<PAGE>
HARRY'S FARMERS MARKET, INC.
1180 UPPER HEMBREE ROAD
ROSWELL, GEORGIA 30076
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 18, 1997
To the Holders of Common Stock of Harry's Farmers Market, Inc.:
Notice is hereby given that the Annual Meeting of Shareholders (the
"Meeting") of Harry's Farmers Market, Inc., a Georgia corporation (the
"Company"), will be held in the Roswell Municipal Auditorium located at 950
Forrest Street, Roswell, Georgia 30075, on Wednesday, June 18, 1997 at 10:00
a.m., local time, for the following purposes:
(1) To elect five directors to serve for a term of one year and until their
successors have been elected and qualified;
(2) To conduct such other business as may properly come before the Meeting or
any adjournment thereof.
Only shareholders of record as of the close of business on April 25, 1997
will be entitled to notice of and to vote at the Meeting or any adjournment
thereof.
By Order of the Board of Directors
John L. Latham
Secretary
Roswell, Georgia
May 16, 1997
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN
PERSON, YOU ARE URGED TO COMPLETE, SIGN, DATE AND PROMPTLY MAIL THE ENCLOSED
PROXY IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE. IF YOU ATTEND THE MEETING, YOU
MAY REVOKE THE PROXY AND VOTE YOUR SHARES IN PERSON.
<PAGE>
HARRY'S FARMERS MARKET, INC.
ANNUAL MEETING OF SHAREHOLDERS
JUNE 18, 1997
PROXY STATEMENT
This Proxy Statement and form of proxy, which are first being mailed to
shareholders on or about May 16, 1997, are furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of Harry's Farmers
Market, Inc., a Georgia corporation (the "Company"), for use at the Annual
Meeting of Shareholders of the Company to be held in the Roswell Municipal
Auditorium located at 950 Forrest Street, Roswell, Georgia 30075, on Wednesday,
June 18, 1997 at 10:00 a.m., local time, and at any or all adjournments thereof
(the "Meeting"). The address of the principal executive offices and the mailing
address of the Company is 1180 Upper Hembree Road, Roswell, Georgia 30076 and
the Company's telephone number is (770) 667-8878.
Only shareholders of record at the close of business on April 25, 1997 (the
"Record Date") will be entitled to notice of and to vote at the Meeting and any
adjournments thereof. As of the Record Date, the Company had outstanding
4,118,056 shares of Class A Common Stock, 2,050,701 shares of Class B Common
Stock and 1,222,221 shares of Series AA Preferred Stock.
The presence, in person or by proxy, of the holders of a majority of the
votes entitled to be cast on a matter at the Meeting will constitute a quorum to
conduct business at the Meeting. Each share of Class A Common Stock issued and
outstanding on the Record Date is entitled to one vote, while each share of
Class B Common Stock issued and outstanding on the Record Date is entitled to
ten (10) votes. Each share of the Series AA Preferred Stock issued and
outstanding on the Record Date is entitled to such number of votes per share on
each matter as shall equal the number of shares of Class A Common Stock
(including fractions of a share) into which each share of Series AA Preferred
Stock is convertible as of the Record Date. As of the Record Date, each share
of Series AA Preferred Stock is convertible into approximately 1.39 shares of
Class A Common Stock.
Proxies which are returned properly executed and not revoked will be voted
in accordance with the shareholder's directions specified thereon. Where no
direction is specified, proxies will be voted FOR the election of the nominees
for director named herein, and on any other matters presented for a vote, in
accordance with the judgment of the persons acting under the proxies.
Abstentions and broker non-votes (which occur when shares held by brokers or
nominees for beneficial owners are voted on some matters but not others) will
not be counted as votes either in favor of or against the matter with respect to
which the abstention or broker non-vote relates however, abstentions and broker
non-votes will be counted as shares present for purposes of determining the
presence of a quorum.
Any proxy given pursuant to this solicitation may be revoked by any
shareholder who attends the Meeting and gives oral notice of his election to
vote in person, without compliance with any other formalities. In addition, any
proxy given pursuant to this solicitation may be revoked prior to the Meeting by
delivering to the Secretary of the Company an instrument revoking it or a duly
executed proxy for the same shares bearing a later date.
The cost of this solicitation will be borne by the Company. In addition to
the mails, proxies may be solicited by officers and regular employees of the
Company, without remuneration, by personal interviews, telephone and facsimile.
It is anticipated that banks, brokerage houses and other custodians, nominees
and fiduciaries will forward soliciting material to beneficial owners of stock
entitled to vote at the Meeting, and such persons will be reimbursed for the
out-of-pocket expenses incurred by them in this connection.
<PAGE>
AGENDA ITEM ONE
ELECTION OF DIRECTORS
The Board of Directors of the Company, pursuant to the Company's Bylaws,
has set the number of directors to serve for the next year at five, all of whom
are to be elected at the Meeting. Proxies received will be voted for all the
nominees named below, unless authority to do so is withheld. In the event any
nominee is unable or declines to serve as a director at the time of the Meeting,
the persons named in the proxy will have discretionary authority to vote the
proxies for the election of such person or persons as may be nominated in
substitution by the present Board of Directors. Management knows of no current
circumstances which would render any nominee named herein unable to accept
nomination or to serve if elected.
Members of the Board of Directors are elected annually to serve until the
next annual meeting of shareholders and until their successors are elected and
qualified. Directors will be elected by a plurality of the votes of the shares
present or represented by proxy at the Meeting and entitled to vote on the
election of directors.
The following persons have been nominated for election to the Board of
Directors:
Harry A. Blazer, age 46, is the founder of the Company and served as sole
General Partner of the predecessor to the Company and as Chief Executive Officer
from the Company's inception in 1987. Upon the Company's incorporation in 1993,
Mr. Blazer was named a director and President and Chief Executive Officer and
was elected to the additional office of Chairman in June 1994. From 1979 to
1987, Mr. Blazer was employed at DeKalb Farmers Market in Atlanta, Georgia and
served as its General Manager from 1983 until 1987 when he left to form the
Company.
Terry L. Ransom, age 50, has extensive knowledge of information systems
integration and management. Mr. Ransom has served as Executive Vice President
and Chief Administrative Officer of the Company since September 1995 and was
first elected to the Board of Directors of the Company in September 1995. Prior
thereto, Mr. Ransom served as Chief Information Officer and Vice President of
Information Systems from June 1995. From 1987 until June 1995, Mr. Ransom was
employed as Director of Hospital Information Services for the Scottish Rite
Children's Medical Center in Atlanta, Georgia. In addition to extensive
information systems and management consulting experience, Mr. Ransom has had
more than ten years experience in various positions with AT&T including nearly
three years experience as national manager for implementing and supporting
systems projects for AT&T's Overseas Accounting Department. He also has
experience launching new business ventures in a variety of industries.
Robert C. Glustrom, age 45, has been a practicing attorney since 1976. Mr.
Glustrom has extensive management experience: in 1985 he became President of a
Hyatt Development Corporation affiliated company, founding and opening an
international retail, water sports and boating company. In 1987, Glustrom
helped organize and headed development of the Holmes Hotel Company for Colgate
Holmes, the past president of the Ritz-Carlton Hotel Company. In addition, Mr.
Glustrom serves as President of Broadstreet, Inc., a bank holding company, and
serves as Co-Chairman of AmTrade International Banks based in Atlanta, Georgia
and Miami, Florida. Mr. Glustrom was first elected to the Board of Directors of
the Company in September 1995.
John D. Branch, age 41, has broad business experience in strategic and
financial management, and has served as a Senior Vice President and Chief
Financial Officer at Earl Scheib, Inc. since April 1996. Prior to joining Earl
Scheib, Inc., Mr. Branch was Senior Vice President and Chief Financial Officer
of Mac Frugals, a large national retailer, where he was employed from August
1995 until April 1996. Preceding his tenure at Mac Frugals from September 1990
until January 1995, he was a Senior Vice President of Finance at Thrifty Payless
Corporation, one of the largest retailers in the United States. Mr. Branch
previously had ten years experience with Arthur Andersen & Co. and four years
experience
-2-
<PAGE>
with The May Department Stores. Mr. Branch was first elected to the Board of
Directors of the Company in September 1995.
William J. Horvath, age 51, has over twenty-two years experience as a
corporate real estate executive. Since 1994, Mr. Horvath has been Executive
Director of Chain Links, a cooperative group of 28 real estate companies that
represent the real estate needs of retail and restaurant companies. From 1992
until 1994, Mr. Horvath served as Vice President of Solo Serve and from 1990-
1992, he was a general partner and Executive Vice President of EZ's Restaurants,
a start up company. Prior thereto, from 1976 until 1990, Mr. Horvath was
employed by the H. E. Butt Grocery Company where he was Senior Vice President
and served on the Board of Directors.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS
VOTE FOR EACH OF THE NOMINEES LISTED ABOVE.
Additional Executive Officers of the Company:
Harold C. Weissman, age 43, has served as the Company's Chief Financial
Officer since June, 1996 and as Treasurer since 1995. From 1990 until 1991, Mr.
Weissman was employed by the Company, as Director of Training and from 1991
until 1995 Mr. Weissman served as Director of Accounting. Before coming to the
Company in 1990, Mr. Weissman acquired an extensive background in bank auditing
while employed at Grant Thornton, L.L.P. from 1976 until 1978 and thereafter
acquired ten years experience as a controller for various manufacturing, retail
and wholesale companies.
John L. Latham, age 42, was appointed Secretary and General Counsel for the
Company in September 1995. From 1992 until 1996, Mr. Latham was a partner in
the firm of Nelson, Mullins, Riley & Scarborough, L.L.P. In August 1996, Mr.
Latham joined as a partner to the law firm of Alston & Bird LLP, which currently
serves as general counsel for the Company.
Meetings of the Board of Directors and Committee
During the fiscal year ended January 29, 1997, the Board of Directors held
a total of six meetings. Each director attended all of the Meetings held by the
Board of Directors and by committees of the Board on which such director served
during the past fiscal year.
The Company's Board of Directors has the following standing committees:
(a) The Executive Compensation Committee is currently comprised of Harry A.
Blazer and Robert C. Glustrom. The function of this committee is to establish
salaries, bonuses and other compensation for the Company's officers. The
Executive Compensation Committee did not meet during the last fiscal year, but
had informal discussions from time to time and acted by unanimous written
consent on one occasion.
(b) The Audit Committee is currently comprised of Mr. Branch. The function
of this committee is to review and make recommendations to the Board of
Directors on the Company's audit procedures and independent auditor's report to
management, to recommend to the Board of Directors the appointment of
independent auditors for the Company and to establish and monitor the Company's
financial policies and control procedures. The Audit Committee met two times
during the last fiscal year, and had informal discussions with management and
the Company's auditors from time to time.
(c) The Stock Option Committee is currently comprised of Messrs. Blazer
and Glustrom. The function of this committee is to administer the Company's
1993 Management Incentive Plan and 1996 Employee Stock Purchase Plan. The Stock
Option Committee did not meet during the last fiscal year, but had informal
discussions from time to time.
-3-
<PAGE>
The Company does not have a Directors' Nominating Committee, that function
being reserved to the entire Board of Directors.
Directors' Compensation
The Company pays each of its directors a quarterly retainer of $2,500, as
well as reimbursing its directors for any travel and related expenses incurred
in connection with their physical attendance at each meeting of the Company's
Board of Directors.
The Company's 1996 Director Stock Option Plan (the "Director Plan")
provides that each director who is not a holder of more than 5% of the shares of
stock of the Company ("Eligible Directors") will be granted thereunder five-year
options to purchase 10,000 shares of Common Stock upon (i) his initial election
as a director of the Company and (ii) the day immediately following the day of
each Meeting of Shareholders of the Company, provided that such director shall
not have been granted an option under the aforementioned clause (i) during the
same calendar year as the year of such Meeting of Shareholders. The exercise
price of such options shall be equal to the fair market value of the Common
Stock on the date of grant and such options vest in one-third increments on each
of the first three anniversaries of the date of grant. In addition to the
aforementioned automatic grants, upon the initial adoption of the Director Plan,
each Eligible Director was granted an option to purchase 30,000 shares of the
Company's Common Stock, which options were vested as to 20,000 of such shares on
the date of grant and the remaining 10,000 shares are to vest on the day prior
to the Meeting.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, certain officers, and persons who own more than 10% of the
outstanding Class A Common Stock of the Company, to file with the Securities and
Exchange Commission reports of changes in ownership of the common stock of the
Company held by such persons. Such officers, directors and 10% shareholders are
also required to furnish the Company with copies of all forms they file under
this regulation. To the Company's knowledge, based solely on a review of the
copies of such reports furnished to the Company and representations that no
other reports were required, during the fiscal year ended January 29, 1997, the
Company's officers, directors and 10% shareholders complied with all Section
16(a) filing requirements applicable to them.
-4-
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
Based solely on information made available to the Company, the following
table sets forth certain information as of April 25, 1997 with respect to the
beneficial ownership of the Company's equity securities by (i) all persons known
to the Company to beneficially own more than five percent (5%) of any class of
voting securities of the Company, (ii) each executive officer of the Company
named in the Summary Compensation table on page 5 of this proxy statement, (iii)
each director and nominee for director of the Company, and (iv) all directors
and executive officers of the Company as a group. Unless otherwise indicated,
the named person has sole voting and investment power with respect to all
shares.
Harry A. Blazer is the only holder of Class B Common Stock of the Company.
Such shares are entitled to ten votes per share. If at any time any shares of
Class B Common Stock are beneficially owned by any person other than Mr. Blazer
(or entities controlled by him) or upon his death, such shares automatically
convert to an equal number of shares of Class A Common Stock.
As described above, each share of Series AA Preferred Stock is currently
convertible into approximately 1.39 shares of Class A Common Stock at any time,
until the mandatory redemption date of December 1, 2001.
<TABLE>
<CAPTION>
Shares Beneficially Owned Percent of Pertcent of Total
-------------------------
Beneficial Owner Class Shares Class Voting Power
--------------- ---------------------------------------------- ------------ -----------------
<S> <C> <C> <C> <C>
Harry A. Blazer Class A Common Stock 31,000/1/ *
Class B Common Stock 2,050,701/2/ 100.00%
---------
Total 2,081,701 78.04%
Robert Fleming Series AA Preferred Stock 883,666 72.30
Nominees Ltd./3/ Class A Common Stock 392,421/4/ 8.80
-------
Total 1,276,087 6.08
AXA Equity & Law Series AA Preferred Stock 166,667 13.64 *
Life Assurance Society/5/
Orbis Pension Trustees Ltd./6/ Series AA Preferred Stock 111,111 9.09 *
Progressive Food Concepts, Inc./7/ Class A Common Stock 2,000,000 32.69 7.06
Terry L. Ransom Class A Common Stock 34,500/8/ * *
Robert C. Glustrom Class A Common Stock 100,000/9/ * *
John D. Branch Class A Common Stock 40,000/10/ * *
William J. Horvath Class A Common Stock 6,000 * *
All directors and
executive officers Class A Common Stock 207,756/11/ 4.86
as a group Class B Common Stock 2,050,701 100.00%
-------- ---------
(5 persons) Total 2,258,457/11/ 78.25%
- ---------------------
</TABLE>
*less than 1%
-5-
<PAGE>
1 Shares owned by Mr. Blazer's wife, with respect to which Mr. Blazer
disclaims beneficial ownership.
2 Includes 2,049,400 shares owned by Harry Blazer, Inc., an entity of which
Mr. Blazer is sole director and sole stockholder. Mr. Blazer's address is
1180 Upper Hembree Road, Roswell, Georgia 30076
3 Based on information the Company obtained from Robert Fleming Nominees
Ltd.'s Schedule 13-G filed on February 14, 1997. Includes shares
registered in the name of Robert Fleming Nominees Ltd. on behalf and for
the benefit of investment funds managed by Robert Fleming, Inc. or one of
its affiliates. The address of Robert Fleming Inc., is 1285 Avenue of the
Americas, 16th Floor, New York, New York 10019
4 Includes presently exercisable warrants to purchase 300,000 shares of Class
A Common Stock.
5 The address for AXA Equity & Law Life Assurance Society is 20 Lincoln's
Ninn Fields, London, WC2A 3ES, England.
6 The address for Orbis Pension Trustees Ltd. is One Connaught Place, London,
W2 2DY, England.
7 Based on information the Company obtained from Progressive Food Concepts,
Inc.'s Schedule 13-D filed on February 10, 1997. Represents presently
exercisable warrants to purchase 2,000,000 shares of Class A Common Stock.
The address of Progressive Food Concepts, Inc. is 14103 Denver West
Parkway, Golden, Colorado 80401.
8 Represents shares subject to presently exercisable stock options.
9 Includes 80,000 shares subject to presently exercisable stock options.
10 Represents shares subject to presently exercisable stock options.
11 Includes 146,750 shares subject to presently exercisable stock options.
There are no arrangements known to the Company, the operation of which may,
at a subsequent date, result in a change in control of the Company.
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning
compensation paid or accrued by the Company, for services rendered in all
capacities during the fiscal years ended February 1, 1995 ("fiscal 1995"),
January 31, 1996 ("fiscal 1996") and January 29, 1997 ("fiscal 1997"), for the
Company's Chief Executive Officer and the other most highly compensated
executive officer of the Company whose total annual salary and bonus for fiscal
1997 exceeded $100,000 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
------------
Annual Compensation Securities
---------------------
Name and Underlying
Principal Position Fiscal Year Salary Bonus Options/1/
- ------------------------------ ----------- -------- ----- ------------
<S> <C> <C> <C> <C>
Harry A. Blazer 1997 $200,000 -- --
Chairman, President, Chief 1996 100,000 -- --
Executive Officer and a 1995 100,000 -- --
Director
Terry L. Ransom/2/ 1997 102,466 -- 30,000
Vice President and a 1996 69,918 -- 9,000
Director
</TABLE>
- ---------------------
/1/ See "Option Grants in Last Fiscal Year" table for additional information
regarding options granted in fiscal 1996 to the Named Executive Officers
and "Director Compensation".
/2/ Mr. Ransom first became employed by the Company in June 1995.
-6-
<PAGE>
The following table presents information regarding grants to the Named Executive
Officers of options to purchase shares of the Company's Class A Common Stock
during fiscal 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
------------------------------------------------ Value at Assumed
Number of Percent of Total Annual Rates of
Securities Options Stock Price
Underlying Granted to Exercise Appreciation for
Options Employees Price Expiration Option Term /1/
-------------------
Name Granted/2/ in Fiscal Year Per Share Date 5% 10%
- ----------------- ---------- ---------------- --------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Terry L. Ransom 30,000 9.2% $3.00 3/4/2001 $24,865 $54,946
</TABLE>
1 The dollar amounts under these columns represent the potential realizable
value of each option assuming that the market price of the Class A Common
Stock appreciates in value from the date of grant at the 5% and 10% annual
rates prescribed by regulation and therefore are not intended to forecast
possible future appreciation, if any, of the price of the Class A Common
Stock.
2 Total number of shares underlying options granted to employees for fiscal
1997 was 325,575. The exercise price of the options granted is at least
equal to the fair market value of the Company's Class A Common Stock on the
date of the grant.
The following table presents information regarding the value of options
outstanding at January 29, 1997 held by the Named Executive Officers. There
were no options exercised by the Named Executive Officers in fiscal 1997.
FISCAL 1997 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
Fiscal Year-End Fiscal Year-End/1/
------------------------------- ------------------------
Not Not
Name Exercisable Exercisable Exercisable Exercisable
- ----------------- --------------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
Terry L. Ransom 34,500 4,500 $18,750 - 0 -
</TABLE>
1 Based on a closing bid price of $3.625 per share of Class A Common Stock on
January 29, 1997 as reported by the Nasdaq National Market.
Compensation Committee Interlocks and Insider Participation
As noted above, the current members of the Executive Compensation Committee
are Harry A. Blazer and Robert C. Glustrom. None of these individuals served as
a member of the compensation committee or other board committees performing
similar functions of any other entity during fiscal 1997.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this proxy statement, in whole or in part, the following Report of the
Executive Compensation Committee on Executive Compensation and the Shareholder
Return Performance Graph shall not be incorporated by reference into any such
filings.
-7-
<PAGE>
REPORT OF EXECUTIVE COMPENSATION
COMMITTEE ON EXECUTIVE COMPENSATION
In accordance with the proxy statement rules of the Securities and Exchange
Commission, the Executive Compensation Committee of the Board of Directors has
furnished the following report on the Company's executive compensation policy
for the Chief Executive Officer and the executive officers of the Company for
the fiscal year ended January 29, 1997:
The Company's policy with regard to executive compensation has been
designed to:
. Adequately and fairly compensate executive officers in relation to
their responsibilities, capabilities and contributions to the Company
and to do so in a manner that is commensurate with compensation paid
by companies of comparable size within the Company's industry;
. Reward executive officers for the achievement of short-term operating
goals and for the enhancement of the long-term shareholder value of
the Company; and
. Align the interests of executive officers with those of the Company's
shareholders with respect to short-term operating results and long-
term shareholder value.
The primary components of compensation paid by the Company to executive
officers, and the relationship of such components to the Company's performance,
are discussed below.
Base Salary
Each year, the Executive Compensation Committee reviews and approves the
base salaries to be paid by the Company during the following year to members of
senior management, except for that of Harry A. Blazer, the Company's Chief
Executive Officer whose compensation is determined by the Board of Directors
with Mr. Blazer abstaining, annual adjustments to base salaries are determined
based on the individual's performance and contributions to the Company's
success.
During fiscal 1995, at the request of Harry A. Blazer, the Company's Chief
Executive Officer, the Executive Compensation Committee agreed to reduce Mr.
Blazer's salary to $100,000. The decision to maintain Mr. Blazer's compensation
at $100,000 during fiscal 1996 was based on the rationale that he not receive
compensation that might be perceived as excessive by the Company's shareholders
in light of the disappointing performance of the Company during recent years.
In support of its decision relating to Mr. Blazer's salary, the Committee
acknowledged that Mr. Blazer remained amply incentivized to improve the
Company's performance by virtue of his position as the controlling stockholder
of the Company. The Committee believes that Mr. Blazer's fiscal 1996
compensation was significantly less than the average salary for president/chief
executive officers in publicly traded retail trade companies with $150 million
in annual revenue./1/ The Board of Directors voted (with Mr. Blazer abstaining)
to increase Mr. Blazer's salary for fiscal 1997 to $200,000.
All of the other key executives' salaries were also significantly less than
the average market value paid to executives with similar responsibilities in the
comparison group.
- ----------------------------------
/1/ The comparison group used for purposes of this report includes public
companies in the retail trade business with annual revenue of $150 million, as
identified in Executive Compensation Survey: Top Management Regression Analysis
------------------------------------------------------------------
Report, by Wyatt Data Services (1994-95 Edition).
- ------
-8-
<PAGE>
Stock Options
The Company has, from the date of its initial public offering, utilized
stock option grants as an incentive for executive performance./2/ Stock option
grants provide executives with the opportunity to buy and maintain an equity
interest in the Company and to share in the rewards of stock appreciation.
Stock option grants have value only if the stock appreciates in value from the
date the options are granted. Executives are encouraged to hold shares upon the
exercise of the options, linking their interests to those of other shareholders.
Bonuses
In fiscal 1997, the Company did not utilize the payment of bonuses as part
of its compensation to executive officers.
Summary
The Committee remains committed to the implementation of compensation
practices that are increasingly linked to the performance of the Company. It
believes that the current compensation policies and practices are appropriate
considering the Company's disappointing performance during the last fiscal year.
As the Company's performance improves, it is anticipated that performance-based
compensation practices will be implemented.
Harry A. Blazer
Robert C. Glustrom
- ------------------------
/2/ Mr. Blazer, as a member of the Stock Option Committee, is not eligible to
receive stock option grants pursuant to the Company's 1993 Management Incentive
Stock Option Plan.
-9-
<PAGE>
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following line graph compares the yearly percentage change in the
cumulative total shareholder return on the Company's Class A Common Stock
against the cumulative total return of the Nasdaq Stock Market Index and a
composite index for corporations in the same industry as the Company (i.e.,
classified under the same Standard Industrial Classification Code ("SIC"), 541--
Grocery Stores) (the "Industry Index") for the period commencing May 20, 1993
(the date the Company's Class A Common Stock commenced trading on the Nasdaq
National Market) and ending January 29, 1997. Information with regard to SIC
classifications in general can be found in the Standard Industrial
Classification Manual published by the Executive Office of the President, Office
of Management and Budget. The graph assumes that the value of the investment in
the Company's Class A Common Stock and each index was $100 on May 20, 1993. The
change in cumulative total return is measured by dividing (i) the sum of (a) the
cumulative amount of dividends for the period, assuming dividend reinvestment,
and (b) the change in share price between the beginning and end of the period,
by (ii) the share price at the beginning of the period. The Company has not
paid any dividends during the period covered by the graph.
<TABLE>
<CAPTION>
Total Returns for Years Ending
------------------------------
5/20/93 1/31/94 1/31/95 1/31/96 1/31/97
<S> <C> <C> <C> <C> <C>
Harry's Farmers Market $ 100.00 $ 88.46 $ 51.28 $ 14.74 $ 21.35
Industry Index $ 100.00 $ 104.57 $ 107.64 $ 132.03 $ 189.23
NASDAQ Market Index $ 100.00 $ 112.26 $ 106.09 $ 148.55 $ 221.56
</TABLE>
-10-
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Grant Thornton LLP, the Company's independent auditors since 1990,
have been appointed by the Board of Directors as the Company's independent
auditors for fiscal 1998. A representative of Grant Thornton LLP is expected to
be present at the Meeting, to be available to answer appropriate questions and
to make a statement if desired.
SHAREHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING OF SHAREHOLDERS
Shareholder proposals to be presented at the 1998 Annual Meeting of
Shareholders of the Company must be received at the Company executive offices at
1180 Upper Hembree Road, Roswell, Georgia 30076, addressed to the attention of
the Secretary, by January 16, 1998 in order to be included in the proxy
statement and form of proxy relating to such meeting. Any such proposals must
comply in all respects with the rules and regulations of the Securities and
Exchange Commission.
ANNUAL REPORT
The Company's 1997 Annual Report is concurrently being mailed to
shareholders. The Annual Report contains consolidated financial statements of
the Company and the report thereon of Grant Thornton LLP, independent public
accountants.
By Order of the Board of Directors
John L. Latham
Secretary
May 16, 1997
-11-
<PAGE>
PROXY
HARRY'S FARMERS MARKET, INC.
1180 Upper Hembree Road
Roswell, Georgia 30076
The undersigned stockholder of Harry's Farmers Market Inc. (the "Company"),
hereby constitutes and appoints Harry A. Blazer and John L. Latham, or either
one of them, each with full power of substitution, to vote the number of shares
of Class A Common Stock which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Stockholders to be held at the
Roswell Municipal Auditorium, 950 Forrest Street, Roswell, Georgia 30075 on
Wednesday, June 18, 1997, at 10:00 A.M., local time, or at any adjournments
thereof (the "Annual Meeting"), upon the proposal (the "Proposal") described in
the Notice to the Holders of Annual Meeting of Shareholders and Proxy Statement,
the receipt of which is hereby acknowledged, in the manner specified below. The
proxies, in their discretion, are further authorized to vote for the election of
a person to the Board of Directors if any nominee named herein becomes unable to
serve or will not serve and are further authorized to vote on other matters
which may properly come before the Annual Meeting and any adjournments thereof.
The Board of Directors recommends a vote FOR the Proposal.
Election of Directors. On the Proposal to elect the following directors to
serve until the 1998 Annual Meeting of Shareholders of the Company and until
their successors are elected and qualified:
Harry A. Blazer
John D. Branch
Robert C. Glustrom
William J. Horvath
Terry L. Ransom
For [ ] Withhold Authority [ ]
To withhold authority for any individual nominee(s), write the name of the
nominee(s) in the space provided:
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This Proxy, when properly executed, will be voted in the manner directed by
the undersigned stockholder. If no direction is made, this Proxy will be voted
FOR the Proposal and with discretionary authority on all other matters that may
properly come before the Annual Meeting or any adjournments thereof.
Please sign exactly as your name appears on your stock certificate and date.
Where shares are held jointly, each stockholder should sign. When signing as
executor, administrator, trustee, or guardian, please give full title as such.
If a corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in full partnership name by
authorized person.
Shares Held:
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Signature of Shareholder
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Signature of Shareholder (if held jointly)
Dated: , 1997
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Month Day
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF HARRY'S FARMERS
MARKET, INC. AND MAY BE REVOKED BY THE STOCKHOLDER PRIOR TO ITS EXERCISE.
