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(c)(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):
No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:
_____________________________________________________________________
(5) Total fee paid:
_____________________________________________________________________
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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_____________________________________________________________________
4) Date Filed:
_____________________________________________________________________
VICORP RESTAURANTS, INC.
400 West 48th Avenue
Denver, Colorado 80216
-------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 6, 1999
-------------------------------------------------------------------------
The Annual Meeting of the Shareholders of VICORP Restaurants, Inc., will
be held at The Harvard Club of New York City, 27 West 44th Street, New York,
New York 10036, on Thursday, May 6, 1999, at 4:00 p.m. New York 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 appointment
of Arthur Anderson LLP as independent auditors for the Company for fiscal
year 1999;
(3) To transact such other business as may properly come before
the Meeting.
The Board of Directors has fixed the close of business on March 15, 1999,
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 EXERCISE.
By Order of the Board of Directors
Stanley Ereckson, Jr.
Secretary
Denver, Colorado
March 25, 1999
VICORP RESTAURANTS, INC.
400 West 48th Avenue
Denver, Colorado 80216
____________________
PROXY STATEMENT
___________________
Annual Meeting of Shareholders
To Be Held May 6, 1999
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 May 6, 1999, at 4:00 p.m. New York time, at
The Harvard Club of New York City, 27 West 44th Street,
New York, New York 10036, and at any adjournment thereof.
This Proxy Statement, the form of Proxy, and the 1998 Annual
Report to Shareholders are first being sent to shareholders on
approximately March 25, 1999.
Shareholder Proposals
Any shareholder proposal to be considered for presentation at
the 2000 Annual Meeting of Shareholders must be received by the
Company in writing at its executive offices on or before
November 27, 1999, to be considered for inclusion in the
Company's proxy materials under the rules of the Securities and
Exchange Commission. If a shareholder desires to present a
proposal for consideration at the 2000 Annual Meeting of
Shareholders which is not timely submitted for inclusion in the
Company's proxy materials and the shareholder fails to notify the
Company by February 9, 2000, of such proposal, the
management proxies may use their discretionary voting authority
when the proposal is raised at the Annual Meeting without any
discussion of the matter in the Proxy Statement.
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, March 15, 1999, will be entitled to notice of and
to vote at the Meeting. There were outstanding on the record
date 8,903,866 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 March 5,
1999, 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> 14.12%
(par value $.05 Management, Inc.
per share) 6410 Poplar Avenue, Suite 900
Memphis, TN 38119
Quaker Capital 820,700 <F2> 9.05%
Management Corporation
1300 Arrott Building
401 Wood Street
Pittsburgh, PA 15222
First Manhattan Co. 751,902 <F3> 8.29%
437 Madison Avenue
New York, NY 10022
The Prudential Insurance 654,200 <F4> 7.22%
Company of America
751 Broad Street
Newark, NJ 07102-3777
Dimensional Fund Advisors, Inc. 520,700 <F5> 5.74%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401-1038
Franklin Advisory Services, Inc. 480,000 <F6> 5.30%
One Parker Plaza, 16th Floor
Fort Lee, NJ 07024
Carole Lewis Anderson 21,000 <F7> *
3616 Reservoir Road NW
Washington, DC 20007
Bruce B. Brundage 31,000 <F7> *
5290 DTC Parkway
Suite 160
Englewood, CO 80111
Charles R. Frederickson 163,654 <F7> 1.80%
400 West 48th Avenue
Denver, CO 80216
John C. Hoyt 61,868 <F7> *
500 SE Sixth Street
Bartlesville, OK 74003
J. Michael Jenkins -0- *
8393 South Peninsula Drive
Littleton, CO 80120
Robert E. Kaltenbach 12,525 <F7> *
400 West 48th Avenue
Denver, CO 80216
Robert T. Marto 24,000 <F7> *
354 New Cannan
Wilton, CT 06897
Dudley C. Mecum 23,500 <F7> *
33 Khakum Wood Road
Greenwich, CT 06831
Dennis B. Robertson 28,000 <F7> *
1987 West 111th Street
Chicago, IL 60643
Richard E. Sabourin 53,544 <F7> *
400 West 48th Avenue
Denver, CO 80216
Joseph F. Trungale -0- *
501 Forest Avenue, #205
Glen Ellyn, IL 60137
Hunter Yager 10,000 <F7> *
314 West Fields
Manchester, VT 05255
Arthur Zankel 168,100 <F8> 1.85%
437 Madison Avenue
New York, NY 10022
All directors 597,191 6.41%
and executive officers
as a group (13 persons
including those
named above)
</TABLE>
_______________________
* Percent of class is less than 1%
<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 820,700 shares beneficially owned, the shareholder
has sole voting power over 287,300 shares, shared voting power
over 533,400 shares, sole dispositive power over 287,300 shares,
and shared dispositive power over 533,400 shares.
<F3> Of the 751,902 shares beneficially owned, the
shareholder has sole voting power over 364,500 shares, shared
voting power over 385,702 shares, sole dispositive power over
364,500 shares, and shared dispositive power over 387,402 shares.
Arthur Zankel, a director of the Company, is a Partner of First
Manhattan Co.; and 152,100 of the shares owned by him are reflected
in the share ownership reported by First Manhattan Co.
<F4> Of the 654,200 shares beneficially owned, the shareholder
has sole voting power over 173,600 shares, shared voting power
over 480,600 shares, sole dispositive power over 173,600 shares,
and shared dispositive power over 480,600 shares.
<F5> Of the 520,700 shares beneficially owned, the shareholder
has sole voting and dispositive power over all the shares.
<F6> Of the 480,000 shares beneficially owned, the shareholder
has sole voting and dispositive power over all of the shares.
<F7> Includes 20,000, 16,000, 50,000, 20,000, 12,500, 24,000,
22,000, 16,000, 50,000, and 10,000 shares which Ms. Anderson,
Messrs. Brundage, Frederickson, Hoyt, Kaltenbach, Marto, Mecum,
Robertson, Sabourin, and Yager, respectively, have the right to
purchase under options that are presently exercisable.
<F8> Includes 152,100 shares owned directly by Mr. Zankel,
and 16,000 shares which he has the right to purchase under options
that are currently 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, 54 Director of the Company April 1991
Bruce B. Brundage, 63 Director of the Company August 1988
Charles R. Frederickson, 61 Chairman of the Board, June 1968
Chief Executive Officer
and President of the Company
John C. Hoyt, 71 Director of the Company October 1982
Robert T. Marto, 53 Director of the Company August 1989
Dudley C. Mecum, 64 Director of the Company December 1989
Dennis B. Robertson, 61 Director of the Company August 1988
Hunter Yager, 69 Director of the Company April 1996
Arthur Zankel, 66 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, and to the positions of Chief Executive Officer
and President in May 1998.
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.
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.
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 Citigroup; Lyondell Petrochemical Co.;
Dyncorp; The Metris Companies, Inc.; Suburban Propane MLP;
Travelers Property and Casualty; and CCC Information Services,
Inc.
Dennis B. Robertson became a director of the Company in
August 1988. Mr. Robertson is currently the Chairman, President,
and CEO of DOCK'S Great Fish, Inc., which operates seafood
restaurants. From October 1997 to November 1998, he was the
Chairman of that Company and from October 1991 to October 1997,
he was its Chairman and CEO.
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 an independent
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 three times in fiscal 1998, 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 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 1998, the Board of Directors met seven 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 Officers and named executive officers
for the three fiscal years ended November 1, 1998.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------- ------------
Other
Annual Securities
Compen- Underlying All Other
Name and Principal Salary Bonus sation Options/ Compensation
Position Year ($) ($) ($) SARs(#) ($)
-------- ---- ------ ------ ------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Charles R. Frederickson <F1> 1998 301,828 120,300 3,861
Chairman, Chief Executive 1997 311,538 63,000 3,562
Officer and President 1996 291,923 703
J. Michael Jenkins <F2> 1998 241,052 358
Chief Executive 1997 377,386 428
Officer and President 1996 350,000 300,000 520
Robert E. Kaltenbach <F3> 1998 198,463 390,384 100,000 3,688
President/Village Inn 1997 181,267 150,000 3,522
Division 1996 175,000 100,000 564
Richard E. Sabourin <F4> 1998 250,621 100,250 3,648
Executive Vice 1997 259,201 52,500 1,091
President/Chief Financial 1996 43,269 100,000 75
Officer
Joseph F. Trungale <F5> 1998 253,269 153,075 50,000 218
President/Bakers Square 1997 40,385
Division
- --------------------------------
</TABLE>
F<1> Mr. Frederickson was appointed Chief Executive Officer and
President in May 1998. The amount shown under "All Other
Compensation" represents $335, $3,200, and $3,200 paid as the
Company's matching contribution under its 401(k) plan and $368,
$362, and $661 paid by the Company for term life insurance
premiums for the years 1996, 1997, and 1998, respectively.
F<2> Mr. Jenkins resigned from the Company on April 30, 1998.
Under "All Other Compensation", the amount shown represents the
Company's payment for term life insurance premiums for 1996,
1997, and 1998, respectively.
F<3> The amount shown represents $335, $3,200, and $3,200 paid as
the Company's matching contribution under its 401(k) plan and
$229, $322, and $488 paid by the Company for term life insurance
premiums for years 1996, 1997, and 1998, respectively.
F<4> 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 and $3,200 paid as the Company's matching
contribution under its 401(k) plan and $300 and $448 paid by the
Company for term life insurance premiums for 1997 and 1998 and
$75 for term life insurance premiums for 1996.
F<5> Mr. Trungale was appointed to the position of
President/Bakers Square Division, in August 1998. He first
joined the Company as a Regional Operating partner for the
Chicago Bakers Square Restaurants in July 1997. Under "All Other
Compensation" the amount shown represents the Company's payment
for term life insurance premiums for 1998.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential realizable value at assumed
annual rates of stock price
Individual Grants appreciation for option term
----------------------------------------------------- -------------------------------------
Name Number of Percent of
Securities total options/ Exercise or Expiration 5%($) 10%($)
Underlying SARs base price date
Options/ granted to ($/sh)
SARs employees in
granted fiscal year
(#)
---- --- ----------- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Kaltenbach 50,000 33 1/3 18.25 4/9/2008 573,866.35 1,454,289.99
50,000 33 1/3 14.25 10/2/2008 448,087.42 1,135,541.50
Joseph F. Trungale 50,000 33 1/3 14.25 10/2/2008 448,087.42 1,135,541.50
</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 1998 by the named executive officers and the
value of such officers' unexercised options/SARs at November 1,
1998.
<TABLE>
<CAPTION>
Value of
Number of Unexercised In-
Unexercised 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 2,000 19,500 50,000/0 0/0
J. Michael Jenkins 100,000 268,166 0/0 0/0
Robert E. Kaltenbach 12,500/87,500 0/0
Richard E. Sabourin 50,000/50,000 131,250/131,250
Joseph F. Trungale 0/50,000 0/0
</TABLE>
Compensation Committee Interlocks and Insider Participation in
Compensation Decisions
The members of the Compensation Committee for fiscal 1998 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 for fiscal year 1998,
he was to receive a base salary of $450,000 and was eligible to
earn a bonus (not to exceed $1.5 million) equal to 20% of the
amount by which the Company's earnings before interest, taxes,
and the bonus itself, exceeded $32 million. Upon Mr. Jenkins'
resignation in April 1998, the agreement terminated without any
payment to him other than his base salary earned through the date
of his resignation.
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 Stock at an exercise price of $11.50 per share, the
fair market value of the Company's Stock on the date of grant.
The options vest in 25,000-share increments on September 1, 1997,
1998, 1999, and 2000. The agreement provides Mr. Sabourin
benefits consistent with those provided to other Company
officers.
Certain employees of the Company, including Messrs.
Kaltenbach, Sabourin, and Trungale, have entered into employment
severance agreements with the Company. Those agreements expire
December 31, 1999, unless a Change-of-Control occurs prior to
that date, then the agreements expire two years after the Change-
of-Control. If a covered employee is terminated within one year
following a Change-of-Control, the employee is entitled to the
following payments. If the termination is because of death,
disability, retirement, the employee's voluntary action, or for
cause (as defined in the agreement), the Company must pay all
earned, but unpaid, compensation to the date of termination. If
the termination is for other reasons, the Company must pay all
compensation earned and unpaid, as of the date of termination; a
lump sum cash payment equal to two times the employee's base
salary at the greater of the rate in effect on the date of the
Change-of-Control or the Notice of Termination; and the amount
equal to the bonus compensation the employee earned in the most
recent fiscal year for which the employee earned a bonus.
Additionally, the Company must provide for eighteen (18) months
following termination, or until the employee obtains other
comparable benefits from another employer, medical,
hospitalization, and dental benefits comparable to those provided
prior to the Change-of-Control. All stock options granted the
employee become immediately exercisable upon a Change-of-Control.
If the employee is terminated within the second year after a
Change-of-Control, the benefits the employee is to receive are
the same except the base salary component of the lump sum payment
is based upon one, not two, times base salary.
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 Officers and other executives named in the
Summary Compensation Table were determined for the 1998 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 in keeping with the ultimate goal 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 of Messrs. Jenkins and Sabourin were
established by the terms of their respective employment
agreements. See Executive Contract and Termination of Employment
and Change-of-Control Arrangements for a discussion of those
agreements.
The base salaries, which were in the median range of the
companies included in the survey described below, of Messrs.
Frederickson and Kaltenbach were determined by the Compensation
Committee in December 1997. In making the determinations, the
committee reviewed information contained in the 1997 Chain
Restaurant Compensation Association Survey, considered the
Company's performance, and evaluated the competitiveness of the
entire compensation package for each.
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. Public and private companies in various segments
of the restaurant industry were represented. Included among
those companies were ones on the Dow Jones Entertainment &
Leisure - Restaurant Index.
Mr. Trungale's compensation was approved by the Committee in
January 1998 when he was appointed an officer and became
responsible for the Company's Midwest Bakers Square Restaurants.
In approving the package, the same criteria used for Messrs.
Frederickson and Kaltenbach were applied.
Bonus Program
In December 1997, the Compensation Committee approved a
bonus program for certain officers of the Company, including
Messrs. Frederickson and Sabourin, which was predicated upon
achievement of overall Company performance against a set baseline
of 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 an increase over the previous year) were
selected by the Committee as being appropriate because of their
direct relationship to shareholder interest. Under the program
each participating executive officer could earn a bonus of up to
52% of the executive's base salary. Bonuses were determined by
application of a formula that takes into account the extent to
which the earnings' target was met or exceeded. In fiscal 1998,
106.5% of the earnings' target was achieved resulting in a bonus
payment to the participating executive officers of 40% of that
individual's base salary.
With respect to Mr. Kaltenbach, in December 1997, the
Compensation Committee approved a bonus program. The payout, a
percentage of profit and income, was predicated upon achieving
store operating profits (restaurant results excluding corporate
overhead), plus net franchise income targets. The measures were
selected because of their direct relationship to Mr. Kaltenbach's
areas of control and responsibility. In fiscal 1998, the targets
achieved resulted in a bonus payment to Mr. Kaltenbach equal to
approximately 1.5% of the Village Inn store operating profit and
net franchise income.
Mr. Trungale's bonus program was predicated upon the store
operating profits (restaurant results excluding corporate
overhead) for the Midwest Bakers Square Restaurants. That
measure was selected because of its focus on increasing profits
and because it was directly tied to his area of control and
responsibility. His bonus program was not modified upon his
appointment in August 1998 to the position of President/Bakers
Square Division. Mr. Trungale's performance resulted in a bonus
payment equal to approximately 1% of the gross store operating
profit of the Company's Midwest Bakers Square Restaurants.
Mr. Jenkins was ineligible for any bonus payment due to his
resignation from the Company.
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 the 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>
1993 1994 1995 1996 1997 1998
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
VICORP Restaurants, Inc. 20.750 16.750 11.000 14.500 15.500 14.125
Dow Jones Restaurant Index 844.420 796.600 1,051.54 1,152.920 1,140.860 1,609.820
Dow Jones Equity Market Index 541.120 561.220 709.270 877.420 1,164.460 1,412.960
</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 1998 were $164,935. 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 1998 was $47,217. As of February 21,
1999, MPH's open account was current.
MPH is also the managing partner for a franchised Village Inn
Restaurant located in New Mexico. In fiscal 1998 the franchisee,
3155 Associates Limited Partnership ("3155"), paid franchise
service fees (2.7% of gross sales at that location) in the amount
of $40,420. 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 1998 was $2,162. As of
February 21, 1999, 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 November 1, 1998. The Board of
Directors has selected Arthur Andersen LLP to serve as the
Company's independent accountants for fiscal 1999.
Representatives of Arthur Anderson LLP are not expected to be present
at the Meeting.
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 November 1, 1998, is being mailed with this
Proxy Statement to each shareholder of record as of March 15,
1999.
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 MARCH 15, 1999. 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: March 25, 1999.
VICORP RESTAURANTS, INC.
Proxy Solicited on Behalf of Board of Directors
The undersigned hereby appoints Charles R. Frederickson, Richard E.
Sabourin, or either of them, with full power of subsistution, proxies to
vote at the Annual Meeting of Shareholders of VICORP Restaurants, Inc.
(the "Company"), to be held on May 6, 1999, at 4:00 p.m., New York, New York,
and at any adjournment or adjournments therof, 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.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE NOMINEES AND
EACH OF THE PROPOSALS LISTED BELOW.
1. ELECTION OF FOR WITHHELD
DIRECTORS
Nominees: Carole Lewis Anderson, Bruce B. Brundage, Charles R.
Frederickson, John C. Hoyt, 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 Independent Accountants FOR AGAINST WITHHELD
SIGNATURE(S):___________________________________DATE:_______________
NOTE: Please sign name excatly as it appears hereon. Joint owners should
each sign. When signing as attorney, executor, administrator, trustee, or
guardian, please give full title as such.
