191576.002
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exch
ange Act of 1934
[Amendment No. ______]
Filed by Registrant X
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
X Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to 240.14a-11(c) or
240.14a-12
The Quizno's Corporation
(Name of Registrant as Specified in Its Charter)
The Quizno's Corporation
(Name of Person(s) Filing Proxy Statement)
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.
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transaction computed pursuant to Exchange Act Rule
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Check box if any part of the fee is offset as provided by
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previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form Schedule or Registration Statement No.:
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4) Date Filed:
THE QUIZNO'S CORPORATION
1099 Eighteenth Street, Suite 2850
Denver, Colorado 80202
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
June 6, 1997
To the Stockholders of
The Quizno's Corporation:
The 1997 Annual Meeting of Stockholders (the "Annual
Meeting") of The Quizno's Corporation, a Colorado corporation
(the "Company"), will be held on Friday, June 6, 1997, at
10:00 a.m. (local time), in the Remington 2 Room of the Embassy
Suites Hotel - Downtown, 1881 Curtis Street, Denver, Colorado
80202, for the following purposes:
1) to elect directors of the Company to serve until
the next annual meeting of stockholders or until their successors
are duly elected and qualified;
2) to ratify amendments to the Company's Non-Employee
Directors and Advisors Stock Option Plan, including an increase
from 90,000 to 140,000 in the number of shares of the Company's
Common Stock reserved for issuance under such Plan;
3) to ratify the selection by the Board of Directors
of Ehrhardt Keefe Steiner & Hottman, P.C. as independent auditors
of the Company for the 1997 fiscal year; and
4) to transact such other business as may properly
come before the Annual Meeting, or any adjournment(s) or
postponement(s) thereof.
The Board of Directors has fixed the close of business
on Friday, April 18, 1996, as the record date for determining the
stockholders entitled to notice of, and to vote at, the Annual
Meeting. A complete list of stockholders entitled to vote at the
Annual Meeting will be available, upon written demand, for
inspection during normal business hours by any stockholder of the
Company prior to the Annual Meeting, for a proper purpose, at the
Company's offices located at the address set forth above. Only
stockholders of record at that time are entitled to notice of,
and to vote at, the Annual Meeting and any and all adjournments
or postponements thereof.
A copy of the Company's Annual Report for the fiscal
year ended December 31, 1996, a Proxy Statement and a proxy card
accompany this notice. These materials are first being sent to
stockholders on or about May 1, 1997.
Stockholders are cordially invited to attend the Annual
Meeting in person. However, to assure your representation at the
Annual Meeting, please complete and sign the enclosed proxy card
and return it promptly. If you choose, you may still vote in
person at the Annual Meeting even though you previously submitted
a proxy card.
By Order of the Board of Directors,
RICHARD F. SCHADEN
Secretary
Denver, Colorado
April 29, 1997
THE QUIZNO'S CORPORATION
1099 Eighteenth Street, Suite 2850
Denver, Colorado 80202
PROXY STATEMENT
Annual Meeting of Stockholders
To Be Held on June 6, 1997
This Proxy Statement and the accompanying proxy card
are being furnished to the stockholders of The Quizno's
Corporation (the "Company"), in connection with the solicitation
of proxies by and on behalf of the Board of Directors of the
Company (the "Board") for use at its 1997 Annual Meeting of
Stockholders to be held on Friday, June 6, 1996, at 10:00 a.m.
(local time), in the Remington 2 Room of the Embassy Suites
Hotel - Downtown, 1881 Curtis Street, Denver, Colorado 80202, and
at any adjournment(s) or postponement(s) thereof (the "Annual
Meeting"). This Proxy Statement, the accompanying proxy card and
the Company's Annual Report (the "Annual Report") for the fiscal
year ended December 31, 1996, are first being mailed to
stockholders on or about May 1, 1997. The Annual Report is not
to be considered a part of the Company's proxy solicitation
materials.
PURPOSE OF ANNUAL MEETING
At the Annual Meeting, stockholders will be asked to
(i) elect five directors of the Company to serve until the next
annual meeting of stockholders or until their successors are duly
elected and qualified; (ii) ratify amendments to the Company's
Non-Employee Directors and Advisors Stock Option Plan, including
an increase from 90,000 to 140,000 in the number of shares of the
Company's Common Stock, par value $.001 per share (the "Common
Stock"), reserved for issuance under such Plan; (iii) ratify the
selection by the Board of Ehrhardt Keefe Steiner & Hottman, P.C.
as the Company's auditors for the year ending December 31, 1997
("Fiscal 1997"); and (iv) transact such other business as may
properly come before the Annual Meeting. For election of
directors, those candidates receiving the most votes shall be
elected, if a quorum exists. Action on item (ii) above will be
approved by shareholders if a majority of votes present, or
represented and entitled to vote at the meeting vote in favor of
the action, and a quorum exists. Action on other matters will be
approved by the shareholders if the number of votes cast for the
action exceeds the number of votes cast against the action, and a
quorum exists. The Board recommends a vote "FOR" (a) the
election of the five nominees for director of the Company listed
below, (b) the ratification of the proposed amendments to the
Company's Non-Employee Directors and Advisors Stock Option Plan,
and (c) the ratification of Ehrhardt Keefe Steiner & Hottman,
P.C. as the Company's auditors for Fiscal 1997.
QUORUM AND VOTING RIGHTS
The presence, in person or by proxy, of the holders of
a majority of the outstanding shares of Common Stock is necessary
to constitute a quorum at the Annual Meeting. Only stockholders
of record at the close of business on Friday, April 18, 1996 (the
"Record Date"), will be entitled to notice of, and to vote at,
the Annual Meeting. As of the Record Date, there were 2,865,746
shares of Common Stock outstanding and entitled to vote. Holders
of Common Stock as of the Record Date are entitled to one vote
for each share held.
All shares of Common Stock represented by properly
executed proxies will, unless such proxies have previously been
revoked, be voted in accordance with the instructions indicated
in such proxies. If no such instructions are indicated, such
shares will be voted in favor of (i.e., "FOR") (i) the election
of the nominees for director of the Company listed below, (ii)
the ratification of the proposed amendments to the Company's Non-
Employee Directors and Advisors Stock Option Plan, and (iii) the
ratification of Ehrhardt Keefe Steiner & Hottman, P.C. as the
Company's auditors for Fiscal 1997. Abstentions and broker non-
votes will not be counted as votes cast and will have no effect
on the result of a vote on matters identified in clauses (i) and
(iii) above, although both will count towards the presence of a
quorum. On the matter identified in clause (ii) above,
abstentions will be treated as "no" votes and broker non-votes
will again be disregarded. Any stockholder executing a proxy has
the power to revoke such proxy at any time prior to its exercise.
A proxy may be revoked prior to exercise by (a) filing with the
Company a written revocation of the proxy, (b) appearing at the
Annual Meeting and casting a vote contrary to that indicated on
the proxy or (c) submitting a duly executed proxy bearing a later
date.
The cost of preparing, printing, assembling and mailing
this Proxy Statement and other material furnished to stockholders
in connection with the solicitation of proxies will be borne by
the Company. In addition to the solicitation of proxies by use
of the mails, officers, directors and regular employees of the
Company may solicit proxies by written communication, by
telephone, telegraph or personal call. Such persons are to
receive no special compensation for any solicitation activities.
The Company will reimburse banks, brokers and other persons
holding Common Stock in their names, or those of their nominees,
for their expenses in forwarding proxy solicitation materials to
beneficial owners of Common Stock.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information
regarding beneficial ownership of the Company's equity securities
as of April 18, 1996, (a) by each person known to the Company to
own beneficially more than 5% of the such securities, (b) each of
the Company's directors and (c) by all officers and directors of
the Company named herein as a group.
<TABLE>
<CAPTION>
Common Stock Percent Preferred Preferred Stock
Percentage
Name and Address of Owner Owned (1) Ownership Stock Owned Ownership
<S> <C> <C> <C> <C>
Richard E. Schaden(2) 776,878 27.1% 73,000 50%
1099 Eighteenth St.,
Suite 2850
Denver, CO 80202
Richard F. Schaden(2) 776,667 27.1% 73,000 50%
1099 Eighteenth St.,
Suite 2850
Denver, CO 80202
Retail & Restaurant 372,847 11.5% N.A. N.A.
Growth
Capital, L.P.(2)
10000 N. Central
Expressway
Suite 1060
Dallas, TX 75231
Brownell M. Bailey 14,000(3) 0.5% N.A. N.A.
5380 Ridge Trail
Littleton, CO 80123
J. Eric Lawrence 4,003(3) 0.1% N.A. N.A.
10000 N. Central
Expressway
Suite 1060
Dallas, TX 75231
Frederick H. Schaden 14,000(3) 0.5% N.A. N.A.
123 North Wacker
Drive, 24th Floor
Chicago, IL 60606
All Named Officers 1,617,088 55.2% 146,000 100%
and Directors
as a Group (9
persons)
</TABLE>
________________________
(1) The persons named in the table have sole voting power with
respect to all shares of Common Stock shown as beneficially
owned by them. A person is deemed to be the beneficial
owner of securities that can be acquired by such person
within sixty (60) days from the Record Date upon the
exercise of options. The record ownership of each
beneficial owner is determined by assuming that options that
are held by such person and that are exercisable within
sixty (60) days from the Record Date have been exercised.
The total outstanding shares used to calculate each
beneficial owner's percentage includes such option shares.
(2) Richard E. Schaden and Richard F. Schaden hold all of their
Common Stock and Preferred Stock of the Company in a voting
trust pursuant to which they are joint voting trustees
(excluding 211 shares allocated to Richard E. Schaden under
the Company's 401(K) Plan). However, each of them,
individually, has been given a proxy by the voting trust to
vote 50% of the shares owned by the voting trust. The
remaining duration of the voting trust agreement is 7 years,
subject to extension. Retail & Restaurant Growth Capital,
L.P. loaned the Company $2,000,000 on December 31, 1996, a
portion of which is convertible into 372,847 shares of
Common Stock at a conversion price of $3.10, subject to
adjustment in certain circumstances. The voting trust has
pledged 90% of the shares of Common Stock and Preferred
Stock owned by it to Retail & Restaurant Growth Capital,
L.P., subject to the Schadens continuing to exercise voting
control so long as there is no default under the loan
documents. So long as there is no default, the number of
shares pledged will ratably decrease over four years. See
"Certain Transactions."
(3) Messrs. Frederick Schaden, Lawrence and Bailey, each own
options to purchase the shares of the Company's Common Stock
indicated, which are currently exercisable.
ELECTION OF DIRECTORS
Nominees
The Board currently consists of five (5) members:
Richard E. Schaden, Richard F. Schaden, Frederick H. Schaden,
Brownell M. Bailey and J. Eric Lawrence. Mr. Richard E. Schaden
and Mr. Richard F. Schaden have been on the Company's Board of
Directors since 1991. Messrs. Bailey and Frederick Schaden were
elected to the Board in December 1993, just before the Company's
initial public offering. Mr. Lawrence was elected to the Board
in 1997. Richard E. Schaden is the son of Richard F. Schaden.
Frederick H. Schaden is the brother of Richard F. Schaden. The
Board proposes that the five current directors, listed below as
nominees, be re-elected as directors of the Company to hold
office until the next annual meeting of stockholders or until
their successors are duly elected and qualified. Each nominee
has consented to serve if elected to the Board. In the event
that any nominee is unable to serve as a director at the time of
the Annual Meeting (which is not expected), proxies with respect
to which no contrary direction is made will be voted "FOR" such
substitute nominee as shall be designated by the Board to fill
the vacancy.
The names of the nominees, their ages at the Record
Date and certain other information about them are set forth
below:
<TABLE>
<CAPTION>
Nominee Age Position(s) with Director
Company Since
<S> <C> <C> <C>
Richard E. 33 President, Chief 1991
Schaden Executive Officer and
Director
Richard F. 58 Vice President, 1991
Schaden Secretary and
Director
Frederick H. 50 Director 1993
Schaden
J. Eric Lawrence 29 Director 1997
Brownell E. 42 Director 1993
Bailey
</TABLE>
Mr. Richard E. Schaden has been President and a
Director of the Company since its inception on January 7, 1991.
Mr. Schaden had been a principal and the chief operating officer
of Schaden & Schaden, Inc., a company that owned and operated
Quizno's franchised restaurants from 1987 to 1994 when it was
sold to the Company. Mr. Schaden graduated Magna Cum Laude from
the University of Colorado with a degree in Business Management
and Finance. See "Certain Transactions."
Mr. Richard F. Schaden has been a Vice President,
Secretary and a Director of the Company since its inception on
January 7, 1991. Mr. Schaden had been a principal of Schaden &
Schaden, Inc., a company that owned and operated Quizno's
franchised restaurants from 1987 to 1994 when it was sold to the
Company. Mr. Schaden is the founding partner of the law firm of
Schaden, Katzman & Lampert with offices in Bloomfield Hills,
Michigan and Broomfield, Colorado. Mr. Schaden graduated from
the University of Detroit with a Bachelor of Science in
Aeronautical Engineering, received his Juris Doctorate from the
University of Detroit Law School and is an internationally known,
well-published attorney, specializing in aviation law. Prior to
entering the legal profession, Mr. Schaden was an aeronautical
engineer for Boeing Aircraft and Continental Aviation and
Engineering. Mr. Schaden has been on the board of numerous
private companies. See "Certain Transactions."
Mr. Brownell M. Bailey is a self-employed real-estate
development consultant, land planner and design engineer. He has
been self-employed for over five years. Prior employment
included the management of field operations and contract services
for the acquisition, development and construction of resort
properties, including residential, mixed use, and commercial
projects. Mr. Bailey has a B.A. degree from Union College and a
B.S. degree in Urban Planning and Engineering from Worcester
Polytechnic Institute.
Mr. Frederick H. Schaden is an Executive Vice President
of the Automotive Consulting Group of Aon Consulting, Inc. Aon
Consulting, Inc. is a subsidiary of Aon Corporation, a publicly
held company with annual revenues of nearly $4 billion. He has
been employed by Aon for over 20 years and has served as a senior
officer of its affiliates since 1981. Mr. Schaden earned a B.S.
in Business Administration from Xavier University in Cincinnati,
Ohio. See "Certain Transactions."
Mr. J. Eric Lawrence has been the General Partner of
Retail & Restaurant Growth Capital, L.P. ("RRGC"), a $60 million
investment fund focused on providing growth and expansion capital
to small businesses in the retail and restaurant industries,
since December 1995. RRGC is a Small Business Investment
Company, federally licensed by the Small Business Administration.
RRGC loaned $2,000,000 to the Company in 1996, and Mr. Lawrence
serves on the Board pursuant to a contractual arrangement between
the Company and RRGC. Mr. Lawrence has been extensively involved
in the analysis of the financial, operational and managerial
aspects of retail and restaurant companies throughout his career.
Prior to RRGC, he served as Vice President of Strategic Retail
Ventures, Inc., a boutique financial consulting and private
investment firm focusing on the needs of specialty retail and
restaurant companies from March 1993 to December 1995. Prior to
SRV, Mr. Lawrence was a Senior Consultant with Arthur Andersen,
in Dallas, Texas. Mr. Lawrence is a licensed C.P.A., and is a
graduate of Southern Methodist University with a B.B.A. in
Accounting and Minor in Economics, which included study abroad at
Oxford University, Oxford, England.
Board Committees and Meetings
Messrs. Frederick Schaden and Bailey are members of the
Compensation Committee of the Board of Directors. Messrs.
Richard E. Schaden and Bailey are members of the Audit Committee
of the Board of Directors. There is no nominating committee of
the Board of Directors.
The Board held a total of four (4) regular meetings and
two (2) special meeting during Fiscal 1996. One special meeting
of directors was held by execution of a unanimous consent.
During Fiscal 1996, the Audit Committee held one (1)
meeting. The Audit Committee is primarily responsible for
reviewing recommendations made by the Company's independent
auditors and evaluating the Company's adoption/implementation of
such recommendations.
During Fiscal 1996, the Compensation Committee held
three (3) regular meetings and one (1) special meeting. The
special meeting was held by execution of a unanimous consent.
The Compensation Committee is responsible for initiating,
evaluating and recommending to the Board matters relating to
employee compensation and the Company's employee benefit plans.
During Fiscal 1996, all directors attended over 75% of
the aggregate number of regular and special meetings of the Board
and of their respective committees.
Director Compensation
Directors who are not officers or employees of the
Company are paid $500 per day for each Board and Committee
meeting they attend and they are reimbursed for their reasonable
expenses of attending such meetings. In addition, such directors
receive an annual grant of options to purchase 4,000 shares of
Company Common Stock, which immediately vest. See "Increase of
Shares for Issuance Under and Amendment of Non-Employee Directors
and Advisors Stock Option Plan."
During Fiscal 1996, the Company paid Messrs. Bailey,
Patrick E. Meyers and Frederick Schaden ("Outside Directors")
$2,500, $2,500 and $2,000, respectively, as compensation for
their attendance at Board and Committee meetings. During Fiscal
1996, the Outside Directors each received a grant of options to
purchase 4,000 shares of Company Common Stock that immediately
vested.
Advisory Board
The Board of Directors have appointed three members to
an Advisory Board of persons with substantial experience in areas
of importance to the franchise restaurant industry and public
companies. The Advisory Board members attend Board meetings and
provide Directors with the benefit of their expertise. They do
not vote on matters before the Board. They are compensated in
the same manner as Directors who are not officers or employees of
the Company are compensated. The three current members of the
Advisory Board are Mr. Lewis G. Rudnick, Mr. Bruce H. Gulbas and
Mr. Lyle B. Stewart. Their backgrounds are as follows:
Lewis G. Rudnick is an internationally recognized
authority on franchising and distribution law and has practiced
in this area for 32 years. He is counsel to the International
Franchise Association, was a member of the Governing Committee of
the American Bar Association Forum on Franchising from 1977-1984
and served as Forum Chairman from 1981-1983. He is an editor of
the Journal of International Franchising and Distribution Law and
the Franchise Legal Digest, has authored and edited numerous
articles and books on franchising law and is a frequent speaker
on the topic of franchising and distribution law. He has
testified before Congress and other legislative bodies on the
subject of franchising.
Bruce H. Gulbas has been the President and owner of
National Restaurant Supply Co. since 1976. He is a graduate of
the University of Texas where he obtained his BBA degree in
marketing. He currently serves on the Boards of Directors of
Food Service Dealers Association ("FEDA") and Allied Buying
Corporation (a national food service equipment buying group). He
is also a member of Young Presidents Organization (YPO).
Lyle B. Stewart is an experienced securities attorney
who has represented public companies for over 25 years. He has
written articles for legal periodicals and spoken on securities
law matters. He was appointed by the Governor of Colorado to the
Colorado Securities Board in 1995 and currently serves as its
Chairman. He has represented the Company as legal counsel since
the Company's initial public offering.
EXECUTIVE OFFICERS
The following table sets forth (i) the names of the
executive officers, (ii) their ages at the Record Date and (iii)
the capacities in which they serve the Company:
<TABLE>
<CAPTION>
Name Age Positions with the Company
<S> <C> <C>
Richard E. 33 President, Chief Executive Officer and
Schaden Director
John F. Fitchett 35 Executive Vice President - Franchise
Support Services
Richard F. 58 Vice President, Secretary and Director
Schaden
Patrick E. Meyers 37 Vice President and General Counsel
John L. Gallivan 50 Chief Financial Officer, Treasurer and
Assistant Secretary
</TABLE>
See "Election of Directors - Nominees" above for a
description of the backgrounds of Richard E. Schaden and
Richard F. Schaden.
John F. Fitchett joined the Company as Executive Vice
President in 1996. Prior to joining the Company, he served as an
Area Director for Quizno's from December 1995 to April 1996.
From December 1990 to June 1995, he was President of Colonial
Pizza, Inc., a Domino's Pizza franchisee in Williamsburg,
Virginia. Prior to that he held several positions in the
Domino's Pizza, Inc. organization, from 1985 to 1990, including
Regional Director, overseeing corporate owed stores and Franchise
Operations Director, acting as a liaison with franchisees. He
graduated from Elon College in North Carolina with a BA degree.
Patrick E. Meyers joined the Company in 1997. He had
been an associate with the Denver law firm of Moye, Giles,
O'Keefe, Vermeire & Gorrell since September 1991, and was
selected as a partner of that firm in 1996. Before that he
served as a judicial law clerk to a Justice of the Colorado
Supreme Court from July 1990 to September 1991. Mr. Meyers
received his J.D. degree from the University of California,
Hastings College of Law and his B.A. degree from the University
of Colorado - Denver. Mr. Meyers served as a director of the
Company from 1993 to 1997, when he resigned to become a full-time
employee of the Company.
John L. Gallivan joined the Company as Chief Financial
Officer in 1994. He was later elected Treasurer and Assistant
Secretary. Prior to his joining the Company, he was a director
and Executive Vice President of Grease Monkey Holding Corporation
of Denver, a franchisor, owner, and operator of over 200 ten
minute oil change and fluid maintenance centers in the U.S. and
Mexico from 1979 through April 1994. He is a member of the
Colorado Society and the American Institute of CPAs. He
graduated from the University of Colorado at Boulder with a
bachelors degree in accounting.
Executive Compensation
Richard E. Schaden is the only executive officer of the
Company to receive in excess of $100,000 in base salary and bonus
in Fiscal 1996. However, Scott K. Adams, Senior Vice President
of Development, a non-executive officer of the Company also
exceeded $100,000 in base salary and bonus in Fiscal 1996.
Summary Compensation Table. The following table
provides certain summary information for fiscal 1996, fiscal 1995
and fiscal 1994, concerning compensation awarded or paid to, or
earned by, such officers:
<TABLE>
<CAPTION>
Long-Term and Other
Annual Compensation Compensation
Option 401(k) Plan
Name and Position Year Salary Bonus Other (1) Shares(2) Shares(3)
<S> <C> <C> <C> <C> <C> <C>
Richard E. Schaden, 12/31/94 $ 87,721 $ 0 $ 4,493 0 0
President and Chief12/31/95 $108,500 $52,212 $ 9,506 0 0
Executive Officer 12/31/96 $108,500 $ 0 $11,039 0 211
Scott K. Adams 12/31/94 $ 93,704 $16,447 $ 0 8,321 0
Senior Vice Pres. 12/31/95 $ 66,168 $25,490 $ 0 6,899 0
for Development 12/31/96 $ 62,936 $64,747 $ 0 9,773 10
</TABLE>
_________________
(1) The Company provides Mr. Schaden with an automobile
allowance for both business and personal use and pays
certain insurance premiums on his behalf.
(2) The Company, as an incentive for its eligible employees to
endeavor to enhance the Company's performance and assure its
future success, grants options to purchase shares of its
Common Stock to successful employees from time to time under
its Employee Stock Option Plan. All options indicated in
this table have been granted under such Plan.
(3) The Company has provided its employees with a 401(K)
Employee's Savings Plan, pursuant to which the Company
contributes to each eligible employee's account an amount
equal to 50% of such employee's annual contribution, up to
6% of such employee's total annual compensation. The
Company has issued shares of its Common Stock for 50% of its
annual contribution to each account under its 401(K) Plan.
Stock Option Awards. Richard E. Schaden has not been
granted any options or other rights to acquire Common stock,
except for the shares of convertible preferred stock beneficially
owned by him. See "Certain Transactions."
Scott K. Adams, as of December 31, 1996, held options
to acquire 24,993 shares of Common Stock, 9,773 of which relate
to options granted during 1996. Options granted under the Plan
generally expire ten years after the grant, or three months after
employment is terminated. The exercise prices of Mr. Adams'
options range from $3.00 to $5.00 per share of Common Stock.
During 1996, Mr. Adams received 18% of all options granted to
employees during such year. Mr. Adams has not exercised any of
the options granted to him under the Plan. As of December 31,
1996, Mr. Adams had exercisable options covering 4,707 shares of
Common Stock and unexercisable options covering 20,286 shares of
Common Stock. As of December 31, 1996, the aggregate dollar
value of Mr. Adams' in-the-money, unexercised but exercisable
options was $0 and his in-the-money, unexercised and
unexercisable options was approximately $677. Values for "in-the-
money" options represent the positive difference, if any, between
$3.125 per share, the reported last sale price on the NASDAQ
Small-Cap Market on December 31, 1996, and the exercise price of
outstanding options. Outstanding options are unexercisable if
they have not yet vested.
Employment Contracts. Richard E. Schaden has entered
into an Employment Agreement with the Company that terminates on
December 31, 2003. His contract provides that he will serve as
President and Chief Executive Officer of the Company.
Mr. Schaden will devote his full time to the Company. His
current base salary is set at $108,500 per year under the
contract, which may be adjusted from time to time by mutual
agreement between Mr. Schaden and the Board of Directors. The
contract provides an annual bonus equal to 10% of any positive
increase in earnings before interest, taxes, depreciation and
amortization for such full calendar year over the level of such
amount for the prior full calendar year. Such percentage was
reduced to 7% for the 1995 bonus reported above. See "Certain
Transactions." Mr. Schaden will receive a monthly automobile
allowance of up to $620.00 plus up to $150.00 for insurance
coverage. He will also receive a per diem travel allowance of
$30.00 per day while travelling on Company business. The
contract provides that the Company will pay one-half of
Mr. Schaden's medical insurance coverage and one-half of the cost
of disability insurance. The Company will pay for $1,000,000 of
term life insurance for Mr. Schaden, payable to his designated
beneficiary. The Company may terminate the Employment Agreement
for cause upon ninety days notice. Mr. Schaden may terminate the
Employment Agreement upon ninety days notice.
Richard F. Schaden has entered into an Employment
Agreement with the Company that terminates on December 31, 1998.
His contract provides that he will serve as Vice President and
Secretary of the Company. Mr. Schaden will not devote his full
time to the Company, but he will devote such time to the Company
as the Company requests. His current base salary is set at
$83,500 per year under the contract, which may be adjusted from
time to time by mutual agreement between Mr. Schaden and the
Board of Directors. Mr. Schaden may take on special projects for
the Company at the direction of the Board of Directors and
receive additional compensation for such projects. The contract
provides an annual bonus equal to 6% of any positive increase in
earnings before interest, taxes, depreciation and amortization
for such full calendar year over the level of such amount for the
prior full calendar year. See "Certain Transactions." The
Company may terminate the Employment Agreement for cause upon
ninety days notice. Mr. Schaden may terminate the Employment
Agreement upon ninety days notice.
Scott K. Adams does not have a written employment
contract with the Company. He is compensated based upon the
number of area directorships and franchises that are sold by the
Company. His current arrangement with the Company provides that
his compensation is a commission equal to 10% of area director
fees received by the Company from March 8, 1997 through June 30,
1997, and 12% of such fees from July 1, 1997 through December 31,
1997. In addition, Mr. Adams will receive a commission equal to
the lesser of $5,000 or 25% of the initial franchise fee received
by the Company for franchises sold by him in territories in which
there is no area director.
CERTAIN TRANSACTIONS
On December 31, 1996, Retail & Restaurant Growth
Capital, L.P. ("RRGC") made a $2,000,000 loan to the Company, a
portion of which is convertible into shares of the Company's
Common Stock. See "Principal Stockholders." The loan is
repayable over five years, with interest only at 12.75% per annum
due for eighteen months and principal and interest due over the
remaining 42 months. If the loan is repaid before conversion,
RRGC will receive warrants to purchase the Company's Common
Stock, which may be exercisable until December 31, 2004.
Effective October 1, 1994, a wholly-owned subsidiary of
the Company acquired by merger all of the assets and obligations
of Schaden & Schaden, Inc., a Colorado corporation ("SSI"), owned
by Richard E. Schaden and Richard F. Schaden. The assets of SSI
included five wholly-owned Quizno's Classic Subs restaurants
located in and near Denver, a majority interest in a sixth
Quizno's Classic Subs restaurant located near Denver, and
interests in two Area Directors for the Company owning three
Quizno's Classic Subs restaurants in the Chicago area and two
Quizno's Classic Subs restaurants in Michigan as well as other
assets. The consideration paid by the Company to the Schadens,
as selling shareholders, was $1,139,000, of which $263,000 was
paid in cash and $876,000 was paid in the Company's preferred
stock. The preferred stock is non-voting, bears a 6.5%
cumulative dividend, and may be converted after November 1, 1997
into 146,000 shares of the Company's Common Stock. The Company
may call the preferred stock upon 60 days notice after November
1, 1997. During 1995 and 1996 each preferred shareholder
received dividends of $28,470, annually.
Through the Company's acquisition of SSI, the Company
acquired three notes payable to Richard E. Schaden and Richard F.
Schaden, individually. At December 31, 1995 and December 31,
1996 the aggregate principal amount of such notes was $39,152 and
$0, respectively. During 1996, the Company paid these notes in
full.
Richard E. Schaden and Richard F. Schaden each owned an
interest in a franchisee of a single Quizno's Classic Subs
restaurant that was sold to an unaffiliated party during 1995.
Royalties and other amounts paid by such franchisee in 1995 were
$10,276 and $3,500. Richard F. Schaden and Frederick H. Schaden
each own an interest in one of the Company's Area Directors which
owned three franchised restaurants during 1995. The Company also
owns approximately 12% of such entity, and the Company loaned
such entity $31,959 in 1994 to purchase certain equipment. Such
loan bears interest at 12.5% per annum and will mature on
October 1, 1999. Royalties and other amounts paid by the Area
Director to the Company in 1995 were $40,324 and $13,350 before
the Area Director disposed of all its restaurants. In 1995, the
Company paid the Area Director $7,500 and $30,355 as commissions
on the sale of new franchises and royalties, respectively, and in
1996, $7,309 and $8,500 in such amounts. In early 1996, such
Area Director requested that the Company extend the payment terms
relating to amounts owed to the Company by the Area Director. As
a result of such request, the Company agreed to defer payment of
$63,547. The Area Director has issued to the Company a
promissory note in such amount payable over 6 years with an
interest rate of 12% per annum. At December 31, 1996, $57,691
was owed to the Company on this promissory note. During 1996,
interest payments on such note were $3,130.
In 1995, the Company sold the Area Director rights for
the Detroit, Michigan area to a company wholly-owned by Richard
F. Schaden. The fee to the Company was $150,000, which is
consistent with fees received for the sale of Area Directorships
to unaffiliated parties, and was paid in cash. During 1996, the
Company paid the Area Director $4,618 and $22,771 in sale
commissions and royalties, respectively.
Thomas Schaden, a brother of Richard F. Schaden and
Frederick H. Schaden, is in the insurance brokerage business and
has acted as a broker for the Company's insurance policies,
including the directors and officers policies that the Company
has purchased.
INCREASE OF SHARES RESERVED FOR ISSUANCE UNDER AND AMENDMENT
OF NON-EMPLOYEE DIRECTORS AND ADVISORS STOCK OPTION PLAN
The Company adopted the Non-Employee Directors and
Advisors Stock Option Plan (the "Directors/Advisors Plan") in
1993. The purposes of the Directors/Advisors Plan are to enable
the Company to attract, retain, and to provide incentives to non-
employee directors and advisors who will serve and advise the
Company regarding the establishment and satisfaction of long-term
strategic objectives.
The Company has currently reserved 90,000 shares of its
Common Stock for issuance upon the exercise of options granted or
available for grant to non-employee directors and advisory board
members under the Directors/Advisors Plan. As of April 18, 1997,
such shares had an aggregate market value of $337,500. As of
April 18, 1997, options to purchase 78,000 shares had been
granted under this Plan. Messrs. Bailey, Meyers, Frederick
Schaden, Rudnick and Gulbas have each received grants of options
under this Plan to purchase 14,000 shares, and Messrs. Lawrence
and Stewart have each received options to purchase 4,000 shares.
The exercise prices of granted options range from $3.43 to $5.75.
On February 6, 1997, the Board approved an amendment to the Plan
to increase the number of shares reserved from 90,000 to 140,000.
The Board recommends to the Shareholders that they ratify the
increase in the number of shares currently reserved for issuance
under the Directors/Advisors Plan.
The Directors/Advisors Plan provides that any person
who becomes a non-employee director of the Company or a member of
the Advisory Board may receive options to purchase 4,000 shares
of Company Common Stock at their fair market value on the date
such person becomes a non-employee director or advisor. Prior to
the Board meeting on February 6, 1997, the Plan provided that
4,000 shares be issued to non-employee directors and advisors
upon each anniversary of the date they became a director or
advisor, so long as such persons remain directors or advisors,
subject to the overall limit of the number of shares issuable
under the Directors/Advisors Plan. In order to simplify
recordkeeping, on that date the Board amended the Plan to provide
that additional options would be issued to each non-employee
director and advisor on January 1 of each year subsequent to
becoming a director or advisor, so long as such person remains a
non-employee director or advisor of the Company. The Board
recommends to the Shareholders that they ratify this amendment.
Such options are immediately exercisable and expire on
the sooner of (i) ten years from the date of grant, or (ii) three
years from the termination of service as a director or Advisor.
The Compensation Committee waived the three-year provision for
Mr. Meyers when he resigned from the Board of Directors to become
a full-time employee of the Company. Upon exercise, shares will
be issued upon payment of the exercise price in cash, by delivery
of shares of Company Common Stock, a combination of these two
methods or by delivery of options granted under the
Directors/Advisors Plan. Options which expire, or are canceled
or terminated without having been exercised, may, in the
discretion of the Board, be re-granted to other non-employee
directors or members of the Advisory Board under the
Directors/Advisors Plan. There are currently three directors and
three advisors covered by the Directors/Advisors Plan. Each will
receive grants as described above on each future January 1 as
long as such person remains a director or advisor.
The Directors/Advisors Plan is administered by the
Compensation Committee of the Board of Directors. However, the
Committee has no authority to set terms or conditions of options
and the Directors/Advisors Plan is a formula plan as described in
Rule 16b-3 issued under the Securities and Exchange Act of 1934.
The Board, without further adoption of the stockholders of the
Company, except as may be required by the Code, may at any time
suspend or terminate the Directors/Advisors Plan in whole or in
part, or amend the Directors/Advisors Plan in such respects as
the Board may deem appropriate in the best interests of the
Company.
Options issued under the Directors/Advisors Plan are
NQOs. NQOs are not taxed upon grant. The optionee is taxed, as
ordinary income, on the exercise of such option to the extent
that fair market value on the date of exercise exceeds the
exercise price. The optionee's basis for determining capital
gain or capital loss upon the sale of the shares is the higher of
their fair market value on the date of exercise and the exercise
price. The Company is entitled to a deduction equal to the
ordinary income realized by the optionee upon the exercise of
NQOs.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board has appointed Ehrhardt Keefe Steiner &
Hottman, P.C., independent certified public accountants, as
auditors to examine the financial statements of the Company for
Fiscal 1997 and to perform other appropriate accounting services
and is requesting ratification of such appointment by the
stockholders. Ehrhardt Keefe Steiner & Hottman, P.C. has served
as the Company's auditors since October 1993.
A representative of Ehrhardt Keefe Steiner & Hottman,
P.C. is expected to attend the Annual Meeting and will have an
opportunity to make a statement if he desires to do so and to
respond to appropriate questions.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's directors, officers (including a person
performing a policy-making function) and persons who own more
than 10% of a registered class of the Company's equity securities
("10% Holders") to file with the Securities and Exchange
Commission ("SEC") initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities
of the Company. Directors, officers and 10% Holders are required
by SEC regulations to furnish the Company with copies of all of
the Section 16(a) reports they file. Based solely upon such
reports, the Company believes that during 1996 its directors,
officers and 10% Holders complied with all filing requirements
under Section 16(a) of the Exchange Act, except for Robert B.
Whitmore, a former Vice President who inadvertently failed to
file a Form 3 in a timely manner.
STOCKHOLDER PROPOSALS
Stockholders may submit proposals on matters
appropriate for stockholder action at the Company's annual
meetings consistent with regulations adopted by the SEC. For
such proposals to be considered for inclusion in the proxy
statement and form of proxy relating to the 1998 annual meeting,
they must be received by the Company not later than December 31,
1997. Such proposals should be addressed to the Company at 1099
18th Street, Suite 2850, Denver, CO 80202, Attn: Patrick E.
Meyers, General Counsel.
OTHER MATTERS
Management does not intend to present, and has no
information as of the date of preparation of this Proxy Statement
that others will present, any business at the Annual Meeting
other than business pertaining to matters set forth in the Notice
of Annual Meeting and Proxy Statement. However, if other matters
requiring the vote of the stockholders properly come before the
Annual Meeting, it is the intention of the persons named in the
enclosed proxy to vote the proxies held by them in accordance
with their best judgment on such matters.
THE QUIZNO'S CORPORATION
1099 Eighteenth Street, Suite 2850
Denver, Colorado 80202
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 6, 1997
The undersigned hereby appoints each of Richard E. Schaden and Patrick E.
Meyers, individually, as proxy and attorney-in-fact for the undersigned with
full power of substitution to vote on behalf of the undersigned at the
Company's 1997 Annual Meeting of Stockholders to be held on June 6, 1997, and
at any adjournment(s) or postponement(s) thereof, all shares of the Common
Stock $.001 par value, of the Company standing in the name of the undersigned
or which the undersigned may be entitled to vote as follows:
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" ITEMS 1, 2 AND 3. In their discretion, the proxies are
authorized to vote upon such other business as may properly come before the
Annual Meeting or any adjournments or postponements thereof, hereby revoking
any proxy or proxies heretofore given by the undersigned.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
1. ELECTION OF DIRECTORS . . . . . . . . . . . . FOR all nominees
WITHHOLD AUTHORITY
(except as indicated below) to vote
for all nominees
Nominees: Richard E. Schaden, Richard F. Schaden, Frederick H. Schaden, J. Er
ic Lawrence and Brownell M. Bailey.
To withhold authority to vote for any individual nominee, write that individua
l's name in the space below:
2. Ratify the amendments to the Company's Non-Employee Directors and Advisors
Stock Option Plan:
FOR AGAINST ABSTAIN
3. Ratify the selection by the Board of Directors of Ehrhardt Keefe Steiner &
Hottman as independent auditors of the Company for the 1997 fiscal year.
FOR AGAINST ABSTAIN
Please sign exactly as name appears at left:
Dated:
Signature
Signature (if held jointly)
When
shares are held by joint tenants, both
should sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title as
such. If a corporation, please sign in
the corporate name by president or
other authorized officer. If a
partnership, please sign in partnership
name by authorized person.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY USING THE ENCLOSED E
NVELOPE.
