UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
AMENDMENT TO ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
VICORP Restaurants, Inc.
(Exact name of registrant as specified in its charter)
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items, financial
statements, exhibits, or other portions of its Annual Report of 1999 on
Form 10-K as set forth in the pages attached hereto:
The information comprising Part III, Item 10. Directors and Executive
Officers of the Registrant; Item 11. Executive Compensation; Item 12.
Security Ownership of Certain Beneficial Owners and Management; and Item 13.
Certain Relationships and Related Transactions.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Amendment to be signed on its behalf by
the undersigned, thereunto duly authorized.
VICORP Restaurants, Inc.
(Registrant)
By /s/ Richard E. Sabourin
------------------------
Richard E. Sabourin
Executive Vice President/
Chief Financial Officer
Date: February 22, 2000
Commission File Number 0-12343
Item 10. Directors and Executive Officers of the Registrant.
Directors of the Company
<TABLE>
<CAPTION>
Served as
a director
Name and Age Position since
- ------------ -------- ----------
<S> <C> <C>
Carole Lewis Anderson, 55 Director of the Company April 1991
Bruce B. Brundage, 64 Director of the Company August 1988
Charles R. Frederickson, 62 Chairman of the Board, Chief June 1968
Executive Officer of the
Company
John C. Hoyt, 72 Director of the Company October 1982
Robert T. Marto, 54 Director of the Company August 1989
Dudley C. Mecum, 65 Director of the Company December 1989
Dennis B. Robertson, 62 Director of the Company August 1988
Joseph F. Trungale, 58 Director and President November 1999
of the Company
Hunter Yager, 70 Director of the Company April 1996
Arthur Zankel, 67 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. In
November 1999 he resigned his position as President.
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 Relationships and Related 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; 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.
Joseph F. Trungale became a director in November 1999 simultaneously with
his appointment as President of the Company. Since joining the Company in 1997,
he has held various positions with the Company, including Regional Operating
Partner for Bakers Square and President/Bakers Square Division. From September
1995 until July 1997, Mr. Trungale was in the real estate business. Prior to
that, he was employed with Whataburger, Inc.
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. He is a
Managing Member of Zankel Capital Advisors, L.L.C. Until December 31, 1999,
and for more than the last five years, he was a General Partner of First
Manhattan Co., a money management firm. Mr. Zankel is also a director of
Travelers Group Property Casualty Corp.; Citigroup; and White Mountain
Insurance Group.
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.
Item 11. Executive Compensation
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, 1999.
<TABLE>
<CAPTION>
Summary Compensation Table
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> 1999 300,000 125,086 3,721
Chairman, Chief Executive 1998 301,828 120,300 3,861
Officer and President 1997 311,538 63,000 3,562
Robert E. Kaltenbach<F2> 1999 296,626 105,000 3,680
President/Village Inn 1998 198,463 390,384 100,000 3,688
Division 1997 181,267 150,000 3,522
Richard E. Sabourin<F3> 1999 250,000 104,239 3,644
Executive Vice 1998 250,621 100,250 3,648
President/Chief Financial 1997 259,201 52,500 1,091
Officer
Joseph F. Trungale<F4> 1999 241,346 157,500 90,000 379
President/Baker Square 1998 253,269 153,075 50,000 281
Division 1997 40,385
</TABLE>
<F1> Mr. Frederickson was appointed Chief Executive Officer and President in
May 1998. The amount shown under "All Other Compensation" represents
$3,200 paid each year as the Company's matching contribution under its
401(k) plan and $362, $661, and $521 paid by the Company for term life
insurance premiums for the years 1997, 1998, and 1999, respectively.
<F2> The amount shown represents $3,200 paid each year as the Company's
matching contribution under its 401(k) plan and $322, $488, and $480 paid by
the Company for term life insurance premiums for years 1997, 1998, and 1999,
respectively.
<F3> The amount reflected in the column captioned "All Other Compensation"
represents $791, $3,200, and $3,200 paid each year as the Company's matching
contribution under its 401(k) plan and $300, $448, and $344 paid by the
Company for term life insurance premiums for years 1997, 1998, and 1999,
respectively.
<F4> Mr. Trungale was appointed to the position of President in November 1999.
He first joined the Company as a Regional Operating Partner for the
Chicago Bakers Square Restaurants in July 1997. Under "All Other Compensation"
the amount shown represents the Company's payment for term life
insurance premiums. The amount reflected in the column captioned "Other
Annual Compensation" represents the amount he was reimbursed by the
Company for his expenses in relocating to Denver.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
The following table provides information on option/SAR exercises in
fiscal 1999 by the named executive officers and the value of such officers'
unexercised options/SARs at October 31, 1999.
<TABLE>
<CAPTION>
Value of
unexercise in-
Number of the-money
unexercised options/SARs at
options/SARs at fiscal year-end
fiscal year-end ($)
(#)
--- ---
Shares
acquired on Value
exercise realized Exercisable/ Exercisable/
Name (#) ($) unexercisable unexercisable
---- --- --- ------------- -------------
<C> <C> <C>
Charles R. Frederickson 0/0 0/0
Robert E. Kaltenbach 41,666/58,334 43,748/87,502
Richard E. Sabourin 75,000/25,000 403,125/134,375
Joseph F. Trungale 16,666/33,334 43,748/87,502
</TABLE>
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
The members of the Compensation Committee for fiscal 1999 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
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 with 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, 2000, 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 withinthe 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
Officer and other executives named in the Summary Compensation Table were
determined for the 1999 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 salary of Mr. Sabourin was established by the terms of his
employment agreement. See Employment Contracts and Termination of Employment
and Change-of-Control Arrangements for a discussion of that agreement.
The base salaries, which were in the median range of the companies
included in the survey described below, of Messrs. Frederickson, Kaltenbach,
and Trungale were determined by the Compensation Committee in December 1998.
In making the determinations, the Committee reviewed information contained in
the 1998 Chain Restaurant Compensation Association Survey, considered the
Company's performance, and evaluated the competitiveness of the entire
compensation package for each individual.
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.
Bonus Program
In December 1998, 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
1999, results exceeded by 6.73% the earnings' target, resulting in a bonus
payment to the participating executive officers of 39.71% of that
individual's base salary.
With respect to Mr. Kaltenbach, in December 1998, 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). The measures were selected because of
their direct relationship to Mr. Kaltenbach's areas of control and
responsibility. In fiscal 1999, the targets achieved resulted in a bonus
payment to Mr. Kaltenbach equal to approximately .45% of the Village Inn
store operating profit.
Mr. Trungale's bonus program was predicated upon the store operating
profits (restaurant results excluding corporate overhead) for the 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. Mr. Trungale's performance resulted in a bonus payment
equal to approximately .7% of the gross store operating profit of the Company's
Bakers Square Restaurants.
1999 Stock Options
No stock options were granted to any of the named executive officers
during fiscal 1999. The decision not to grant additional options was made
after the Committee considered the amount and terms of the options currently
held by each of the named executives. It was the position of the Committee
that the options currently granted were comparable to those offered by
similar restaurant companies and were sufficient to create a direct
link between the long-term interest of the executives and the Company's
shareholders.
On November 1, 1999, Mr. Trungale, in connection with his appointment
as the Company's President, was granted the option to purchase 50,000 shares
of the Company's Common Stock. The exercise price is $16.75 per share, the
fair market value of the Company's Common Stock on the date of grant. The
options vest 16,666 shares on November 1, 1999; and 16,667 shares on each of
November 1, 2000, and 2001. In making the grant, the Committee considered
the amount and terms of the options currently held by each of the named
executive officers and the increased level of responsibility being
undertaken by Mr. Trungale.
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
In fiscal 1999, the compensation of non-employee directors was changed.
From November 1, 1998, through June 30, 1999, the nonemployee directors were
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 was also granted options to purchase
2,000 shares of the Company's stock, pursuant to the terms of the now-
terminated 1983 Non-Qualified Stock Option Plan. The options were granted
at 100% of the fair market value of the Company's Common Stock on the
date of grant.
Effective July 1, 1999, the non-employee directors' compensation was changed
to $2,000 per calendar quarter, plus each such director is to receive Common
Stock of the Company equal to $20,000 annually, and reimbursement for actual
expenses incurred. The stock grant is made quarterly. The quarterly stock
grant is $5,000 in value based upon the average closing price of the Company's
Common Stock during the last five trading days prior to the end of the quarter
rounded to a full share. Each nonemployee director can elect to place the
shares into the Company's Deferred Stock Plan for non-employee directors.
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>
1994 1995 1996 1997 1998 1999
______________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
VICORP Restaurants, Inc. 16.750 11.000 14.500 15.500 14.125 16.875
Dow Jones Restaurant
Index 796.600 1,051.540 1,152.920 1,140.860 1,609.820 1,848.400
Dow Jones Equity
Market Index 561.220 709.270 877.420 1,164.460 1,412.960 1,767.520
</TABLE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
Stock
The following table sets forth information as of February 15, 2000, 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 Executive Compensation) 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> 18.98%
(par value $.05 Management, Inc.
per share) 6410 Poplar Avenue,
Suite 900
Memphis, TN 38119
Quaker Capital 807,351<F2> 11.97%
Management Corporation
1300 Arrott Building
401 Wood Street
Pittsburgh, PA 15222
First Manhattan Co. 612,913<F3> 9.09%
437 Madison Avenue
New York, NY 10022
Dimensional Fund Advisors, Inc. 580,500<F4> 8.61%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401-1038
Franklin Advisory Services, Inc. 493,763<F5> 7.32%
One Parker Plaza, 16th Floor
Fort Lee, NJ 07024
Carole Lewis Anderson 23,000<F6> *
3616 Reservoir Road NW
Washington, DC 20007
Bruce B. Brundage 33,000<F6> *
5290 DTC Parkway
Suite 160
Englewood, CO 80111
Charles R. Frederickson 162,654<F6> 2.39%
400 West 48th Avenue
Denver, CO 80216
John C. Hoyt 54,833<F6> *
500 SE Sixth Street
Bartlesville, OK 74003
Robert E. Kaltenbach 41,691<F6> *
400 West 48th Avenue
Denver, CO 80216
Robert T. Marto 16,000<F6> *
354 New Cannan
Wilton, CT 06897
Dudley C. Mecum 15,500<F6> *
33 Khakum Wood Road
Greenwich, CT 06831
Dennis B. Robertson 27,290<F6> *
1987 West 111th Street
Chicago, IL 60643
Richard E. Sabourin 77,641<F6> 1.14%
400 West 48th Avenue
Denver, CO 80216
Joseph F. Trungale 33,332<F6> *
400 West 48th Avenue
Denver, CO 80216
Hunter Yager 14,100<F6> *
314 West Fields
Manchester, VT 05255
Arthur Zankel 170,100<F7> 2.52%
437 Madison Avenue
New York, NY 10022
All directors 669,141 9.45%
and executive officers
as a group (12 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 807,351 shares beneficially owned, the shareholder has sole
voting power over 356,351 shares, shared voting power over 451,000 shares,
sole dispositive power over 356,351 shares, and shared dispositive power
over 451,000 shares.
<F3> Of the 612,913 shares beneficially owned, the shareholder has sole
voting power over 364,500 shares, shared voting power over 242,875 shares,
sole dispositive power over 364,500 shares, and shared dispositive power
over 248,413 shares. The 152,100 shares owned by Arthur Zankel, a director
of the Company, are reflected in the share ownership reported by First
Manhattan Co.
<F4> Of the 580,500 shares beneficially owned, the shareholder has sole
voting and dispositive power over all the shares.
<F5> Of the 493,763 shares beneficially owned, the shareholder has sole
voting and dispositive power over all of the shares.
<F6> Includes 22,000, 18,000, 50,000, 20,000, 41,666, 16,000, 14,000,
18,000, 75,000, 33,332 and 12,000 shares which Ms. Anderson, Messrs.
Brundage, Frederickson, Hoyt, Kaltenbach, Marto, Mecum, Robertson, Sabourin,
Trungale, and Yager, respectively, have the right to purchase under options
that are presently exercisable.
<F7> Includes 152,100 shares owned directly by Mr. Zankel, 18,000 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.
Item 13. Certain Relationships and Related 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 1999 were $174,676. 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 1999 was $51,991. As of
February 15, 2000, MPH's open account was current.
MPH is also the managing partner for a franchised Village Inn Restaurant
located in New Mexico. In fiscal 1999 the franchisee, 3155 Associates Limited
Partnership ("3155"), paid franchise service fees (2.7% of gross sales at that
location) in the amount of $38,557. 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 1999 was $7,341. As of February 15, 2000,
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.
