DAKA INTERNATIONAL, INC.
One Corporate Place
55 Ferncroft Road
Danvers, Massachusetts
(508) 774-9115
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On December 4, 1996
The Annual Meeting of Stockholders of DAKA International, Inc. (the
"Company") will be held at the Tara Hotel, 50 Ferncroft Road, Danvers,
Massachusetts on Wednesday, December 4, 1996, at 10:00 a.m., local time, for the
following purposes:
1. To elect two Class II Directors of the Company;
2. To consider and approve the DAKA International, Inc. Employee Stock
Purchase Plan; and
3. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Only stockholders of record at the close of business on October 28,
1996 are entitled to notice of, and to vote at, the meeting or any adjournment
thereof.
We hope you will be represented at the meeting by signing and returning
the enclosed proxy card in the accompanying envelope as promptly as possible,
whether or not you expect to be present in person. The vote of every stockholder
is important and the Board of Directors of the Company appreciates the
cooperation of stockholders in promptly returning proxies in order to help limit
expenses incidental to proxy solicitation.
By Order of the Board of Directors
CHARLES W. REDEPENNING, JR.
Secretary
Danvers, Massachusetts
October 28, 1996
<PAGE>
DAKA INTERNATIONAL, INC.
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
December 4, 1996
The enclosed proxy is solicited by the Board of Directors of DAKA
International, Inc., a Delaware corporation (the "Company or "DAKA"), from the
holders of shares of the Company's common stock, par value $.01 per share
("Common Stock"), and Series A Preferred Stock, par value $.01 per share
("Series A Preferred Stock"), to be voted at the Annual Meeting of Stockholders
(the "Annual Meeting") to be held at the Tara Hotel, 50 Ferncroft Road, Danvers,
Massachusetts on Wednesday, December 4, 1996 at 10:00 a.m., local time, and at
any adjournment thereof. This Proxy Statement and the enclosed Form of Proxy
will be mailed to the Company's stockholders on or about October 31, 1996.
The Company's principal executive office is located at One Corporate
Place, 55 Ferncroft Road, Danvers, Massachusetts 01923-4001. The Company's
telephone number at its principal executive office is (508) 744-9115.
VOTING AND PROXIES
Only holders of shares of Common Stock or Series A Preferred Stock of
record at the close of business on October 28, 1996 are entitled to notice of
and to vote at the Annual Meeting or any adjournments thereof. On such date, the
Company had outstanding 11,129,058 shares of Common Stock, each of which is
entitled to one vote on each matter submitted to a vote of stockholders, and
11,912 shares of Series A Preferred Stock, convertible into 264,684 shares of
Common Stock, each of which is entitled to one vote on each matter submitted to
a vote of the stockholders for each share of Common Stock issuable upon
conversion of the Series A Preferred Stock at the time the vote is taken.
Pursuant to the Company's By-laws, the presence, in person or by proxy,
of at least a majority of the total number of outstanding shares of capital
stock of the Company issued and outstanding and entitled to vote is necessary to
constitute a quorum for the transaction of business at the Company's Annual
Meeting. Abstentions, votes withheld with respect to director nominees and
"broker non-votes" (i.e. shares represented at the Annual Meeting held by
brokers or nominees with respect to which instructions have not been received
from beneficial owners or persons entitled to vote such shares and with respect
to which the broker or nominee does not have discretionary voting power to vote
such shares) shall be treated as shares that are present and entitled to vote
for purposes of determining whether a quorum is present. With respect to the
election of directors, the Company's By-laws provide that such election shall be
determined by a plurality of the votes cast by stockholders, and thus shares
represented by a proxy that withholds authority to vote for the Board of
Directors' nominee and broker non-votes will have no effect on the outcome. With
respect to the DAKA International, Inc. Employee Stock Purchase Plan, the
Company's By-laws provide that such plan shall be approved by the affirmative
vote of a majority of the shares of capital stock present or represented and
entitled to vote at the Annual Meeting, and thus abstentions and broker
non-votes will have the effect of votes cast against the proposal.
The Board of Directors recommends that all stockholders vote FOR the
election to the Board of Directors of the nominees named in this proxy statement
and FOR the approval of the DAKA International, Inc. Employee Stock Purchase
Plan. Properly executed proxies will be voted in accordance with the
1
<PAGE>
directions indicated thereon. If no direction is indicated thereon, the shares
will be voted: (1) FOR the election to the Board of Directors of the nominees
named in this proxy statement; (2) FOR the approval of the Employee Stock
Purchase Plan; and (3) in the discretion of the persons named as proxies, upon
such other matters as may properly come before the Annual Meeting.
Any stockholder giving a proxy has the power to revoke such proxy at
any time before it is voted by appearing and voting in person at the Annual
Meeting, by delivering a later-dated proxy, or by delivering to the Secretary of
the Company a written revocation of such proxy prior to the exercise of such
proxy.
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table sets forth certain information, as of October 22,
1996, with respect to each person known by DAKA to be the beneficial owner of
more than 5% of any class of the voting stock of DAKA, each director of DAKA,
executive officers included in the Summary Compensation Table below, and all
directors and executive officers of DAKA as a group:
<TABLE>
<CAPTION>
Beneficial Ownership
--------------------
Percentage
Name and Address of Number of Common Voting
Beneficial Owner Shares(1) Stock Stock(2)
---------------- --------- ----- --------
<S> <C> <C> <C>
William H. Baumhauer(3)........................................... 187,000(4) 1.7% 1.6%
Allen R. Maxwell(3)............................................... 392,766(5) 3.5 3.4
Dean P. Vlahos(6)................................................. 847,014 7.6 7.4
E.L. Cox(7)....................................................... 7,000(8) * *
Erline Belton(9).................................................. 5,000(10) * *
Alan D. Schwartz(11).............................................. 8,500(12) * *
Joseph W. O'Donnell(13)........................................... 1,900 * *
David G. Parker(3)................................................ 32,500(14) * *
William T. Freeman(3)............................................. - * *
Louis A. Kaucic(3)................................................ 14,500(15) * *
Palisade Capital Management(16)................................... 642,000(17) 5.8 5.6
All directors and executive
officers as a group (9 persons)................................ 1,471,680(18) 12.9% 12.6%
</TABLE>
- -------------------
* Less than 1%
(1) Beneficial share ownership is determined pursuant to Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended.
Accordingly, a beneficial owner of a security includes any person who,
directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise has or shares the power to
vote such security or the power to dispose of such security. The
amounts set forth in the table as beneficially owned include shares
owned, if any, by spouses and relatives living in the same home as to
which beneficial ownership may be disclaimed. The amounts set forth in
the table as beneficially owned include (i) shares of Common Stock
which directors and executive officers have the right to acquire
pursuant to previously granted options exercisable within 60 days of
October 22, 1996, and (ii) shares of Common Stock which may be
2
<PAGE>
acquired upon conversion of shares of Series A Preferred Stock
outstanding as of October 22, 1996.
(2) Includes all outstanding shares of Common Stock and 11,912 shares of
Series A Preferred Stock remaining outstanding. For purposes of
determining the percentages set forth in the table, each outstanding
share of Series A Preferred Stock is counted as the equivalent of the
22.22 shares of Common Stock into which it can be converted, because it
is entitled to one vote on each matter submitted to a vote of
stockholders for each share of Common Stock issuable upon conversion.
(3) The address of the beneficial owner is One Corporate Place, 55
Ferncroft Road, Danvers, MA 01923-4001.
(4) Includes 187,000 shares of Common Stock issuable upon exercise of
options.
(5) Includes 35,000 shares of Common Stock issuable upon exercise of
options.
(6) The address of the beneficial owner is 153 East Lake Street, Wayzata,
MN 55391.
(7) The address of the beneficial owner is 2215 Covey Court, Grand Rapids,
MI 49546.
(8) Includes 7,000 shares of Common Stock issuable upon exercise of
options.
(9) The address of the beneficial owner is 41 Hawthorne Street, Roxbury, MA
02119.
(10) Includes 4,000 shares of Common Stock issuable upon exercise of
options.
(11) The address of the beneficial owner is 245 Park Avenue, New York, NY
10167.
(12) Includes 8,500 shares of Common Stock issuable upon exercise of
options.
(13) The address of the beneficial owner is Rte 7A, Equinox Jr., Floor 2,
Manchester, VT 05254.
(14) Includes 32,500 shares of Common Stock issuable upon exercise of
options.
(15) Includes 14,500 shares of Common Stock issuable upon exercise of
options.
(16) The address of the beneficial owner is 1 Bridge Plaza, Suite 695, Fort
Lee, NJ 07024.
(17) This information is based on a Schedule 13G, dated February 12, 1996,
filed by Palisade Capital Management LLC/ADV with the Securities and
Exchange Commission.
(18) Includes 265,000 shares of Common Stock issuable upon exercise of stock
options.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors consists of seven members. The seven directors
are divided into three classes, with the directors of each class elected to
three-year terms. One class stands for election at each annual meeting of the
Company's stockholders. Two Class II directors will be elected at the Annual
3
<PAGE>
Meeting to hold office for three years or until their respective successors are
elected and qualified. Three Class III and two Class I directors who are
currently in office have one year and two years remaining in their respective
terms. Unless otherwise specified in the enclosed proxy, the persons named in
the enclosed proxy intend to vote the shares represented by each properly
executed proxy FOR the election of the nominees named below. The Board of
Directors has no reason to believe that either nominee will be unable to serve
if elected. In the event either nominee shall become unavailable for election,
the persons named in the enclosed proxy will vote such shares for the election
of such other person as the Board of Directors may recommend.
Nominees for Class II Directors
The Board of Directors has nominated the following persons for election
as Class II directors for terms expiring in 1999:
Erline Belton
Alan D. Schwartz
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF MS. BELTON
AND MR. SCHWARTZ TO THE BOARD OF DIRECTORS.
For more detailed information regarding Ms. Belton and Mr. Schwartz,
see "Directors and Committees--Incumbent Directors."
DIRECTORS AND COMMITTEES
Incumbent Directors
The following table sets forth certain information regarding current
members of the Board of Directors:
<TABLE>
<CAPTION>
Principal Director Expiration
Name Age Occupation Since of Term Class
---- --- ---------- ----- ------- -----
<S> <C> <C> <C> <C> <C>
William H. Baumhauer............... 48 Chairman, Chief Executive September 1988 1997 III
Officer and Director of the
Company and President of
Fuddruckers, Inc.
Allen R. Maxwell................... 57 President, Chief Operating September 1988 1997 III
Officer and Director of the
Company and President of
Daka, Inc.
Joseph W. O'Donnell................ 46 Partner, Osgood, August 1996 1997 III
O'Donnell & Walsh
Erline Belton...................... 51 President and Chief December 1993 1996* II
Executive Officer of
The Lyceum Group
4
<PAGE>
Alan D. Schwartz................... 46 Senior Managing Director September 1988 1996* II
of Corporate Finance for
Bear, Stearns & Co., Inc.
E. L. Cox.......................... 69 Chairman of the Board and September 1988 1998 I
Chief Executive Officer of
the Michigan Accident
Fund, Retired
Dean P. Vlahos..................... 45 Chairman of the Board, February 1996 1998 I
President and Chief
Executive Officer, Champps
Entertainment, Inc.
</TABLE>
- ----------------
* Nominee for re-election at the Annual Meeting.
The name, age and principal occupation during the past five years and
other information concerning each director are set forth below:
William H. Baumhauer, 48, has served as Chairman of the Board and Chief
Executive Officer of the Company since November 1990 and as a Class III Director
since September 1988. He served as President and Chief Operating Officer of the
Company from September 1988 to November 1990. He has also served Fuddruckers,
Inc. as Chairman of the Board since March 1985, President since January 1985 and
as a director since July 1983.
Allen R. Maxwell, 57, has served as President and Chief Operating
Officer of the Company since November 1990 and as a Class III Director since
September 1988. Mr. Maxwell, one of the original founders of Daka, Inc., has
also served as its President since November 1988.
Joseph W. O'Donnell, 46, has served as a class III director of the
Company since August 1996. Mr. O'Donnell is a partner in the firm of Osgood,
O'Donnell & Walsh. Mr. O'Donnell has served as Chairman and Chief Executive
Officer of The J. Walter Thompson Company and Campbell-Mithun-Esty Advertising,
Inc.
Erline Belton, 51, has served as a Class II director of the Company
since December 1993. She has served as President and Chief Executive Officer of
The Lyceum Group, a human resource consulting firm, since September 1992. She
served as Senior Vice President of Human Resource and Organizational Development
for Progressive Insurance Companies from April 1991 through September 1992. She
also served as International Human Relations Director, as well as several other
human resources positions, with Digital Equipment Corporation from 1978 through
April 1991. Ms. Belton serves on the Board of Directors of: The National
Leadership Coalition on AIDS; National Minority AIDS Coalition; Museum of
African American History.
Alan D. Schwartz, 46, has served as a Class II director of the Company
since September 1988 and as a director of Fuddruckers, Inc. from September 1984
until November 1988. Mr. Schwartz is Senior Managing Director--Corporate Finance
of Bear, Stearns & Co., Inc., and a director of its parent, The Bear Stearns
Companies, Inc. He has been associated with such investment banking firm for
more than five years. Mr. Schwartz is also a director of Protein Databases, Inc.
and a member of the Board of Visitors of the Fuqua School of Business at Duke
University.
5
<PAGE>
E. L. Cox, 69, has served as a Class I director of the Company since
September 1988 and as a director of Fuddruckers, Inc. from June 1988 until
November 1988. Mr. Cox served as Chairman and Chief Executive Officer of the
Michigan Accident Fund from February 1990 until his retirement in August 1995.
Prior thereto Mr. Cox served as Chairman and Chief Executive Officer of Michigan
Mutual/Amerisure Companies and its affiliated insurance companies from May 1981
through January 1990. Ms. Cox is also a member of the Board of Directors of
Comerica, Inc., a publicly-traded financial institution, and a director of
various trade associations in the insurance industry.
Dean P. Vlahos, 45, has served as a director of the Company since
February 1996. Mr. Vlahos was the founder, and has been Chairman of the Board,
President and Chief Executive Officer of Champps Entertainment, Inc. since its
inception in October 1988. Mr. Vlahos also served as Chief Financial Officer of
Champps from its inception to March 1994. Prior to establishing Champps, he
started, owned and operated the original Champps Americana restaurants in St.
Paul, Minnesota (opened January 1983) and Richfield, Minnesota (opened February
1986). Mr. Vlahos has over 20 years of experience in the restaurant industry.
Meeting and Committees
The Board of Directors of the Company has an Audit Committee, a
Compensation Committee, an Executive Committee and a Nominating Committee.
During the fiscal year ended June 29, 1996, the Board of Directors held six
meetings, the Audit Committee held two meetings, and the Compensation Committee
held two meetings. The Nominating Committee does not meet separately and its
business is conducted at meetings of the full Board of Directors. Each director
attended 75% or more of the aggregate of (a) the total number of meetings of the
Board of Directors during fiscal year 1996, and (b) the total number of meetings
held by all committees of the Board of Directors on which such director served
during fiscal year 1996.
The Audit Committee has the responsibility of selecting the Company's
independent auditors and communicating with the Company's independent auditors
on matters of auditing and accounting. The Audit Committee is currently composed
of Ms. Belton and Messrs. Cox and Schwartz.
The Compensation Committee has the responsibility of reviewing on an
annual basis all officer and employee compensation. The Compensation Committee
is currently composed of Ms. Belton and Messrs. Cox and Schwartz. The
Compensation Committee also acts as the Stock Option Committee, and has the
responsibility of administering the Company's Incentive Stock Option Plan, the
Non-Qualified Stock Option Plan, the Executive Stock Option Plan and the 1994
Equity Incentive Plan (collectively, the "Stock Option Plans").
Directors' Compensation
Directors receive $1,000 per meeting plus travel expenses. Under the
the Company's 1994 Equity Incentive Plan, each year each non-employee director
receives options to purchase 1,500 shares of Common Stock at an exercise price
equal to the fair market value of the Common Stock as of the date of grant.
6
<PAGE>
EXECUTIVE COMPENSATION
The following tables provide information as to compensation paid by the
Company during each of the three previous fiscal years ending with the fiscal
year ended June 29, 1996 to the Chief Executive Officer and the four other most
highly compensated executive officers whose total salary and bonus for fiscal
year 1996 exceeded $100,000:
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Awards
Name and Compensation Other AnnualOptions/ All Other
Principal Position Year Salary Bonus Compensation SARs(1) Compensation
------------------ ---- ------ ----- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
William H. Baumhauer......... 1996 $369,558 $200,000
Chairman and Chief...... 1995 325,000 230,000 $1,220,848(2)
Executive Officer....... 1994 303,708 161,000 9,000
Allen R. Maxwell............. 1996 254,527 50,000 $60,000(3) 30,000(4)
President and Chief..... 1995 248,850 50,000 60,000(3) 5,000
Operating Officer....... 1994 256,036 80,500 60,000(3)
David G. Parker.............. 1996 172,160 25,000 18,000(4)
Senior Vice President... 1995 171,500 30,000 1,500
and Chief Administrative 1994 174,798 36,750 1,500
Officer
William T. Freeman........... 1996 147,116 50,000 21,000(4)
Senior Vice President 1995 108,270 6,000
Corporate Development 1994 (5)
Louis A. Kaucic.............. 1996 154,500 25,000 15,000(4)
Senior Vice President... 1995 154,500 25,000 1,500
Human Resources......... 1994 157,471 36,750 1,500
</TABLE>
- -----------------
(1) Represents the number of options to acquire Common Stock granted during
the fiscal year.
(2) Represents amount earned pursuant to a long-term incentive plan, based
on the market value of the Common Stock as of June 29, 1996 (the
closing sale price of the Common Stock on June 28, 1996, as reported by
Nasdaq, was $23.50 per share). Due to the decline in the Common Stock
price subsequent to June 29, 1995, as of October 22, 1996 this amount
had declined to zero. The amount earned under such plan vests on June
30, 1997 and is payable in either cash or DAKA stock at the option of
DAKA. No portion of the amount earned under the plan vests or is
payable until June 30, 1997.
(3) In lieu of the receipt of senior executive stock options in fiscal 1992
in connection with the recapitalization of DAKA, DAKA provides to Allen
R. Maxwell an annuity for which DAKA pays to an insurance company
$60,000 per year for five years, which payments commenced in fiscal
year 1992.
(4) Granted on August 1, 1995 pursuant to a long-term incentive plan for
management pursuant to which the options will vest 100% on August 1,
1998 and have an exercise price equal to $24.00 per share (the fair
market price of the Common Stock as of the date of grant) with respect
to one third of the options granted, $25.80 per share with respect to
another one third of the options granted and $27.60 per share with
respect to the remaining one third of the options granted.
(5) Mr. Freeman became an employee of the Company in August, 1994.
7
<PAGE>
Option Grants in Fiscal 1996
<TABLE>
<CAPTION>
Potential Realizable
Values at Assumed
% of Annual Rates of Stock
Total Options Price Appreciation
Granted to Exercise for Option Term
Options Employees in Price Expiration (10 Years)
Name Granted Fiscal Year Per Share Date 5% ($) 10% ($)
---- ------- ----------- --------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Allen R. Maxwell............. 30,000(1) 5.7% (1) 7/31/05 486,765 1,233,557
David G. Parker.............. 18,000(1) 3.3 (1) 7/31/05 292,059 740,134
Louis A. Kaucic.............. 15,000(1) 2.7 (1) 7/31/05 243,381 616,778
Willaim T. Freeman........... 21,000(1) 4.0 (1) 7/31/05 347,737 863,490
</TABLE>
- -----------------------
(1) Granted on August 1, 1995 pursuant to a long-term incentive plan for
management pursuant to which the options will vest 100% on August 1,
1998 and have an exercise price equal to $24.00 per share (the fair
market price of the Common Stock as of the date of grant) with respect
to one third of the options granted, $25.80 per share with respect to
another one third of the options granted and $27.60 per share with
respect to the remaining one third of the options granted.
Aggregate Option Exercises in Fiscal 1996
and Year-End Option Values
<TABLE>
<CAPTION>
Value of Outstanding
Shares Number of Beneficial In-the-Money Options
Acquired Value Options at Fiscal Year-End at Fiscal Year-End(1)
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William H. Baumhauer......... - - 187,000 - $3,584,580 -
Allen R. Maxwell............. - - 35,000 30,000 683,100 -
David G. Parker.............. 10,000 $187,500 32,500 18,000 585,985 -
Louie A. Kaucic.............. 0 - 14,500 15,000 223,985 -
William T. Freeman........... 6,000 86,220 - 21,000 - -
</TABLE>
- --------------
(1) Based on the closing bid price on the Nasdaq National Market of $23.50
per share on June 28, 1996.
Long-Term Incentive Plan--Award in Fiscal 1996
<TABLE>
<CAPTION>
Performance
Number of or Other
Shares, Units Period Until Estimated Future Payouts Under
or Other Maturation Non Stock-Price-Based Plans
Name Rights or Payout Threshold Target Maximum
---- ------ --------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
William H. Baumhauer......... (1) June 30, 1997 (1) (1) (1)
</TABLE>
- -------------
(1) The long-term incentive plan implemented by the Company's Board of
Directors on July 3, 1994 for the Chief Executive Officer is designed
to provide an incentive payment, payable at DAKA's option in the form
of either cash or stock, equal to 2% of the increase in the market
value of DAKA, as determined by the average 30 day trading price of the
Common Stock and the weighted average number of shares outstanding,
from July 3, 1994 to June 30, 1997 in excess of 15% of the market value
at June 30, 1994. The incentive payment vests on June 30, 1997.
8
<PAGE>
Employment Agreements
Messrs. Baumhauer and Maxwell are each employed by the Company pursuant
to separate five (5) year employment agreements which commenced on January 1,
1992 and expire on January 1, 1997. Each of Mr. Baumhauer and Mr. Maxwell has
entered into a new employment agreement effective January 1, 1997 which provides
for an initial term of three (3) years and automatic renewal each year so that
the residual term of the agreement is never less than three years. The new
agreements provide for initial annual base salaries of $450,500 for Mr.
Baumhauer and $265,000 for Mr. Maxwell. Any adjustments to these amounts are at
the discretion of the Board of Directors. Each of the agreements provides that
in the event the Company terminates the executive's employment without "cause"
(as defined therein) or the executive terminates his employment for "good
reason" (as defined therein), DAKA shall pay the executive an amount equal to
the executive's cash compensation for three years. "Good reason" is defined in
each agreement as (i) an assignment to the executive of duties other than those
contemplated by the agreement, or a limitation on the powers of the executive
not contemplated by the agreement, (ii) the removal of the executive from or
failure to elect the executive to his named position, or (iii) a reduction in
the executive's rate of compensation or level of fringe benefits. "Cause" is
defined in each agreement as the executive's (i) theft from or fraud on DAKA,
(ii) conviction of a felony or crime of moral turpitude, (iii) willful violation
of the terms of the agreement, (iv) conscious disregard or neglect of his
duties, or (v) willful and demonstrated unwillingness to perform his duties
under the agreement.
Under the terms of an employment agreement among DAKA, Champps and Mr.
Vlahos which commenced on February 21, 1996, Mr. Vlahos provides full-time
services to Champps in the capacity of Chairman of the Board, Chief Executive
Officer and President, for a five (5) year term. Under the agreement, Mr. Vlahos
shall continue to maintain the authority to control the operations of Champps so
long as the average annual gross revenues per square foot of the Champps-owned
restaurants is at least $400. During the period of Mr. Vlahos' full-time
employment, Champps shall pay Mr. Vlahos an initial base salary of $350,000 plus
a bonus of 50% of his base salary if he attains certain targets established by
the Board of Directors of the Company, which amount may be increased to up to
100% of his base salary if he exceeds such performance targets by margins
determined by the Board of Directors. Twenty percent (20%) of the potential
bonus payments for Mr. Vlahos are related to performance targets established for
DAKA as a whole and eighty percent (80%) shall be related to performance targets
established for Champps. If Mr. Vlahos leaves for "good reason," or is
terminated by DAKA without "cause," during the term of his employment contract,
DAKA will be obligated to pay him his remaining salary and bonus as severance.
"Good reason" is defined in each agreement as (i) an assignment to Mr. Vlahos of
duties other than those contemplated by the agreement, or a limitation on the
powers of Mr. Vlahos not contemplated by the agreement, (ii) the removal of Mr.
Vlahos from or failure to elect Mr. Vlahos to his named position, or (iii) a
reduction in Mr. Vlahos' rate of compensation or level of fringe benefits.
"Cause" is defined in the agreement as Mr. Vlahos' (i) theft from or fraud on
DAKA, (ii) conviction of a felony, (iii) violation of the terms of the
agreement, (iv) conscious disregard or neglect of his duties, or (v)
demonstrated unwillingness to perform his duties under the agreement. In the
event that Mr. Vlahos' employment is terminated for any reason other than by
DAKA for cause, Mr. Vlahos shall be provided the right, subject to certain
obligations to DAKA, to establish a franchise for up to five Champps Americana
restaurants anywhere in the world, but no such restaurant may be within a 20
mile radius of any other Champps restaurant, or in any territory that has been
franchised or licensed by Champps.
Compensation Committee Report
The Compensation Committee reviews and approves compensation levels for
the Company's executive officers and oversees and administers the Company's
executive compensation programs. All members of the Compensation Committee,
listed at the end of this report, are outside directors who are not
9
<PAGE>
eligible to participate in the compensation programs that the Compensation
Committee oversees except for non-discretionary option grants. See "--Directors'
Compensation."
Philosophy. The Compensation Committee believes that the interests of
the Company's stockholders are best served when compensation is directly aligned
with the Company's financial performance. Therefore, the Compensation Committee
has approved overall compensation programs which award a competitive base
salary, and then encourage exceptional performance through meaningful incentive
awards, both short and long term, which are tied to DAKA's performance.
Responsibilities. The responsibilities of the Compensation Committee
include:
o developing compensation programs that are consistent with and
are linked to the Company's strategy;
o assessing the performance of and determining an appropriate
compensation package for the Chief Executive Officer; and
o ensuring that compensation for the other executive officers
reflects individual, team, and the Company's performance
appropriately.
Purpose. the Company's executive compensation programs are designed
to:
o attract, retain, and motivate key executive officers;
o link the interests of executive officers with stockholders by
encouraging stock ownership;
o support DAKA's goal of providing superior value to its
stockholders and customers; and
o provide appropriate incentives for executive officers, based
on achieving key operating and organizational goals.
The Compensation Committee believes that DAKA's executive compensation
policies should be reviewed during the first quarter of the fiscal year when the
financial results of the prior fiscal year become available. The policies should
be reviewed in light of their consistency with the Company's financial
performance, its business plan and its position within the foodservice and
restaurant industries, as well as the compensation policies of similar companies
in the foodservice and restaurant businesses. The compensation of individual
executives is reviewed annually by the Compensation Committee in light of its
executive compensation policies for that year.
In setting and reviewing compensation for the executive officers, the
Compensation Committee considers a number of different factors designed to
assure that compensation levels are properly aligned with the Company's business
strategy, corporate culture and operating performance. Among the factors
considered are the following:
Comparability -- The Compensation Committee considers the
compensation packages of similarly situated executives at companies
deemed comparable to DAKA. The objective is to maintain competitiveness
in the marketplace in order to attract and retain the highest quality
executives. This is a principal factor in setting base levels of
compensation.
Pay for Performance -- The Compensation Committee believes
that compensation should in part be directly linked to operating
performance. To achieve this link with regard to short-term
10
<PAGE>
performance, the Compensation Committee has relied on cash bonuses
which have been determined on the basis of certain objective criteria
and recommendations of the Chief Executive Officer.
Equity Ownership -- The Compensation Committee believes that
equity-based, long-term compensation aligns executives' long-range
interests with those of the stockholders. These long-term incentive
programs are principally reflected in DAKA's stock option plans. The
Compensation Committee believes that significant stock ownership is a
major incentive in building stockholder value and reviews grants of
options with that goal in mind.
Qualitative Factors -- The Compensation Committee believes
that in addition to corporate performance and specific business unit
performance, in setting and reviewing executive compensation it is
appropriate to consider the personal contributions that a particular
individual may make to the overall success of the Company. Such
qualitative factors as leadership skills, planning initiatives and
employee development have been deemed to be important qualitative
factors to take into account in considering levels of compensation.
Annual Cash Compensation. Annual cash compensation for the executive
officers consists of a base salary and a variable, at-risk incentive bonus under
the Company's Management Annual Incentive Plan.
It is the Company's general policy to pay competitive base compensation
to its executive officers. The Compensation Committee annually reviews and, if
appropriate, adjusts executive officers' base salaries. In making individual
base salary recommendations, the Compensation Committee considers the
executive's experience, management and leadership ability and technical skills,
his or her compensation history, as well as the performance of the Company as a
whole and, where applicable, the performance of specific business units.
Under the Management Annual Incentive Plan, each executive is assigned
a target incentive award. This incentive award, or some portion thereof, is
"earned" through a combination of four factors: DAKA's performance, business
unit performance, attainment of predetermined individual goals, and the level of
personal/leadership impact. This evaluation process is not strictly
quantitative, but is largely based on qualitative judgments made by the Chief
Executive Officer related to individual, team, and the Company's performance.
Under the CEO Long Term Incentive Plan Mr. Baumhauer is eligible to
earn a percentage of an increase in the Company's value, as measured by stock
appreciation above a predetermined rate of return, over a specified three-year
period. The Compensation Committee may, at its option, pay any amount due under
the CEO Long Term Incentive Plan in cash or in DAKA stock. Any amount due under
the CEO Long Term Incentive Plan will vest 100% at the end of the three-year
period. Fiscal 1996 was the second year of the three-year vesting period.
The Management Long Term Incentive Plan, developed by the Compensation
Committee effective for fiscal year 1996 and beyond, grants stock options to
senior management and certain other managers. The options vest 100% on the third
anniversary of the date of grant and will have an exercise price equal to the
fair market value of the Common Stock as of the date of grant with respect to
one third of the options granted and equal to such fair market value plus a
predetermined rate of appreciation with respect to the remaining two thirds of
the options granted. The Compensation Committee has discretion in awarding
grants under this plan based upon the executive's level and direct line
responsibility.
11
<PAGE>
Chief Executive Officer Compensation. Mr. Baumhauer is employed by the
Company pursuant to a five-year employment contract which expires on January 1,
1997; Mr. Baumhauer and the Company have entered into a new three-year
employment agreement effective as of January 1, 1997. He participates in the
compensation programs as outlined above. Mr. Baumhauer's total compensation for
1996 reflects the Compensation Committee's view of his outstanding performance
and leadership in executing expansion plans for future growth, completing two
major restaurant acquisitions, restructuring the balance sheet and articulating
a clear and sound approach to restore profitability levels and pursue long-term
growth in shareholder value, as well as the Compensation Committee's goal of
maintaining his compensation at a level competitive with that of chief
executives of companies comparable to DAKA. Mr. Baumhauer was awarded an annual
incentive award of $200,000, compared to $230,000 for the prior year. Mr.
Baumhauer's salary was increased to $450,000 from $370,000, representing a 21.6%
increase. His long term incentive award, although not vested until June 30,
1997, had, as of June 29, 1996, a value of approximately $1,220,848 (based on
the then market value of the Common Stock, which closed on Nasdaq at $23 1/2 per
share on June 28, 1996), compared to $380,000 as of July 1, 1995; due to the
decline in the Common Stock price subsequent to June 29, 1996, as of the time
when the Compensation Committee determined the compensation for Mr. Baumhauer
and as of October 22, 1996 the value of his long term incentive award had
declined to zero. The dramatic effect of changes in the value of Mr. Baumhauer's
long term incentive award, as determined by changes in the value of the Common
Stock, on his total compensation reflect the Compensation Committee's philosophy
that variable, at-risk pay should comprise a significant portion of overall
executive compensation.
Compensation of Other Officers. DAKA's executive compensation program
for other executive officers is described above, although the Corporate business
unit and individual performance goals and the relative weighting of the
quantitative performance factors described above varies, depending upon the
responsibilities of particular officers.
Erline Belton
E. L. Cox
Alan D. Schwartz
12
<PAGE>
Performance Graph
The following graph presents a five-year comparison of total cumulative
returns on the Common Stock, the S&P 500 Index and a Company-selected peer group
consisting of businesses in the foodservice and restaurant industries, assuming
an initial investment of $100 and reinvestment of all dividends; [GRAPHIC
OMITTED]
- --------------------------------------------------------------------------------
6/28/91 6/26/92 6/25/93 7/1/94 6/30/95 6/28/96
------- ------- ------- ------ ------- -------
DAKA 100 141 193 247 435 442
S&P 500 Index 100 111 127 131 165 206
Peer Group 100 69 64 55 52 31
- --------------------------------------------------------------------------------
The companies included in the peer group are: Bertucci's, Inc., Ground
Round Restaurants, Inc., Hamburger Hamlet Restaurants, Inc., Sizzler
International, Inc., and Uno Restaurant Corporation and, for years prior to
1996, Morrison, Inc. In 1996 Morrison, Inc. was acquired by another firm and its
stock ceased to be publicly traded. The returns of each issuer in the foregoing
group have been weighted according to the respective company's stock market
capitalization as of the end of each period.
The Common Stock prices shown are neither indicative nor determinative
of future stock price performance.
PROPOSAL NO. 2
APPROVAL OF THE DAKA INTERNATIONAL, INC.
EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors believes it is in the best interests of the
Company to encourage stock ownership by employees of DAKA and its subsidiaries.
Accordingly, the Board of Directors adopted, subject to stockholder approval at
the Annual Meeting, the DAKA International, Inc. Employee Stock
13
<PAGE>
Purchase Plan (the "Stock Purchase Plan") covering an aggregate of 400,000
shares of Common Stock. The Stock Purchase Plan will allow eligible employees to
purchase shares of Common Stock directly from DAKA. Pursuant to applicable
securities and tax laws, stockholders must approve the adoption of the Stock
Purchase Plan. A copy of the plan is attached to this Proxy Statement as
Appendix A.
The Stock Purchase Plan provides an opportunity for eligible employees
of DAKA and its subsidiaries to purchase shares of Common Stock, at a discount,
through regular payroll deductions and cash purchases. Subject to adjustment for
stock splits, stock dividends and similar events, a maximum of 400,000 shares of
Common Stock may be issued under the Stock Purchase Plan. The Stock Purchase
Plan is administered by an administrator appointed by the Board of Directors
(the "Administrator").
Offerings under the Stock Purchase Plan generally will begin on the
first business day of each calendar quarter, beginning January 1997, and have a
duration of three months. The Administrator may, in its discretion, choose a
different period for each offering. Generally, all employees who are customarily
employed for more than 20 hours per week as of the first day of the applicable
offering are eligible to participate in the Stock Purchase Plan.
An eligible employee may purchase shares under the Stock Purchase Plan
by authorizing payroll deductions or making direct payment to the Administrator.
On the last day of each offering, the employee's accumulated payroll deductions
and other payments will be used to purchase a maximum of 600 shares (or other
predetermined maximum) of Common Stock at a price equal to a predetermined
percentage (between 85% and 100%) of the fair market value of the Common Stock
on the first or last day of the offering, whichever is lower. Under applicable
tax rules, an employee may purchase no more than $25,000 worth of Common Stock
in any calendar year (determined on the first day of the offering(s) in which
such stock is purchased); certain other tax limitations may apply.
The Board of Directors has the discretion to determine the percentage
discount reflected in the purchase price of Common Stock for any offering and
has the discretion to designate the subsidiaries of DAKA whose employees are
eligible to participate in the Stock Purchase Plan from time to time. The Board
of Directors may at any time amend the Stock Purchase Plan, subject to the
approval of the stockholders if required by the Internal Revenue Code of 1986,
as amended (the "Code"), to preserve the favorable tax treatment of
participants, and may at any time discontinue the Stock Purchase Plan.
The Stock Purchase Plan is intended to qualify as an "employee stock
purchase plan" as defined in Section 423 of the Code, which provides that an
employee will not have income for federal income tax purposes at the start of an
offering or upon receipt of shares of Common Stock at the end of an offering.
The employee is, however, required to pay federal income tax on the difference,
if any, between the price at which he or she sells the shares and the price he
or she paid for them. DAKA generally will not be entitled to a tax deduction
upon either the purchase or sale of shares issued under the Stock Purchase Plan
if certain holding period requirements are met.
If the employee has owned the shares for more than one year and
disposed of them at least two years after the date an offering commenced, the
employee will be taxed as follows: if the market price of the shares on the date
they were sold is equal to or less than the price paid for the shares under the
Stock Purchase Plan, the employee will incur a long-term capital loss in the
amount equal to the price paid over the sale price; if the sale price is higher
than the price paid under the Stock Purchase Plan, such employee will have to
recognize ordinary income in an amount equal to the lesser of (i) the market
price of the shares on the date the offering commenced over the price paid; or
(ii) the excess of the sale price over the price paid. Any further gain is
treated as long-term capital gain. Except as set forth below, the Company will
generally not be entitled to a tax deduction upon the purchase or sale of shares
under the Stock Purchase Plan. If the employee sells the shares before he or she
has owned them for more than one year or before
14
<PAGE>
the expiration of a two-year period commencing on the date the offering period
commenced, the employee will have to recognize ordinary income in the amount of
the difference between the price paid and the fair market value of the shares on
the date of purchase and the Company will receive an expense deduction for the
same amount. The employee will recognize a capital gain or loss for the
difference between the sale price and the fair market value on the date of
purchase.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE DAKA
INTERNATIONAL, INC. EMPLOYEE STOCK PURCHASE PLAN
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires that
Company's executive officers, directors and persons who own more than 10% of a
registered class of the Company's equity securities to file reports of ownership
and changes in ownership with the Securities and Exchange Commission and to
furnish copies to the Company.
Based upon a review of the reports furnished to the Company and
representations made to the Company by its officers and directors, the Company
believes that, during fiscal year 1996, its officers, directors and 10%
beneficial owners complied with all applicable reporting requirements.
AUDITORS
The Board of Directors has selected the firm of Deloitte & Touche LLP
as auditors of the Company for fiscal year 1997. Representatives of Deloitte &
Touche LLP are expected to be present at the Annual Meeting and will have an
opportunity to make a statement if they desire to do so, and they will be
available to respond to appropriate questions.
EXPENSE OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. In
addition, the Company will reimburse its transfer agent for charges and expenses
in connection with the distribution of proxy materials to brokers or other
persons holding stock in their names or in the names of their nominees and for
charges and expenses in forwarding proxies and proxy materials to the beneficial
owners. Solicitations may further be made by officers and regular employees of
the Company, without additional compensation, by use of the mails, personal
interview, telephone or telegraph.
STOCKHOLDER PROPOSALS
Any stockholder desiring to present a proposal for inclusion in the
Company's proxy statement in connection with its 1997 annual meeting of
stockholders must submit the proposal so as to be received by the Secretary of
the Company at the principal executive offices of the Company located at One
Corporate Place, 55 Ferncroft Road, Danvers, Massachusetts 01923-4001, not later
than August 7, 1997. In addition, in order to be included in the proxy
statement, such a proposal must comply with the requirements as to form and
substance established by applicable laws and regulations.
15
<PAGE>
OTHER MATTERS
The Board of Directors is not aware of any other matter to be presented
for action at the Annual Meeting; however, if any other matter is properly
presented it is the intention of the persons named in the enclosed form of proxy
to vote in accordance with their judgment on such matter.
THIS PROXY STATEMENT IS ACCOMPANIED BY THE COMPANY'S ANNUAL REPORT TO
STOCKHOLDERS FOR FISCAL YEAR 1996. ADDITIONAL INFORMATION IS CONTAINED IN THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 29, 1996,
INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO. THE COMPANY WILL
FURNISH WITHOUT CHARGE TO ANY STOCKHOLDER A COPY OF ITS ANNUAL REPORT ON FORM
10-K UPON WRITTEN REQUEST TO: INVESTOR RELATIONS, DAKA INTERNATIONAL, INC., ONE
CORPORATE PLACE, 55 FERNCROFT ROAD, DANVERS, MASSACHUSETTS 01923-4001.
CHARLES W. REDEPENNING, JR.
Secretary
October 28, 1996
16
<PAGE>
Appendix A
DAKA INTERNATIONAL, INC.
EMPLOYEE STOCK PURCHASE PLAN
The purpose of the DAKA International, Inc. Employee Stock Purchase
Plan ("the Plan") is to provide eligible employees of DAKA International, Inc.
(the "Company") and certain of its subsidiaries with opportunities to purchase
shares of the Company's common stock, par value $0.01 per share (the "Common
Stock"). Four hundred thousand (400,000) shares of Common Stock in the aggregate
have been approved and reserved for this purpose. The Plan is intended to
constitute an "employee stock purchase plan" within the meaning of Section
423(b) of the Internal Revenue Code of 1986, as amended (the "Code"), and shall
be interpreted in accordance with that intent.
1. Administration. The Plan will be administered by the person or
persons (the "Administrator") appointed by the Company's Board of Directors (the
"Board") for such purpose. The Administrator has authority to make rules and
regulations for the administration of the Plan, and its interpretations and
decisions with regard thereto shall be final and conclusive. No member of the
Board or individual exercising administrative authority with respect to the Plan
shall be liable for any action or determination made in good faith with respect
to the Plan or any option granted hereunder.
2. Offerings. The Company will make one or more offerings to eligible
employees to purchase Common Stock under the Plan ("Offerings"). Unless
otherwise determined by the Administrator, the initial Offering will begin on
January 2, 1997 and will end on March 31, 1997. Thereafter, unless otherwise
determined by the Administrator, an Offering will begin on the first business
day occurring on or after each April 1, July 1, October 1 and January 1 and will
end on the last business day occurring on or before the following June 30,
September 30, December 31 and March 31, respectively. The Administrator may, in
its discretion, designate a different period for any Offering, provided that no
Offering shall exceed one year in duration or overlap any other Offering.
3. Eligibility. All employees of the Company (including employees who
are also directors of the Company) and all employees of each Designated
Subsidiary (as defined in Section 9) are eligible to participate in any one or
more of the Offerings under the Plan, provided that as of the first day of the
applicable Offering (the "Offering Date") they are customarily employed by the
Company or a Designated Subsidiary for more than twenty (20) hours a week.
Notwithstanding the foregoing, participation in the Plan will neither be
permitted nor be denied contrary to the requirements of the Code.
4. Grant of Options. On each Offering Date, the Company will grant to
each eligible employee an option ("Option") to purchase on the last day of such
Offering (the "Exercise Date"), at the Option Price hereinafter provided for, a
maximum of six hundred (600) shares of Common Stock reserved for the purposes of
the Plan, or such other maximum number of shares as shall have been established
by the Administrator in advance of the Offering. The purchase price for each
share purchased under such Option (the "Option Price") will be a certain
percentage of the Fair Market Value of the Common Stock on the Offering Date or
the Exercise Date, whichever is less. Such percentage will be determined by the
Board in advance of such Offering Date and will be between 85% and 100% of the
Fair Market Value of the Common Stock, inclusive.
Notwithstanding the foregoing, no employee may be granted an option
hereunder if such employee, immediately after the option was granted, would be
treated as owning stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or any
Parent or
A-1
<PAGE>
Subsidiary (as defined in Section 9). For purposes of the preceding sentence,
the attribution rules of Section 424(d) of the Code shall apply in determining
the stock ownership of an employee, and all stock which the employee has a
contractual right to purchase shall be treated as stock owned by the employee.
In addition, no employee may be granted an Option which permits his rights to
purchase stock under the Plan, and any other employee stock purchase plan of the
Company and its Parents and Subsidiaries, to accrue at a rate which exceeds
$25,000 of the fair market value of such stock (determined on the option grant
date or dates) for each calendar year in which the Option is outstanding at any
time. The purpose of the limitation in the preceding sentence is to comply with
Section 423(b)(8) of the Code.
5. Election to Purchase. An eligible employee may elect to exercise his
Option and to purchase Common Stock in an Offering, provided all other
conditions are satisfied on the Exercise Date for such Offering, by delivering a
purchase authorization form to the Administrator in accordance with such rules
and procedures as have been established in advance of such Offering by the
Administrator. Such form must be accompanied by either a payroll deduction
authorization or a deposit of funds to be used as the purchase price for the
Common Stock acquired pursuant to the employee's purchase authorization, as
provided in Section 6. Except as otherwise determined by the Administrator in
advance of the Offering, an employee's purchase authorization will be
irrevocable, and amounts credited to such employee's account will not be
refunded except as expressly provided in the Plan.
6. Payment of Purchase Price. A participating employee may provide for
the payment of the purchase price for the Common Stock acquired pursuant to his
purchase authorization in an Offering (a) by delivering a payroll deduction
authorization to the Administrator, (b) by depositing funds with the
Administrator, in cash or by check or money order payable to the Company, or (c)
by a combination of the foregoing. Deposits will be received by the
Administrator on behalf of the Company and will be accepted subject to
collection. The Administrator will maintain book accounts showing the amount of
payroll deductions and deposits made on behalf of each participant for each
Offering. No interest will accrue or be paid on such amounts.
All payroll deduction authorizations and deposits must be made in
accordance with such rules and procedures as have been established in advance of
such Offering by the Administrator. Except as otherwise determined by the
Administrator, the following rules will apply: (1) All payroll deduction
authorizations and deposits must be made pursuant to a purchase authorization
form. (2) A participant may make more than one deposit during an Offering, or
may authorize payroll deductions and also make one or more deposits during an
Offering, but may have no more than one payroll deduction authorization in
effect during any Offering. (3) All deposits must be delivered to the
Administrator at least ten (10) business days before the Exercise Date for the
applicable Offering. (4) A payroll deduction authorization will take effect on
the first regular payroll date that occurs at least ten (10) business days after
it is received by the Administrator. (5) A payroll deduction authorization in
effect for an Offering will continue in effect for the duration of the Offering,
unless terminated by the participant. (6) A participant may terminate his
payroll deduction authorization (but not his purchase authorization) during an
Offering by delivering written notice of termination to the Administrator; such
termination will take effect on the first regular payroll date that occurs at
least ten (10) business days after such notice is received by the Administrator.
(7) A payroll deduction authorization in effect at the end of an Offering, and
the related purchase authorization, will remain in effect for the next Offering
(provided the employee remains eligible), unless the participant has changed or
terminated his authorization with respect to the next Offering. (8) A
participant may change or terminate his payroll deduction authorization for the
next Offering by delivering to the Administrator a new payroll deduction
authorization or a notice of termination, as the case may be, at least ten (10)
business days before the first regular payroll date that occurs on or after the
next Offering Date.
7. Exercise of Option and Purchase of Shares. Each employee who has a
purchase authorization in effect on the Exercise Date shall be deemed to have
exercised his Option on such date and
A-2
<PAGE>
shall acquire from the Company such number of whole shares of Common Stock
reserved for the purpose of the Plan as the aggregate of his accumulated payroll
deductions and other amounts deposited with the Administrator during the
Offering will purchase at the Option Price, subject to any other limitations
contained in the Plan. Except as otherwise determined by the Administrator in
advance of an Offering, any amount remaining in an employee's account at the end
of an Offering will be carried forward and treated as a deposit for the next
Offering, provided the employee remains eligible and continues to have a
purchase authorization in effect, and otherwise will be refunded to the employee
promptly.
8. Issuance of Certificates. Certificates representing shares of Common
Stock purchased under the Plan may be issued only in the name of the employee,
in the name of the employee and another person of legal age as joint tenants
with rights of survivorship, or in the name of a broker authorized by the
employee to be his, or their, nominee for such purpose.
9. Definitions.
The term "Designated Subsidiary" means any present or future Subsidiary
(as defined below) that has been designated by the Board to participate in the
Plan. The Board may so designate any Subsidiary, or revoke any such designation,
at any time and from time to time, either before or after the Plan is approved
by the stockholders.
The term "Fair Market Value of the Common Stock" means (i) if the
Common Stock is admitted to trading on a national securities exchange or the
Nasdaq National Market, the closing price reported for the Common Stock on such
exchange or system for such date or, if no sales were reported for such date,
for the next preceding date for which a sale was reported, or (ii) if clause (i)
does not apply but the Common Stock is admitted to quotation on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"), the
average of the highest bid and lowest asked prices reported for the Common Stock
on NASDAQ for such date or, if no bid and asked prices were reported for such
date, for the next preceding date for which such prices were reported.
The term "Parent" means a "parent corporation" with respect to the
Company, as defined in Section 424(e) of the Code.
The term "Subsidiary" means a "subsidiary corporation" with respect to
the Company, as defined in Section 424(f) of the Code.
10. Rights on Termination of Employment. If a participant's employment
terminates for any reason before the Exercise Date for any Offering, such
participant's purchase authorization under the Plan will immediately terminate,
no payroll deduction will be taken from any pay due and owing to the participant
and the balance of accumulated payroll deductions and other amounts credited to
his account will be promptly refunded to him or, in the case of his death, paid
to his designated beneficiary. An employee will be deemed to have terminated
employment, for this purpose, if the corporation that employs him, having been a
Designated Subsidiary, ceases to be a Subsidiary, or if the employee is
transferred to any corporation other than the Company or a Designated
Subsidiary.
11. Special Rules. Notwithstanding anything herein to the contrary, the
Administrator may adopt special rules applicable to the employees of a
particular Designated Subsidiary, whenever the Administrator determines that
such rules are necessary or appropriate for the implementation of the Plan in a
jurisdiction where such Designated Subsidiary has employees; provided that such
rules are consistent with the requirements of Section 423(b) of the Code. Such
special rules may include (by way of example, but not by way of limitation) the
establishment of a method for employees of a given Designated Subsidiary to fund
the purchase of shares other than by payroll deduction, if the payroll deduction
method is prohibited by
A-3
<PAGE>
local law or is otherwise impracticable. Any special rules established pursuant
to this Section 11 shall, to the extent possible, result in the employees
subject to such rules having substantially the same rights as other participants
in the Plan.
12. Optionees Not Stockholders. Neither the granting of an Option to an
employee, his authorization to purchase Common Stock, the deductions from his
pay, nor his deposits with the Administrator shall constitute such employee a
holder of the shares of Common Stock covered by an Option under the Plan until
such shares have been purchased by and issued to him.
13. Rights Not Transferable. Rights under the Plan are not transferable
by a participant other than by will or the laws of descent and distribution, and
are exercisable during the employee's lifetime only by the employee.
14. Application of Funds. All funds received or held by or on behalf of
the Company under the Plan may be combined with other corporate funds and may be
used for any corporate purpose.
15. Adjustment in Case of Changes Affecting Common Stock. In the event
of a subdivision of outstanding shares of Common Stock, or the payment of a
dividend in Common Stock, the number of shares approved for the Plan, and the
share limitation established under Section 4, shall be increased
proportionately, and such other adjustment shall be made as may be deemed
equitable by the Administrator. In the event of any other change affecting the
Common Stock, such adjustment shall be made as may be deemed equitable by the
Administrator to give proper effect to such event.
16. Amendment of the Plan. The Board may at any time, and from time to
time, amend the Plan in any respect, except that without the approval, within
twelve (12) months of such Board action, by the holders of a majority of the
shares of stock of the Company present or represented and entitled to vote at a
meeting of stockholders, no amendment shall be made increasing the number of
shares approved for the Plan or making any other change that would require
stockholder approval in order for the Plan, as amended, to qualify as an
"employee stock purchase plan" under Section 423(b) of the Code.
17. Insufficient Shares. If the total number of shares of Common Stock
that would otherwise be purchased on any Exercise Date plus the number of shares
purchased under previous Offerings under the Plan exceeds the maximum number of
shares issuable under the Plan, the shares then available shall be apportioned
among participants in proportion to the amount of payroll deductions and
deposits accumulated on behalf of each participant that would otherwise be used
to purchase Common Stock on such Exercise Date.
18. Termination of the Plan. The Plan may be terminated at any time by
the Board. Upon termination of the Plan, all amounts in the accounts of
participants shall be promptly refunded.
19. Governmental Regulations. The Company's obligation to sell and
deliver Common Stock under the Plan is subject to obtaining all governmental
approvals required in connection with the authorization, issuance, or sale of
such stock.
The Plan shall be governed by the law of the Commonwealth of
Massachusetts except to the extent that such law is preempted by federal law.
20. Issuance of Shares. Shares may be issued upon exercise of an Option
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
A-4
<PAGE>
21. Tax Withholding. Participation in the Plan is subject to any
required tax withholding on income of the participant in connection with the
Plan. Each employee agrees, by entering the Plan, that the Company and its
Subsidiaries shall have the right to deduct any such taxes from any payment of
any kind otherwise due to the employee, including shares issuable under the
Plan.
22. Notification Upon Sale of Shares. Each employee agrees, by entering
the Plan, to give the Company prompt notice of any disposition of shares
purchased under the Plan where such disposition occurs within two years after
the date of grant of the Option pursuant to which such shares were purchased.
23. Effective Date and Approval of Shareholders. The Plan shall take
effect on the later of the date it is adopted by the Board or the date it is
approved by the holders of a majority of the shares of stock of the Company
present or represented and entitled to vote at a meeting of stockholders, which
approval must occur within twelve (12) months of the adoption of the Plan by the
Board.
A-5
<PAGE>
[FRONT OF CARD]
DAKA INTERNATIONAL, INC.
ONE CORPORATE PLACE
55 Ferncroft Road
Danvers, MA 01923
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints William H. Baumhauer and Allen R.
Maxwell, and each of them, as proxies (the "Proxies"), each with the power to
appoint his substitute, and hereby authorizes each of them to represent and to
vote all the shares of Common Stock and Series A Preferred Stock of DAKA
International, Inc. (the "Corporation") held of record by the undersigned on
October 28, 1996, at the Annual Meeting of Stockholders to be held on December
4, 1996 or any adjournment or postponement thereof.
IF NO DIRECTION IS MADE, THIS PROXY IF PROPERLY EXECUTED AND SUBMITTED
WILL BE VOTED FOR THE NOMINEES FOR DIRECTOR AND FOR APPROVAL OF THE DAKA
INTERNATIONAL, INC. EMPLOYEE STOCK PURCHASE PLAN. A STOCKHOLDER WISHING TO VOTE
IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATION NEED ONLY SIGN AND
DATE THIS PROXY AND RETURN IT IN THE STAMPED ENVELOPE PROVIDED.
The undersigned hereby acknowledge(s) receipt of a copy of the
accompanying Notice of Annual Meeting of Stockholders, the Proxy Statement with
respect thereto and the Corporation's Annual Report to Stockholders for Fiscal
Year 1996 and hereby revoke(s) any proxy or proxies heretofore given. This proxy
may be revoked at any time before it is exercised.
(Continued and to be dated and signed on the reverse side)
[BACK OF CARD]
A |X| Please mark
your votes as
in this example
WITHHELD Nominees: Erline Belton
FOR from Alan D. Schwartz
the Nominees the Nominees
1. Election |_| |_|
of
Class II
Directors
(TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S
NAME ON THE LINE PROVIDED BELOW:)
-----------------------------------------------
FOR AGAINST ABSTAIN
2. Approval of the DAKA International, Inc. |_| |_| |_|
Employee Stock Purchase Plan as described
in the accompanying proxy materials
3. In their discretion, the proxies
are authorized to vote upon such other
business as may properly come before the meeting.
CHECK HERE IF YOU |_| CHECK |_|
PLANT TO ATTEND HERE FOR
THE MEETING ADDRESS
CHANGE
New Address:
--------------------------------
--------------------------------
Sign , Date and Return the Proxy Card Promptly using the Enclosed Envelope
SIGNATURE: DATE
--------------------- ------------------
SIGNATURE DATE
--------------------- ------------------
NOTE: Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor,
adminstrator, trustee or guardian please give full title as such. If a
corporation, please sign in full corporation name by President or other
authorized officer. If a partnership, please sign in partnership name
only.
