<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
(Rule 14a-101)
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
HARRY'S FARMERS MARKET, 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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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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Notes:
<PAGE>
HARRY'S FARMERS MARKET, INC.
1180 UPPER HEMBREE ROAD
ROSWELL, GEORGIA 30076
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 17, 1998
To the Shareholders 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 17, 1998 at 10:00
a.m., local time, for the following purposes:
(1) To elect four 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 27, 1998
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 14, 1998
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 17, 1998
PROXY STATEMENT
This Proxy Statement and form of proxy, which are first being mailed to
shareholders on or about May 14, 1998, 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 17, 1998 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 27, 1998 (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
4,132,257 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 any 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 was 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 four, 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 47, 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.
ROBERT C. GLUSTROM, age 46, 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; and, in 1987, Mr.
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 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 42, 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 MacFrugals, a large national retailer, where he was employed from August 1995
until April 1996. Preceding his tenure at MacFrugals 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 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 52, 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, an entity which
petitioned for protection under Chapter 11 of the United States Bankruptcy Code
in 1994, 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
2
<PAGE>
was Senior Vice President and served on the Board of Directors. Mr. Horvath was
first elected to the Board of Directors of the Company in June 1997.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS
VOTE FOR EACH OF THE NOMINEES LISTED ABOVE.
ADDITIONAL OFFICERS OF THE COMPANY:
HAROLD C. WEISSMAN, age 44, 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 LLP from 1976 until 1978 and thereafter
acquired ten years experience as a controller for various manufacturing, retail
and wholesale companies.
JOHN L. LATHAM, age 43, was appointed Secretary and General Counsel for the
Company in September 1995. From 1992 until 1996, Mr. Latham was a partner in
the law 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 28, 1998, the Board of Directors held
a total of four meetings and acted by unanimous written consent on five
occasions. 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 Messrs.
Blazer, Glustrom and Horvath. 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 Messrs. Branch and
Horvath. 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 three 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 and acted by unanimous written consent on four
occasions.
The Company does not have a Directors' Nominating Committee, that function
being reserved to the entire Board of Directors.
3
<PAGE>
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 vested on the day prior to the
1997 Annual Meeting of Shareholders.
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 beneficially 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 securities 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 28, 1998, the
Company's officers, directors and 10% shareholders complied with all Section
16(a) filing requirements applicable to them, except for Messrs. Branch and
Weissman who were inadvertently late in reporting one transaction each.
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 1, 1998 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 previously described, 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 PERCENT OF TOTAL
BENEFICIAL OWNER CLASS SHARES CLASS VOTING POWER
- --------------------------- -------------------------- -------------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Harry A. Blazer Class A Common Stock 38,000 /1/ *
Class B Common Stock 2,050,701 /2/ 100.00%
---------
Total 2,088,701 78.01%
Robert Fleming Series AA Preferred Stock 888,888 72.73
Nominees Ltd./3/ Class A Common Stock 394,444 /4/ 8.81
Total 5.92
AXA Equity & Law Series AA Preferred Stock 166,667 13.64
Life Assurance
Society/5/ Class A Common Stock 64,583 /6/ 1.54
Total 1.12
Orbis Pension Trustees Series AA Preferred Stock 111,111 9.09
Ltd./7/ Class A Common Stock 43,056 /8/ 1.03
Total *
Progressive Food Concepts, Class A Common Stock 2,000,000 /9/ 32.61 7.06
Inc./9/
Dimensional Fund Advisors Class A Common Stock 206,800 5.01 *
Inc./10/
Terry L. Ransom Class A Common Stock 30,000 /11/ * *
Robert C. Glustrom Class A Common Stock 123,333 /12/ 2.93 *
John D. Branch Class A Common Stock 40,000 /13/ * *
William J. Horvath Class A Common Stock 22,793 * *
All directors and
executive officers Class A Common Stock 253,799 /14/ 5.92
as a group (6 persons) Class B Common Stock 2,050,701 100.00%
---------
Total 2,304,500 78.37%
- ---------------------
*less than 1%
</TABLE>
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 23, 1998. 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 320 Park Avenue, New York, New York
10022
4 Includes (i) presently exercisable warrants to purchase 300,000 shares of
Class A Common Stock and (ii) warrants, exercisable upon a change in control
of the Company, to purchase 44,444 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 Includes (i) presently exercisable warrants to purchase 56,250 shares of
Class A Common Stock and (ii) warrants, exercisable upon a change in control
of the Company, to purchase 8,333 shares of Class A Common Stock.
7 The address for Orbis Pension Trustees Ltd. is One Connaught Place, London,
W2 2DY, England.
8 Includes (i) presently exercisable warrants to purchase 37,500 shares of
Class A Common Stock and (ii) warrants, exercisable upon a change in control
of the Company, to purchase 5,556 shares of Class A Common Stock.
9 Based on information the Company obtained from Progressive Food Concepts,
Inc.'s Amendment to Schedule 13-D filed on November 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.
10 Based on information the Company obtained from Dimensional Fund Advisors Inc.
("Dimensional") Schedule 13-G filed on February 10, 1998. Dimensional, a
registered investment advisor, is deemed to have beneficial ownership of
206,800 shares of the Company's Class A Common Stock, all of which are held
in portfolios of DFA Investment Dimensions Group Inc., a registered open-end
investment company, or in series of DFA Investment Trust Company, a Delaware
business trust, or the DFA Group Trust and DFA Participation Group Trust,
investment vehicles for qualified employee benefit plans, to all of which
Dimensional serves as investment manager. Dimensional disclaims beneficial
ownership of all such shares.
11 Represents shares subject to presently exercisable stock options.
12 Includes 83,333 shares subject to presently exercisable stock options.
13 Represents shares subject to presently exercisable stock options.
14 Includes 153,000 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 January 31, 1996 ("fiscal 1996"),
January 29, 1997 ("fiscal 1997") and January 28, 1998 ("fiscal 1998"), for the
Company's Chief Executive Officer. No other executive officer of the Company
received total annual salary and bonus for fiscal 1998 exceeding $100,000.
6
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
-------------------------------
<S> <C> <C> <C>
Name and
Principal Position FISCAL YEAR SALARY BONUS
- ----------------------------- ----------- -------- -------
HARRY A. BLAZER
Chairman, President, Chief 1998 $250,000 $50,000*
Executive Officer and a 1997 200,000 --
Director 1996 100,000 --
- ---------------------
</TABLE>
*Mr. Blazer has elected to defer his 1998 bonus until the 1999 fiscal year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Executive Compensation Committee are Harry A.
Blazer, Robert C. Glustrom and William J. Horvath. Mr. Blazer serves as
President and Chief Executive Officer of the Company, while Messrs. Glustrom and
Horvath are not employees of the Company. None of these individuals served as a
member of a compensation committee, or other board committees performing similar
functions, of any other entity during fiscal 1998.
Mr. Glustrom is the sole shareholder of RCG Management LLC ("RCG"),
the management company for the Harry's Crossing Shopping Center in Cobb County,
Georgia, where the Company's Cobb County megastore store is located. RCG is
responsible for the daily management of the stores in the shopping center and,
in connection with the performance of such services, receives a fee of $2,500
per month from the Company. During fiscal 1998, the first year RCG performed
such services, the Company paid RCG approximately $11,400.
Mr. Glustrom also serves as a consultant to the Company in all its
real estate matters and other corporate endeavors. Mr. Glustrom's duties, in
acting as a consultant, include assistance with site selection for new
facilities, as well as the analysis and lease negotiation for such facilities,
supervision and organization for the sales and leases of the distribution
center, outparcels and other storage spaces currently owned by the Company,
advisement of certain signage and advertisement for the Company's stores, and
examination of the financing needs of the Company and subsequent negotiation of
the resulting loan and lease facilities. During the 1998 fiscal year, Mr.
Glustrom received approximately $113,500 for such services.
In addition, during fiscal 1998, Mr. Glustrom served as an advisor and
consultant to the Company in connection with its transaction with Progressive
Food Concepts, Inc. ("PFCI"), for which Mr. Glustrom received stock options to
purchase 50,000 shares of the Company's Class A Common Stock at an exercise
price of $3.00 per share.
Prior to becoming a director of the Company, Mr. Horvath assisted the
Company in connection with its transaction with PFCI. As compensation for his
services in such transaction, Mr. Horvath received $100,000 and 13,793 shares of
the Company's Class A Common Stock.
7
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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.
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 28, 1998:
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 who abstains from determinations regarding his compensation.
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. 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. Prior to fiscal 1997, The Board of Directors voted (with Mr. Blazer
abstaining) to increase Mr. Blazer's salary for fiscal 1997 to $200,000, which
was subsequently increased by the Executive Compensation Committee (with Mr.
Blazer abstaining) to $250,000 for fiscal 1998. The increase during the last
two fiscal years in Mr. Blazer's salary, although still below the average for
comparable industry positions, represents the Board's belief in the efforts
being expended by Mr. Blazer in his continued efforts to improve the performance
of the Company.
8
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The Committee further believes that all of the other key executives'
salaries were significantly less than the average market value paid to
executives with similar responsibilities in the comparison group.
Stock Options
The Company has, from the date of its initial public offering,
utilized stock option grants as an incentive for executive performance, except
for Mr. Blazer who is not eligible to receive stock options pursuant to the
terms of the Company's 1993 Management Incentive Stock Option Plan. The
Committee believes that 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. Officers
are encouraged to hold shares upon the exercise of the options, linking their
interests to those of other shareholders.
Bonuses
In fiscal 1998, the Executive Compensation Committee utilized the
payment of bonuses as part of its compensation to certain executive officers,
including Mr. Blazer, who is not eligible to receive stock options pursuant to
the terms of the Company's incentive plans, for his instrumental efforts in
pursuing, negotiating and securing the initial $23 million in financing from
Progressive Food Concepts, Inc. The committee believes that, in light of the
efforts being expelled by certain officers to better the future for the Company,
combined with the belief that the overall executive salaries of the Company are
below the average market value paid to similar executives in other companies,
the use of a bonus provides such officers with the support to continue their
efforts towards the overall success of the Company. In addition, such amounts
contribute to the Company's ability to attract and retain talented executives
who seek to be rewarded for performance.
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 additional
performance-based compensation practices will be implemented.
Harry A. Blazer
Robert C. Glustrom
William J. Horvath
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 28, 1998. 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.
[GRAPH APPEARS HERE]
COMPARISON OF SIX YEAR CUMULATIVE RETURNS AMONG
HARRY'S FARMERS MARKET, INDUSTRY INDEX AND NASDAQ MARKET INDEX
TOTAL RETURNS FOR YEARS ENDING
------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
5/20/93 1/31/94 1/31/95 1/31/96 1/31/97 1/28/98
Harry's Farmers Market $ 100.00 $ 88.46 $ 51.28 $ 14.74 $ 21.35 $ 10.29
Industry Index $ 100.00 $ 104.57 $ 107.64 $ 132.03 $ 189.23 $ 242.60
NASDAQ Market Index $ 100.00 $ 112.26 $ 106.09 $ 148.55 $ 221.56 $ 260.97
</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 1999. 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 1999 ANNUAL MEETING OF SHAREHOLDERS
Shareholder proposals to be presented at the 1999 Annual Meeting of
Shareholders of the Company must be received at the Company's executive offices
at 1180 Upper Hembree Road, Roswell, Georgia 30076, addressed to the attention
of the Secretary, by January 14, 1999 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 1998 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 14, 1998
11
<PAGE>
LOGO
PROXY
HARRY'S FARMERS MARKET, INC.
1180 UPPER HEMBREE ROAD
ROSWELL, GEORGIA 30076
The undersigned shareholder 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 Shareholders to be held at the
Roswell Municipal Auditorium, 950 Forrest Street, Roswell, Georgia 30075 on
Wednesday, June 17, 1998, 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 1999 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
For [_] Withhold Authority [_]
To withhold authority for any individual nominee(s), write the name of the
nominee(s) in the space provided:
- --------------------------------------------------------------------------------
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED SHAREHOLDER. 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.
<PAGE>
LOGO
Please sign exactly as your name appears on your stock certificate and date.
Where shares are held jointly, each shareholder 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: _______________________
____________________________________
Signature of Shareholder
------------------------------------
Signature of Shareholder (if held
jointly)
Dated: _______________________, 1998
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 SHAREHOLDER PRIOR TO ITS EXERCISE.
