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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
HARRY'S FARMERS MARKET, INC.
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(Name of Registrant as Specified In Its Charter)
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(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:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
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HARRY'S FARMERS MARKET, INC.
1180 UPPER HEMBREE ROAD
ROSWELL, GEORGIA 30076
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 26, 2000
To the Shareholders of Harry's Farmers Market, Inc.:
Notice is hereby given that the annual meeting of shareholders of Harry's
Farmers Market, Inc., a Georgia corporation, will be held at the High Museum of
Art, 1280 Peachtree Street NE, Atlanta, Georgia 30309, on Monday, June 26, 2000
at 10:00 a.m. The purpose of the meeting is for the shareholders to consider
and vote upon:
(1) The election of five directors to serve until the 2001 annual meeting of
shareholders or until their successors have been elected and qualified;
(2) Approval of the 2000 Long-Term Incentive Plan; and
(3) Such other business as properly may come before the meeting or any
adjournments.
Information relating to these matters is set forth in the attached proxy
statement. Shareholders of record at the close of business on May 2, 2000 are
entitled to receive notice of and to vote at the annual meeting and
adjournments.
By Order of the Board of Directors
John L. Latham
Secretary
Roswell, Georgia
May 15, 2000
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.
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HARRY'S FARMERS MARKET, INC.
ANNUAL MEETING OF SHAREHOLDERS
JUNE 26, 2000
PROXY STATEMENT
The board of directors of Harry's Farmers Market is furnishing this proxy
statement to solicit your proxy for the voting of your shares at the 2000 annual
meeting of shareholders and at any adjournments. We will hold the meeting on
Monday, June 26, 2000 at 10:00 a.m. at the High Museum of Art, 1280 Peachtree
Street NE, Atlanta, Georgia. We are mailing this proxy statement and the
accompanying proxy card to shareholders on or about May 16, 2000.
VOTING
General
The securities that can be voted at the annual meeting consist of Class A
common stock and Class B common stock. Holders of Class A common stock are
entitled to cast one vote for each share held on the record date on each matter
submitted to the shareholders at the annual meeting. Holders of Class B common
stock are entitled to cast ten votes for each share held on the record date on
each matter submitted to the shareholders at the annual meeting.
The record date for determining the shareholders who are entitled to
receive notice of and to vote at the annual meeting has been fixed by the board
of directors as the close of business on May 2, 2000. On the record date,
4,139,375 shares of Class A common stock and 2,050,701 shares of Class B common
stock were outstanding and eligible to be voted at the annual meeting.
Quorum and Vote Required
The presence at the annual meeting, in person or by proxy, of the holders
of a majority of the votes entitled to be cast will constitute a quorum for the
transaction of business at the annual meeting. In determining whether a quorum
is present, we will apply the following principles:
. Abstentions and votes withheld from any director nominee will be
considered to be "votes entitled to be cast" and will be counted as
present for purposes of determining the presence or absence of a
quorum.
. Broker non-votes will not be considered to be "votes entitled to be
cast" and will not be counted as present for quorum purposes. Broker
non-votes are votes that brokers holding shares of record for their
customers are not permitted to cast under stock exchange rules because
the brokers have not received specific instructions from their
customers as to certain proposals and as to which the brokers have
advised us that they lack voting authority.
Proxies that are returned properly executed and not revoked will be voted
in accordance with the shareholder's directions. Where no direction is
specified, proxies will be voted FOR the election of the nominees for director
named in this proxy statement, FOR approval of the 2000 Long-Term Incentive Plan
and on any other matters presented for a vote in accordance with the judgment of
the persons acting under the proxies. As to all of the proposals, abstentions
and votes withheld will have the same effect as votes against the proposal or
nominee, but broker non-votes will have no effect.
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Any proxy given pursuant to this solicitation may be revoked by any
shareholder who attends the meeting and gives notice of his election to vote in
person. In addition, any proxy given pursuant to this solicitation may be
revoked prior to the annual meeting by executing and delivering to us a proxy
card bearing a later date or by giving written notice to Harry's Farmers Market,
Inc., 1180 Upper Hembree Road, Roswell, Georgia 30076, Attention: John D.
Branch, Senior Vice President and Chief Financial Officer.
Cost of Proxy Solicitation
We are soliciting your proxy on behalf of the board of directors, and we
will bear all of the related costs. Brokers, banks and others holding shares in
their names or in the names of their nominees will forward copies of the proxy
solicitation materials to beneficial owners and will seek authority for
execution of proxies. We will reimburse them for their reasonable expenses in
so doing. Our employees also may communicate with you to solicit your proxy,
but we will not pay them any additional compensation for doing so.
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AGENDA ITEM ONE
ELECTION OF DIRECTORS
Pursuant to our bylaws, our board of directors has set the number of
directors to serve for the next year at five, all of whom are to be elected at
the annual meeting. Shareholders elect directors annually to serve until the
next annual meeting of shareholders or until their successors are elected and
qualified. Shareholders elect directors by a plurality of the votes cast, which
means that if a quorum is present, votes withheld from any nominee will have no
effect on the outcome of the election of directors. Proxies received will be
voted for all the nominees named below, unless authority to do so is withheld.
If any nominee is unable or declines to serve as a director at the time of the
meeting, which is not anticipated, the board of directors may designate a
substitute nominee, in which case the persons named as proxies will vote the
shares represented by all valid proxies for the election of the substitute
nominee.
The board of directors has nominated the following persons for election to
the Board of Directors:
Harry A. Blazer, age 49, is the founder of Harry's Farmers Market and
served as the sole General Partner and as Chief Executive Officer of our
predecessor from its inception in 1987. Upon our 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 Harry's
Farmers Market.
John D. Branch, age 44, was named our Chief Financial Officer and Senior
Vice President in May and June, 1999, respectively, and has been a member of our
board of directors since September 1995. Prior to that time, he served as a
Senior Vice President and Chief Financial Officer at Earl Scheib, Inc. from
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. From September 1990
until January 1995, Mr. Branch 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.
Robert C. Glustrom, age 48, serves as President of Broadstreet, Inc., a
bank holding company, and as Chairman of AmTrade International Bank 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 1986 he headed Caribbean development for Hyatt
Development Corp. In 1987, Mr. Glustrom helped Mr. Colgate Holmes, who at that
time was president of the Ritz-Carlton Hotel Company, organize and develop the
Holmes Hotel Company. Mr. Glustrom has been a practicing attorney since 1976.
Mr. Glustrom was first elected to our Board of Directors in September 1995.
Donald M. Pamenter, age 61, is an independent management consultant. Since
1984 he has served a wide variety of medium to large manufacturing, marketing
and service companies. His practice focuses on improving strategic operations
and competitor management for companies throughout North America and Europe. Mr.
Pamenter was an executive with General Foods Corporation from 1978 to 1984.
Prior to this, he served as a management consultant with McKinsey & Company in
its Toronto and Amsterdam offices. Mr. Pamenter was the co-founder, director and
Executive Vice President of Consolidated Computer, Inc., a publicly traded
international computer manufacturing and software company established in 1968.
Mr. Pamenter was first elected to our board of directors in July 1999.
Charles W. Sapp, age 65, was first elected to the board of directors in
February 1999. He has been retired since January 1999 and, prior to his
retirement, served as Senior Vice President of Distribution and Manufacturing of
H.E. Butt Grocery Company, where he worked from 1981 through 1998. From 1989
until 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
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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 manufacturing and retailing industry.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR EACH OF THE
NOMINEES LISTED ABOVE.
Additional Officers:
H. Wayne Crawford, age 52, has served as our Senior Vice President and
Chief Operating Officer since December, 1999. For the two years prior to
joining the Company, Mr. Crawford served as Vice President of Operations of e-
Com Solutions Inc., a web integration company in Atlanta. Mr. Crawford was
Operations Manager for Carmax from 1997 to 1998 at which time he left to cofound
e-Com Solutions Inc. From 1994 through 1997, Mr. Crawford was Director of
Corporate Training and Quality Management at Bill Heard Enterprises. Mr.
Crawford has a Masters of Science Degree in Logistics Management and served 27
years in the United States Army, retiring as a Colonel. In his last assignment
with the United States Army, he served four years as the Director of Training
and Operations for the United States Army Infantry Center and School at Fort
Benning, Georgia.
John L. Latham, age 45, was appointed as our Corporate Secretary and
General Counsel 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 our general counsel.
Meetings of the Board of Directors and Committee
The board of directors conducts its business through meetings of the full
board and through committees of the board. During the fiscal year ended
February 2, 2000, the board of directors held nine meetings and acted by
unanimous written consent on six occasions. Each director attended at least 75%
of the meetings held by our board of directors and by committees of the board on
which such director served during the past fiscal year.
Our board of directors has the following committees:
(a) The executive compensation committee is currently comprised of Harry
Blazer, Donald Pamenter and Charles Sapp. The committee establishes salaries,
bonuses and other compensation for our officers. The executive compensation
committee held two meetings during the last fiscal year, and had informal
discussions from time to time.
(b) The audit committee is currently comprised of John Branch, Donald
Pamenter and Charles Sapp. The audit committee reviews and makes recommendations
to the board of directors on our audit procedures and independent auditor's
report to management, recommends the appointment of independent auditors to the
board of directors, and establishes and monitors our financial policies and
control procedures. The audit committee plans to adopt a formal written charter
by June 14, 2000 pursuant to new rules of the Securities and Exchange Commission
and the Nasdaq National Market. The audit committee held two meetings during the
last fiscal year, and had informal discussions with management and our auditors
from time to time.
(c) The stock option committee is currently comprised of Harry Blazer and
Robert Glustrom. The stock option committee administers our 1993 Management
Incentive Plan and 1996 Employee Stock Purchase Plan. During the last fiscal
year, the stock option committee acted by unanimous written consent on three
occasions.
The board of directors as a whole functions as a nominating committee to
select management's nominees for election to the board. The board of directors
will also consider nominees recommended by shareholders. For a
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description of requirements regarding shareholder nominations and other
proposals, see "Shareholder Proposals for the 20001 Annual Meeting of
Shareholders."
Directors' Compensation
We pay each of our directors a quarterly retainer of $5,000, as well as
reimbursing directors for any travel and related expenses incurred in connection
with their attendance in person at each meeting of our Board of Directors.
Our 1996 Director Stock Option Plan provides that each director who does
not hold more than 5% of our stock will be granted five-year options to purchase
10,000 shares of Class A common stock upon (i) his initial election as a
director and (ii) the day immediately following the day of each of our annual
shareholders meetings, provided that such director was not granted an option
under clause (i) during that same calendar year. The exercise price of the
options is equal to the fair market value of the Class A common stock on the
date of grant, and the options vest in one-third increments on each of the first
three anniversaries of the date of grant. In addition to the automatic grants,
upon the initial adoption of the Director Stock Option Plan, each eligible
director received an option to purchase 30,000 shares of our Class A common
stock. These options vested as to 20,000 of the shares on the date of grant and
the remaining 10,000 shares vested on the day prior to the 1997 annual meeting
of shareholders.
AGENDA ITEM TWO
APPROVAL OF THE 2000 LONG-TERM INCENTIVE PLAN
On April 24, 2000, our board of directors adopted the Harry's Farmer's
Market, Inc. 2000 Long-Term Incentive Plan, or LTIP and will submit it to the
shareholders for approval at the annual meeting. We have reserved 250,000 shares
of the authorized but unissued shares of our Class A common stock for issuance
under the LTIP. A summary of the LTIP is set forth below; however, the following
summary is qualified by reference to the full text of the LTIP, which is filed
as an exhibit to this proxy statement.
The purpose of the LTIP is to promote our success by linking the personal
interests of our employees, officers, and consultants to those of our
shareholders and by providing participants with an incentive for outstanding
performance. As of May 1, 2000, approximately _____ employees were eligible to
participate in the LTIP.
The LTIP authorizes the granting of awards to our employees, officers and
consultants in any of the following forms:
. options to purchase shares of our Class A common stock, which may be
incentive stock options or non-qualified stock options;
. stock appreciation rights, or SARs;
. performance shares;
. restricted stock;
. dividend equivalents;
. other stock-based awards; and
. cash.
Not more than 10% of the shares authorized under the LTIP may be granted as
awards of restricted stock or unrestricted stock awards. No participant may
receive options or SARs for more than 250,000 shares of our Class A common stock
during any one calendar year. In addition, the maximum fair market value of all
awards, other than options and SARs, that a participant may receive during any
one calendar year is $2,000,000.
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Administration
The LTIP will be administered by the executive compensation committee of
our board of directors or by the board. The committee has the authority to
designate participants and to determine the type of awards to be granted to each
participant and the necessary terms and conditions of the award. In addition,
the committee may establish, adopt or revise any rules and regulations to
administer the LTIP and may make all other decisions and determinations that may
be required under the LTIP.
Awards
Stock Options. The committee is authorized to grant options, which may be
incentive stock options, or ISOs, or non-qualified stock options, or NSOs, to
participants. All options will be evidenced by a written award agreement between
us and the participant. The terms of an incentive stock option must meet the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended,
including shareholder approval requirements.
Stock Appreciation Rights. The committee may grant SARs to participants.
Upon the exercise of a SAR, the participant has the right to receive the excess
of the fair market value of one share of Class A common stock on the date of
exercise over the grant price of the SAR as determined by the committee. The
committee may not set a grant price that is less than the fair market value of
one share of our Class A common stock on the date of grant. All awards of SARs
will be evidenced by an award agreement, reflecting the terms, methods of
exercise, methods of settlement, form of consideration payable in settlement,
and any other terms and conditions.
Performance Shares. The committee may grant performance shares to
participants on the terms established by the committee. The committee has the
complete discretion to determine the number of performance shares granted to
each participant and to set performance goals and other terms or conditions that
will determine the number and value of performance shares paid to the
participant.
Restricted Stock Awards. The committee may make awards of restricted stock
to participants, which will be subject to restrictions on transferability and
other restrictions as the committee may impose. These restrictions may include
limitations on the right to vote restricted stock or the right to receive
dividends on the restricted stock.
Dividend Equivalents. The committee is authorized to grant dividend
equivalents to participants. Dividend equivalents entitle the participant to
receive payments equal to dividends with respect to all or a portion of the
number of shares of Class A common stock subject to an award, as determined by
the committee. The committee may provide that dividend equivalents be paid or
distributed when accrued or be deemed to have been reinvested in additional
shares of our Class A common stock or otherwise reinvested.
Other Stock-Based Awards. The committee may, subject to limitations under
applicable law, grant other awards to participants that are payable in, valued
in whole or in part by reference to, or otherwise based on or related to shares
of our Class A common stock as deemed by the committee to be consistent with the
purposes of the LTIP. These awards may include shares of our Class A common
stock awarded purely as a bonus and not subject to any restrictions or
conditions, convertible or exchangeable debt securities, other rights
convertible or exchangeable into shares of our Class A common stock, and awards
valued by reference to book value of shares of our Class A common stock or the
value of securities of or the performance of specified subsidiaries. The
committee will determine the terms and conditions of any such awards.
Performance Goals. The committee may determine that any award will be
determined solely on the basis of:
. the achievement by us or a subsidiary of a specified target return, or
target growth in return, on equity or assets;
. total shareholder return (our stock price appreciation plus reinvested
dividends) relative to a defined comparison group or target over a
specific performance period;
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. our stock price;
. the achievement by an individual, us, or one of our business units or
subsidiary's business unit, of a specified target, or target growth
in, revenues, net income or earnings per share; or
. any combination of the above.
If an award is made on this basis, the committee must establish goals prior
to the beginning of the period for which such performance goal relates (or such
later date as may be permitted under applicable tax regulations). The committee
may for any reason reduce, but not increase, any award, notwithstanding the
achievement of a specified goal. Any payment of an award granted with
performance goals will be conditioned on the written certification of the
committee that the performance goals and any other material conditions were
satisfied.
Limitations on Transfer; Beneficiaries. No award will be assignable or
transferable by a participant other than by will or the laws of descent and
distribution or, except in the case of an ISO, pursuant to a qualified domestic
relations order. However, the committee may permit other transfers when the
transfers do not result in accelerated taxation, do not cause any option
intended to be an ISO to fail to qualify as such, and are otherwise appropriate
and desirable, taking into account any factors deemed relevant. Factors to be
considered may include any state or federal tax or securities laws or
regulations applicable to transferable awards. A participant may, in the manner
determined by the committee, designate a beneficiary to exercise the rights of
the participant and to receive any distribution with respect to any award upon
the participant's death.
Acceleration Upon Certain Events. Upon the participant's death or
disability, all outstanding options, SARs and other awards in the nature of
exercisable rights will become fully exercisable and all restrictions on
outstanding awards will lapse. Any options or SARs will continue or lapse in
accordance with the other provisions of the LTIP and the award agreement. In
the event of a change in control, as defined in the LTIP, all outstanding
options, SARs, and other awards in the nature of exercisable rights will become
fully vested and all restrictions on all outstanding awards will lapse. In
addition, in the event of the occurrence of any circumstances or event not
constituting a change in control, the committee may, in its discretion, declare
all awards to be fully vested or all restrictions on all outstanding awards to
lapse. The committee may discriminate among participants and among awards in
exercising such discretion.
Termination and Amendment
Our board of directors or the committee may, at any time, terminate, amend
or modify the LTIP without shareholder approval. However, they may condition
any amendment on the approval of shareholders if such approval is necessary or
deemed advisable under tax, securities or other applicable laws, policies or
regulations. No termination, amendment or modification of the LTIP may
adversely affect any award previously granted without the written consent of the
participant.
Certain Federal Income Tax Effects
Nonqualified Stock Options. Under present federal income tax regulations,
there will be no federal income tax consequences to us or the participant upon
the grant of a NSO under the LTIP. However, the participant will realize
ordinary income on the exercise of the NSO in an amount equal to the excess of
the fair market value of the common stock acquired over the exercise price, and
we will receive a corresponding deduction. Any gain that a participant realizes
when he later sells or disposes of the option shares will be short-term or long-
term capital gain, depending on how long he held the shares.
Incentive Stock Options. Under present federal income tax regulations,
there will be no federal income tax consequences to us or the participant upon
the grant or exercise of an ISO or the participant's exercise of the ISO. If
the participant holds the shares of common stock for the greater of two years
after the date the option was granted or one year after exercise of the option,
the difference between the exercise price and the amount realized upon sale or
disposition of the shares will be long-term capital gain or loss, and we will
not be entitled to a federal income tax deduction. If the participant disposes
of the shares in a sale, exchange, or other disqualifying
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disposition before the required holding period ends, the participant will
realize taxable ordinary income in an amount equal to the excess of the fair
market value of the shares at the time of exercise over the aggregate exercise
price, and we will be allowed a federal income tax deduction equal to such
amount.
Stock Appreciation Rights. Under the present federal income tax
regulations, a participant receiving a SAR will not recognize income, and we
will not be allowed to take a tax deduction, at the time the award is granted.
When a participant exercises the SAR, the amount of cash and the fair market
value of any shares of common stock received will be ordinary income to the
participant, and we will not be allowed to take a deduction.
Restricted Stock. Under present federal income tax regulations, unless the
participant makes an election to accelerate recognition of the income to the
date of grant, a participant receiving a restricted stock award will not
recognize income, and we will not be allowed a tax deduction, at the time the
award is granted. When the restrictions lapse, the participant will recognize
ordinary income equal to the fair market value of the common stock, and we will
be allowed a corresponding tax deduction at that time.
If a participant files an election under Section 83(b) of the Internal
Revenue Code within 30 days after the date of grant of the restricted stock, the
participant will recognize ordinary income as of the date of grant equal to the
fair market value of the stock as of that date, and we will be allowed a
corresponding tax deduction at that time. Any future appreciation in the stock
will be taxable to the participant at capital gains rates.
Performance Shares. Under present federal income tax regulations, a
participant receiving performance shares will not recognize income, and we will
not be allowed a tax deduction, at the time the award is granted. When a
participant receives payment under the performance shares, the amount of cash
and the fair market value of any shares of common stock received will be
ordinary income to the participant, and we will be allowed as corresponding tax
deduction at that time.
Benefits to Named Executive Officers and Others
As of the date of this proxy statement, no awards had been granted or
approved for grant under the LTIP. Any awards under the LTIP will be made at
the discretion of the committee or the Board. Consequently, it is not presently
possible to determine either the benefits or amounts that will be received by
any particular person or group pursuant to the LTIP.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE APPROVAL OF
THE 2000 LONG-TERM INCENTIVE PLAN.
Section 16(a) Beneficial Ownership Reporting Compliance
The United States securities laws require our directors, executive officers
and any persons who beneficially own more than 10% of our common stock to file
with the SEC and the Nasdaq Stock Market initial reports of ownership and
subsequent reports of changes in ownership. To our knowledge, based solely on a
review of the copies of the reports furnished to us and written representations
that no other reports were required, during fiscal year ended February 2, 2000
all directors, executive officers and beneficial owners of more than 10% of our
common stock made all required filings.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of March 31, 2000, unless
otherwise indicated, regarding the beneficial ownership of our equity securities
by each person known by us to own more than 5% of any class of our voting
securities, each director and nominee for director, each executive officer named
in the Summary Compensation Table and all directors and executive officers as a
group.
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Pursuant to SEC rules, the number of shares of common stock beneficially
owned by a specific person or group includes shares issuable pursuant to
convertible securities, warrants and options held by such person or group that
may be converted or exercised within 60 days after March 31, 2000. These shares
are deemed to be outstanding for the purpose of computing the percentage of the
class beneficially owned by such person or group but are not deemed to be
outstanding for the purpose of computing the percentage of the class
beneficially owned by any other person or group.
The persons named in the table gave us the stock ownership information
about themselves. Except as explained in the footnotes below, the named persons
have sole voting and investment power with regard to the shares shown as
beneficially owned by them. Harry A. Blazer is the only holder of our Class B
common stock. Holders of Class B 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,
these shares of Class B common stock automatically convert to an equal number of
shares of our Class A common stock.
<TABLE>
<CAPTION>
Shares Beneficially Owned Percent Percent of Total
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Beneficial Owner Class Shares of 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 83.36%
Charles W. Sapp Class A Common Stock 39,133/3/ * *
Robert C. Glustrom Class A Common Stock 189,999/4/ 4.44% *
John D. Branch Class A Common Stock 231,224/5/ 5.36% *
Donald C. Pamenter Class A Common Stock --- -- --
All directors and
executive officers Class A Common Stock 498,356/6/ 11.16%
as a group Class B Common Stock 2,050,701 100.00%
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(6 persons) Total 2,549,057 84.12%
</TABLE>
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*Represents beneficial ownership of less than 1%.
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 shareholder. Mr. Blazer's address is
1180 Upper Hembree Road, Roswell, Georgia 30076.
3 Includes 13,333 shares subject to presently exercisable stock options.
4 Includes 139,999 shares subject to presently exercisable stock options.
5 Includes 171,874 shares subject to presently exercisable stock options.
6 Includes 325,206 shares subject to presently exercisable stock options.
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning
compensation paid or accrued by us for services rendered in all capacities
during the fiscal years ended January 28, 1998, February 3, 1999 and February 2,
2000, for our Chief Executive Officer, and our other executive officer whose
annual salary and bonus for the fiscal year ended 2000 exceeded $100,000.
-9-
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
---------
Annual Compensation Compensation Awards
----------------------- ----------------------
Name and Securities Underlying
Principal Position Fiscal Year Salary Bonus Options (#)
- ------------------ ----------- ------ ----- ----------------------
<S> <C> <C> <C> <C>
Harry A. Blazer 2000 $250,000 -- $ --
Chairman, President, Chief 1999 254,808/(1)/ -- --
Executive Officer and a 1998 250,000 50,000/(2)/ --
Director
John D. Branch 2000 $123,750 -- 235,000
Senior Vice President,
Chief Financial Officer
and a Director/(3)/
</TABLE>
______________________________
/(1)/ Due to our 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.
/(3)/ Mr. Branch became our Chief Financial Officer and Senior Vice President
in May and June, 1999, respectively.
Employment Agreements
We are a party to an Employment and Non-Competition Agreement with
John D. Branch, our Senior Vice President and Chief Financial Officer. In
exchange for Mr. Branch's services under his Employment Agreement, during the
employment period, he will: (a) receive an annual base salary of $165,000, which
may be increased by our Board of Directors; (b) be entitled to participate in
the same incentive, savings and retirement plans, practices, policies and
programs as our other senior executive and the senior executives of any of our
affiliates; (c) receive, together with his family, the same benefits under all
of our welfare benefit plans, practices and programs as our other senior
executives and the senior executives of any of our affiliates; and (d) receive,
upon entering into the Employment Agreement, a nonqualified stock option to
purchase 225,000 shares of our Class A common stock at an exercise price of
$0.9688 per share. The option vests in equal installments of 9,375 option shares
on the 16/th/ day of each month and becomes fully exercisable upon a change of
control. If the option is redeemed or terminated due to a change in control, Mr.
Branch will receive a minimum of $165,000 in exchange for the option.
If, during the employment period, Mr. Branch's employment is
terminated for any reason by us or by Mr. Branch, Mr. Branch will receive a lump
sum equal to, to the extent unpaid: (1) his annual base salary through the date
of termination, plus (2) any compensation previously deferred, plus (3) any
other amounts or benefits required to be paid or provided under any plan,
program, policy or practice or contract or agreement with us or any of our
affiliates. In addition, the Employment Agreement also provides that for a two-
year period following the termination of his employment, Mr. Branch may not
disclose or otherwise use any of our confidential information or solicit or
induce any of our employees to terminate their employment.
Option Grants
We made two option grants to John D. Branch, our Senior Vice President
and Chief Financial Officer, during the fiscal year ended February 2, 2000. On
April 16, 1999 in connection with his employment by us, we entered into a Non-
Qualified Stock Option Agreement with Mr. Branch pursuant to which he received
an option to purchase 225,000 shares of our Class A common stock. On June 17,
1999, in connection his re-election to the Board of Directors at the 1999 annual
meeting of shareholders, an option was automatically granted to Mr. Branch, as
well as our other directors (except Harry Blazer), under our 1996 Director Stock
Option Plan, to
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<PAGE>
purchase 10,000 shares of our Class A common stock. The grants under the 1996
Director Stock Option Plan occur automatically upon the re-election of directors
and is not subject to the discretion of the board of directors or any committee
of the board.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number of Percent of Total Potential Realizable Value at
Securities Options Assumed Annual Rates of
Underlying Granted to Stock Price Appreciation for
Options Employees in Exercise or Base Option Term
-----------------------
Name Granted (#) Fiscal Year Price ($/Sh) Expiration Date 5% ($) 10% ($)
- ---- ----------- ----------- -------------- --------------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Harry A. Blazer -- -- -- -- -- --
John D. Branch 225,000 63.27 .9688 4/16/09 355,048 565,355
10,000 2.81 .9375 6/17/04 11,965 15,099
</TABLE>
FISCAL YEAR-END OPTION VALUES
Number of Securities Underlying Value of Unexercised In-The-
Unexercised Options at Money Options at
February 2, 2000 (#) February 2, 2000 ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ------------------------- -------------------------
Harry A. Blazer -- --
John D. Branch 171,874 / 123,126 30,463 / 28,589
Compensation Committee Interlocks and Insider Participation
Harry Blazer, Robert Glustrom and Charles Sapp serve on the executive
compensation committee of our board of directors. Mr. Blazer serves as our
President and Chief Executive Officer, but Mr. Glustrom and Mr. Sapp are not our
employees. None of the committee members served as a member of a compensation
committee, or other board committees performing similar functions, of any other
entity during the fiscal year ended February 2, 2000. Mr. Blazer routinely
excludes himself when the committee discusses and makes determinations regarding
his salary and compensation.
Mr. Glustrom is the sole shareholder of RCG Management LLC, the management
company for the Harry's Crossing Shopping Center in Cobb County, Georgia, where
our Cobb County megastore store is located. RCG is responsible for the daily
management of the stores in the shopping center, and we pay RCG a fee of $2,500
per month for the management services. During the fiscal year ended February 2,
2000, we paid RCG $30,000.
Mr. Glustrom also serves as a consultant to us in all of our real estate
matters and other corporate endeavors. As a consultant, Mr. Glustrom's duties
include assisting us with site selection and negotiation for new facilities and
supervision and organization for the sales and leases of the distribution
center, outparcels and other storage spaces we own. During the fiscal year
ended February 2, 2000, Mr. Glustrom received approximately $130,000 and an
option to purchase 50,000 shares of our Class A common stock for his services as
a consultant.
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<PAGE>
Notwithstanding anything to the contrary set forth in any of our 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
The compensation committee is responsible for developing our executive
compensation policies and advising the board of directors with respect to these
policies. This report by the compensation committee reviews our policies
generally with respect to the compensation of all executive officers as a group
for the fiscal year ended February 2, 2000 and specifically reviews the
compensation established for our Chief Executive Officer for the fiscal year
ended February 2, 2000.
Our 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 and to do so in
a manner that is commensurate with compensation paid by companies of
comparable size within our industry;
. Reward executive officers for the achievement of short-term operating
goals and for the enhancement of our long-term shareholder value; and
. Align the interests of executive officers with those of our
shareholders with respect to short-term operating results and long-
term shareholder value.
The primary components of our compensation to our executive officers, and
the relationship of these components to our performance, are discussed below.
Base Salary
Each year the executive compensation committee members review and approve
the base salaries to be paid during the following year to members of our senior
management, except for the salary of Harry Blazer, 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 our success.
The executive compensation committee (with Mr. Blazer abstaining) increased
Mr. Blazer's salary from $200,000 to $250,000 for fiscal 1998, and his salary
has remained at $250,000. The compensation committee believes that Mr. Blazer's
salary is in-line with the average for comparable industry positions. In
determining Mr. Blazer's salary, the compensation committee noted that Mr.
Blazer is not eligible to receive stock options pursuant to any of our existing
stock option plans.
Stock Options
From the date of our initial public offering, we have used 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 our 1993
Management Incentive Stock Option Plan or through our 1996 Director Stock Option
Plan. We believe that stock option grants provide executives with the
opportunity to buy and maintain an equity interest in us 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.
-12-
<PAGE>
Bonuses
In light of our performance during fiscal 2000, the compensation committee
decided not to grant any bonuses for the past fiscal year. While in the past the
compensation committee has used bonuses to provide officers with the support to
continue their efforts towards our overall success, the compensation committee
felt that our current financial performance did not justify such awards for
fiscal 2000. However, the compensation committee may decide to grant bonuses in
fiscal 2001 and in the future, as such bonuses contribute to our ability to
attract and retain talented executives who seek to be rewarded for performance.
Summary
We remain committed to the implementation of compensation practices that
are increasingly linked to our performance. We believe that our current
compensation policies and practices are appropriate considering our
disappointing performance during the last fiscal year. As our performance
improves, we anticipate that additional performance-based compensation practices
will be implemented.
COMMITTEE MEMBERS:
Harry A. Blazer
Robert C. Glustrom
Charles W. Sapp
-13-
<PAGE>
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following line graph compares the yearly percentage change in the
cumulative total shareholder return on our Class A common stock against the
cumulative total return of the Nasdaq Stock Market Index and a composite index
for corporations in our industry (i.e., classified under the same Standard
Industrial Classification Code ("SIC"), 541--Grocery Stores) for the period
commencing February 1, 1995 and ending February 2, 2000. The graph assumes that
the value of the investment in our Class A Common Stock and each index was $100
on February 1, 1995. 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. We have not paid any dividends during the period covered by the graph.
Total Returns for Years Ending
------------------------------
<TABLE>
<CAPTION>
2/1/95 1/31/96 1/29/97 1/28/98 2/3/99 2/2/000
------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Harry's Farmers Market $100.00 $ 28.75 $ 36.25 $ 17.50 $ 11.25 $ 12.19
Industry Index $100.00 $ 122.66 $ 161.21 $ 206.68 $278.43 $ 195.47
NASDAQ Market Index $100.00 $ 140.02 $ 184.26 $ 217.04 $338.74 $ 506.71
</TABLE>
-14-
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The board of directors has appointed Grant Thornton LLP, our independent
auditors since 1990, to be our independent auditors for fiscal 2001. A
representative of Grant Thornton LLP is expected to be present at the
shareholders meeting, to be available to answer appropriate questions and to
make a statement, if desired.
SHAREHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING OF SHAREHOLDERS
To be considered for inclusion in our proxy statement for the 2001 annual
meeting, director nominations and other proposals of shareholders must be
submitted in writing to us on or before January 12, 2001. For any director
nomination or other proposal that is not submitted for inclusion in next year's
proxy statement but is instead sought to be presented directly to the
shareholders at the 2001 annual meeting, management will be able to vote proxies
in its discretion if we:
. receive notice of the proposal before the close of business on March
29, 2001 and advise shareholders in the proxy statement for the 2001
annual meeting about the nature of the proposal and how management
intends to vote on the proposal, or
. do not receive notice of the proposal before the close of business on
March 29, 2001.
All director nominations and other proposals of shareholders with regard to
the 2001 annual meeting should be submitted by certified mail, return receipt
requested, to Harry's Farmers Market, Inc., 1180 Upper Hembree Road, Roswell,
Georgia 30076, Attention: John D. Branch, Senior Vice President and Chief
Financial Officer.
ANNUAL REPORT
Our 2000 annual report is concurrently being mailed to shareholders. The
annual report contains our consolidated financial statements and the report on
the financial statements of Grant Thornton LLP, our independent public
accountants.
By Order of the Board of Director
John L. Latham
Secretary
May 15, 2000
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<PAGE>
EXHIBIT A
---------
HARRY'S FARMERS MARKET, INC.
2000 LONG-TERM INCENTIVE PLAN
ARTICLE 1
PURPOSE
1.1 GENERAL. The purpose of the Harry's Farmers Market, Inc. 2000 Long-
-------
Term Incentive Plan (the "Plan") is to promote the success, and enhance the
value, of Harry's Farmers Market, Inc. (the "Corporation"), by linking the
personal interests of its employees, officers, and consultants to those of the
Corporation's shareholders and by providing such persons with an incentive for
outstanding performance. The Plan is further intended to provide flexibility to
the Corporation in its ability to motivate, attract, and retain the services of
employees upon whose judgment, interest, and special effort the successful
conduct of the Corporation's operation is largely dependent. Accordingly, the
Plan permits the grant of incentive awards from time to time to selected
employees, officers or consultants.
ARTICLE 2
EFFECTIVE DATE
2.1 EFFECTIVE DATE. The Plan shall be effective as of the date upon which
--------------
it shall be approved by the Board (the "Effective Date"). However, the Plan
shall be submitted to the shareholders of the Corporation for approval within 12
months of the Board's approval thereof. No Incentive Stock Options (as defined
below) granted under the Plan may be exercised prior to approval of the Plan by
the shareholders and if the shareholders fail to approve the Plan within 12
months of the Board's approval thereof, any Incentive Stock Options previously
granted hereunder shall be automatically converted to Non-Qualified Stock
Options (as defined below) without any further act. In the discretion of the
Committee, Awards (as defined below) may be made to Covered Employees (as
defined below) that are intended to constitute qualified performance-based
compensation under Code Section 162(m). Any such Awards shall be contingent
upon the shareholders having approved the Plan.
ARTICLE 3
DEFINITIONS
3.1 DEFINITIONS. When a word or phrase appears in this Plan with the
-----------
initial letter capitalized, and the word or phrase does not commence a sentence,
the word or phrase shall generally be given the meaning ascribed to it in this
Section or in Section 1.1 unless a clearly different meaning is required by the
context. The following words and phrases shall have the following meanings:
<PAGE>
(a) "Award" means any Option, Stock Appreciation Right, Restricted
Stock Award, Performance Share Award, Dividend Equivalent Award, or Other
Stock-Based Award, or any other right or interest relating to Stock or
cash, granted to a Participant under the Plan.
(b) "Award Agreement" means any written agreement, contract, or other
instrument or document evidencing an Award.
(c) "Board" means the Board of Directors of the Corporation.
(d) "Cause" as a reason for a Participant's termination of employment
shall have the meaning assigned such term in the employment agreement, if
any, between such Participant and the Corporation or an affiliated company,
provided, however that if there is no such employment agreement in which
such term is defined, "Cause" shall mean any of the following acts by the
Participant, as determined by the Board: gross neglect of duty, prolonged
absence from duty without the consent of the Corporation, intentionally
engaging in any activity that is in conflict with or adverse to the
business or other interests of the Corporation, or willful misconduct,
misfeasance or malfeasance of duty which is reasonably determined to be
detrimental to the Corporation.
(d) "Change of Control" means and includes the occurrence of any one
of the following events:
(i) individuals who, at the Effective Date, constitute the Board
(the "Incumbent Directors") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a
director after the Effective Date and whose election or nomination for
election was approved by a vote of at least a majority of the
Incumbent Directors then on the Board (either by a specific vote or by
approval of the proxy statement of the Corporation in which such
person is named as a nominee for director, without written objection
to such nomination) shall be an Incumbent Director; provided, however,
-------- -------
that no individual initially elected or nominated as a director of the
Corporation as a result of an actual or threatened election contest
(as described in Rule 14a-11 under the 1934 Act ("Election Contest")
or other actual or threatened solicitation of proxies or consents by
or on behalf of any "person" (as such term is defined in Section
3(a)(9) of the 1934 Act and as used in Section 13(d)(3) and 14(d)(2)
of the 1934 Act) other than the Board ("Proxy Contest"), including by
reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest, shall be deemed an Incumbent Director;
(ii) any person becomes a "beneficial owner" (as defined in Rule
13d-3 under the 1934 Act), directly or indirectly, of securities of
the Corporation representing 25% or more of the combined voting power
of
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<PAGE>
the Corporation's then outstanding securities eligible to vote for the
election of the Board (the "Company Voting Securities"); provided,
--------
however, that the event described in this paragraph (ii) shall not be
-------
deemed to be a Change of Control of the Corporation by virtue of any
of the following acquisitions: (A) any acquisition by a person who is
on the Effective Date the beneficial owner of 25% or more of the
outstanding Company Voting Securities, (B) an acquisition by the
Corporation which reduces the number of Company Voting Securities
outstanding and thereby results in any person acquiring beneficial
ownership of more than 25% of the outstanding Company Voting
Securities; provided, that if after such acquisition by the
-------- ----
Corporation such person becomes the beneficial owner of additional
Company Voting Securities that increases the percentage of outstanding
Company Voting Securities beneficially owned by such person, a Change
of Control of the Corporation shall then occur, (C) an acquisition by
any employee benefit plan (or related trust) sponsored or maintained
by the Corporation or any Parent or Subsidiary, (D) an acquisition by
an underwriter temporarily holding securities pursuant to an offering
of such securities, or (E) an acquisition pursuant to a Non-Qualifying
Transaction (as defined in paragraph (iii)); or
(iii) the consummation of a reorganization, merger,
consolidation, statutory share exchange or similar form of corporate
transaction involving the Corporation that requires the approval of
the Corporation's shareholders, whether for such transaction or the
issuance of securities in the transaction (a "Reorganization"), or the
sale or other disposition of all or substantially all of the
Corporation's assets to an entity that is not an affiliate of the
Corporation (a "Sale"), unless immediately following such
Reorganization or Sale: (A) more than 50% of the total voting power of
(x) the corporation resulting from such Reorganization or the
corporation which has acquired all or substantially all of the assets
of the Corporation (in either case, the "Surviving Corporation"), or
(y) if applicable, the ultimate parent corporation that directly or
indirectly has beneficial ownership of 100% of the voting securities
eligible to elect directors of the Surviving Corporation (the "Parent
Corporation"), is represented by the Company Voting Securities that
were outstanding immediately prior to such Reorganization or Sale (or,
if applicable, is represented by shares into which such Company Voting
Securities were converted pursuant to such Reorganization or Sale),
and such voting power among the holders thereof is in substantially
the same proportion as the voting power of such Company Voting
Securities among the holders thereof immediately prior to the
Reorganization or Sale, (B) no person (other than (x) the Corporation,
(y) any employee benefit plan (or related trust) sponsored or
maintained by the Surviving Corporation or the Parent Corporation, or
(z) a person who immediately prior to the Reorganization or Sale was
the beneficial owner of 25% or more of the outstanding Company Voting
Securities) is the
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<PAGE>
beneficial owner, directly or indirectly, of 25% or more of the total
voting power of the outstanding voting securities eligible to elect
directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation), and (C) at least a majority
of the members of the board of directors of the Parent Corporation
(or, if there is no Parent Corporation, the Surviving Corporation)
following the consummation of the Reorganization or Sale were
Incumbent Directors at the time of the Board's approval of the
execution of the initial agreement providing for such Reorganization
or Sale (any Reorganization or Sale which satisfies all of the
criteria specified in (A), (B) and (C) above shall be deemed to be a
"Non-Qualifying Transaction").
(e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(f) "Committee" means the committee of the Board described in Article
4.
(g) "Corporation" means Harry's Farmers Market, Inc., a Georgia
corporation.
(h) "Covered Employee" means a covered employee as defined in Code
Section 162(m)(3).
(i) "Disability" shall mean any illness or other physical or mental
condition of a Participant that renders the Participant incapable of
performing his customary and usual duties for the Corporation, or any
medically determinable illness or other physical or mental condition
resulting from a bodily injury, disease or mental disorder which, in the
judgment of the Committee, is permanent and continuous in nature. The
Committee may require such medical or other evidence as it deems necessary
to judge the nature and permanency of the Participant's condition.
Notwithstanding the above, with respect to an Incentive Stock Option,
Disability shall mean Permanent and Total Disability as defined in Section
22(e)(3) of the Code.
(j) "Dividend Equivalent" means a right granted to a Participant
under Article 11.
(k) "Effective Date" has the meaning assigned such term in Section
2.1.
(l) "Fair Market Value", on any date, means (i) if the Stock is
listed on a securities exchange or is traded over the Nasdaq National or
Small Cap Market, the closing sales price on such exchange or over such
system on such date or, in the absence of reported sales on such date, the
closing sales price on the immediately preceding date on which sales were
reported, or (ii) if the Stock is not
-4-
<PAGE>
listed on a securities exchange or traded over the Nasdaq National or Small
Cap Market, the mean between the bid and offered prices as quoted by Nasdaq
for such date, provided that if it is determined that the fair market value
is not properly reflected by such Nasdaq quotations, Fair Market Value will
be determined by such other method as the Committee determines in good
faith to be reasonable.
(m) "Incentive Stock Option" means an Option that is intended to meet
the requirements of Section 422 of the Code or any successor provision
thereto.
(n) "Non-Qualified Stock Option" means an Option that is not an
Incentive Stock Option.
(o) "Option" means a right granted to a Participant under Article 7
of the Plan to purchase Stock at a specified price during specified time
periods. An Option may be either an Incentive Stock Option or a Non-
Qualified Stock Option.
(p) "Other Stock-Based Award" means a right, granted to a Participant
under Article 12, that relates to or is valued by reference to Stock or
other Awards relating to Stock.
(q) "Parent" means a corporation which owns or beneficially owns a
majority of the outstanding voting stock or voting power of the
Corporation. Notwithstanding the above, with respect to an Incentive Stock
Option, Parent shall have the meaning set forth in Section 424(e) of the
Code.
(r) "Participant" means a person who, as an employee, officer or
consultant of the Corporation or any Parent or Subsidiary, has been granted
an Award under the Plan.
(s) "Performance Share" means a right granted to a Participant under
Article 9, to receive cash, Stock, or other Awards, the payment of which is
contingent upon achieving certain performance goals established by the
Committee.
(t) "Plan" means the Harry's Farmers Market, Inc. 2000 Long-Term
Incentive Plan, as amended from time to time.
(u) "Restricted Stock Award" means Stock granted to a Participant
under Article 10 that is subject to certain restrictions and to risk of
forfeiture.
(v) "Retirement" means a Participant's termination of employment with
the Corporation, Parent or Subsidiary after attaining any normal or early
retirement age specified in any pension, profit sharing or other retirement
program sponsored by the Corporation, or, in the event of the
inapplicability thereof with respect to the person in question, as
determined by the Committee in its reasonable judgment.
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<PAGE>
(w) "Stock" means the no par value Class A common stock of the
Corporation and such other securities of the Corporation as may be
substituted for Stock pursuant to Article 14.
(x) "Stock Appreciation Right" or "SAR" means a right granted to a
Participant under Article 8 to receive a payment equal to the difference
between the Fair Market Value of a share of Stock as of the date of
exercise of the SAR over the grant price of the SAR, all as determined
pursuant to Article 8.
(y) "Subsidiary" means any corporation, limited liability company,
partnership or other entity of which a majority of the outstanding voting
stock or voting power is beneficially owned directly or indirectly by the
Corporation. Notwithstanding the above, with respect to an Incentive Stock
Option, Subsidiary shall have the meaning set forth in Section 424(f) of
the Code.
(z) "1933 Act" means the Securities Act of 1933, as amended from time
to time.
(aa) "1934 Act" means the Securities Exchange Act of 1934, as amended
from time to time.
ARTICLE 4
ADMINISTRATION
4.1 COMMITTEE. The Plan shall be administered by a committee (the
---------
"Committee") appointed by the Board (which Committee shall consist of two or
more directors) or, at the discretion of the Board from time to time, the Plan
may be administered by the Board. It is intended that the directors appointed
to serve on the Committee shall be "non-employee directors" (within the meaning
of Rule 16b-3 promulgated under the 1934 Act) and "outside directors" (within
the meaning of Code Section 162(m) and the regulations thereunder). However,
the mere fact that a Committee member shall fail to qualify under either of the
foregoing requirements shall not invalidate any Award made by the Committee,
which Award is otherwise validly made under the Plan. The members of the
Committee shall be appointed by, and may be changed at any time and from time to
time in the discretion of, the Board. During any time that the Board is acting
as administrator of the Plan, it shall have all the powers of the Committee
hereunder, and any reference herein to the Committee (other than in this Section
4.1) shall include the Board.
4.2 ACTION BY THE COMMITTEE. For purposes of administering the Plan, the
-----------------------
following rules of procedure shall govern the Committee. A majority of the
Committee shall constitute a quorum. The acts of a majority of the members
present at any meeting at which a quorum is present, and acts approved
unanimously in writing by the members of the Committee in lieu of a meeting,
shall be deemed the acts of the
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<PAGE>
Committee. Each member of the Committee is entitled to, in good faith, rely or
act upon any report or other information furnished to that member by any officer
or other employee of the Corporation or any Parent or Subsidiary, the
Corporation's independent certified public accountants, or any executive
compensation consultant or other professional retained by the Corporation to
assist in the administration of the Plan.
4.3 AUTHORITY OF COMMITTEE. Except as provided below, the Committee has
----------------------
the exclusive power, authority and discretion to:
(a) Designate Participants;
(b) Determine the type or types of Awards to be granted to each
Participant;
(c) Determine the number of Awards to be granted and the number of
shares of Stock to which an Award will relate;
(d) Determine the terms and conditions of any Award granted under the
Plan, including but not limited to, the exercise price, grant price, or
purchase price, any restrictions or limitations on the Award, any schedule
for lapse of forfeiture restrictions or restrictions on the exercisability
of an Award, and accelerations or waivers thereof, based in each case on
such considerations as the Committee in its sole discretion determines;
(e) Accelerate the vesting or lapse of restrictions of any
outstanding Award, based in each case on such considerations as the
Committee in its sole discretion determines;
(f) Determine whether, to what extent, and under what circumstances
an Award may be settled in, or the exercise price of an Award may be paid
in, cash, Stock, other Awards, or other property, or an Award may be
canceled, forfeited, or surrendered;
(g) Prescribe the form of each Award Agreement, which need not be
identical for each Participant;
(h) Decide all other matters that must be determined in connection
with an Award;
(i) Establish, adopt or revise any rules and regulations as it may
deem necessary or advisable to administer the Plan;
(j) Make all other decisions and determinations that may be required
under the Plan or as the Committee deems necessary or advisable to
administer the Plan; and
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<PAGE>
(k) Amend the Plan or any Award Agreement as provided herein.
Not withstanding the above, the Board or the Committee may expressly
delegate to a special committee consisting of one or more directors who are also
officers of the Corporation some or all of the Committee's authority under
subsections (a) through (g) above with respect to those eligible Participants
who, at the time of grant are not, and are not anticipated to be become, either
(i) Covered Employees or (ii) persons subject to the insider trading
restrictions of Section 16 of the 1934 Act.
4.4 DECISIONS BINDING. The Committee's interpretation of the Plan, any
-----------------
Awards granted under the Plan, any Award Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and
conclusive on all parties.
ARTICLE 5
SHARES SUBJECT TO THE PLAN
5.1 NUMBER OF SHARES. Subject to adjustment as provided in Section 14.1,
----------------
the aggregate number of shares of Stock reserved and available for Awards or
which may be used to provide a basis of measurement for or to determine the
value of an Award (such as with a Stock Appreciation Right or Performance Share
Award) shall be 250,000, of which not more than 10% may be granted as Awards of
Restricted Stock or unrestricted Stock Awards.
5.2 LAPSED AWARDS. To the extent that an Award is canceled, terminates,
-------------
expires or lapses for any reason, any shares of Stock subject to the Award will
again be available for the grant of an Award under the Plan and shares subject
to SARs or other Awards settled in cash will be available for the grant of an
Award under the Plan.
5.3 STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may
-----------------
consist, in whole or in part, of authorized and unissued Stock, treasury Stock
or Stock purchased on the open market.
5.4 LIMITATION ON AWARDS. Notwithstanding any provision in the Plan to
--------------------
the contrary (but subject to adjustment as provided in Section 14.1), the
maximum number of shares of Stock with respect to one or more Options and/or
SARs that may be granted during any one calendar year under the Plan to any one
Participant shall be 250,000. The maximum fair market value (measured as of the
date of grant) of any Awards other than Options and SARs that may be received by
any one Participant (less any consideration paid by the Participant for such
Award) during any one calendar year under the Plan shall be $2,000,000.
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ARTICLE 6
ELIGIBILITY
6.1 GENERAL. Awards may be granted only to individuals who are employees,
-------
officers or consultants of the Corporation or a Parent or Subsidiary.
ARTICLE 7
STOCK OPTIONS
7.1 GENERAL. The Committee is authorized to grant Options to Participants
-------
on the following terms and conditions:
(a) EXERCISE PRICE. The exercise price per share of Stock under an
--------------
Option shall be determined by the Committee, provided that the exercise
price for any Option shall not be less than the Fair Market Value as of the
date of the grant.
(b) TIME AND CONDITIONS OF EXERCISE. The Committee shall determine
-------------------------------
the time or times at which an Option may be exercised in whole or in part.
The Committee also shall determine the performance or other conditions, if
any, that must be satisfied before all or part of an Option may be
exercised. The Committee may waive any exercise provisions at any time in
whole or in part based upon factors as the Committee may determine in its
sole discretion so that the Option becomes exerciseable at an earlier date.
(c) PAYMENT. The Committee shall determine the methods by which the
-------
exercise price of an Option may be paid, the form of payment, including,
without limitation, cash, shares of Stock, or other property (including
"cashless exercise" arrangements), and the methods by which shares of Stock
shall be delivered or deemed to be delivered to Participants; provided,
however, that if shares of Stock are used to pay the exercise price of an
Option, such shares must have been held by the Participant for at least six
months.
(d) EVIDENCE OF GRANT. All Options shall be evidenced by a written
-----------------
Award Agreement between the Corporation and the Participant. The Award
Agreement shall include such provisions, not inconsistent with the Plan, as
may be specified by the Committee.
(e) EXERCISE TERM. In no event may any Option be exercisable for more
-------------
than ten years from the date of its grant.
7.2 INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock Options
-----------------------
granted under the Plan must comply with the following additional rules:
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(a) EXERCISE PRICE. The exercise price per share of Stock shall be
--------------
set by the Committee, provided that the exercise price for any Incentive
Stock Option shall not be less than the Fair Market Value as of the date of
the grant.
(b) EXERCISE. In no event may any Incentive Stock Option be
--------
exercisable for more than ten years from the date of its grant.
(c) LAPSE OF OPTION. An Incentive Stock Option shall lapse under the
---------------
earliest of the following circumstances; provided, however, that the
Committee may, prior to the lapse of the Incentive Stock Option under the
circumstances described in paragraphs (3), (4) and (5) below, provide in
writing that the Option will extend until a later date, but if an Option is
exercised after the dates specified in paragraphs (3), (4) and (5) below,
it will automatically become a Non-Qualified Stock Option:
(1) The Incentive Stock Option shall lapse as of the option
expiration date set forth in the Award Agreement.
(2) The Incentive Stock Option shall lapse ten years after it is
granted, unless an earlier time is set in the Award Agreement.
(3) If the Participant terminates employment for any reason
other than as provided in paragraph (4) or (5) below, the Incentive
Stock Option shall lapse, unless it is previously exercised, three
months after the Participant's termination of employment; provided,
however, that if the Participant's employment is terminated by the
Corporation for Cause (as determined by the Corporation), the
Incentive Stock Option shall (to the extent not previously exercised)
lapse immediately.
(4) If the Participant terminates employment by reason of his
Disability, the Incentive Stock Option shall lapse, unless it is
previously exercised, one year after the Participant's termination of
employment.
(5) If the Participant dies while employed, or during the three-
month period described in paragraph (3) or during the one-year period
described in paragraph (4) and before the Option otherwise lapses, the
Option shall lapse one year after the Participant's death. Upon the
Participant's death, any exercisable Incentive Stock Options may be
exercised by the Participant's beneficiary, determined in accordance
with Section 13.6.
Unless the exercisability of the Incentive Stock Option is accelerated
as provided in Article 13, if a Participant exercises an Option after
termination of employment, the Option may be exercised only with respect to
the shares that were otherwise vested on the Participant's termination of
employment.
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(d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market Value
----------------------------
(determined as of the time an Award is made) of all shares of Stock with
respect to which Incentive Stock Options are first exercisable by a
Participant in any calendar year may not exceed $100,000.00.
(e) TEN PERCENT OWNERS. No Incentive Stock Option shall be granted to
------------------
any individual who, at the date of grant, owns stock possessing more than
ten percent of the total combined voting power of all classes of stock of
the Corporation or any Parent or Subsidiary unless the exercise price per
share of such Option is at least 110% of the Fair Market Value per share of
Stock at the date of grant and the Option expires no later than five years
after the date of grant.
(f) EXPIRATION OF INCENTIVE STOCK OPTIONS. No Award of an Incentive
-------------------------------------
Stock Option may be made pursuant to the Plan after the day immediately
prior to the tenth anniversary of the Effective Date.
(g) RIGHT TO EXERCISE. During a Participant's lifetime, an Incentive
-----------------
Stock Option may be exercised only by the Participant or, in the case of
the Participant's Disability, by the Participant's guardian or legal
representative.
(h) DIRECTORS. The Committee may not grant Incentive Stock Options to
---------
its directors.
ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1 GRANT OF STOCK APPRECIATION RIGHTS. The Committee is authorized to
----------------------------------
grant Stock Appreciation Rights to Participants on the following terms and
conditions:
(a) RIGHT TO PAYMENT. Upon the exercise of a Stock Appreciation
----------------
Right, the Participant to whom it is granted has the right to receive the
excess, if any, of:
(1) The Fair Market Value of one share of Stock on the date of
exercise; over
(2) The grant price of the Stock Appreciation Right as
determined by the Committee, which shall not be less than the Fair
Market Value of one share of Stock on the date of grant in the case of
any Stock Appreciation Right related to an Incentive Stock Option.
(b) OTHER TERMS. All awards of Stock Appreciation Rights shall be
-----------
evidenced by an Award Agreement. The terms, methods of exercise, methods
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of settlement, form of consideration payable in settlement, and any other
terms and conditions of any Stock Appreciation Right shall be determined by
the Committee at the time of the grant of the Award and shall be reflected
in the Award Agreement.
ARTICLE 9
PERFORMANCE SHARES
9.1 GRANT OF PERFORMANCE SHARES. The Committee is authorized to grant
---------------------------
Performance Shares to Participants on such terms and conditions as may be
selected by the Committee. The Committee shall have the complete discretion to
determine the number of Performance Shares granted to each Participant. All
Awards of Performance Shares shall be evidenced by an Award Agreement.
9.2 RIGHT TO PAYMENT. A grant of Performance Shares gives the Participant
----------------
rights, valued as determined by the Committee, and payable to, or exercisable
by, the Participant to whom the Performance Shares are granted, in whole or in
part, as the Committee shall establish at grant or thereafter. The Committee
shall set performance goals and other terms or conditions to payment of the
Performance Shares in its discretion which, depending on the extent to which
they are met, will determine the number and value of Performance Shares that
will be paid to the Participant.
9.3 OTHER TERMS. Performance Shares may be payable in cash, Stock, or
-----------
other property, and have such other terms and conditions as determined by the
Committee and reflected in the Award Agreement.
ARTICLE 10
RESTRICTED STOCK AWARDS
10.1 GRANT OF RESTRICTED STOCK. The Committee is authorized to make Awards
-------------------------
of Restricted Stock to Participants in such amounts and subject to such terms
and conditions as may be selected by the Committee. All Awards of Restricted
Stock shall be evidenced by a Restricted Stock Award Agreement.
10.2 ISSUANCE AND RESTRICTIONS. Restricted Stock shall be subject to such
-------------------------
restrictions on transferability and other restrictions as the Committee may
impose (including, without limitation, limitations on the right to vote
Restricted Stock or the right to receive dividends on the Restricted Stock).
These restrictions may lapse separately or in combination at such times, under
such circumstances, in such installments, upon the satisfaction of performance
goals or otherwise, as the Committee determines at the time of the grant of the
Award or thereafter.
10.3 FORFEITURE. Except as otherwise determined by the Committee at the
----------
time of the grant of the Award or thereafter, upon termination of employment
during the applicable restriction period or upon failure to satisfy a
performance goal during the
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applicable restriction period, Restricted Stock that is at that time subject to
restrictions shall be forfeited and reacquired by the Corporation; provided,
however, that the Committee may provide in any Award Agreement that restrictions
or forfeiture conditions relating to Restricted Stock will be waived in whole or
in part in the event of terminations resulting from specified causes, and the
Committee may in other cases waive in whole or in part restrictions or
forfeiture conditions relating to Restricted Stock.
10.4 CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock granted under the
---------------------------------
Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing shares of Restricted Stock are registered in the name
of the Participant, certificates must bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Restricted Stock.
ARTICLE 11
DIVIDEND EQUIVALENTS
11.1 GRANT OF DIVIDEND EQUIVALENTS. The Committee is authorized to grant
-----------------------------
Dividend Equivalents to Participants subject to such terms and conditions as may
be selected by the Committee. Dividend Equivalents shall entitle the
Participant to receive payments equal to dividends with respect to all or a
portion of the number of shares of Stock subject to an Award, as determined by
the Committee. The Committee may provide that Dividend Equivalents be paid or
distributed when accrued or be deemed to have been reinvested in additional
shares of Stock, or otherwise reinvested.
ARTICLE 12
OTHER STOCK-BASED AWARDS
12.1 GRANT OF OTHER STOCK-BASED AWARDS. The Committee is authorized,
---------------------------------
subject to limitations under applicable law, to grant to Participants such other
Awards that are payable in, valued in whole or in part by reference to, or
otherwise based on or related to shares of Stock, as deemed by the Committee to
be consistent with the purposes of the Plan, including without limitation shares
of Stock awarded purely as a "bonus" and not subject to any restrictions or
conditions, convertible or exchangeable debt securities, other rights
convertible or exchangeable into shares of Stock, and Awards valued by reference
to book value of shares of Stock or the value of securities of or the
performance of specified Parents or Subsidiaries. The Committee shall determine
the terms and conditions of such Awards.
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<PAGE>
ARTICLE 13
PROVISIONS APPLICABLE TO AWARDS
13.1 STAND-ALONE, TANDEM, AND SUBSTITUTE AWARDS. Awards granted under the
------------------------------------------
Plan may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution for, any other Award granted
under the Plan. If an Award is granted in substitution for another Award, the
Committee may require the surrender of such other Award in consideration of the
grant of the new Award. Awards granted in addition to or in tandem with other
Awards may be granted either at the same time as or at a different time from the
grant of such other Awards.
13.2 EXCHANGE PROVISIONS. The Committee may at any time offer to exchange
-------------------
or buy out any previously granted Award for a payment in cash, Stock, or another
Award (subject to Section 14.1 and Section 15.2), based on the terms and
conditions the Committee determines and communicates to the Participant at the
time the offer is made, and after taking into account any factors deemed
relevant, including without limitation, tax, securities and accounting effects
of such an exchange.
13.3 TERM OF AWARD. The term of each Award shall be for the period as
-------------
determined by the Committee, provided that in no event shall the term of any
Incentive Stock Option or a Stock Appreciation Right granted in tandem with the
Incentive Stock Option exceed a period of ten years from the date of its grant
(or, if Section 7.2(e) applies, five years from the date of its grant).
13.4 FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan and any
--------------------------
applicable law or Award Agreement, payments or transfers to be made by the
Corporation or a Parent or Subsidiary on the grant or exercise of an Award may
be made in such form as the Committee determines at or after the time of grant,
including without limitation, cash, Stock, other Awards, or other property, or
any combination, and may be made in a single payment or transfer, in
installments, or on a deferred basis, in each case determined in accordance with
rules adopted by, and at the discretion of, the Committee.
13.5 LIMITS ON TRANSFER. No right or interest of a Participant in any
------------------
unexercised or restricted Award may be pledged, encumbered, or hypothecated to
or in favor of any party other than the Corporation or a Parent or Subsidiary,
or shall be subject to any lien, obligation, or liability of such Participant to
any other party other than the Corporation or a Parent or Subsidiary. No
unexercised or restricted Award shall be assignable or transferable by a
Participant other than by will or the laws of descent and distribution or,
except in the case of an Incentive Stock Option, pursuant to a domestic
relations order that would satisfy Section 414(p)(1)(A) of the Code if such
Section applied to an Award under the Plan; provided, however, that the
Committee may (but need not) permit other transfers where the Committee
concludes that such transferability (i) does not result in accelerated taxation,
(ii) does not cause any Option intended to be an Incentive Stock Option to fail
to be described in Code Section 422(b), and (iii) is otherwise
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<PAGE>
appropriate and desirable, taking into account any factors deemed relevant,
including without limitation, state or federal tax or securities laws applicable
to transferable Awards.
13.6 BENEFICIARIES. Notwithstanding Section 13.5, a Participant may, in
-------------
the manner determined by the Committee, designate a beneficiary to exercise the
rights of the Participant and to receive any distribution with respect to any
Award upon the Participant's death. A beneficiary, legal guardian, legal
representative, or other person claiming any rights under the Plan is subject to
all terms and conditions of the Plan and any Award Agreement applicable to the
Participant, except to the extent the Plan and Award Agreement otherwise
provide, and to any additional restrictions deemed necessary or appropriate by
the Committee. If no beneficiary has been designated or survives the
Participant, payment shall be made to the Participant's estate. Subject to the
foregoing, a beneficiary designation may be changed or revoked by a Participant
at any time provided the change or revocation is filed with the Committee.
13.7 STOCK CERTIFICATES. All Stock certificates delivered under the Plan
------------------
are subject to any stop-transfer orders and other restrictions as the Committee
deems necessary or advisable to comply with federal or state securities laws,
rules and regulations and the rules of any national securities exchange or
automated quotation system on which the Stock is listed, quoted, or traded. The
Committee may place legends on any Stock certificate to reference restrictions
applicable to the Stock.
13.8 ACCELERATION UPON DEATH OR DISABILITY. Notwithstanding any other
-------------------------------------
provision in the Plan or any Participant's Award Agreement to the contrary, upon
the Participant's death or Disability during his employment, all outstanding
Options, Stock Appreciation Rights, and other Awards in the nature of rights
that may be exercised shall become fully exercisable and all restrictions on
outstanding Awards shall lapse. Any Option or Stock Appreciation Rights Awards
shall thereafter continue or lapse in accordance with the other provisions of
the Plan and the Award Agreement. To the extent that this provision causes
Incentive Stock Options to exceed the dollar limitation set forth in Section
7.2(d), the excess Options shall be deemed to be Non-Qualified Stock Options.
13.9 ACCELERATION UPON A CHANGE OF CONTROL. Except as otherwise provided
-------------------------------------
in the Award Agreement, upon the occurrence of a Change of Control, all
outstanding Options, Stock Appreciation Rights, and other Awards in the nature
of rights that may be exercised shall become fully exercisable and all
restrictions on outstanding Awards shall lapse; provided, however that such
acceleration will not occur if, in the opinion of the Corporation's accountants,
such acceleration would preclude the use of "pooling of interest" accounting
treatment for a Change of Control transaction that (a) would otherwise qualify
for such accounting treatment, and (b) is contingent upon qualifying for such
accounting treatment. To the extent that this provision causes Incentive Stock
Options to exceed the dollar limitation set forth in Section 7.2(d), the excess
Options shall be deemed to be Non-Qualified Stock Options.
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<PAGE>
13.10 ACCELERATION UPON CERTAIN EVENTS NOT CONSTITUTING A CHANGE OF
-------------------------------------------------------------
CONTROL. In the event of the occurrence of any circumstance, transaction or
- -------
event not constituting a Change of Control (as defined in Section 3.1) but which
the Board deems to be, or to be reasonably likely to lead to, an effective
change in control of the Corporation of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of the 1934 Act, the Committee
may in its sole discretion declare all outstanding Options, Stock Appreciation
Rights, and other Awards in the nature of rights that may be exercised to be
fully exercisable, and/or all restrictions on all outstanding Awards to have
lapsed, in each case, as of such date as the Committee may, in its sole
discretion, declare, which may be on or before the consummation of such
transaction or event. To the extent that this provision causes Incentive Stock
Options to exceed the dollar limitation set forth in Section 7.2(d), the excess
Options shall be deemed to be Non-Qualified Stock Options.
13.11 ACCELERATION FOR ANY OTHER REASON. Regardless of whether an event
---------------------------------
has occurred as described in Section 13.9 or 13.10 above, the Committee may, in
its sole discretion, at any time determine that all or a portion of a
Participant's Options, Stock Appreciation Rights, and other Awards in the nature
of rights that may be exercised shall become fully or partially exercisable,
and/or that all or a part of the restrictions on all or a portion of the
outstanding Awards shall lapse, in each case, as of such date as the Committee
may, in its sole discretion, declare. The Committee may discriminate among
Participants and among Awards granted to a Participant in exercising its
discretion pursuant to this Section 13.11.
13.12 EFFECT OF ACCELERATION. If an Award is accelerated under Section
----------------------
13.9 or 13.10, the Committee may, in its sole discretion, provide (i) that the
Award will expire after a designated period of time after such acceleration to
the extent not then exercised, (ii) that the Award will be settled in cash
rather than Stock, (iii) that the Award will be assumed by another party to the
transaction giving rise to the acceleration or otherwise be equitably converted
in connection with such transaction, or (iv) any combination of the foregoing.
The Committee's determination need not be uniform and may be different for
different Participants whether or not such Participants are similarly situated.
13.13 PERFORMANCE GOALS. The Committee may determine that any Award
-----------------
granted pursuant to this Plan to a Participant (including, but not limited to,
Participants who are Covered Employees) shall be determined solely on the basis
of (a) the achievement by the Corporation or a Parent or Subsidiary of a
specified target return, or target growth in return, on equity or assets, (b)
the Corporation's stock price, (c) the Corporation's total shareholder return
(stock price appreciation plus reinvested dividends) relative to a defined
comparison group or target over a specific performance period, (d) the
achievement by the Corporation or a Parent or Subsidiary, or a business unit of
any such entity, of a specified target, or target growth in, net income or
earnings per share, or (e) any combination of the goals set forth in (a) through
(d) above. If an Award is made on such basis, the Committee shall establish
goals prior to the beginning of the period for
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<PAGE>
which such performance goal relates (or such later date as may be permitted
under Code Section 162(m) or the regulations thereunder), and the Committee has
the right for any reason to reduce (but not increase) the Award, notwithstanding
the achievement of a specified goal. Any payment of an Award granted with
performance goals shall be conditioned on the written certification of the
Committee in each case that the performance goals and any other material
conditions were satisfied.
13.14 TERMINATION OF EMPLOYMENT. Whether military, government or other
-------------------------
service or other leave of absence shall constitute a termination of employment
shall be determined in each case by the Committee at its discretion, and any
determination by the Committee shall be final and conclusive. A termination of
employment shall not occur (i) in a circumstance in which a Participant
transfers from the Corporation to one of its Parents or Subsidiaries, transfers
from a Parent or Subsidiary to the Corporation, or transfers from one Parent or
Subsidiary to another Parent or Subsidiary, or (ii) in the discretion of the
Committee as specified at or prior to such occurrence, in the case of a spin-off
of the Participant's employer from the Corporation or any Parent or Subsidiary.
To the extent that this provision causes Incentive Stock Options to extend
beyond three months from the date a Participant is deemed to be an employee of
the Corporation, a Parent or Subsidiary for purposes of Section 424(f) of the
Code, the Options held by such Participant shall be deemed to be Non-Qualified
Stock Options.
13.15 LOAN PROVISIONS. With the consent of the Committee, the Corporation
---------------
may make, guarantee or arrange for a loan or loans to a Participant with respect
to the exercise of any Option granted under this Plan and/or with respect to the
payment of the purchase price, if any, of any Award granted hereunder and/or
with respect to the payment by the Participant of any or all federal and/or
state income taxes due on account of the granting or exercise of any Award
hereunder. The Committee shall have full authority to decide whether to make a
loan or loans hereunder and to determine the amount, terms and provisions of any
such loan or loans, including the interest rate to be charged in respect of any
such loan or loans, whether the loan or loans are to be made with or without
recourse against the borrower, the terms on which the loan is to be repaid and
the conditions, if any, under which the loan or loans may be forgiven.
ARTICLE 14
CHANGES IN CAPITAL STRUCTURE
14.1 GENERAL. In the event of a corporate transaction involving the
-------
Corporation (including, without limitation, any stock dividend, stock split,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination or exchange of shares), the
authorization limits under Section 5.1 and 5.4 shall be adjusted
proportionately, and the Committee may adjust Awards to preserve the benefits or
potential benefits of the Awards. Action by the Committee may include: (i)
adjustment of the number and kind of shares which may be delivered under the
Plan; (ii) adjustment of the number and kind of shares subject to outstanding
Awards; (iii) adjustment of the exercise price of outstanding Awards; and (iv)
any other adjustments
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<PAGE>
that the Committee determines to be equitable. Without limiting the foregoing,
in the event a stock dividend or stock split is declared upon the Stock, the
authorization limits under Section 5.1 and 5.4 shall be increased
proportionately, and the shares of Stock then subject to each Award shall be
increased proportionately without any change in the aggregate purchase price
therefor.
ARTICLE 15
AMENDMENT, MODIFICATION AND TERMINATION
15.1 AMENDMENT, MODIFICATION AND TERMINATION. The Board or the Committee
---------------------------------------
may, at any time and from time to time, amend, modify or terminate the Plan
without shareholder approval; provided, however, that the Board or Committee may
condition any amendment or modification on the approval of shareholders of the
Corporation if such approval is necessary or deemed advisable with respect to
tax, securities or other applicable laws, policies or regulations.
15.2 AWARDS PREVIOUSLY GRANTED. At any time and from time to time, the
-------------------------
Committee may amend, modify or terminate any outstanding Award without approval
of the Participant; provided, however, that, subject to the terms of the
applicable Award Agreement, such amendment, modification or termination shall
not, without the Participant's consent, reduce or diminish the value of such
Award determined as if the Award had been exercised, vested, cashed in or
otherwise settled on the date of such amendment or termination, and provided
further that the original term of any Option may not be extended and, except as
otherwise provided in the anti-dilution provision of the Plan, the exercise
price of any Option may not be reduced. No termination, amendment, or
modification of the Plan shall adversely affect any Award previously granted
under the Plan, without the written consent of the Participant.
ARTICLE 16
GENERAL PROVISIONS
16.1 NO RIGHTS TO AWARDS. No Participant or any eligible participant
-------------------
shall have any claim to be granted any Award under the Plan, and neither the
Corporation nor the Committee is obligated to treat Participants or eligible
participants uniformly.
16.2 NO STOCKHOLDER RIGHTS. No Award gives the Participant any of the
---------------------
rights of a shareholder of the Corporation unless and until shares of Stock are
in fact issued to such person in connection with such Award.
16.3 WITHHOLDING. The Corporation or any Parent or Subsidiary shall have
-----------
the authority and the right to deduct or withhold, or require a Participant to
remit to the Corporation, an amount sufficient to satisfy federal, state, and
local taxes (including the Participant's FICA obligation) required by law to be
withheld with respect to any taxable event arising as a result of the Plan.
With respect to withholding required upon any taxable event under the Plan, the
Committee may, at the time the Award is granted or
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<PAGE>
thereafter, require or permit that any such withholding requirement be
satisfied, in whole or in part, by withholding from the Award shares of Stock
having a Fair Market Value on the date of withholding equal to the minimum
amount (and not any greater amount) required to be withheld for tax purposes,
all in accordance with such procedures as the Committee establishes.
16.4 NO RIGHT TO CONTINUED SERVICE. Nothing in the Plan or any Award
-----------------------------
Agreement shall interfere with or limit in any way the right of the Corporation
or any Parent or Subsidiary to terminate any Participant's employment or status
as an officer or consultant at any time, nor confer upon any Participant any
right to continue as an employee, officer or consultant of the Corporation or
any Parent or Subsidiary.
16.5 UNFUNDED STATUS OF AWARDS. The Plan is intended to be an "unfunded"
-------------------------
plan for incentive and deferred compensation. With respect to any payments not
yet made to a Participant pursuant to an Award, nothing contained in the Plan or
any Award Agreement shall give the Participant any rights that are greater than
those of a general creditor of the Corporation or any Parent or Subsidiary.
16.6 INDEMNIFICATION. To the extent allowable under applicable law, each
---------------
member of the Committee shall be indemnified and held harmless by the
Corporation from any loss, cost, liability, or expense that may be imposed upon
or reasonably incurred by such member in connection with or resulting from any
claim, action, suit, or proceeding to which such member may be a party or in
which he may be involved by reason of any action or failure to act under the
Plan and against and from any and all amounts paid by such member in
satisfaction of judgment in such action, suit, or proceeding against him
provided he gives the Corporation an opportunity, at its own expense, to handle
and defend the same before he undertakes to handle and defend it on his own
behalf. The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under the
Corporation's Articles of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Corporation may have to indemnify them or hold
them harmless.
16.7 RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be
------------------------------
taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or benefit plan of the
Corporation or any Parent or Subsidiary unless provided otherwise in such other
plan.
16.8 EXPENSES. The expenses of administering the Plan shall be borne by
--------
the Corporation and its Parents or Subsidiaries.
16.9 TITLES AND HEADINGS. The titles and headings of the Sections in the
-------------------
Plan are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings, shall control.
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<PAGE>
16.10 GENDER AND NUMBER. Except where otherwise indicated by the context,
-----------------
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
16.11 FRACTIONAL SHARES. No fractional shares of Stock shall be issued
-----------------
and the Committee shall determine, in its discretion, whether cash shall be
given in lieu of fractional shares or whether such fractional shares shall be
eliminated by rounding up.
16.12 GOVERNMENT AND OTHER REGULATIONS. The obligation of the Corporation
--------------------------------
to make payment of awards in Stock or otherwise shall be subject to all
applicable laws, rules, and regulations, and to such approvals by government
agencies as may be required. The Corporation shall be under no obligation to
register under the 1933 Act, or any state securities act, any of the shares of
Stock issued in connection with the Plan. The shares issued in connection with
the Plan may in certain circumstances be exempt from registration under the 1933
Act, and the Corporation may restrict the transfer of such shares in such manner
as it deems advisable to ensure the availability of any such exemption.
16.13 GOVERNING LAW. To the extent not governed by federal law, the Plan
--------------
and all Award Agreements shall be construed in accordance with and governed by
the laws of the State of Georgia.
16.14 ADDITIONAL PROVISIONS. Each Award Agreement may contain such other
---------------------
terms and conditions as the Committee may determine; provided that such other
terms and conditions are not inconsistent with the provisions of this Plan.
The foregoing is hereby acknowledged as being the Harry's Farmers Market,
Inc. 2000 Long-Term Incentive Plan as adopted by the Board on April 24, 2000.
HARRY'S FARMERS MARKET, INC.
By: /s/ John D. Branch
------------------------------
Name: John D. Branch
Title: Senior Vice President and
Chief Financial Officer
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<PAGE>
PROXY
HARRY'S FARMERS MARKET, INC.
1180 Upper Hembree Road
Roswell, Georgia 30076
The undersigned shareholder of Harry's Farmers Market, Inc. constitutes and
appoints Harry A. Blazer and John L. Lathum, or either one of them, each with
full power of substitution, to vote the number of shares of Class A common
stock that the undersigned would be entitled to vote if personally present at
the annual meeting of shareholders to be held at the High Museum of Art, 1280
Peachtree Street NE, Atlanta, Georgia 30309 on Monday, June 26, 2000, at 10:00
A.M., or at any adjournments, upon the proposals 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. The board of
directors recommends a vote FOR the proposals.
1. Election of Directors. On the proposal to elect the following directors to
serve until the 2001 annual meeting of shareholders and until their successors
are elected and qualified:
Harry A. Blazer, John D. Branch, Robert C. Glustrom,
Donald M. Pamenter, 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:
- --------------------------------------------------------------------------------
2. Approval of the 2000 Long-Term Incentive Plan. On the proposal to approve
the 2000 Long-Term Incentive Plan:
FOR [_] AGAINST [_] ABSTAIN [_]
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 proposals, and with discretionary authority on all other matters that
may properly come before the annual meeting or any adjournments thereof.
<PAGE>
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: ______________________ , 2000
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.
