<PAGE>
SCHEDULE 14A INFORMATION
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
(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:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
HARRY'S FARMERS MARKET, INC.
1180 UPPER HEMBREE ROAD
ROSWELL, GEORGIA 30076
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 16, 1999
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 16, 1999 at 10:00
a.m., local time, for the following purposes:
(1) To elect four directors to serve for a term of one year or until their
successors have been elected and qualified; and
(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 26, 1999
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 12, 1999
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 16, 1999
PROXY STATEMENT
This Proxy Statement and form of proxy, which are first being mailed to
shareholders on or about May 12, 1999, 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 16, 1999 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 26, 1999 (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
4,139,375 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 (1) 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 that 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 or 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 48, 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.
JOHN D. BRANCH, age 43, 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.
ROBERT C. GLUSTROM, age 47, serves as President of Broadstreet, Inc., a
bank holding company, and as Chairman of AmTrade International Banks based in
Atlanta, Georgia and Miami, Florida. 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. Mr. Glustrom has been a practicing attorney
since 1976. Mr. Glustrom was first elected to the Board of Directors of the
Company in September 1995.
CHARLES W. SAPP, age 64, has been retired since January 1999. Prior to his
retirement, Mr. Sapp was employed by the H.E. Butt Grocery Company as Senior
Vice President of Distribution and Manufacturing, where he worked from 1981
through 1998. From 1989-1993, Mr. Sapp served as Group Vice President, Marketing
and Store Operations for H.E. Butt Grocery Company. Prior to his employment with
H.E. Butt Grocery Company, Mr. Sapp served as the Vice President of Distribution
and Manufacturing with the Alpha Beta Company in California, a subsidiary of
American Stores Incorporated, a national grocery store chain. Mr. Sapp has over
40 years experience in the food
2
<PAGE>
manufacturing and retailing industry. Mr. Sapp was first elected to the Board of
Directors of the Company in February 1999.
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 45, 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 44, was appointed Corporate 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 of 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 February 3, 1999, the Board of Directors held
a total of six meetings and acted by unanimous written consent on one occasion.
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 Sapp. The function of this committee is to establish
salaries, bonuses and other compensation for the Company's officers. The
Executive Compensation Committee met one time during the last fiscal year, and
had informal discussions from time to time.
(b) The Audit Committee is currently comprised of Messrs. Branch and Sapp.
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 met two times during the last fiscal year.
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 $5,000, 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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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 February 3, 1999, 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 1, 1999, 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 7 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 77.99%
Robert Fleming Series AA Preferred Stock 880,244 72.02
Nominees Ltd./3/ Class A Common Stock 392,421 /4/ 8.76
Total 6.06
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 Ltd./7/ Series AA Preferred Stock 111,111 9.09
Class A Common Stock 43,056 /8/ 1.03
Total *
Boston Chicken, Inc. Class A Common Stock 5,875,000 /9/ 58.67 18.24
Charles W. Sapp Class A Common Stock 10,000 /10/ * *
Robert C. Glustrom Class A Common Stock 123,333 /11/ 2.92 *
John D. Branch Class A Common Stock 102,683 /12/ 2.45 *
All directors and
executive officers Class A Common Stock 276,522 /13/ 6.46%
as a group Class B Common Stock 2,050,701 100.00%
---------
(5 persons) Total 2,327,223 78.48%
</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 solely on information the Company obtained from Robert Fleming
Nominees Ltd.'s Schedule 13-G filed on February 10, 1999. 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 presently exercisable warrants to purchase 342,421 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 Represents presently exercisable warrants to purchase 64,583.
7 The address for Orbis Pension Trustees Ltd. is One Connaught Place, London,
W2 2DY, England.
8 Represents presently exercisable warrants to purchase 43,056.
9 Based on information the Company obtained from Progressive Food Concepts,
Inc.'s Amendment to Schedule 13-D filed on June 5, 1998. Includes (i)
presently exercisable warrants to purchase 2,000,000 shares of Class A
Common Stock and (ii) 3,875,000 shares of Class A Common Stock issuable
upon conversion of 387,500 shares of Series B Preferred Stock issuable upon
conversion of certain amounts outstanding pursuant to that certain Second
Amended and Restated Secured Loan Agreement between the Company and
Preferred Food Concepts, Inc., a wholly owned subsidiary of Boston Chicken,
Inc. The address of Progressive Food Concepts, Inc. is 14103 Denver West
Parkway, Golden, Colorado 80401.
10 Represents shares subject to presently exercisable stock options.
11 Includes 83,333 shares subject to presently exercisable stock options.
12 Includes 43,333 shares subject to presently exercisable stock options.
13 Includes 139,166 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 29, 1997 ("fiscal 1997"),
January 28, 1998 ("fiscal 1998") and February 3, 1999 ("fiscal 1999"), for the
Company's Chief Executive Officer. No other executive officer of the Company
received total annual salary and bonus for fiscal 1999 exceeding $100,000.
-6-
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------
NAME AND
PRINCIPAL POSITION FISCAL YEAR SALARY BONUS
- ------------------ ----------- ------ -----
<S> <C> <C> <C>
Harry A. Blazer 1999 $ 254,808/(1)/
Chairman, President, Chief 1998 250,000 $ 50,000/(2)/
Executive Officer and a 1997 200,000 --
Director
</TABLE>
- ----------------------------
/(1)/ Due to the Company's accounting policies, fiscal 1999 was a 53-week
period and Mr. Blazer received additional compensation of $4,808 for such
week.
/(2)/ Mr. Blazer elected to defer his fiscal 1998 bonus until fiscal 1999.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Executive Compensation Committee are Harry A. Blazer,
Robert C. Glustrom and Charles W. Sapp. Mr. Blazer serves as President and Chief
Executive Officer of the Company, while Messrs. Glustrom and Sapp 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 1999.
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 1999, the Company paid RCG $30,000.
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 1999 fiscal year, Mr. Glustrom received
approximately $132,500 for such services.
-7-
<PAGE>
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 February 3, 1999:
The Company's policy with regard to executive compensation has consistently
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, as a member of the Executive Compensation Committee,
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.
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 and has remained as such for
fiscal 1999. The increase in Mr. Blazer's salary during the last two fiscal
years, although the Committee believes such increase is still below the average
for comparable industry positions, represents the Committee's belief in Mr.
Blazer's continued efforts to improve the performance of the Company. In
determining Mr. Blazer's salary, the Committee also noted that Mr. Blazer is not
eligible to receive stock options pursuant to any of the Company's existing
stock option plans.
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.
-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, 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 or through the Company's
1996 Director 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
While in fiscal 1998, the Executive Compensation Committee utilized the
payment of bonuses as part of its compensation to certain executive officers,
including Mr. Blazer for his efforts in negotiating and securing approximately
$21 million in financing, in light of the Company's performance during fiscal
1999, the Committee decided not to grant any such bonuses for the past fiscal
year. While in the past, the Committee has believed that, in light of the
efforts being expelled by certain officers to better the future for the Company,
the use of a bonus provided officers with the support to continue their efforts
towards the overall success of the Company, it felt that the current financial
performance of the Company did not justify such awards for fiscal 1999. However,
the Committee reserves the right to grant bonuses in fiscal 2000 and in the
future, as 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
Charles W. Sapp
-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 February 3,
1994 and ending February 3, 1999. 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 February 3, 1994. 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]
TOTAL RETURNS FOR YEARS ENDING
------------------------------
<TABLE>
<CAPTION>
2/3/94 2/1/95 1/31/96 1/29/97 1/28/98 2/3/99
------- ------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Harry's Farmers Market $100.00 $ 58.82 $ 16.91 $ 21.32 $ 10.29 $ 6.62
Industry Index $100.00 $102.93 $ 126.25 $ 165.93 $ 212.73 $286.59
NASDAQ Market Index $100.00 $ 94.51 $ 132.32 $ 174.14 $ 205.11 $320.12
</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 2000. 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 2000 ANNUAL MEETING OF SHAREHOLDERS
Shareholder proposals to be presented at the 2000 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 13, 2000 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 1999 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 Director
John L. Latham
Secretary
May 12, 1999
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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 16, 1999, 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 2000 Annual Meeting of Shareholders of the Company and until
their successors are elected and qualified:
Harry A. Blazer
John D. Branch
Robert C. Glustrom
Charles W. Sapp
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 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.
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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:
------------------------
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Signature of Shareholder
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Signature of Shareholder (if held
jointly)
Dated: _______________________, 1999
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.
