<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Fresh Choice, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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):
---------------------------------------------------------------------
(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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
FRESH CHOICE, INC.
April 8, 1999
Dear Stockholder:
This year's Annual Meeting of Stockholders will be held on Thursday,
May 20, 1999 at 2:00 p.m. Pacific Daylight Time at the Santa Clara Convention
Center, 5001 Great America Parkway, Santa Clara, California. You are cordially
invited to attend.
The Notice of Annual Meeting of Stockholders and a Proxy Statement,
which describe the formal business to be conducted at the meeting, follow this
letter.
After reading the Proxy Statement, please promptly mark, sign, and
return the enclosed proxy in the postage-prepaid envelope to ensure that your
shares will be represented. Your shares cannot be voted unless you date, sign,
and return the enclosed proxy or attend the annual meeting in person. Regardless
of the number of shares you own, your careful consideration of, and voting upon,
the matters before our stockholders are important.
A copy of the Company's Annual Report is also enclosed.
The Board of Directors and Management look forward to seeing you at the
annual meeting.
Very truly yours,
/s/ Everett F. Jefferson
Everett F. Jefferson
President and Chief Executive Officer
<PAGE> 3
FRESH CHOICE, INC.
2901 Tasman Drive, Suite 109
Santa Clara, CA 95054
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1999
Dear Stockholder:
You are invited to attend the Annual Meeting of the Stockholders of
Fresh Choice, Inc. (the "Company"), which will be held on Thursday, May 20,
1999, at 2:00 p.m. Pacific Daylight Time at the Santa Clara Convention Center,
5001 Great America Parkway, Santa Clara, California:
1. To elect two (2) Class I directors to hold office for a
three-year term and until their respective successors are
elected and qualified.
2. To consider and vote upon a proposal to ratify the appointment
of Deloitte & Touche LLP as the Company's independent
accountants for the fiscal year ending December 26, 1999.
3. To transact such other business as may properly come before
the meeting.
Stockholders of record at the close of business on March 29, 1999 are
entitled to notice of and to vote at this meeting and any adjournments thereof.
For ten (10) days prior to the meeting, a complete list of the stockholders
entitled to vote at the meeting will be available for examination by any
stockholder for any purpose relating to the meeting during ordinary business
hours at the principal office of the Company.
By order of the Board of Directors,
/s/ JOAN M. MILLER
JOAN M. MILLER
Secretary
Santa Clara, California
April 8, 1999
- --------------------------------------------------------------------------------
IMPORTANT: PLEASE FILL IN, DATE, SIGN AND PROMPTLY MAIL THE ENCLOSED PROXY CARD
IN THE ACCOMPANYING POSTAGE PREPAID ENVELOPE TO ENSURE THAT YOUR SHARES ARE
REPRESENTED AT THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY CHOOSE TO VOTE IN
PERSON EVEN IF YOU HAVE PREVIOUSLY SENT IN YOUR PROXY CARD.
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<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
GENERAL INFORMATION...............................................................1
ELECTION OF DIRECTORS.............................................................6
EXECUTIVE COMPENSATION AND OTHER MATTERS..........................................9
Compensation of Directors...............................................12
Change in Control and Severance Arrangements............................13
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION..........................14
Deductibility of Executive Compensation.................................15
COMPARISON OF STOCKHOLDER RETURN.................................................16
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS...........................17
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING.....................17
TRANSACTION OF OTHER BUSINESS....................................................17
</TABLE>
i
<PAGE> 5
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
FRESH CHOICE, INC.
2901 TASMAN DRIVE, SUITE 109
SANTA CLARA, CALIFORNIA 95054
The accompanying proxy is solicited by the Board of Directors of Fresh
Choice, Inc., a Delaware corporation (the "Company"), for use at the Annual
Meeting of Stockholders to be held May 20, 1999, and any adjournment thereof for
the purposes set forth in the accompanying Notice of Annual Meeting. The date of
this Proxy Statement is April 8, 1999, the approximate date on which this Proxy
Statement and the accompanying form of proxy were first sent or given to
stockholders.
GENERAL INFORMATION
Annual Report. An annual report for the fiscal year ended December 27,
1998, is enclosed with this Proxy Statement.
Voting Securities. Only stockholders of record as of the close of
business on March 29, 1999, will be entitled to vote at the meeting and any
adjournment thereof. As of that date, there were 5,718,847 shares of Common
Stock of the Company, par value $.001 per share, issued and outstanding.
Stockholders may vote in person or by proxy. Each holder of shares of Common
Stock is entitled to one (1) vote for each share of stock held on the proposals
presented in this Proxy Statement. The Company's bylaws provide that a majority
of all of the shares of the stock entitled to vote, whether present in person or
represented by proxy, shall constitute a quorum for the transaction of business
at the meeting.
Solicitation of Proxies. The cost of soliciting proxies will be borne
by the Company. In addition to soliciting stockholders by mail through its
regular employees, the Company will request banks, and brokers, and other
custodians, nominees and fiduciaries, to solicit their customers who have stock
of the Company registered in the names of such persons and will reimburse them
for their reasonable, out-of-pocket costs. The Company may use the services of
its officers, directors, and others to solicit proxies, personally or by
telephone, without additional compensation.
Voting of Proxies. All valid proxies received prior to the meeting will
be voted. All shares represented by a proxy will be voted, and where a
stockholder specifies by means of the proxy a choice with respect to any matter
to be acted upon, the shares will be voted in accordance with the specification
so made. If no choice is indicated on the proxy, the shares will be voted in
favor of the proposal. A stockholder giving a proxy has the power to revoke his
or her proxy, at any time prior to the time it is voted, by delivering to the
Secretary of the Company a written instrument revoking the proxy or a
duly-executed proxy with a later date, or by attending the meeting and voting in
person.
Stock Ownership of Certain Beneficial Owners and Management. The
following tables set forth certain information, as of February 28, 1999, with
respect to the beneficial ownership of the Company's Common Stock by (i) all
persons known by the Company to be the beneficial owners of more than 5% of the
outstanding Common Stock of the Company; (ii) each director and director-nominee
of the Company; (iii) the Chief Executive Officer, the four other most
highly-compensated executive officers of the Company whose salary and incentive
compensation for the fiscal year ended December 27, 1998 exceeded $100,000 and
one additional individual who would have been one of the four most
highly-compensated executive officers of the Company but for the fact that such
individual was not serving as an executive officer on December 27, 1998; and
(iv) all executive officers and directors of the Company as a group.
1
<PAGE> 6
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNERS SHARES OF COMMON STOCK OWNED(1)
----------------------------------
NUMBER OF PERCENTAGE
SHARES OF CLASS
------------ ----------
<S> <C> <C>
Crescent Real Estate Equities Limited Partnership 2,198,259(2) 29.623%
777 Main Street, Suite 2100
Fort Worth, TX 76102
Bay Area Micro-Cap Fund, LP 1,143,700(3) 19.999%
1151 Bay Laurel Drive
Menlo Park, CA 94025
T. Rowe Price Associates, Inc. 540,000(4) 9.442%
100 East Pratt Street
Baltimore, MD 21202
Rosewood Venture Capital, Inc. 507,431 8.873%
4 Embarcadero Center, Suite 1580
San Francisco, CA 94111-4166
Richard E. Rainwater 496,400(5) 8.680%
777 Main Street, Suite 2700
Fort Worth, TX 76102
Dimensional Fund Advisors Inc. 334,900(6) 5.856%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Charles A. Lynch 23,056(7) *
Everett F. Jefferson 108,334(8) 1.894%
Carl R. Hays 21,049(9) *
Vern O. Curtis 7,813(10) *
Charles L. Boppell 2,000(11) *
Barry E. Krantz 2,000(12) *
David E. Pertl 26,901(13) *
Tim G. O'Shea 11,900(14) *
Joan M. Miller 12,308(15) *
Tina E. Freedman 10,005(16) *
Executive officers and directors as a group (9 persons) 225,366(17) 3.826%
</TABLE>
- -------------------------------------
*Less than 1%
2
<PAGE> 7
(1) Except as indicated in the footnotes to this table, the persons named in
the table have sole voting and dispositive power with respect to all shares
of Common Stock shown as beneficially owned by them, subject to community
property laws, where applicable.
(2) Includes (i) 1,187,906 shares of Series B Non-Voting Participating
Convertible Preferred Stock ("Series B Preferred Stock"), (ii) an option to
purchase 513,953 shares of Series C Non-Voting Participating Convertible
Preferred Stock ("Series C Preferred Stock") and (iii) 496,400 shares
subject to an option to purchase the Common Stock presently owned by Mr.
Richard E. Rainwater. Does not include (i) 1,187,906 shares of Series A
Voting Participating Convertible Preferred Stock ("Series A Preferred
Stock") that may be acquired at any time upon conversion of Series B
Preferred Stock, because Series B Preferred Stock is included, and (ii)
513,953 shares of Common Stock that may be acquired at any time upon
conversion of Series C Preferred Stock, because Series C Preferred Stock is
included. After conversion of any shares of Series B Preferred Stock into
Series A Voting Participating Convertible Preferred Stock (the "Series A
Preferred Stock"), the holders of Series A Preferred Stock have the right
to elect a majority of the Board.
(3) Based on a Schedule 13G/A filed with the Securities and Exchange Commission
(the "SEC") on February 8, 1999 updated based upon a Form 4 filed with the
SEC on March 5, 1999, includes (i) 1,016,900 shares owned by Bay Area
Micro-Cap Fund, LP (the "Fund") of which Bay Area Micro-Cap Management
Company, LLC is the general partner (the "General Partner"); (ii) 15,400
owned by Gregory F. Wilbur, managing member of the General Partners ("Mr.
Wilbur"); (iii) 19,000 shares owned by Peter L. Holland, a member of the
General Partner ("Mr. P.L. Holland"); (iv) 8,000 shares owned by William A.
Smart III, a member of the General Partner ("Mr. Smart"); (v) 28,000 shares
owned by Smart & Holland Value Fund, L.P. ("Smart & Holland Value"), of
which Mr. Smart is a partner; and (vi) 56,400 shares owned by Smart &
Holland Investment Fund, L.P. ("Smart & Holland Investment"). The 1,016,900
shares owned by the Fund can be voted and disposed of by Mr. Wilbur, as
managing member of the General Partner, acting alone, or by Mr. Smart and
Mr. P.L. Holland, as managing members of the General Partner, acting
together. Each of Messrs. Wilbur, P.L. Holland and Smart have sole voting
and disposition power with respect to the 15,400, 19,000 and 8,000 shares,
respectively, that each owns individually. The 28,000 shares owned by Smart
& Holland Value can be voted and disposed of by David B. Holland ("Mr. D.B.
Holland") and Mr. Smart acting together. The 56,400 shares owned by Smart &
Holland Investment can be voted and disposed of by Mr. D.B. Holland, Mr.
Smart and Mr. P.L. Holland acting together.
(4) Based on a Schedule 13G/A filed with the SEC on February 8, 1999 these
securities are owned by various individual and institutional investors
including T. Rowe Price Small-Cap Value Fund, Inc. (which owns 540,000
shares, representing 9.4% of the shares outstanding), which T. Rowe Price
Associates, Inc. ("Price Associates") serves as investment adviser with
power to direct investments and/or sole power to vote the securities. For
purposes of the reporting requirement of the Securities Exchange Act of
1934, Price Associates is deemed to be a beneficial owner of such
securities; however, Price Associates expressly disclaims that it is, in
fact, the beneficial owner of such securities.
(5) Does not include shares of preferred stock of the Company held by Crescent
Real Estate Equities Limited Partnership. Mr. Rainwater is the Chairman of
the Board of, and holds a significant equity interest in, Crescent Real
Estate Equities Company, a real estate investment trust which holds an
approximate 88.8% limited partnership interest and indirectly holds a 1%
general partnership interest in Crescent Real Estate Equities Limited
Partnership.
(6) Based on a Schedule 13G filed with the SEC on February 11, 1999,
Dimensional Fund Advisors Inc. has sole voting power and sole dispositive
power of all 334,900 shares. All of such shares are owned by advisory
clients of Dimensional Fund Advisors Inc.
(7) Includes 21,679 shares subject to stock options exercisable within sixty
days of February 28, 1999.
(8) Includes (i) 77,334 shares subject to stock options exercisable within
sixty days of February 28, 1999 and (ii) 8,500 shares held in an Individual
Retirement Account
(9) Consists of 17,395 shares subject to stock options exercisable within sixty
days of February 28, 1999.
3
<PAGE> 8
(10) Consists of 7,813 shares subject to stock options exercisable within sixty
days of February 28, 1999.
(11) Consists of 2,000 shares subject to stock options exercisable within sixty
days of February 28, 1999.
(12) Consists of 2,000 shares subject to stock options exercisable within sixty
days of February 28, 1999.
(13) Consists of (i) 14,282 shares subject to stock options exercisable within
sixty days of February 28, 1999, (ii) 6,000 shares held in an Individual
Retirement Account and (iii) 6,619 shares held by David E. Pertl and Judy
A. Pertl Trustees FBO The Pertl Family Trust.
(14) Includes 8,900 shares subject to stock options exercisable within sixty
days of February 28, 1999.
(15) Includes 9,808 shares subject to stock options exercisable within sixty
days of February 28, 1999.
(16) Consists of 10,005 shares subject to stock options exercisable within sixty
days of February 28, 1999.
(17) Includes an aggregate of 171,216 shares subject to stock options held by
all executive officers and directors as a group exercisable within sixty
days of February 28, 1999.
4
<PAGE> 9
<TABLE>
<CAPTION>
NAME AND ADDRESS OF
BENEFICIAL OWNERS SHARES OF PREFERRED STOCK OWNED(1)
------------------- ------------------------------------------------------------------------------
SERIES A SERIES B SERIES C
----------------------- ------------------------ -----------------------
NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE
SHARES OF CLASS SHARES OF CLASS SHARES OF CLASS
--------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Crescent Real Estate Equities
Limited Partnership .............. 1,187,906(2) 100% 1,187,906(3) 100% 513,953(4) 100%
777 Main Street, Suite 2100
Fort Worth, TX 76102
</TABLE>
- -------------------------------------
(1) No shares of Preferred Stock except those listed in the table below are
outstanding or may become outstanding within 60 days of February 28, 1999,
and no one listed in the table above covering the Company's Common Stock
has any rights to beneficially acquire such Preferred Stock.
(2) Represents 1,187,906 shares of Series B Preferred Stock that may be
converted into Series A Preferred Stock at any time at the option of the
holder. Series A Preferred Stock may be converted into Common Stock at any
time at the option of the holder. After conversion of any shares of Series
B Preferred Stock into Series A Voting Participating Convertible Preferred
Stock (the "Series A Preferred Stock"), the holders of Series A Preferred
Stock have the right to elect a majority of the Board.
(3) Series B Preferred Stock is non-voting, but may be converted into Series A
Preferred Stock or Common Stock at any time at the option of the holder.
See also footnote 2 above.
(4) Represents shares subject to an immediately exercisable option. Series C
Preferred Stock is non-voting, but may be converted into Common Stock at
any time at the option of the holder.
5
<PAGE> 10
ELECTION OF DIRECTORS
The Company has a classified Board of Directors consisting of two Class
I directors (Vern O. Curtis and Charles L. Boppell), two Class II directors
(Carl R. Hays and Charles A. Lynch), and two Class III directors (Everett F.
Jefferson and Barry E. Krantz), who will serve until the Annual Meetings of
Stockholders to be held in 1999, 2000 and 2001, respectively, and until their
respective successors are duly elected and qualified. At each Annual Meeting of
Stockholders, directors are elected for a full term of three (3) years to
succeed those directors whose terms expire on the Annual Meeting dates.
Management's nominees for election at the Annual Meeting of
Stockholders to Class I of the Board of Directors are Vern O. Curtis and Charles
L. Boppell. If elected, the nominees will serve as directors until the Company's
Annual Meeting of Stockholders in 2002, and until their successors are elected
and qualified. If either nominee declines to serve or becomes unavailable for
any reason, or if a vacancy occurs before the election (although management
knows of no reason to anticipate that this will occur), the proxies may be voted
for such substitute nominees as management may designate.
If a quorum is present and voting, the two (2) nominees for Class I
director receiving the highest number of votes will be elected as Class I
directors. Abstentions and shares held by brokers that are present but not
voted, because the brokers were prohibited from exercising discretionary
authority (i.e., "broker non-votes"), will be counted as present for purposes of
determining whether a quorum is present.
The table below sets forth for the current directors, including the
Class I nominees to be elected at this meeting, certain information with respect
to age and background:
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY DIRECTOR SINCE
---- --- -------------------------- --------------
<S> <C> <C> <C>
Class I director whose term expires at the
1999 Annual Meeting of Stockholders:
Vern O. Curtis 64 Director 1996
Charles L. Boppell 57 Director 1998
Class II director whose terms expire at the
2000 Annual Meeting of Stockholders:
Carl R. Hays 60 Director 1989
Charles A. Lynch 71 Chairman of the Board of the Company 1989
since March 1995; Director
Class III directors to be elected at the 2001
Annual Meeting of Stockholders:
Barry E. Krantz 54 Director 1998
Everett F. Jefferson 60 President and Chief Executive Officer 1997
of the Company and Director
</TABLE>
Mr. Curtis has served as a director of the Company since April 1996.
Since June 1991, Mr. Curtis has been self-employed as an investor. Mr. Curtis
devoted three years between June 1992 and June 1995 to full-time service for the
Church of Jesus Christ of Latter-day Saints. From August 1988 to June 1991, Mr.
Curtis was Dean of the School of Business and Economics of Chapman College, a
liberal arts college in Orange, California. From 1968 to January 1987, Mr.
Curtis served in various executive positions with Denny's, Inc., a diversified
restaurant company of over 1,900 units, including serving as President and Chief
Executive Officer from 1980 to 1987 and Chairman of
6
<PAGE> 11
the Board from 1985 to 1987. He currently serves on the Board of Directors of
PIMCO Mutual Funds, a group of mutual funds that primarily manages fixed income
securities; PIMCO Commercial Mortgage Security Trust, Inc., a closed-end fund
specializing in investment in commercial mortgage backed securities; and PS
Business Parks, Inc., a real estate investment trust company.
Mr. Boppell has served as a director of the Company since March 1998.
Mr. Boppell has served as the President and CEO of Sizzler International Inc.
("Sizzler") since March 1999. Prior to his employment with Sizzler, Mr. Boppell
served as the President and CEO of La Salsa Holding Co. ("La Salsa") from
November 1993 to March 1999. Mr. Boppell also served as President and CEO of
Godfather Pizza from 1984 to 1985. In 1989, while serving as a Director of
Hudson's Grill America, Inc., Mr. Boppell was chosen to serve as CEO during that
company's reorganization. From 1981 to 1984, Mr. Boppell served as Vice
President of Operations of Taco Bell, and was later elected President. At Pizza
Hut, a division of PepsiCo, Mr. Boppell served from 1977 to 1981 as Western
Division Vice President and later advanced to become the Senior Vice President
of Operations. From 1965 to 1977, Mr. Boppell held various positions with Saga
Corporation, a contract food services company, including College Account
Manager, Regional Vice President Sales, District Manager and Vice President
General Manager of Saga Food Systems. Mr. Boppell currently serves as a Director
of La Salsa, New Focus and Sizzler, and is the owner of Ventura Toyota. Mr.
Boppell serves as Chairman of the Board for his alma mater, Whitworth College in
Spokane, Washington.
Mr. Hays has served as a Director of the Company since March 1989. Mr.
Hays is currently a franchisee of Outback Steakhouse in Northern California.
From November 1989 to January 1993, Mr. Hays was the Chief Operating Officer of
Al Copeland Enterprises, the parent company of Popeye's Famous Fried Chicken and
Church's Fried Chicken.
Mr. Lynch has served as Chairman of the Board since March 1995, and has
served as a Director of the Company since April 1989. Mr. Lynch was an executive
officer of the Company from March 1995 until he resigned as an executive officer
in March 1998. Mr. Lynch also served as the Chief Executive Officer of the
Company from May 1995 to November 1995. Mr. Lynch has served as Chairman and
Chief Executive Officer of La Salsa since February 1999 and as Chairman of the
Board of Regent Pacific Management Corporation since July 1998. From March 1998
to June 1998, Mr. Lynch served as Chairman and Chief Executive Officer of
Arrowhead Mills, Inc. From July 1989 to March 1995, Mr. Lynch was also the
Chairman of Market Value Partners Company, an investment firm. From July 1988 to
June 1989, he was the President and Chief Executive Officer of Levolor
Corporation, a manufacturer of window coverings. From September 1986 to June
1988, he was the Chairman and Chief Executive Officer of DHL Airways, Inc., a
provider of express courier service. From 1978 to 1986, Mr. Lynch was the
Chairman of the Board and Chief Executive Officer of Saga Corporation, a
diversified restaurant and food services company. Mr. Lynch is also a Director
of La Salsa, Pacific Mutual Holding Company, SRI International, Age Wave, Inc.
and Madge Networks, N.V.
Mr. Krantz has served as a director of the Company since March 1998.
From August 1995 to the present, Mr. Krantz has been self-employed serving on
the Board of Directors of and/or consulting with several of the major restaurant
chains in the United States and internationally. Mr. Krantz has spent more than
20 years in various executive positions within the foodservice industry. From
January 1994 to August 1995, Mr. Krantz served as President and Chief Operating
Officer of Family Restaurants, Inc., a $1.2 billion company which owned and
operated the El Torito, Chi-Chi's, Reuben's, Charley Brown's, Coco's, Carrows
and jojos chains. From March 1993 to January 1994, Mr. Krantz served as the
Chief Operating Officer for Restaurant Enterprises Group, and served as
President of its Family Restaurant Division from January 1989 to January 1994.
From January 1979 to January 1987, Mr. Krantz was the Senior Vice President of
Marketing and Concept Development for Denny's Restaurants. Mr. Krantz received a
Bachelor of Arts degree from the University of Pennsylvania and a Masters in
Business Administration from the Stanford University Graduate School of
Business. Before starting a career in the foodservice industry, Mr. Krantz held
a variety of product management positions at General Foods Corporation and
senior account management positions at several major advertising agencies. Mr.
Krantz is also a Director of Sizzler International, Inc. and Tam Restaurants,
Inc.
Mr. Jefferson was elected President and Chief Executive Officer and a
Director of the Company in February 1997. From June 1996 to February 1997 Mr.
Jefferson was an independent consultant. From June 1993 to June 1996, Mr.
Jefferson was President and Chief Executive Officer of Cucina Holdings, Inc.,
the operator of
7
<PAGE> 12
Java City coffee and bakery. From March 1990 to June 1993, he was an independent
consultant and independent restaurant operator. From May 1987 to March 1990, Mr.
Jefferson served as President and Chief Executive Officer of Skipper's, Inc.
From May 1986 to April 1987, Mr. Jefferson served as President of Kings Table,
Inc. Earlier in his career, Mr. Jefferson served for five (5) years as Senior
Vice President of operations for Pizza Hut, Inc. and for ten (10) years as
Regional Director of the Southeast and Caribbean for Saga Corporation.
During the fiscal year ended December 27, 1998, the Board held six (6)
meetings. No director attended fewer than 100% of such meetings of the Board
during the period that he served as a director of the Company.
The Company does not have a standing Nominating Committee, but does
have an Audit and Finance Committee and a Compensation Committee.
The Audit and Finance Committee's function is to review, with the
Company's independent auditors and management, the results of the examination of
the Company's financial statements by the independent auditors and the
independent auditors' opinion. The Audit and Finance Committee also approves all
professional services performed by the independent auditors, recommends the
retention of the independent auditors to the Board, subject to ratification by
the stockholders, and periodically reviews the Company's accounting policies and
internal accounting and financial controls. The Audit and Finance Committee at
the beginning of fiscal 1998 consisted of three non-employee directors of the
Company, Messrs. Curtis and Hays and M. Michael Casey, a former director of the
Company. On May 21, 1998, the date of the Annual Meeting of Stockholders Mr.
Casey did not stand for re-election to the Board of Directors and was removed
from the Audit and Finance Committee, Messrs. Boppell and Krantz were appointed
to the Audit and Finance Committee, and Mr. Curtis replaced M. Michael Casey as
Chairman of the Audit and Finance Committee. The Audit and Finance Committee
held two (2) meetings during the fiscal year ended December 27, 1998.
The Compensation Committee's function is to review and recommend
executive compensation, including officer salary levels, incentive compensation
programs, and stock option grants. The Compensation Committee of the Board of
Directors at the beginning of fiscal 1998 consisted of three non-employee
directors of the Company, Messrs. Curtis, Casey and Hays. On May 21, 1998, the
date of the 1998 Annual Meeting of Stockholders Mr. Casey did not stand for
re-election to the Board of Directors of the Company and was removed from the
Compensation Committee, Mr. Curtis stepped down as Chairman of the committee but
continued to serve as a member, and two newly-elected nonemployee directors of
the Company, Messrs. Boppell and Krantz joined the committee as a member and
Chairman, respectively. The Compensation Committee held three (3) meetings
during the fiscal year ended December 27, 1998. For additional information
concerning the Compensation Committee, see "COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION."
8
<PAGE> 13
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth information concerning the annual and
long-term compensation of the Chief Executive Officer of the Company, the four
other most highly-compensated executive officers of the Company as of December
27, 1998, and one individual who would have been one of the four other most
highly compensated executive officers but for the fact such individual was not
serving as an executive officer on December 27, 1998, whose total salary and
incentive compensation for the fiscal year ended December 27, 1998 exceeded
$100,000 for services in all capacities to the Company. The following table also
sets forth the total salary and incentive compensation for each of such
executive officers for the fiscal years ended December 28, 1997 and December 29,
1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------- AWARDS
------------
SECURITIES
NAME AND PRINCIPAL OTHER UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS ANNUAL OPTIONS COMPENSATION
------------------ ---- -------- -------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles A. Lynch(1) 1998 $ 74,080 $ 0 $ 16(2) 52,491 $ 56,813(3)
Chairman of the Board 1997 $248,068 $ 0 $ 426(2) 0 $ 2,256(4)
1996 $245,192 $ 0 $ 1,097(2) 25,000 $ 1,212(4)
Everett F. Jefferson(5) 1998 $296,030 $ 0 $ 11,216(2) 25,000 $ 729(4)
President and Chief 1997 $231,145 $ 14,000 $ 7,685(2) 220,000 $154,068(7)
Executive Officer; Director 1996 $ -- $ -- $ -- -- $ --
David E. Pertl(8) 1998 $153,106 $ 0 $ 11,906(2) 25,000 $ 181(4)
Senior Vice President, Chief 1997 $126,606 $ 21,000(6) $ 11,260(9) 24,000 $ 55,649(10)
Financial Officer and 1996 $ -- $ -- $ -- -- $ --
Treasurer
Tim G. O'Shea(11) 1998 $145,832 $ 0 $ 12,000(2) 13,000 $ 299(4)
Senior Vice President, 1997 $136,490 $ 9,000(6) $ 12,000(12) 4,000 $ 288(4)
Marketing and Assistant 1996 $103,057 $ 12,123 $ 9,534(13) 10,000 $ 63,402(14)
Secretary
Joan M. Miller 1998 $102,956 $ 0 $ 12,389(2) 9,000 $ 181(4)
Senior Vice President, Human 1997 $ 96,211 $ 0 $ 5,000(2) 3,500 $ 166(4)
Resources and Corporate 1996 $ 84,487 $ 0 $ 0 0 $ 84(4)
Secretary
Tina E. Freedman 1998 $ 97,285 $ 0 $ 13,000(2) 9,000 $ 181(4)
Senior Vice President, 1997 $ 90,817 $ 0 $ 5,000(2) 5,500 $ 55(4)
Product Development and 1996 $ 74,906 $ 2,522 $ 0 5,000 $ 35(4)
Purchasing
</TABLE>
- -------------------------------------
(1) Mr. Lynch, who has been a director of the Company since 1989, joined the
Company as its Chairman of the Board in March 1995 and served as Chief
Executive Officer from May 1995 to November 1995. Mr. Lynch resigned from
the Company as an executive officer in March 1998, but continues to serve
as the Chairman of the Board of the Company.
(2) Represents car allowance.
9
<PAGE> 14
(3) Includes $56,336, the pro-rated portion of a $70,000 annual consulting fee,
paid for services as Chairman of the Board and a consultant pursuant to a
consulting agreement entered into upon resignation as an executive officer
and $477 in premium payments for group life insurance paid for by the
Company on behalf of each employee with a base salary in excess of $50,000
("Premium Payments") in stated fiscal year.
(4) Represents Premium Payments.
(5) Mr. Jefferson joined the Company in February 1997.
(6) Represents bonus paid pursuant to offer letter.
(7) Includes $92,688 in relocation expenses paid in fiscal year 1997, $61,000
in relocation expenses accrued in fiscal year 1997 and paid in fiscal year
1998 and $381 in Premium Payments.
(8) Mr. Pertl joined the Company in January 1997.
(9) Includes $250 in telephone allowance and $11,010 in car allowance.
(10) Includes $55,489 in relocation expenses and $161 in Premium Payments
(11) Mr. O'Shea joined the Company in March 1996.
(12) Includes $375 in telephone allowance and $11,625 in car allowance.
(13) Includes $1,210 in telephone allowance and $8,324 in car allowance.
(14) Includes $63,268 in relocation expenses and $134 in Premium Payments.
10
<PAGE> 15
The following table provides the specified information concerning
grants of options to purchase the Company's Common Stock made during the year
ended December 27, 1998 to the persons named in the Summary Compensation Table:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
INDIVIDUAL GRANTS IN FISCAL 1998 TERM(1)
- ----------------------------------------------------------------------------------------------- -----------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE EXPIRATION
NAME GRANTED(2) FISCAL YEAR PRICE(3) DATE 5% 10%
- --------------------------------- ----------- ------------ ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Charles A. Lynch 50,000 21.28% $3.375 03/31/08 $106,125.94 $268,944.03
2,491 1.06% $1.625 12/08/08 $2,545.69 $ 6,451.27
Everett F. Jefferson 25,000 10.64% $2.8125 02/23/08 $44,219.14 $112,060.00
David E. Pertl 15,000 6.39% $3.125 01/26/08 $29,479.43 $ 74,706.67
10,000 4.26% $1.625 12/08/08 $10,219.53 $ 25,898.31
Tim G. O'Shea 6,000 2.55% $3.375 03/31/08 $12,735.11 $ 32,273.28
7,000 2.98% $1.625 12/08/08 $7,153.67 $ 18,128.82
Joan M. Miller 4,000 1.70% $3.375 03/31/08 $8,490.08 $ 21,515.52
5,000 2.13% $1.625 12/08/08 $5,109.77 $ 12,949.16
Tina E. Freedman 4,000 1.70% $3.375 03/31/08 $8,490.08 $ 21,575.52
5,000 2.13% $1.625 12/08/08 $5,109.77 $ 12,949.16
</TABLE>
- -------------------------------------
(1) Potential gains are net of exercise price, but before taxes associated with
exercise. These amounts represent certain assumed rates of appreciation
only, based on the Securities and Exchange Commission rules. Actual gains,
if any, on stock option exercises are dependent on the future performance
of the Common Stock, overall market conditions and the optionholders'
continued employment through the vesting period. The amounts reflected in
this table may not necessarily be achieved.
(2) Options granted during fiscal 1998 generally vest and become exercisable
20% one year from the date of grant, and 1/60 per month for each complete
calendar month of continuous employment thereafter. See also "EXECUTIVE
COMPENSATION AND OTHER MATTERS -- Change in Control and Severance
Arrangements."
(3) All options were granted at market value on the date of grant.
11
<PAGE> 16
The following table provides the specified information concerning
unexercised options held as of December 27, 1998, by the persons named in the
Summary Compensation Table:
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES(1)
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED OPTIONS AT VALUE OF UNEXERCISED IN-THE-MONEY
12/27/98 OPTIONS AT 12/27/98(1),(2)
NAME EXERCISABLE(3) UNEXERCISABLE EXERCISABLE(3) UNEXERCISABLE
---- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Charles A. Lynch 11,347 53,568 $2,106.13 $0(4)
Everett F. Jefferson 60,499 184,501 $ 0(4) $0(4)
David E. Pertl 8,932 40,068 $ 0(4) $0(4)
Tim G. O'Shea 6,766 20,234 $ 0(4) $0(4)
Joan M. Miller 8,108 14,392 $ 0(4) $0(4)
Tina E. Freedman 8,305 16,195 $ 0(4) $0(4)
</TABLE>
- -------------------------------------
(1) Values are net of exercise price. None of the persons named in the Summary
Compensation Table exercised options during fiscal 1998.
(2) Based on the 1998 year-end market price per share of $1.5312 on December
24, 1998, the last trading date of the Company's fiscal year.
(3) Company stock option grants generally vest over five years and are
exercisable only to the extent vested. See "Option Grants in Last Fiscal
Year."
(4) None of such shares have value in excess of their exercise price, based on
the December 24, 1998 closing price of $1.5312.
COMPENSATION OF DIRECTORS
Each nonemployee director of the Company, except for the Chairman of
the Board, receives $10,000 cash compensation per year, $2,500 of which is
payable at the end of each full quarter of services. Each nonemployee director
of the Company also receives $750 cash compensation for each meeting of the
Board of Directors that he attends. Each nonemployee director who is a member of
a committee of the Board of Directors receives $500 cash compensation for
attendance at each committee meeting. Each nonemployee director serving as a
chairperson of a committee of the Board of Directors receives $1,000 cash
compensation for such service during a fiscal year. The directors of the Company
are reimbursed for expenses incurred in connection with attendance at Board of
Directors or committee meetings. During fiscal year 1998, Charles A. Lynch
received $56,336, the pro-rated portion of a $70,000 fee, for services provided
as Chairman of the Board and a consultant to the Company. During fiscal year
1999, Charles A. Lynch will receive $70,000 cash compensation for services
provided as Chairman of the Board, and a consultant to the Company.
During fiscal 1993, the Company adopted, and the stockholders approved,
an amendment to the Company's 1988 Stock Option Plan (the "Option Plan") to
permit initial and annual automatic stock option grants ("Director Options") to
certain nonemployee directors. Under the Option Plan, a director receives an
initial automatic grant of 10,000 shares (an amount equal to $100,000 divided by
the fair market value of a share of the Company's common stock on the date of
the option grant, rounded to the nearest whole share, up to a maximum of 10,000
shares) upon joining the Board of Directors. In December 1998, each of the four
eligible nonemployee
12
<PAGE> 17
directors received an annual option grant. Messrs. Curtis and Hays each received
an option to purchase 3,000 shares of the Company's common stock (an amount
equal to $50,000 divided by the fair market value of a share of the Company's
common stock on the date of the option grant, rounded to the nearest whole
share, up to a maximum of 3,000 shares), Messrs. Boppell and Krantz each
received a pro-rated option to purchase 2,261 shares of common stock based on
their service from April 1998 to the end of fiscal 1998 and Mr. Lynch received a
pro-rated option to purchase 2,491 shares of common stock based on his service
with the Company after his resignation as an executive officer from March 1998
to the end of fiscal 1998. In March 1998, Messrs. Krantz and Boppell, newly
elected nonemployee directors, received initial automatic grants of 10,000
shares and Mr. Lynch, as Chairman of the Board and consultant of the Company,
received an option grant for 50,000 shares of the Company's common stock under
the Option Plan.
CHANGE IN CONTROL AND SEVERANCE ARRANGEMENTS
On or about January 30, 1997 the Company provided Everett F. Jefferson
with an employment offer letter appointing him President and Chief Executive
Officer. The offer letter provided that if the Company terminates Mr.
Jefferson's employment without cause after the first two years of employment,
Mr. Jefferson would be entitled to severance pay equal to one year's salary at
the then-current rate. "Cause" is defined as (a) the willful and intentional
failure substantially to perform his duties (other than because of physical or
mental incapacity), (b) the commission of an illegal act in connection with his
re-employment, or (c) the commission of any act which falls outside the ordinary
course of his responsibilities and which exposes the Company to a significant
level of undue liability. A determination of "cause" requires the affirmative
vote of at least two-thirds of all members of the Board of Directors. In the
event of a change in control of the Company, Mr. Jefferson's options to purchase
the Company's Common Stock would become immediately vested and exercisable, and
if he were terminated by the acquiring company, he would also be entitled to the
above-described severance payments. Under the terms of the offer letter, "Change
in Control" means an ownership change in which the stockholders of the Company
before such ownership change do not retain, directly or indirectly, at least a
majority of the beneficial interest in the voting stock of the Company.
On or about January 24, 1997, the Company provided David Pertl with an
employment offer letter appointing him Vice President and Chief Financial
Officer. The offer letter provided that if the Company terminates Mr. Pertl's
employment without cause, Mr. Pertl would receive severance pay equal to one
year's salary at the then-current rate, which is currently $150,000. "Without
cause" is defined as a layoff, approved by the President and/or Chairman of the
Company, or a separation, voluntary or involuntary, as a result of a transfer of
control. "Transfer of control" is defined as an ownership change in which the
stockholders of the Company before such ownership change do not retain, directly
or indirectly, at least a majority of the beneficial interest in the voting
stock of the Company. In the event of a change in control of the Company, Mr.
Pertl's options to purchase the Company's Common Stock would become immediately
vested and exercisable, and if he were terminated by the acquiring company, he
would also be entitled to the above-described severance payments.
Beginning July 18, 1996, the Company has entered into Severance
Agreements with each of its vice presidents who is an executive officer (other
than such officers who have other severance arrangements) and Charles A. Lynch,
its Chairman of the Board. These severance agreements provide that in the event
of a layoff or a "Transfer of Control," the executive would be entitled to
receive severance pay of nine months' continued salary for the vice presidents
and 18 months' continued salary for Mr. Lynch. In March 1999, the Company
amended the form of Severance Agreement to provide that severance pay shall be
payable upon a termination without cause in addition to a layoff or a change of
control. Under the terms of these severance agreements, "Transfer of Control"
means an ownership change in which the stockholders of the Company before such
ownership change do not retain, directly or indirectly, at least a majority of
the beneficial interest in the voting stock of the Company. Mr. Lynch's
resignation as an executive officer in March of 1998 terminated his Severance
Agreement without triggering any of the severance provisions.
The Option Plan provides that, with respect to options other than
Director Options, in the event of certain mergers, sale of assets, sale or
exchange by the stockholders of their shares, or a liquidation or dissolution of
the Company, in which the stockholders do not retain at least a majority of the
voting stock of the Company or its successor (a "Transfer of Control"), the
Board of Directors may arrange with the surviving, continuing, successor, or
purchasing corporation, as the case may be (the "Acquiring Corporation"), to
either assume the Company's rights
13
<PAGE> 18
and obligations under stock options outstanding under the Option Plan (the
"Options"), or substitute options for the Acquiring Corporation's stock for such
outstanding Options. Any Options which are neither assumed or substituted for by
the Acquiring Corporation nor exercised as of the date of the Transfer of
Control will terminate effective as of the date of the Transfer of Control.
All shares subject to Director Options will become 100% vested and
exercisable in the event of a Transfer of Control. Any Director Option not
exercised as of the date of a Transfer of Control or assumed or substituted for
by the Acquiring Corporation will terminate as of such date.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors at the beginning
of fiscal 1998 consisted of three non-employee directors of the Company, Messrs.
Curtis, Casey and Hays. On May 21, 1998, the date of the 1998 Annual Meeting of
Stockholders, Mr. Casey did not stand for re-election to the Board of Directors
of the Company and was removed from the Compensation Committee, Mr. Curtis
stepped down as Chairman of the committee but continued to serve as a member,
and two newly-elected nonemployee directors of the Company, Messrs. Boppell and
Krantz joined the committee as a member and Chairman, respectively.
The Compensation Committee is responsible for setting and administering
the policies governing compensation of the executive officers of the Company,
including cash compensation and stock ownership programs. The goals of the
Company's compensation policy are to attract and retain executive officers who
contribute to the overall success of the Company, by offering compensation which
is competitive in the restaurant industry for companies of the Company's size,
to motivate executives to achieve the Company's business objectives, and to
reward them for their achievements. The Company generally uses salary, incentive
compensation, and stock options to meet these goals.
For fiscal year 1998, salaries were set by the Compensation Committee
for each executive officer, including the Chief Executive Officer, within the
range of salary for similar positions in other companies of similar size in
Company's industry, based on available published surveys, which do not
specifically identify companies, obtained by the Company's Human Resources
Department, as adjusted for the Company's projected revenue levels and regional
salary differences. Salaries were generally targeted at the median of salaries
among comparable companies, although the salaries are also adjusted based on
each officer's experience, tenure, and prior performance. The Chief Executive
Officer's salary for fiscal 1998 was within the fourth quartile of the
applicable range of salaries for chief executive officers in similar-sized
companies in the restaurant industry and within the first quartile of the
applicable range of salaries for chief executive officers in all surveyed
companies in the restaurant industry.
In preparing the performance graph for this Proxy Statement, the
Company has selected the University of Chicago Graduate School of Business
Center for Research in Security Prices Index for Nasdaq Retail Eating and
Drinking Places Stocks ("Nasdaq RE&D") as its peer group. The companies that the
Company included in its stratified salary surveys are not necessarily those
included in the indices, as such companies may not be competitive with the
Company for executive talent or may not be publicly traded on the Nasdaq
National Market.
The Company adopted a Management Incentive Plan (the "Plan") for fiscal
1998. The purpose of the Plan was to reward key corporate management positions
for positive accomplishment of the Company's objectives. Only corporate managers
and officers were eligible to participate in the Plan (collectively, the "Plan
Eligible Participants"). In order to participate in the Plan, the Plan Eligible
Participants had to (i) sign an objectives form to be kept on file in the
Company's Human Resources Department, (ii) meet with his or her respective
manager to set and rank objectives to be accomplished by the Plan Eligible
Participant and (iii) be employed with the Company on the last day of the Plan
for that fiscal year. In addition, the Company had to meet or exceed minimum
profitability for fiscal 1998. The Company adopted a separate Officer Incentive
Plan for fiscal 1999. The purpose of the new plan is to reward officers of the
Company for accomplishments in excess of the established plan. Only officers of
the Company at or above vice-president level are eligible to participate. The
participants will share twenty-five percent (25%) of the before-tax earnings
above plan based on a predetermined percentage for each officer.
14
<PAGE> 19
The Company believes that employee equity ownership provides executive
officers with significant additional motivation to maximize value for the
Company's stockholders. Because the stock options are granted at the prevailing
market price, the stock options will only have value if the Company's stock
price increases over the exercise price. Therefore, the Committee believes that
stock options will serve to align the interests of executive officers closely
with other stockholders because of the direct benefit executive officers receive
through improved stock performance.
In fiscal 1998, the Compensation Committee recommended to the Board of
Directors, and the Board of Directors approved, stock option grants to the
executive officers. Grants in fiscal 1998 were recommended on the basis of the
achievement of clearly defined objectives, and in each case the size of each
grant was based upon the relative seniority and responsibilities of each
executive officer, historical and expected contributions of each executive
officer to the Company, and previous stock option grants.
Options were granted with exercise prices equal to the fair market
value per share of Common Stock on the date of the grant, as determined by the
Board of Directors. In order to encourage executive officers to remain in the
Company's employ, stock option grants generally vest over five years. Options
granted in fiscal 1998 vest over a five-year period. All options granted by the
Company are exercisable only to the extent vested.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Effective January 1, 1994, the Internal Revenue Code (the "Code") was
amended to impose a limit under section 162(m) on the amount of compensation
which may be deducted by a publicly-held corporation with respect to the
corporation's chief executive officer and its four other most highly-compensated
officers, set at $1,000,000 per executive per year. Exemptions from this
deductibility limit are provided for certain types of "performance-based
compensation," including compensation related to stock option plans meeting
certain criteria. In order to permit compensation under the Company's 1988 Stock
Option Plan (the "Option Plan") to qualify for this exemption, the Board of
Directors concluded that it would be advisable to establish certain restrictions
on the granting of options under the Option Plan. These restrictions were
approved at the 1994 Annual Meeting of Stockholders. The Compensation Committee
does not believe that other components of the Company's compensation will be
likely in the aggregate to exceed $1,000,000 for any executive officer in any
year in the foreseeable future, and therefore concluded that no further action
with respect to qualifying its executive compensation for deductibility of such
compensation was necessary at this time. The policy of the Committee is to
qualify executive compensation for deductibility under the applicable tax laws
as practicable. In the future, the Committee will continue to evaluate the
advisability of qualifying the deductibility of such compensation.
COMPENSATION COMMITTEE
Barry E. Krantz
Charles L. Boppell
Carl R. Hays
Vern O. Curtis
15
<PAGE> 20
COMPARISON OF STOCKHOLDER RETURN
Set forth below is a line graph comparing the annual percentage change
in the cumulative total return on the Company's Common Stock with the cumulative
total return of The University of Chicago Graduate School of Business Center for
Research in Security Prices ("CRSP") Index for the Nasdaq Stock Market (U.S.
Companies) ("Nasdaq US") and the CRSP Index for Nasdaq Retail Eating and
Drinking Places Stocks ("Nasdaq RE&D") for the period commencing on December 26,
19931 and ending on December 27, 19982.
COMPARISON OF CUMULATIVE TOTAL RETURN FROM DECEMBER 23, 1993 THROUGH
DECEMBER 24, 1998(1)
FRESH CHOICE, INC., CRSP INDEX FOR NASDAQ STOCK MARKET (U.S. COMPANIES) AND CRSP
INDEX FOR NASDAQ RETAIL EATING AND DRINKING PLACES STOCKS
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
12/23/93 12/23/94 12/29/95 12/27/96 12/26/97 12/24/98
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Fresh Choice $ 100.0 $ 36.8 $ 23.6 $ 16.5 $ 12.3 $ 5.8
Nasdaq US $ 100.0 $ 98.9 $ 141.8 $ 174.6 $ 205.6 $ 296.9
Nasdaq RE&D $ 100.0 $ 72.9 $ 90.2 $ 87.6 $ 73.9 $ 66.3
</TABLE>
1 Assumes that $100.00 was invested on December 23, 1993 in the Company's
Common Stock at the closing sales price of $26.50 and at the closing sales
price for each index on that date and that all dividends were reinvested.
No dividends have been declared on the Company's Common Stock. Stockholder
returns over the indicated period should not be considered indicative of
future stockholder returns.
2 The last trading days in each of the fiscal years ended December 26, 1993,
December 25, 1994, December 31, 1995, December 29, 1996, December 28, 1997
and December 27, 1998 were December 23, 1993, December 23, 1994, December
29, 1995, December 27, 1996, December 26, 1997 and December 24, 1998,
respectively.
16
<PAGE> 21
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company selected, and by the affirmative
vote of a majority of the votes cast at the Annual Meeting of Stockholders held
on May 21, 1998, the stockholders approved Deloitte & Touche LLP as independent
accountants to audit the financial statements of the Company for the fiscal year
1998. No event described in paragraph (a)(1)(v) of Item 304 of Regulations S-K
has occurred within the Company's fiscal year ended December 27, 1998.
The Board of Directors of the Company has selected Deloitte & Touche
LLP as independent accountants to audit the financial statements of the Company
for the fiscal year ending December 26, 1999. A representative of Deloitte &
Touche LLP is expected to be present at the Annual Meeting with the opportunity
to make a statement if the representative desires to do so, and is expected to
be available to respond to appropriate questions.
The affirmative vote of a majority of the votes cast at the Annual
Meeting of Stockholders, at which a quorum representing a majority of all
outstanding shares of Common Stock of the Company is present and voting, either
in person or by proxy, is required for approval of this proposal. Abstentions
and broker non-votes will each be counted as present for purposes of determining
the presence of a quorum, but will not be counted as having been voted on the
proposal. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANT'S
FOR THE FISCAL YEAR ENDING DECEMBER 26, 1999.
STOCKHOLDER PROPOSALS TO BE PRESENTED
AT NEXT ANNUAL MEETING
Proposals of stockholders intended to be presented at the next Annual
Meeting of the Stockholders of the Company must be received by the Company at
its offices at 2901 Tasman Drive, Suite 109, Santa Clara, California 95054, no
later than December 9, 1999, and must satisfy the conditions established by the
Securities and Exchange Commission for stockholder proposals in order to be
included in the Company's proxy statement for that meeting.
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the only business which the Board
of Directors intends to present or knows that others will present at the meeting
is as set forth above. If any other matter or matters are properly brought
before the meeting, or any adjournment thereof, it is the intention of the
persons named in the accompanying form of proxy to vote the proxy on such
matters in accordance with their best judgment.
By Order of the Board of Directors
/s/ JOAN M. MILLER
JOAN M. MILLER
Secretary
April 8, 1999
17
<PAGE> 22
<TABLE>
<S> <C>
A VOTE FOR THE FOLLOWING PROPOSALS IS Please mark your
RECOMMENDED BY THE BOARD OF DIRECTORS: votes as indicated [X]
in this example.
Proposal 1. Election of Class I Directors listed below:
FOR WITHHOLD
all nominees AUTHORITY
listed (except [ ] to vote for [ ]
as marked to all nominees
the contrary) listed
(INSTRUCTION: To withhold authority to vote for any individual nominee, strike a line
through that nominee's name in the list below.)
Vern O. Curtis Charles L. Boppell
Proposal 2. To ratify the appointment of Deloitte & FOR AGAINST ABSTAIN
Touche LLP as the Company's Independent
accountants for the fiscal year ending [ ] [ ] [ ]
December 26, 1999
</TABLE>
Signature(s) ________________________________ Date: _______________________
Sign exactly as your name(s) appears on your stock certificate. If shares of
stock stand of record in the names of two or more persons or in the name of
husband and wife, whether as joint tenants or otherwise, both or all of such
persons should sign the above Proxy. If shares of stock are held of record by a
corporation, the Proxy should be executed by the President or Vice President and
the Secretary or Assistant Secretary, and the corporate seal should be affixed
thereto. Executors or administrators or other fiduciaries who execute the above
Proxy for a deceased stockholder should give their full title. Please date the
Proxy.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 23
FRESH CHOICE, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Everett F. Jefferson with full power of
substitution to represent the undersigned and to vote all the shares of the
stock of Fresh Choice, Inc. (the "Company") which the undersigned is entitled
to vote at the Annual Meeting of Stockholders of the Company to be held at the
Santa Clara Convention Center, 5001 Great America Parkway, Santa Clara,
California, on Thursday, May 20, 1999 at 2:00 p.m. Pacific Daylight Time, and
at any adjournment thereof (1) as hereinafter specified upon the proposals
listed below and as more particularly described in the Company's Proxy
Statement, receipt of which if hereby acknowledged, and (2) in their discretion
upon such other matters as may properly come before the meeting. The
undersigned hereby acknowledges receipt of the Company's 1998 Annual Report to
Stockholders.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO SIGN
AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT YOUR STOCK MAY BE
REPRESENTED AT THE MEETING.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED, IF NO SPECIFICATION
IS MADE, SUCH SHARES SHALL BE VOTED IN FAVOR OF PROPOSALS 1 AND 2.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
- --------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
