<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
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 sec.240.14a-11(c) or sec.240.14a-12
IL FORNAIO (AMERICA) CORPORATION
(Name of Registrant as Specified In Its Charter)
Not applicable
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] 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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
[IL FORNAIO LOGO]
IL FORNAIO (AMERICA) CORPORATION
770 TAMALPAIS DRIVE, #400
CORTE MADERA, CA 94925
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 24, 1998
TO THE STOCKHOLDERS OF IL FORNAIO (AMERICA) CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Il
Fornaio (America) Corporation, a Delaware corporation (the "Company"), will be
held on Friday, April 24, 1998, at 4:00 p.m. local time, at the Il Fornaio
restaurant located at 327 Lorton Avenue, Burlingame, California, for the
following purposes:
1. To elect three directors to hold office until the 2001 Annual Meeting
of Stockholders.
2. To ratify the selection of Deloitte & Touche LLP as the Company's
independent auditors for the fiscal year ending December 27, 1998.
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on March 2, 1998 as
the record date for the determination of stockholders entitled to notice of and
to vote at this Annual Meeting and at any adjournment or postponement thereof.
By Order of the Board of Directors
/s/ Paul J. Kelley
Paul J. Kelley
Vice President, Finance, Chief
Financial Officer and Secretary
Corte Madera, California
March 27, 1998
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT ATTENDANCE AT THE MEETING WILL NOT BY ITSELF REVOKE A PROXY.
FURTHERMORE, IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE> 3
IL FORNAIO (AMERICA) CORPORATION
770 TAMALPAIS DRIVE, #400
CORTE MADERA, CA 94925
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
APRIL 24, 1998
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board") of Il Fornaio (America) Corporation, a Delaware corporation (the
"Company"), for use at the Annual Meeting of Stockholders (the "Annual Meeting")
to be held on Friday, April 24, 1998, at 4:00 p.m. local time, or at any
adjournment or postponement thereof, for the purposes set forth herein and in
the accompanying Notice of Annual Meeting. The Annual Meeting will be held at
the Il Fornaio restaurant located at 327 Lorton Avenue, Burlingame, California.
The Company intends to mail this proxy statement and accompanying proxy card on
or about March 27, 1998 to all stockholders entitled to vote at the Annual
Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the Company.
No additional compensation will be paid to directors, officers or other regular
employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on March 2,
1998 (the "Record Date") will be entitled to notice of and to vote at the Annual
Meeting. At the close of business on the Record Date, the Company had
outstanding and entitled to vote 5,827,999 shares of Common Stock.
Each holder of record of Common Stock on the Record Date will be entitled
to one vote for each share held on all matters to be voted upon at the Annual
Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether a matter has
been approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 770
Tamalpais Drive, #400, Corte Madera, California 94925, a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the meeting and voting in person. Attendance at the meeting will
not, by itself, revoke a proxy. Furthermore, if the shares are held of record by
a
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broker, bank or other nominee and the stockholder wishes to vote at the meeting,
the stockholder must obtain from the record holder a proxy issued in the
stockholder's name.
STOCKHOLDER PROPOSALS
Proposals of stockholders that are intended to be presented at the
Company's 1999 Annual Meeting of Stockholders must be received by the Company no
later than November 27, 1998, in order to be included in the proxy statement and
proxy relating to that annual meeting. In addition, any stockholder that desires
to make a proposal to be presented at the Company's Annual Meeting of
Stockholders must comply with the provisions relating to advance notice
contained in the Company's By-laws.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Amended and Restated Certificate of Incorporation and By-laws
provide that the Board of Directors shall be divided into three classes, each
class consisting, as nearly as possible, of one-third of the total number of
directors, with each class having a three-year term. Vacancies on the Board may
be filled only by persons elected by a majority of the remaining directors. A
director elected by the Board to fill a vacancy (including a vacancy created by
an increase in the size of the Board of Directors) shall serve for the remainder
of the full term of the class of directors in which the vacancy occurred and
until such director's successor is elected and qualified.
The Board of Directors is presently composed of eight members. There are
three directors in the class whose term of office expires in 1998. Each of the
nominees for election to this class is currently a director of the Company who
was previously elected by the stockholders. If elected at the Annual Meeting,
each of the nominees would serve until the 2001 annual meeting and until his or
her successor is elected and has qualified, or until such director's earlier
death, resignation or removal.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote at the meeting.
Set forth below is biographical information for each person nominated and
each person whose term of office as a director will continue after the Annual
Meeting.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM
EXPIRING AT THE 2001 ANNUAL MEETING
LAURENCE B. MINDEL
Laurence B. Mindel, 60, joined the Company as Chairman of the Board,
President and Chief Executive Officer in January 1987. From 1964 to 1970, Mr.
Mindel was President and Chief Executive Officer of Caswell Coffee Company in
San Francisco. In 1970, Mr. Mindel co-founded Spectrum Foods, where he served as
Chairman of the Board, President and Chief Executive Officer. Under Mr. Mindel's
direction, Spectrum created 14 restaurants in Northern and Southern California,
including Chianti, MacArthur Park, Harry's Bar and American Grill, Prego and
Guaymas. In 1984, Saga Corporation acquired Spectrum Foods, and from that time
until he joined the Company, Mr. Mindel served as President of the Saga
Restaurant Group, which included Stuart Anderson's Black Angus, Velvet Turtle,
Spoons, Hotel Food Services and the newly acquired Spectrum Foods restaurants.
In 1985, Mr. Mindel became the first person of non-Italian descent and the first
American to be awarded the Caterina di Medici medal. Awarded by the Italian
government, the medal recognizes persons who have excelled in preserving the
Italian heritage outside of Italy. Michael Mindel, the son of Laurence B.
Mindel, is Vice President of Marketing of the Company.
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W. SCOTT HEDRICK
Scott Hedrick, 51, has been a director of the Company since 1987. Mr.
Hedrick co-founded InterWest Partners, a venture capital management firm, in
1979 and has been a general partner of that firm since that time. From 1974 to
1979, Mr. Hedrick was a partner of American-Euro Interfund, a venture capital
corporation. From 1970 to 1974, he was an Assistant Vice President with Small
Business Enterprise Company, a venture capital subsidiary of Bank of America NT
& SA. Mr. Hedrick is also a director of Office Depot, Inc.
W. HOWARD LESTER
Mr. Lester, 62, has been a director of the Company since 1980. Mr. Lester
has served as Chairman of the Board and Chief Executive Officer of
Williams-Sonoma, Inc., a retail kitchen furnishings and housewares company,
since 1978. Mr. Lester is also a director of The Good Guys, Inc., CKE (Carl's)
and Harold's Corporation.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE
DIRECTORS CONTINUING IN OFFICE UNTIL THE 1999 ANNUAL MEETING
F. WARREN HELLMAN
F. Warren Hellman, 63, has been a director of the Company since 1983. From
1984 to 1997 Mr. Hellman was a general partner of Hellman & Friedman, an
investment firm and since January 1998, he has been Chairman of Hellman &
Friedman LLC. He has also been a partner of Matrix Partners, a venture capital
firm, since 1982 and a general partner of FWH Associates, an investment firm,
since 1985. From 1962 to 1977, Mr. Hellman was a partner of Lehman Brothers in
New York, where he served at various times as head of Lehman's Investment
Banking Division, President and Director of Lehman Brothers, Inc., and Chairman
of Lehman Brothers, Inc. and Chairman of Lehman Corporation, a closed-end
investment company. From October 1981 to March 1984, Mr. Hellman also served as
Managing Director of Lehman Brothers Kuhn Loeb. Mr. Hellman is also a director
of Levi Strauss & Co., Franklin Resources, Inc., MobileMedia Communications,
Osterweis Capital Management, PowerBar, Inc., D.N. & E. Walter & Co., Young &
Rubicam Holdings, Inc., VSP Holdings and Sugarbowl Corporation.
MICHAEL J. HISLOP
Michael J. Hislop, 43, joined the Company as President and Chief Operating
Officer in July 1995. From April 1991 to May 1995, Mr. Hislop served as Chairman
and Chief Executive Officer of Chevy's Mexican Restaurants which, under his
direction, grew from 17 locations to 63 locations nationwide. From 1982 to 1991,
Mr. Hislop was employed by El Torito Mexican Restaurants, Inc., serving first as
Regional Operator, then as Executive Vice President of Operations and, for the
last three years, as Chief Operating Officer. From 1979 to 1982, Mr. Hislop was
employed by T.G.I. Fridays Restaurants, Inc. as a Regional Manager.
T. GARY ROGERS
T. Gary Rogers, 55, has been a director of the Company since 1989. He has
been Chairman of the Board and Chief Executive Officer of Dreyer's Grand Ice
Cream, Inc., a manufacturer and distributor of premium ice cream products, since
1977. In 1973, he founded Vintage Management Company, a restaurant company
operating Vintage House Restaurants, and served as its President until 1977.
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DIRECTORS CONTINUING IN OFFICE UNTIL THE 2000 ANNUAL MEETING
PIERRE W. MORNELL
Pierre W. Mornell, 63, has been a director of the Company since 1991. Since
1969, Dr. Mornell has been a psychiatrist and a consultant in private practice.
Since 1985, he has lectured in the IBM Advanced Management Seminar and
International Executive Programs. Dr. Mornell has also lectured at the Stanford
University and Harvard University business schools. Dr. Mornell was a founding
director of the Trust for Public Land. He has served as a consultant to a number
of presidents of organizations, including Northern Telecom (Canada), Intuit Inc.
and Kinko's.
DEAN A. CORTOPASSI
Dean A. Cortopassi, 59, has been a director of the Company since April
1996. Mr. Cortopassi founded and has served as Chief Executive Officer of San
Tomo Group, a holding company which owns and operates a number of food
processing and marketing companies, including Stanislaus Food Products, Gilroy
Canning Company, Sierra Quality Canners and Muir Glen Organics. Mr. Cortopassi
is also a director of the National Food Processors Association and Aidell's
Sausage Company.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 28, 1997, the Board held four
meetings. The Board has an Audit Committee and a Compensation Committee, but
does not have a nominating committee or any committee performing a similar
function.
The Audit Committee meets with the Company's independent auditors to review
the results of the annual audit and discuss the financial statements; recommends
to the Board the independent auditors to be retained; receives and considers the
auditors' comments as to controls, adequacy of staff and management performance
and procedures in connection with audit and financial controls; and performs
other related duties delegated to such committee by the Board. The Audit
Committee, which consists of two non-employee directors, Mr. Hellman and Mr.
Cortopassi, did not meet during fiscal 1997.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants under
the Company's stock option plans and otherwise determines compensation levels
and performs such other functions regarding compensation as the Board may
delegate. The Compensation Committee, which consists of four non-employee
directors, Messrs. Hedrick, Lester, Mornell and Rogers, held one meeting during
fiscal 1997.
During fiscal 1997, each Board member attended 75% or more of the aggregate
of the meetings of the Board and of the committees on which he served during the
fiscal year, held during the period for which he was a director or committee
member, respectively.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board has selected Deloitte & Touche LLP as the Company's independent
auditors for the fiscal year ending December 27, 1998 and has further directed
that management submit the selection of independent auditors for ratification by
the stockholders at the Annual Meeting. Deloitte & Touche LLP has audited the
Company's financial statements since 1990. Representatives of Deloitte & Touche
LLP are expected to be present at the Annual Meeting, will have an opportunity
to make a statement if they so desire and will be available to respond to
appropriate questions.
Stockholder ratification of the selection of Deloitte & Touche LLP as the
Company's independent auditors is not required by the Company's By-laws or
otherwise. However, the Board is submitting the selection of Deloitte & Touche
LLP to the stockholders for ratification as a matter of good corporate practice.
If the stockholders fail to ratify the selection, the Audit Committee and the
Board will reconsider whether or
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not to retain that firm. Even if the selection is ratified, the Board in its
discretion may direct the appointment of different independent auditors at any
time during the year if it determines that such a change would be in the best
interests of the Company and its stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and voting at the Annual Meeting will be required
to ratify the selection of Deloitte & Touche LLP.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 2, 1998 by (a) all those
known by the Company to be beneficial owners of more than 5% of its Common
Stock; (b) each director and nominee for director; (c) each of the executive
officers named in the Summary Compensation Table; and (d) all executive officers
and directors of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP(1)
------------------------
NUMBER PERCENT
BENEFICIAL OWNER OF SHARES OF TOTAL(2)
---------------- --------- -----------
<S> <C> <C>
InterWest Partners (3)...................................... 706,031 12.1%
Building Three, Suite 255
3000 Sand Hill Road
Menlo Park, CA 94025
Laurence B. Mindel (4)...................................... 714,896 12.2%
Il Fornaio (America) Corporation
770 Tamalpais Drive, #400
Corte Madera, CA 94925
The TCW Group, Inc. (5)..................................... 476,200 8.2%
865 South Figueroa Street
Los Angeles, CA 90017
Michael J. Hislop(6)........................................ 285,580 4.7%
Paul J. Kelley(7)........................................... 56,740 1.0%
Michael J. Beatrice(8)...................................... 21,412 *
Dean A. Cortopassi(9)....................................... 62,294 1.1%
W. Scott Hedrick(3)(10)..................................... 719,031 12.3%
F. Warren Hellman(11)....................................... 140,854 2.4%
W. Howard Lester(12)........................................ 188,201 3.2%
Pierre W. Mornell, M.D.(13)................................. 25,997 *
T. Gary Rogers(14).......................................... 54,462 *
All executive officers and directors as a group
(10 persons)(15)............................................ 2,265,168 36.1%
</TABLE>
- ---------------
* Less than one percent.
(1) This table is based on information supplied by officers, directors and
principal stockholders of the Company and on any Schedules 13D or 13G filed
with the Securities and Exchange Commission (the "Commission"). Except as
otherwise indicated in the footnotes to this table and subject to community
property laws where applicable, the Company believes that each of the
stockholders named in this table has sole voting and investment power with
respect to the shares indicated as beneficially owned.
(2) Applicable percentages are based on 5,827,999 shares outstanding on March
2, 1998, adjusted as required by rules promulgated by the Commission.
(3) Includes 201,289 shares held of record by InterWest Partners I, 202,412
shares held of record by InterWest Partners II, 295,158 shares held of
record by InterWest Partners IV and 7,172 shares held of record by
InterWest Entreprenuers. HBH Partners I is the general partner of InterWest
Partners I, HBH Partners II is the general partner of InterWest Partners
II, InterWest Management Partners IV is the general partner of InterWest
Partners IV and InterWest Partners II is the general partner of InterWest
Entrepreneurs. Mr. Hedrick is a general partner of HBH Partners I, HBH
Partners II and InterWest Management IV. Mr. Hedrick disclaims beneficial
ownership of share held by such entities except to the extent of his pro
rata interests in such partnerships.
(4) Includes 7,195 share held by the Mindel Family Trust, 5,750 shares held by
a Trust created for the benefit of Laurence B. Mindel and his family, and
646,179 shares held by The Mindel Living Trust, of which Mr. Mindel is a
trustee. Also includes 55,772 shares issuable upon the exercise of stock
options that are exercisable within 60 days of the Record Date. Excludes an
aggregate of 195,944 shares held in
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trusts for five children of Mr. Mindel, as to which Mr. Mindel is not a
trustee and disclaims beneficial ownership.
(5) Based on a Schedule 13G filed with the Commission on February 12, 1998,
includes 476,200 shares held by Trust Company of the West, TCW Asset
Management Company and TCW Funds Management, Inc., all of which are
subsidiaries of The TCW Group, Inc.
(6) All of which are issuable upon the exercise of stock options that are
exercisable within 60 days of the Record Date.
(7) Includes 26,887 shares issuable upon the exercise of stock options that are
exercisable within 60 days of the Record Date.
(8) Includes 21,312 shares issuable upon the exercise of stock options that are
exercisable within 60 days of the Record Date.
(9) Includes 57,794 shares held of record by Stanislaus Food Products Company,
a California Corporation. Mr. Cortopassi is Chief Executive Officer and a
principal stockholder of Stanislaus Food Products company. Also includes
4,500 shares issuable upon the exercise of stock options that are
exercisable within 60 days of the Record Date.
(10) Includes 13,000 shares issuable upon the exercise of stock options that are
exercisable within 60 days of the Record Date.
(11) Includes 123,555 shares held of record by FWH Associates, A California
Limited Partnership. Mr. Hellman is a general partner of FWH Associates.
Also includes 586 shares held of record by InterWest Partners I and 1,661
shares held of record by InterWest Partners II which represents FWH's pro
rata interest of such partnerships' holdings. FWH Associates is a limited
partner of InterWest I and II. Also includes 391 shares held of record by
InterWest Partners I and 1,661 shares held of record by InterWest Partners
II which represents the pro rata interest of such partnerships' holdings
held by The Marco Hellman Trust "B". Mr. Hellman is the sole trustee of The
Marco Hellman Trust "B". The Marco Hellman Trust "B" is a limited partner
of InterWest Partners I and II. Also includes 3,000 shares issuable upon
the exercise of stock options that are exercisable within 60 days of the
Record Date.
(12) Includes 23,535 share held of record by Williams-Sonoma, Inc. Mr. Lester is
the Chairman of the Board and Chief Executive Officer of Williams-Sonoma,
Inc. Also includes 13,000 shares issuable upon the exercise of stock
options that are exercisable within 60 days of the Record Date.
(13) Includes 2,145 shares held of record by an individual retirement account
for the benefit of Dr. Mornell's wife and 4,620 shares held by Pierre
Mornell, M.D., Sole Proprietor Profit Sharing Plan. Also includes 13,000
shares issuable upon the exercise of stock option that are exercisable
within 60 days of the Record Date.
(14) Includes 5,487 shares held of record by Rogers Revocable Trust and 35,975
shares held of record by Four Rogers Trust. Mr. Rogers is a trustee of both
Rogers Revocable Trust and Four Rogers Trust. Also includes 13,000 shares
issuable upon the exercise of stock options that are exercisable within 60
days of the Record Date.
(15) Includes information contained in the notes above, as applicable.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's directors and executive officers and
persons who own more than ten percent of a registered class of the Company's
equity securities to file with the Commission initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Officers, directors and greater than ten percent stockholders are
required by Commission regulation to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended
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December 28, 1997, the Company's officers, directors and greater than ten
percent beneficial owners complied with applicable Section 16(a) filing
requirements.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company receive stock option grants
for their services as directors under the 1997 Non-Employee Directors' Stock
Option Plan (the "Directors Plan"). Options granted under the Directors' Plan
are intended by the Company not to qualify as incentive stock options under the
Internal Revenue Code of 1986, as amended (the "Code").
Option grants under the Directors' Plan are non-discretionary. Each person
who was serving as a non-employee director on April 23, 1997, the date the
Directors' Plan was approved by the stockholders of the Company, was
automatically granted an option to purchase 4,500 shares of Common Stock of the
Company. Additionally, each person who is first elected or appointed to the
Board after April 23, 1997, will automatically be granted an option to purchase
4,500 shares of Common Stock of the Company. Every 36 months after the initial
grant of 4,500 shares, each non-employee director will be granted an option to
purchase an additional 4,500 shares of the Common Stock of the Company. No other
options may be granted at any time under the Directors' Plan. The exercise price
of options granted under the Directors' Plan is 100% of the fair market value of
the Common Stock subject to the option on the date of the option grant. Options
granted under the Directors' Plan vest in three equal annual installments
commencing on the date one year after the grant of the option, provided that the
optionee has, during the entire year prior to each such vesting date, provided
continuous service to the Company as a non-employee director or as an employee
of the Company or an affiliate of the Company. The term of options granted under
the Directors' Plan is 10 years. In the event of a merger of the Company with or
into another corporation or a consolidation, acquisition of assets or other
change-in-control transaction involving the Company, the vesting of each option
will accelerate and the option will terminate if not exercised prior to the
consummation of the transaction unless any surviving corporation assumes such
options or substitutes similar options for such options.
During fiscal 1997, the Company granted options covering an aggregate of
27,000 shares to the six non-employee directors of the Company at an exercise
price of $6.00 per share, the fair market value of the Common Stock on the date
of, as determined by the Board. During fiscal 1997, no options to purchase
shares were exercised under the Directors' Plan.
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation
The following table shows, for the fiscal years ended December 28, 1997 and
December 29, 1996, compensation awarded or paid to, or earned by, the Company's
Chief Executive Officer, and its other four most highly compensated executive
officers (the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION(1) ------------------
----------------------- NUMBER OF SHARES
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2)(3) UNDERLYING OPTIONS
--------------------------- ---- -------- ----------- ------------------
<S> <C> <C> <C> <C>
Laurence B. Mindel 1997 $402,910 $204,050 20,500
Chairman of the Board and Chief 1996 $369,519 $ 12,900 17,695
Executive Officer
Michael J. Hislop 1997 $339,612 $175,000 17,500
President and Chief Operating Officer 1996 $313,615 $ 9,000 15,200
Paul J. Kelley 1997 $149,446 $ 37,500 7,450
Vice President, Finance, Chief Financial 1996 $139,496 $ 28,000 6,350
Officer and Secretary
Michael J. Beatrice(4) 1997 $135,511 $ 48,000 6,650
Vice President, Operations 1996 $ 86,538 $ 34,260 50,000
</TABLE>
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- ---------------
(1) In accordance with the rules of the Commission, the compensation described
in this table does not include medical, group life insurance or other
benefits received by the Named Executive Officers that are available
generally to all salaried employees of the Company, and certain perquisites
and other personal benefits received by the Named Executive Officers that do
not exceed the lesser of $50,000 or 10% of any such officer's salary and
bonus disclosed in this table.
(2) Includes car allowance.
(3) Includes bonuses paid in 1997 and 1998 for services rendered in 1996 and
1997, respectively, but does not include bonuses paid in 1996 for services
rendered in 1995.
(4) Mr. Beatrice commenced employment with the Company on April 15, 1996.
Accordingly, the amounts shown for 1996 are for compensation paid from April
15 to the end of fiscal 1996.
Stock Option Information
In March 1997 the Board of Directors adopted, and in April 1997 the
stockholders approved, the Company's 1997 Equity Incentive Plan ( the "1997
Plan"), as an amendment and restatement of the Company's 1992 Stock Option Plan
and the 1995 Stock Option Plan. An aggregate of 1,300,000 shares of Common Stock
is authorized for issuance under the 1997 Plan. In addition, in April, 1997, the
Board of Directors terminated the Company's 1988 Stock Option Plan and 1991
Stock Option Plan (the 1988, 1991, 1992 and 1995 Stock Option Plans are
collectively referred to as the "Prior Plans"). The Company currently grants
options to its executive officers under the 1997 Plan. As of December 28, 1997,
options to purchase a total of 979,785 shares were outstanding under the Prior
Plans and the 1997 Plan and options to purchase 458,320 shares remained
available for grant under the 1997 Plan.
The following tables shows, for fiscal 1997, certain information regarding
options granted to the Named Executive Officers during fiscal 1997 and options
held by the Named Executive Officers at fiscal year end.
STOCK OPTION GRANTS DURING FISCAL 1997
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
--------------------------------------------------------- ANNUAL RATES OF
% OF TOTAL STOCK PRICE
NUMBER OF OPTIONS EXERCISE APPRECIATION
SECURITIES GRANTED TO OR BASE PRICE FOR OPTION TERM(4)
OPTIONS EMPLOYEES IN PER SHARE EXPIRATION ---------------------
NAME GRANTED(1) FISCAL YEAR(2) $/SHARE(3) DATE 5% 10%
---- ----------- -------------- ------------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Laurence B. Mindel........... 20,500 14.4% $6.60 04/23/02 $37,380 $ 82,602
Michael J. Hislop(5)......... 17,500 12.3% $6.00 04/23/07 $66,150 $166,950
Paul J. Kelley............... 7,450 5.2% $6.00 04/23/07 $28,161 $ 71,073
Michael J. Beatrice.......... 6,650 4.6% $6.00 04/23/07 $25,137 $ 63,441
</TABLE>
- ---------------
(1) Options generally become exercisable on an annual basis at a rate of 20% per
year over five years. Options generally expire 10 years from the date of
grant or earlier upon termination of employment. Upon certain changes in
control of the Company, if an outstanding option is not assumed or
substituted by the surviving entity, the unvested portion of the option
accelerates and the option terminates if not exercised prior to such change
in control.
(2) Options to purchase 142,555 shares of Common Stock were granted to employees
in fiscal 1997.
(3) The exercise price per share of each option was equal to the fair market
value of the Common Stock on the date of grant as determined by the Board of
Directors except that, with respect to the option granted to Mr. Mindel, the
exercise price was equal to 110% of such fair market value.
(4) The potential realizable value is calculated based on the term of the option
at its date of grant (five years for Mr. Mindel's option and 10 years for
options held by other officers). It is calculated based on the assumption
that the stock price on the date of grant appreciates from the date of grant
at the indicated annual rate compounded annually for the entire term of the
option and that the option is exercised and
9
<PAGE> 12
sold on the last day of its term for the appreciated stock price. The 5% and
10% assumed rates of appreciation are derived from the rules of the
Commission and do not represent the Company's estimate or projection of
future Common Stock price.
(5) In the event of a change of control of the Company, the unvested portion of
Mr. Hislop's option accelerates and he has the right to exercise all or any
portion of the option.
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND FISCAL YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR END(#) FISCAL YEAR END($)(2)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Laurence B. Mindel........................ 42,141 55,738 $ 412,987 $ 490,117
Michael J. Hislop......................... 279,040 213,660 $2,754,000 $2,077,563
Paul J. Kelley............................ 25,986 35,500 $ 262,158 $ 339,072
Michael J. Beatrice....................... 10,000 46,650 $ 93,750 $ 430,694
</TABLE>
- ---------------
(1) No options were exercised by any of the Named Executive Officers during
fiscal 1997.
(2) Fair market value of the Company's Common Stock at December 28, 1997
($14.375) minus the exercise price of the options.
EMPLOYMENT AGREEMENTS
In April 1995, the Company entered into an at-will employment agreement
with Michael J. Hislop as President and Chief Operating Officer. The agreement
provided for a base salary, annual bonus and a monthly car allowance, subject to
annual review. In addition, pursuant to the agreement, in April 1995, the
Company granted Mr. Hislop options to purchase 460,000 shares of Common Stock.
As set forth in the employment agreement, in the event of a change of control
(as defined in the agreement), the unvested portion of the option automatically
accelerates and Mr. Hislop has the right to exercise all or any portion of the
option. The agreement provides further that in the event Mr. Hislop's employment
is involuntarily terminated by the Company for any reason other than death,
disability or cause (as defined in the agreement) or in the event Mr. Hislop
voluntarily terminates his employment within 30 days of a change of control (as
defined in the agreement), Mr. Hislop will receive, in lieu of any severance
benefits which he may otherwise be entitled to receive under any Company
severance plan or program, a cash severance payment in an aggregate amount equal
to 100% of Mr. Hislop's annual base salary at the time of such termination.
JOINT REPORT OF THE COMPENSATION COMMITTEE AND THE BOARD OF DIRECTORS ON
EXECUTIVE COMPENSATION(1)
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors. The Committee consists of W.
Scott Hedrick, W. Howard Lester, Pierre W. Mornell and T. Gary Rogers, none of
whom is an employee of the Company. The Committee is currently responsible for
setting the Company's policies regarding compensation and benefits, and
administering the Company's employee stock option and stock purchase plans. In
particular, the Committee evaluates the performance of management and determines
the compensation and benefits of executive officers. Prior to the Company's
initial public offering in September 1997, the Company's employee stock plans
were administered by the Board of Directors. Accordingly, the Board has joined
in this Report with respect to the grant of options to executives prior to the
effective date of that offering.
- ---------------
1 This Section is not soliciting material, is not deemed filed with the
Commission and it is not to be incorporated by reference in any filing of the
Company under the Securities Act of 1933, as amended (the Securities Act) or the
Exchange Act, whether made before or after the date hereof and irrespective of
any general incorporation language in any such filing.
10
<PAGE> 13
The Company's executive management program is designed (i) to attract and
retain outstanding executive officers capable of leading the Company to
fulfillment of its business objectives and (ii) to establish an appropriate link
between executive compensation and achievement of the Company's strategic and
financial performance goals, including the enhancement of stockholder value. To
that end, the Company's compensation program offers competitive compensation
opportunities that reward individual contributions as well as corporate
performance, based on the following policies and principles:
- Implementation of competitive pay practices, taking into account the pay
practices of other companies of comparable size and stage of development
with which the Company competes for talented executives.
- Emphasis on pay-for-performance as a major component of compensation
through annual incentive programs designed to reward executives for
achievement of annual corporate financial performance goals.
- Use of equity-based incentives designed to motivate executives to focus
on long-term strategic objectives, to align the interests of management
and the stockholders and to provide opportunities for management to share
in the benefits that they achieve for the Company's stockholders.
For 1997, the Company's executive compensation program included the
following components: (i) base salary, (ii) annual incentives in the form of
cash bonuses and (iii) long-term incentives in the form of options to purchase
common stock of the Company.
In establishing the size of an executive's opportunity for incentive
compensation, including bonus and stock options, the Committee takes into
account, in addition to general comparative information, the individual
performance of the executive and the financial performance and strategic
achievements of the Company during the prior year, the executive's level of
responsibility and potential to influence or contribute to the Company's
operation and direction and the quality of the executive's long-term strategic
decisions made during the year. The Committee generally does not base its
considerations on any single performance factor nor does it specifically assign
relative weights to factors, but rather considers a mix of factors and evaluates
Company and individual performance against that mix. To the extent that
qualitative factors are involved in the determination, the Committee must
necessarily make a subjective assessment of performance.
Base Compensation
Base salaries paid to executives are subject to annual review and
adjustment. The Committee evaluates executive performance on the basis of a
variety of factors, both individual and corporate, as well as level of
responsibility, competitive factors and the Company's internal policies
regarding salary increases. For 1997, the base salary of Laurence B. Mindel, the
Company's Chief Executive Officer, was increased by 6%, largely reflecting his
contribution to the Company in connection with the execution of the Company's
long-term strategic initiatives, as well as the increase in 1996 in comparable
restaurant sales. The Committee also considered, to a lesser extent, a variety
of comparative data, gathered informally by the Committee members, with respect
to compensation paid to executives at other companies with which the Committee
members were familiar (although these companies are not included in the industry
index used in the performance graph.) The base salaries paid to other executives
were increased for 1997 by amounts ranging from 6% to 12%, reflecting similar
factors.
Annual Incentive Compensation
Annual bonuses are intended to reward executives for achievement of
targeted corporate financial performance goals. At a meeting in 1996, the
Committee established the bonus potential for 1997 for each executive. Mr.
Mindel was eligible to receive a bonus for 1997 equal to 25% of his base salary
if the Company attained a targeted level of pre-tax income established by the
Board in the Company's annual operating plan and an additional 25% of his base
salary if the Company achieved a targeted level of improvement in 1997 earnings
per share as compared with 1996. The other executives were eligible to receive
bonuses ranging from 25% to 50% of their respective base salaries if the Company
achieved certain financial performance goals. The
11
<PAGE> 14
goals, and the relative weights attributable to each, varied for each executive.
These goals included achievement of one or more of the following elements: a
targeted level of pre-tax income established by the Board in the Company's
operating plan, a targeted level of improvement in 1997 earnings per share and a
targeted divisional operating profit. With respect to any target, bonuses are
typically not paid unless the particular target is achieved in full, with the
result that a substantial portion of each executive's compensation is "at risk."
In all cases, the targeted goals for 1997 were met or exceeded, and the full
amount of potential bonuses was awarded to all executives.
Long-Term Compensation
Stock options under the Company's stock option plans are used to underscore
the common interests of stockholders and management. Options are granted to
executives to provide a continuing financial incentive to maximize long-term
value to stockholders and to help make the executive's total compensation
opportunity competitive. Options may be tax-qualified or nonstatutory and
typically have exercise prices set at the fair market value of the Common Stock
on the date of grant. In addition, because stock options generally become
exercisable over a period of several years, options encourage executives to
remain in the long-term employ of the Company.
The size of an option to be granted to an executive is calculated on the
basis of the potential reward to the officer, assuming a specified stock price
appreciation over a five-year period. The targeted potential return is
determined as a percentage of current base salary. Based on this formula, in
1997, Mr. Mindel was granted options to purchase 20,500 shares of Common Stock,
and the other executives were granted options to purchase Common Stock at levels
ranging from 6,350 to 15,200 shares. (Messrs. Mindel and Hislop did not
participate in decisions with respect to the grant of their options.) Executives
may realize the targeted return only to the extent that the actual price of the
Common Stock increases in the public market at the assumed rate.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally imposes on the Company an annual corporate deduction
limitation of $1 million on the compensation of certain executive officers.
Compensation in excess of $1 million may be deducted if it is performance-based
compensation within the meaning of the Code. The Committee has not yet adopted a
policy with respect to the treatment of all forms of compensation under Section
162(m); however, the Committee has determined that stock options granted under
the Company's 1997 Equity Incentive Plan with an exercise price at least equal
to the fair market value of the Company's Common Stock on the date of grant
should, where practicable, be treated as "performance-based compensation," and
the 1997 Equity Incentive Plan contains provisions designed to allow
compensation recognized by an executive as a result of the grant of a stock
option to be deductible by the Company.
Compensation Committee
W. Scott Hedrick
W. Howard Lester
Pierre W. Mornell
T. Gary Rogers
Other Board Members
Dean A. Cortopassi
F. Warren Hellman
Michael J. Hislop
Laurence B. Mindel
12
<PAGE> 15
PERFORMANCE MEASUREMENT COMPARISON(1)
The following chart shows the value of an investment of $100 in cash at the
close of business on September 19, 1997, the date of commencement of public
trading of the Company's Common Stock, in (a) the Company's Common Stock, (b)
the Dow Jones Restaurant Index and (c) the CRSP Total Return Index for the
Nasdaq Stock Market (United States companies). All values assume reinvestment of
the full amount of all dividends.
COMPARISON OF 3 MONTH CUMULATIVE TOTAL RETURN ON INVESTMENT
<TABLE>
<CAPTION>
Il Fornaio
Measurement Period (America) Dow Jones Nasdaq CRSP
(Fiscal Year Covered) Corporation Restaurant Index Total Return
<S> <C> <C> <C>
9/19/97 100 100 100
12/26/97 99 100 100
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 19, 1997 DECEMBER 26, 1997
------------------ -----------------
<S> <C> <C>
Il Fornaio (America) Corporation........................... 100.00 99.00
Dow Jones Restaurant Index................................. 100.00 100.00
Nasdaq CRSP Total Return................................... 100.00 100.00
</TABLE>
CERTAIN TRANSACTIONS
The Company has entered into indemnity agreements with each of the
Company's directors and executive officers which provide that, subject to
certain limitations, the Company will indemnify against any and all expenses of
the director or executive officer who incurred such expenses because of his or
her status as a director or executive officer, to the fullest extent permitted
by the Company's By-laws and Delaware law. In addition, the Company's By-laws
provide that the Company shall indemnify its directors and executive officers to
the fullest extent not prohibited by Delaware law, subject to certain
limitations and may also secure insurance, to the fullest extent permitted by
Delaware law, on behalf of any director, officer, employee or agent against any
expense, liability or loss arising out of his or her actions in such capacity.
- ---------------
1 This Section is not soliciting material, is not deemed filed with the
Commission and it not to be incorporated by reference in any filing of the
Company under the Securities Act or the Exchange Act, whether made before or
after the date hereof and irrespective of any general incorporation language in
any such filing.
13
<PAGE> 16
The Company's Amended and Restated Certificate of Incorporation (the
"Restated Certificate"), provides that a director of the Company shall not be
personally liable to the Company or its stockholders for monetary damages for
any breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intention
misconduct or a knowing violation of law, (iii) for unlawful payment of
dividends or unlawful stock repurchases or redemptions, or (iv) for any
transaction from which the director derived an improper personal benefit. If the
Delaware law is amended to authorize corporate action further eliminating or
limiting the personal liability of a director, then the liability of a Company
director shall be eliminated or limited to the fullest extent permitted by the
Delaware law, as so amended. The provision in the Restated Certificate does not
eliminate the duty of care and, in appropriate circumstances, equitable remedies
such as injunctive or other forms of non- monetary relief will remain available
under Delaware law. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws.
Laurence B. Mindel's son, Michael Mindel, is Vice President of Marketing of
the Company and, as such, for 1997, received aggregate cash compensation of
$110,754 and options to acquire 3,950 shares of Common Stock.
OTHER BUSINESS
The Board knows of no other business that will be presented for
consideration at the Annual Meeting. If other matters are properly brought
before the meeting, however, it is the intention of the persons named in the
accompanying proxy to vote the shares represented thereby on such matters in
accordance with their best judgment.
By Order of the Board of Directors
/s/ Paul J. Kelley
Paul J. Kelley
Chief Financial Officer, Vice
President,
Finance and Secretary
March 27, 1998
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
28, 1997 IS AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO: INVESTOR RELATIONS
DEPARTMENT, IL FORNAIO (AMERICA) CORPORATION, 770 TAMALPAIS DRIVE #400, CORTE
MADERA, CALIFORNIA 94925.
1637-PS-98
14
<PAGE> 17
IL FORNAIO (AMERICA) CORPORATION
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 24, 1998
The undersigned hereby appoints LAURENCE B. MINDEL and PAUL J. KELLEY,
and each of them, as attorneys and proxies of the undersigned, with full power
of substitution, to vote all of the shares of stock of Il Fornaio (America)
Corporation that the undersigned may be entitled to vote at the Annual Meeting
of Stockholders of Il Fornaio (America) Corporation to be held on Friday, April
24, 1998, at 4:00 p.m. local time, at the Il Fornaio restaurant located at 327
Lorton Avenue, Burlingame, California, and at any and all continuations and
adjournments thereof, with all powers that the undersigned would possess if
personally present, upon and in respect of the following matters and in
accordance with the following instructions, with discretionary authority as to
any and all other matters that may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2, AS MORE SPECIFICALLY DESCRIBED
IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL
BE VOTED IN ACCORDANCE THEREWITH.
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED BELOW.
PROPOSAL 1: To elect three directors to hold office until the 2001 Annual
Meeting of Stockholders and until their successors are elected.
<TABLE>
<S> <C>
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote for all nominees below
(except as written below)
</TABLE>
NOMINEES: Laurence B. Mindel, W. Scott Hedrick, W. Howard Lester
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S), WRITE SUCH
NOMINEE(S)' NAME(S) BELOW:
----------------------------------------------------------------------
<PAGE> 18
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSAL 2 BELOW.
PROPOSAL 2: To ratify the selection of Deloitte & Touche LLP as the Company's
independent auditors for the fiscal year ending December 27, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Dated: __________, 1998
------------------------------
------------------------------
Signature(s)
Please sign exactly as your
name appears hereon. If the
stock is registered in the
names of two or more persons,
each should sign. Executors,
administrators, trustees,
guardians and
attorneys-in-fact should add
their titles. If signer is a
corporation, please give full
corporate name and have a duly
authorized officer sign,
stating title. If signer is a
partnership, please sign in
partnership name by authorized
person.
PLEASE VOTE, DATE, SIGN AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
