24,000, 25,000 and 8,000 shares which Ms.
Anderson, Messrs. Brundage, Frederickson, Hoyt, Jenkins,
Kaltenbach, Marto, Mecum, Robertson, Sabourin, and Yager
respectively, have the right to purchase under options that are
presently exercisable.
<F9> Includes 142,100 shares owned directly by Mr. Zankel,
24,000 shares which he has the right to purchase under options
that are presently exercisable.
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
<TABLE>
<CAPTION>
Served as
a Director
Name and Age Position Since
- ------------ -------- ----------
<S> <C> <C>
Carole Lewis Anderson, 53 Director of the Company April 1991
Bruce B. Brundage, 62 Director of the Company August 1988
Charles R. Frederickson, 60 Chairman of the Board June 1968
John C. Hoyt, 70 Director of the Company October 1982
J. Michael Jenkins, 51 Director, Chief Executive August 1994
Officer and President of
the Company
Robert T. Marto, 52 Director of the Company August 1989
Dudley C. Mecum, 63 Director of the Company December 1989
Dennis B. Robertson, 60 Director of the Company August 1988
Hunter Yager, 68 Director of the Company April 1996
Arthur Zankel, 65 Director of the Company October 1988
</TABLE>
Carole Lewis Anderson became a director in April 1991. Since
June 1995, she has been a principal of Suburban Capital Markets,
Inc., a commercial real estate mortgage company. Prior to that
time, she was the President of MASDUN Capital Advisors, a private
investment banking company which engages in corporate and real
estate finance. Ms. Anderson is also a trustee of AARP Cash
Investment Funds, AARP Growth Trust, AARP Income Trust, AARP
Managed Investment Portfolios Trust, and AARP Tax-Free Income
Trusts.
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 also 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.
John C. Hoyt, a director since October 1982, has for more
than the past five years been an officer, director and
controlling 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 and Chief
Executive Officer in August 1996. 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.
Robert T. Marto, a private investor, has been a director
since August 1989. He was the President and Chief Executive
Officer of White River Corporation from December 1993 to December
1997. For more than a year prior to that, 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. Mr. Marto is a
director of CCC Information Services, Inc., and White River
Corporation.
Dudley C. Mecum became a director in December 1989. He is
currently a Managing Director in Capricorn Holdings LLC, a
leveraged buy-out fund. From August 1989 until January 1997, Mr.
Mecum was a partner in G.L. Ohrstrom & Company. Mr. Mecum is
also a director of The Travelers Group, Lyondell Petrochemical
Co., Dyncorp, Fingerhut Companies, Inc., The Metris Companies,
Inc., Suburban Propane MLP, and Travelers Property and Casualty.
Dennis B. Robertson became a director of the Company in
August 1988. Mr. Robertson is currently the Chairman of DOCK'S
Great Fish, Inc., which operates seafood restaurants. Prior to
his appointment as Chairman, he was that company's President, a
position he held since 1985.
Hunter Yager became a director in April 1996. In 1985 he
retired from Grey Advertising, Inc., where he was an Executive
Vice President. Since his retirement, he has been a private
consultant in marketing and advertising.
Arthur Zankel became a director of the Company in October
1988. For more than the last five years, he has been a General
Partner of First Manhattan Co., a money management firm. Mr.
Zankel is also a director of Travelers Group, Fund American
Enterprises Holdings, Inc., and Travelers/Aetna Casualty Property
Corp.
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 1997, and consisted
of Ms. Anderson and Messrs. Brundage, Hoyt, Marto, Mecum,
Robertson, Yager and Zankel. The functions of the Committee are
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 Stock Option Plan,
was composed of Ms. Anderson and Messrs. Brundage, Marto, Mecum,
Robertson, Yager and Zankel. That committee met one time 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 1997, the Board of Directors met five 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 Chief Executive Officer and named executive officers
for the three fiscal years ended October 31, 1997.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
-------------------------- -------------
Other
Annual Securities
Compen- Underlying All Other
Name and Principal Salary Bonus sation Options/SARs Compensation
Position Year ($) ($) ($) (#) ($)
------------------ ---- ------ ----- ------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Charles R.Fredrickson 1997 311,538 63,000 3,562 <F1>
Chairman 1996 291,923 703 <F1>
1995 300,000 3,398 <F1>
James R. Burke <F2> 1997 85,813 175,000 1,244
President/Bakers 1996 174,327 4,094 534
Square Division 1995 130,160 6,355 29,000 2,558
Nicholas S. Galanos <F3> 1997 113,595 100
Executive Vice 1996 200,000 245
President/Development 1995 148,462 177
J. Michael Jenkins <F4> 1997 377,386 428
Chief Executive 1996 350,000 300,000 520
Officer and President 1995 350,000 46,910 610
Robert E. Kaltenbach <F5> 1997 181,267 150,000 3,522 <F5>
President/Village 1996 175,000 100,000 564 <F5>
Inn Division 1995 172,981 13,860 3,238 <F5>
Richard E. Sabourin <F6> 1997 259,201 52,500 1,091
Executive Vice 1996 43,269 75
President/Chief
Financial Officer
</TABLE>
[FN]
<F1> The amount shown represents $3,000, $335, and $3,200 paid as
the Company's matching contribution under its 401(k) plan and
$398, $368, and $362 paid by the Company for term life insurance
premiums for the years 1995, 1996, and 1997.
<F2> Mr. Burke resigned on April 8, 1997, and the amount reflected
in the column captioned "Other Annual Compensation" for 1997
represents the amount paid to Mr. Burke under an Employment
Severance and Mutual Release Agreement executed at the time of
his resignation from the Company. For 1995 and 1996, the amounts
reflected are the reimbursement for Mr. Burke's expenses in 1995
and 1996 in relocating to Denver. Under "All Other
Compensation", the amount shown represents $2,388, $335, and
$1,155 paid as the Company's matching contribution under its
401(k) plan and $170, $199, and $89 paid by the Company for term
life insurance premiums for 1995, 1996, and 1997.
<F3> Mr. Galanos resigned from the Company on April 4, 1997. The
$177, $245, and $100 payment reflected under "All Other
Compensation" represents the Company's payment for term life
insurance premiums for the stated years.
<F4> The amount reflected in the column captioned "Other Annual
Compensation" represents a reimbursement of moving expenses in
conjunction with his relocation to Denver. Under "All Other
Compensation", the amount shown represents the Company's payment
for term life insurance premiums for 1995, 1996, and 1997,
respectively.
<F5> The amount shown represents $3,000, $335, and $3,200 paid as
the Company's matching contribution under its 401(k) plan and
$238, $229, and $322 paid by the Company for term life insurance
premiums respectively for years 1995, 1996, and 1997.
<F6> Mr. Sabourin joined the Company as its Executive Vice
President/Chief Financial Officer in August 1996. The amount
reflected in the column captioned "All Other Compensation"
represents $791 paid as the Company's matching contribution under
its 401(k) plan and $300 paid by the Company for term life
insurance premiums for 1997 and $75 for term life insurance
premiums for 1996.
Aggregated Option / SAR Exercises in Last Fiscal Year and Fiscal
Year-End Option / SAR Values
The following table provides information on option/SAR
exercises in fiscal 1997 by the named executive officers and the
value of such officers' unexercised options/SARs at October 31,
1997.
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-money
Options/SARs at Options/SARs at
Fiscal Year End Fiscal Year End
(#) ($)
--------------- ------------
Shares
Acquired
on Value
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
---------------------- -------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Charles R. Frederickson 100,000 727,500 52,000/0 14,000/0
J. Michael Jenkins 100,000/200,000 250,000/500,000
Robert E. Kaltenbach 12,000/0 60,000/0
Richard E. Sabourin 25,000/75,000 100,000/300,000
</TABLE>
Compensation Committee Interlocks and Insider Participation in
Compensation Decisions
The members of the Compensation Committee for fiscal 1997 were
Carole Lewis Anderson, Bruce B. Brundage, Robert T. Marto, Dudley
C. Mecum, Dennis B. Robertson, Hunter Yager, 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, a
base salary of $350,000 per year for the first three years and
will receive a base salary of $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 were to vest on October 1, 1999, and were exercisable
until October 1, 2004. In the event Mr. Jenkins died, became
permanently disabled, resigned on Just Grounds or was terminated
other than for Just Cause, the vesting was to have accelerated in
50,000-share increments on September 1, 1994 and on October 1,
1995 and each year thereafter through October 1, 1999.
On August 19, 1996, Mr. Jenkins surrendered, and the Company
canceled, the described options in exchange for the grant of new
options to purchase a total of 300,000 shares of the Company's
common stock at an exercise price of $13.00 per share. The
options vest in 100,000 share increments on August 19, 1996,
October 1, 1999, and October 1, 2002 and are exercisable until
August 20, 2006. 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 October 1, 1996 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.
Mr. Sabourin executed an employment agreement of undefined
term with the Company in July 1996. Mr. Sabourin is to receive a
base salary of $250,000 per year and is eligible to participate
in the incentive bonus program, if any, as approved annually by
the Board of Directors. Pursuant to the agreement, Mr. Sabourin
was granted the option to purchase a total of 100,000 shares of
the Company's common stock at an exercise price of $11.50 per
share, the fair market value of the Company's common stock on the
date of grant. The options vest in 25,000-share increments on
September 1, 1997, 1998, 1999, and 2000. In the event Mr.
Sabourin's employment is terminated by the Company for other than
cause, the agreement provides that he is to receive severance in
an amount equal to one year's base salary calculated as of the
time of termination. Finally, the agreement provides Mr.
Sabourin benefits consistent with those provided to other Company
officers.
Certain employees of the Company, including Mr. Kaltenbach,
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
Chief Executive Officer and other executives named in the
Summary Compensation Table were determined for the 1997 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 stockholders. 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 in keeping with the ultimate goal of
enhancing stockholder 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 each of the
Named Executives with the exception of Mr. Jenkins for
the 1997 fiscal year, were determined by the
Compensation Committee in December 1996. In making its
determinations, the Committee reviewed the information contained
in the 1996 Chain Restaurant Compensation Association Survey, the
performance of the Company 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 the restaurant companies
on the Dow Jones Entertainment & Leisure - Restaurant Index.
Mr. Jenkins' compensation is governed by the terms of his
employment agreement with the Company, which was approved by the
Board of Directors when it was executed in 1994. See Executive
Contracts and Termination of Employment and Change-of-Control
Arrangements for a detailed discussion of Mr. Jenkins' employment
agreement.
Bonus Program
In December 1996, the Compensation Committee approved a
bonus program which was predicated upon achievement of overall
Company performance against a set baseline of the Company's
earnings before interest and taxes as computed in accordance with
generally accepted accounting principles. The measure of
earnings before interest and taxes and the baseline that was
established (which was a substantial earnings increase over the
previous year) were selected by the Committee as being
appropriate because of their direct relationship to shareholder
interest. That program applied to each of the Company's
executives for fiscal 1997, except Mr. Jenkins (whose bonus
compensation is governed by his employment contract), and the
Presidents of the operating divisions. Under the program each
participating executive officer could earn a bonus of up to 52%
of the executive's base salary. Bonuses are determined by
application of a formula that takes into account the extent to
which the earnings' target was met or exceeded. In fiscal 1997,
90% of the earnings' target was achieved resulting in a bonus
payment to the participating executive officers of 21% of that
individual's base salary.
No bonus was paid to Mr. Jenkins because the performance
targets set forth in his employment contract were not met.
With respect to the 1997 bonus program for Presidents of the
Company's operating divisions, in December 1996 the Compensation
Committee approved a bonus program for those individuals which
was predicated upon an approximate 10% improvement in store
operating profits (restaurant results excluding corporate
overhead) and increasing customer counts over the preceding year
in their respective divisions. That measure was selected because
of its focus on increasing profits and was directly tied to their
areas of control and responsibility. The President of the
Village Inn Division, after meeting his target, was paid a bonus.
The Bakers Square Division did not meet its target, nor did it
have a President at fiscal year end. Accordingly, no bonus was
paid with respect to that Division.
Deductibility of Compensation
The Compensation Committee has considered the potential
impact of Section 162(m) (the "Section") of the Internal Revenue
Code adopted under the Federal Revenue Reconciliation Act of
1993. The Section disallows a tax deduction for any publicly-
held company for individual compensation exceeding $1 million in
any tax year for any of the named executive officers, unless the
compensation is performance-based. The Company intends to
structure its compensation plans to achieve maximum deductibility
under the Section with minimal sacrifices in flexibility and
Company objectives. The Compensation Committee will consider the
deductibility of compensation payments in connection with future
compensation arrangements with the named executive officers, but
deductibility will not be the sole factor used by the
Compensation Committee in determining appropriate levels or types
of compensation. If, in the judgment of the Compensation
Committee, the benefits of a compensation package that does not
satisfy the requirements of the Section outweigh the costs to the
Company of a failure to comply with the Section, the Compensation
Committee may adopt compensation arrangements in the future under
which payments are not deductible under the Section.
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
Hunter Yager
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>
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
VICORP Restaurants, Inc. 22.250 20.750 16.750 11.000 14.500 15.500
Dow Jones Restaurant Index 653.570 844.420 796.600 1,051.540 1,152.920 1,140.860
Dow Jones Equity Market Index 465.240 542.230 562.370 710.730 879.220 1,166.960
</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 2%
of gross sales at each of those locations. Total franchise
service fees paid by MPH in fiscal 1997 were $150,349. 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 1997 was $17,366. As of February 12,
1998, MPH's open account was current.
MPH is also the managing partner for a franchised Village Inn
Restaurant located in New Mexico. In fiscal 1997, the franchisee,
3155 Associates Limited Partnership ("3155"), paid franchise
service fees (2.7% of gross sales at that location) in the amount
of $42,539. 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 1997 was $2,741. As of
February 12, 1998, 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.
Section 16(a) Beneficial Ownership Reporting Compliance
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 followed.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP served as the Company's independent
accountants for the year ended October 31, 1997. The Board of
Directors has selected Arthur Andersen LLP to serve as the
Company's independent accountants for fiscal 1998. Representatives
of Arthur Anderson LLP are expected to be present at the meeting,
will be given an opportunity to make a statement if they desire
to do so and are expected to be available to respond to appropriate
questions from shareholders.
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 31, 1997, is being mailed with this
Proxy Statement to each shareholder of record as of February 19,
1998.
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 19, 1998. REQUESTS
AND INQUIRIES SHOULD BE ADDRESSED TO:
Stanley Ereckson, Jr., Secretary
VICORP Restaurants, Inc.
400 West 48th Avenue
Denver, Colorado 80216
Fax (303) 672-2668
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: February 27, 1998.
(Front)
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 9, 1998, at 9:00 a.m., Denver, Colorado, 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.
(To be Signed on Reverse Side)
(Back)
X Please mark your
votes as in this
example.
1. Election of FOR WITHHELD
Directors
Nominees: Carole Lewis Anderson, Bruce B. Brundage, Charles
R. Frederickson, John C. Hoyt, J. Michael Jenkins,
Robert T. Marto, Dudley C. Mecum, Dennis B. Robertson,
Hunter Yager, Arthur Zankel
For, except vote withheld from the following nominee(s).
2. Approval of FOR AGAINST WITHHELD
Independent Accountants
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.
