SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SILVER DINER, INC.
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(Name of Registrant as Specified in Its Charter)
-------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[SILVER DINER LOGO APPEARS HERE]
11806 Rockville Pike
Rockville, Maryland 20852
- - --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 10, 1998
- - --------------------------------------------------------------------------------
The annual meeting of stockholders of Silver Diner, Inc., a Delaware
corporation (the "Company"), will be held on Wednesday, June 10, 1998 at 10:00
a.m. (Eastern time), at the Hyatt Regency Reston, 1800 Presidents Street,
Reston, Virginia 20190, for the following purposes:
1. To elect the Company's directors.
2. To consider and vote upon a proposal to increase the number of shares of
Common Stock that may be granted pursuant to the Company's Stock Option
Plan from 350,000 shares to 1,200,000 shares.
3. To consider and vote upon a proposal to increase the number of shares of
Common Stock that may be granted pursuant to the Company's 1996
Non-Employee Director Stock Option Plan from 75,000 shares to 150,000
shares.
4. To transact such other business as may properly come before the meeting
and at any adjournment thereof.
The Board of Directors has fixed the close of business on April 24, 1998 as
the record date for determination of stockholders entitled to notice of, and to
vote at, the annual meeting and at any adjournment thereof.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN AND
DATE YOUR PROXY AND MAIL IT IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE
IF MAILED WITHIN THE UNITED STATES OF AMERICA. IF YOU ATTEND THE MEETING, YOU
MAY, IF YOU WISH, REVOKE YOUR PROXY AND VOTE YOUR SHARES PERSONALLY.
By Order of the Board of Directors
Ype Von Hengst
Secretary
April 27, 1998
<PAGE>
[SILVER DINER LOGO APPEARS HERE]
11806 Rockville Pike
Rockville, Maryland 20852
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PROXY STATEMENT
- - --------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 10, 1998
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Silver Diner, Inc., a
Delaware corporation (the "Company"), for use at the annual meeting of the
Company's stockholders to be held on Wednesday, June 10, 1998 at 10:00 a.m.
(Eastern time), at the Hyatt Regency Reston, 1800 Presidents Street, Reston,
Virginia 20190, and at any adjournment thereof (the "Meeting").
On April 24, 1998 there were outstanding 11,590,936 shares of the Common
Stock. Record holders of the outstanding shares of Common Stock at the close of
business on April 24, 1998 are entitled to notice of, and to vote at, the
Meeting. Such record holders will be entitled to one vote for each share of
Common Stock held of record at the close of business on April 24, 1998. To take
action, a quorum, composed of holders of a majority of the outstanding shares of
Common Stock, must be represented by proxy or in person at the Meeting.
Shares of Common Stock represented by valid proxies received by the Company
in time for the Meeting will be voted as specified in such proxies. Any
stockholder giving a proxy has the right to revoke it at any time before it is
exercised by attending the Meeting and voting in person or by filing with the
Company's secretary an instrument of revocation or a duly executed proxy bearing
a later date.
Votes cast by proxy or in person at the Meeting will be tabulated by the
judge of elections appointed for the Meeting. The judge of elections will treat
abstentions as shares of Common Stock that are present and entitled to be voted
for purposes of determining the presence of a quorum but as not voted for
purposes of determining the approval of any matter submitted to stockholders for
a vote. If a broker indicates on a proxy that such broker does not have
discretionary authority as to certain shares of Common Stock to vote on a
particular matter, such shares will not be considered as present and entitled to
vote with respect to that matter.
This proxy statement, the accompanying proxy, and the Company's annual
report to stockholders on Form 10-K for the fiscal year ended December 28, 1997,
were first sent or given to stockholders on or about May 6, 1998. ADDITIONAL
COPIES OF THE COMPANY'S ANNUAL REPORT TO STOCKHOLDERS ON FORM 10-K FOR THE
FISCAL YEAR ENDED DECEMBER 28, 1997 WILL BE FURNISHED WITHOUT CHARGE TO ANY
STOCKHOLDER UPON WRITTEN REQUEST TO: SILVER DINER, INC., ATTENTION: INVESTOR
RELATIONS, 11806 ROCKVILLE PIKE, ROCKVILLE, MARYLAND 20852.
1
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
Stockholders of record as of the close of business on April 24, 1998, will
be entitled to one vote for each share then held. As of that date, the Company
had 11,590,936 shares of Common Stock issued and outstanding. The following
table sets forth, to the Company's knowledge, the beneficial ownership of Common
Stock by each person or entity beneficially owning more than 5% of the shares of
the Company's Common Stock, each director, each nominee, and certain executive
officers, individually, and all directors and executive officers as a group, as
of April 24, 1998.
<TABLE>
<CAPTION>
AMOUNT
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT
- - ------------------------ ------------------ -------
<S><C>
Catherine Britton.......................................................................... 1,620,154(1),(11) 14.0
Clinton A. Clark........................................................................... 547,526(2),(11) 4.7
Robert T. Giaimo........................................................................... 1,508,472(3) 13.0
Ype Von Hengst............................................................................. 197,881(4) 1.7
Edward H. Kaplan........................................................................... 455,759(5),(11) 3.9
Patrick Meskell............................................................................ 40,004(6) *
George A. Naddaff.......................................................................... 272,506(7),(11) 2.3
Louis P. Neeb.............................................................................. 34,905(8),(11) *
Charles M. Steiner......................................................................... 473,466(9),(11) 4.1
Douglas M. Suliman, Jr. ................................................................... 177,397(10),(11) 1.5
Timothy Cusick............................................................................. 20,216(12) *
Daniel Brannan............................................................................. 13,401(13) *
T. Rowe Price New Horizons Fund, Inc....................................................... 750,000(14) 6.5
All directors and executive officers as a group (12 persons)............................... 4,760,538 40%
</TABLE>
"*" means less than 1%
- - ---------------
(1) Includes options for 9,000 shares of Common Stock (the "Shares") under the
1996 Non-Employee Director Stock Option Plan, exercisable at the prices set
forth in Note 11 below. Unless otherwise stated in Notes 1 through 13
below, all references to options are to options exercisable currently and
within 60 days of April 24, 1998. Also includes 20,003 Shares subject to
options granted to Mr. Clinton A. Clark by Mr. Robert T. Giaimo pursuant to
a stock option agreement between such parties, which agreement was assigned
by Mr. Giaimo to, and assumed by, Ms. Britton. The options are exercisable
at $3.60 per Share at any time prior to April 5, 2004. Does not include
1,508,472 Shares beneficially owned by Mr. Giaimo, Ms. Britton's spouse.
Ms. Britton disclaims beneficial ownership of the Shares beneficially owned
by Mr. Giaimo.
(2) Includes: (a) 5,000 Shares held of record by Mr. Clark's minor son; (b)
options to purchase 5,000 Shares under the 1991 Stock Option Plan, at an
exercise price of $4.05 per Share, (c) options to purchase 9,000 Shares
under the 1996 Non-Employee Director Stock Option Plan, at the exercise
prices set forth in Note 11 below; and (d) options to purchase 20,003
Shares from Catherine Britton as assignee of Robert T. Giaimo, which
options expire on April 5, 2004.
(3) The 1,508,472 Shares beneficially owned by Mr. Giaimo include the
following: (a) 300,000 directly owned Shares; (b) options to purchase
40,000 Shares under the Stock Option Plan at an exercise price of $1.375
per Share; (c) 483,334 Shares owned of record by four persons who were
principals of the Company prior to the Merger, which are subject to a
voting agreement as described in Note 7; (d) 130,133 Shares which are
subject to a voting agreement and are owned of record by GKN Securities
Corp. and/or certain assignees thereof; and (e) 555,005 Shares owned of
record by stockholders of the Company that are subject to voting
agreements. The voting rights described in clause (d) of the preceding
sentence have been granted to Mr. Giaimo pursuant to the GKN Voting and
Lockup Agreement, which provides that Mr. Giaimo has an irrevocable right
to vote such Shares with respect to all matters in which stockholder
approval is required under the Delaware General Corporation Law, including,
without limitation, voting such stockholders' Shares in favor of nominees
to the Board of Directors of the Company and for or against any and all
matters that may come before the Company's stockholders for a vote. The
proxy continues until the earlier of three years after consummation of the
Merger or the sale of the Shares by such stockholders to a non-affiliate in
a bona fide transaction for value. The voting rights described in clause
(e) above have been granted to Mr. Giaimo pursuant to the voting agreements
that grant to Mr. Giaimo an irrevocable right to vote with respect to all
matters in which stockholder approval is required under the Delaware
General Corporation Law, including, without limitation, voting such
stockholders' Shares in favor of nominees to the Board of Directors of the
Company and for or against any and all matters that may come before the
Company's stockholders for a vote. The appointment survives until the
earliest of five years after consummation of the Merger, the public
offering of Shares by the Company from which the Company realizes $15
million or more, or the death of the stockholder. The 1,508,472 Shares
beneficially owned by Mr. Giaimo do not include any Shares beneficially
owned by Catherine Britton, Mr. Giaimo's spouse, or Shares issuable upon
the exercise of certain outstanding stock option agreements ("Options")
that will be subject to the terms of Voting and Lockup Agreements between
the holders of such Options and Mr. Giaimo. Mr. Giaimo disclaims beneficial
ownership of Shares beneficially owned by Catherine Britton. Pursuant to
the Voting and Lockup Agreements, Mr. Giaimo would have the sole power to
vote the Shares issued upon the exercise of such Options until the earliest
to occur of: (x) March 27, 2001; (y) an underwritten public offering by the
Company from which it realizes at least $15 million; or (z) if applicable,
termination of the optionee's employment with the Company as a result of
death or incapacity. An aggregate of approximately 336,000 Shares issuable
upon exercise of Options would be subject to the Voting and Lockup
Agreements. Of such Options, approximately 204,000 are currently
exercisable through June 24, 1998 (including approximately 129,000 with an
exercise price of less than $.01 per Share and approximately 75,000 with an
exercise price of between $2.25 and $4.05 per Share) and approximately
132,000 are not exercisable within such period (including approximately
15,000 with an exercise price of less than $.01 per Share and approximately
116,000 with an exercise price of between $2.25 and $4.05 per Share). Mr.
Giaimo would have sole power to vote the approximately 204,000 Shares
underlying the currently exercisable Options, if such Options were
exercised.
(4) Includes options to purchase 15,000 under the Stock Option Plan, at an
exercise price of $1.25 per Share. The Shares owned by Mr. Hengst are
subject to the terms of a voting agreement described in clause (e) of Note
3.
(5) Includes: (a) options to purchase 9,000 Shares under the 1996 Non-Employee
Director Stock Option Plan, at the exercise prices set forth in Note 11
below; and (b) options to purchase 5,000 Shares under the 1991 Stock Option
Plan, at an exercise price of $4.05 per Share.
(6) Includes: (a) options to purchase 15,002 Shares under the Earned Ownership
Plan at $.0003 per Share; (b) options to purchase 15,002 Shares under the
1991 Stock Option Plan, at an exercise price of $4.05 per Share; and (c)
options to purchase 10,000 Shares under the Stock Option Plan, at an
exercise price of $1.25 per Share.
2
<PAGE>
(7) Includes 238,961 Shares with respect to which Mr. Naddaff has granted
voting rights to Robert T. Giaimo pursuant to the FTAC Voting and Lockup
Agreement, which provides that Robert T. Giaimo has an irrevocable right to
vote the aforementioned 238,961 Shares with respect to all matters in which
stockholder approval is required under the Delaware General Corporation
Law. The right survives until the earlier of (a) five years after
consummation of the Merger; (b) the death of the stockholder; or (c) the
sale by Robert T. Giaimo of 50% or more of his Shares. Notwithstanding the
foregoing, up to 25% of such Shares may be transferred free of the voting
restriction during the period commencing 36 months after consummation of
the Merger and ending 48 months after such time and up to a total of 50% of
such Shares may be transferred free of the voting restrictions during the
period commencing 48 months after consummation of the Merger and ending 60
months after such time. In addition, a security interest in the Shares may
be granted at any time after 36 months after consummation of the Merger and
in the event of a default with respect to such secured debt the Shares may
be sold free and clear of such right. Also includes options for 9,000
Shares under the 1996 Non-Employee Director Stock Option Plan, at the
exercise prices set forth in Note 11 below.
(8) Includes: (a) 13,334 Shares owned of record by Neeb Enterprises, Inc., a
corporation wholly-owned by Mr. Neeb and of which Mr. Neeb is President and
a Director; (b) options to purchase 12,572 Shares under the 1991 Stock
Option Plan, at the exercise price of $.003 per Share; and (c) options to
purchase 9,000 Shares under the 1996 Non-Employee Director Stock Option
Plan, at the exercise prices set forth in Note 11 below.
(9) Includes: (a) 409,466 Shares held of record by the Steiner Family
Partnership ( Mr. Steiner owns a 25% interest in and is the managing
partner of The Steiner Family Partnership and, therefore, may be deemed to
beneficially own all Shares held of record by such partnership. Except to
the extent of his 25% ownership interest in The Steiner Family Partnership,
Mr. Steiner disclaims beneficial ownership of such Shares); (b) 50,000
Shares held by the Branch Group, Inc. 401(k) Profit Sharing Plan ( Mr.
Steiner is sole trustee of the Branch Group, Inc. 401(k) Profit Sharing
Plan and one of a number of beneficiaries thereof, holding an approximate
7% interest in the plan); (c) options to purchase 5,000 Shares under the
1991 Stock Option Plan, at the exercise price of $4.05 per Share; and (d)
options to purchase 9,000 Shares under the 1996 Non-Employee Director Stock
Option Plan, at the exercise prices set forth in Note 11 below.
(10) Includes 159,307 Shares with respect to which Mr. Suliman has granted
voting rights to Mr. Robert T. Giaimo similar to the rights granted to Mr.
Giaimo by Mr. George Naddaff, as described in Note 7 above. Also includes
options for 9,000 Shares under the 1996 Non-Employee Director Stock Option
Plan, at the exercise prices set forth in Note 11 below.
(11) Each non-employee director (seven persons) holds options for 9,000 Shares
under the 1996 Non-Employee Director Stock Option Plan, exercisable at the
following prices: 1,000 at $6.50 per Share; 1,000 at $5.625 per Share;
1,000 at $5.375 per Share; 1,000 at $3.8125 per Share; 1,000 at $3.4375 per
Share; 1,000 at $3.125 per Share; 1,000 at $2.125 per Share; 1,000 at $1.25
per Share; and 1,000 at $1.25 per Share
(12) Includes: (a) options to purchase 7,001 Shares under the 1991 Stock Option
Plan, at an exercise price of $4.05 per Share; (b) options to purchase
3,215 Shares under the Earned Ownership Plan, at an exercise price of
$.0003 per Share; and (c) options to purchase 10,000 Shares under the Stock
Option Plan, at an exercise price of $1.25 per Share.
(13) Includes: (a) options to purchase 4,441 Shares under the Earned Ownership
Plan, at an exercise price of $.0003 per Share; (b) options to purchase
2,960 Shares under the 1991 Stock Option Plan, at an exercise price of
$4.05 per Share; and (c) options to purchase 6,000 Shares under the Stock
Option Plan, at an exercise price of $1.25 per Share.
(14) 750,000 Shares of Common Stock were beneficially owned by T. Rowe Price New
Horizons Fund, Inc. as of Feb. 12, 1998, based on such Fund's Amendment
Number 1 to Schedule 13G as filed with the U.S. Securities and Exchange
Commission.
3
<PAGE>
ELECTION OF DIRECTORS
DIRECTORS
The Board consists of nine directors whose terms continue until the next
annual meeting of stockholders, or until their respective successors are elected
and have qualified. At each annual meeting, directors are elected for a term of
one year to succeed those directors whose term expires at the annual meeting
date. The election of each director requires the vote of holders of a plurality
of the outstanding Common Stock present and entitled to be voted at the Meeting.
The Board has fixed the number of directors for the current year at nine.
The persons named in the proxy solicited by the Board will vote, unless the
proxy is marked otherwise, to elect the persons identified in the table below.
If a nominee is unable to serve as a director, the persons acting under the
proxy may vote the proxy for the election of a substitute. It is not currently
contemplated that any nominee will be unable to serve. All directors have held
their present positions for at least five years, except as otherwise indicated.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE NOMINEES LISTED
BELOW.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE POSITION
- - ---- ---- -------- --------
<S><C>
Robert T. Giaimo............................ 46 1996 Chairman, President, Chief Executive
Officer, and Treasurer
Catherine Britton........................... 44 1996 Director
Clinton A. Clark............................ 56 1996 Director
Ype Von Hengst.............................. 47 1996 Director, Vice President, Executive Chef,
and Secretary
Edward H. Kaplan............................ 59 1996 Director
George A. Naddaff........................... 68 1994 Director
Louis P. Neeb............................... 59 1996 Director
Charles M. Steiner.......................... 56 1996 Director
Douglas M. Suliman, Jr. .................... 42 1994 Director
</TABLE>
ROBERT T. GIAIMO has been the Company's Chairman of the Board, President,
Chief Executive Officer and Treasurer since March 1996 and co-founder, director,
president, chief executive officer and treasurer of SDDI since its inception in
1987. Mr. Giaimo was president, chief executive officer and director of Monolith
Enterprises, Inc. ("Monolith") from 1971 to January 1987. In 1977, Mr. Giaimo
co-founded and operated, through Monolith, The American Cafe restaurant, a
restaurant chain which was one of the first restaurants to promote "American
cuisine" and helped popularize the croissant sandwich. Mr. Giaimo graduated from
the Business School of Georgetown University in 1974 and Harvard University's
Smaller Company Management Program in 1982. He is a member of the Young
President's Organization and serves as a Director and Co-chairman of
Development. In 1993, Mr. Giaimo received an "Entrepreneur of the Year" award
from Inc. Magazine in conjunction with Ernst & Young and Merrill Lynch.
CATHERINE BRITTON has been a Director since March 1996 and was a director
of SDDI from July 1995 until the Merger. She assisted with marketing and design
of Silver Diner restaurants and has been involved with menu development and
concept evolution since SDDI's inception. She also participated extensively in
the development of Silver Diner restaurants. Ms. Britton graduated from
Georgetown University in 1975, receiving a Bachelor of Arts degree in
Philosophy. Ms. Britton earned a Masters Degree in Special Education from George
Washington University in 1978.
CLINTON A. CLARK has been a Director since March 1996 and was a director of
SDDI from 1987 until the Merger and during such time served as the chairman of
SDDI's Compensation Committee. He is also the president of Ironwood Equity, Inc.
and CAC Investments, Inc. From September, 1990 until October 1993, he served as
president and chief executive officer of Long John Silvers, Inc., a 1500-store
seafood restaurant chain. He was a co-founder and served as president and chief
executive officer of Children's Place, a national children's apparel retail and
manufacturing company, from 1969 until 1986. Mr. Clark received his B.A. from
Missouri School of Mines and Metallurgy in 1963 and an MBA from Harvard Business
School in 1965. He also serves on the Board of Trustees of Boys Town and the
University of Missouri-Rolla. Mr. Clark also serves as a Director for Ethan
Allen, Inc. and for Kerkendall, Krouse and Clark, Inc. More recently, he has
joined the
4
<PAGE>
Delbarton School Finance Committee and has become a member of the Whitehead
Institute for Biomedical Research's Board of Associates.
YPE VON HENGST has been a Director, Vice President, Executive Chef and
Secretary since March 1996 and co-founder, director, vice president of culinary
operations, and executive chef of SDDI since 1987. Mr. Hengst was a director of
operations of "Dominiques" restaurant in Washington, D.C. from May through
September 1987. From 1984 to 1987, Mr. Hengst was corporate executive chef and
director for Food Service for The American Cafe and was responsible for the
central kitchen and bake shop, menu changes, and food preparation for all seven
American Cafe restaurants. From 1981 to 1984, Mr. Hengst was corporate executive
chef for Restaurant Associates in New York, New York, where he supervised over
fifteen diverse full-service restaurants. From 1976 to 1981, Mr. Hengst held
executive chef positions in Charlotte, North Carolina, Cleveland, Ohio, Houston,
Texas, and New York, New York. Prior to 1976, Mr. Hengst worked as a chef in
Europe.
EDWARD H. KAPLAN has been a Director since March 1996 and was a director of
SDDI from 1987 until the Merger. He is a real estate developer and investor and
has served since 1983 as a Director of Palmer National Bank, Washington, D.C.
and subsequently, its successor by merger, George Mason Bankshares until April
2, 1998, when George Mason merged into United Bankshares. Mr. Kaplan received
his B.A. from the University of Pennsylvania, Wharton School in 1961. Mr. Kaplan
served as President of the United Jewish Appeal Federation of Greater Washington
from 1989 to 1991, President of the United Jewish Endowment Fund from 1992 to
1997, and currently is a member of the Maryland Public Television Commission.
GEORGE A. NADDAFF has been a Director since the Company's organization in
April 1994. From April 1994 to March 1996, Mr. Naddaff was also chairman of the
Board. In September 1992, he co-founded Olde World Bakeries, Ltd. ("OWB") with
Douglas M. Suliman, Jr. and since its inception was its chief executive officer.
OWB was a commercial bread bakery which developed a chain of retail gourmet
coffee and breakfast shops. In December 1994, OWB sold its assets and
discontinued its business. From 1988 until June 1992, Mr. Naddaff was chairman,
chief executive officer and a director of New Boston Chicken, Inc. ("Boston
Chicken") and from 1988 until 1989, he also served as its president. Mr. Naddaff
also was active in the development of Mulberry Child Care Centers, Inc. ("MCC"),
which developed a chain of child care centers in the northeast United States.
Mr. Naddaff was chairman of the board of MCC until 1991 when he sold his
interest in MCC. In 1987, Mr. Naddaff founded Business Expansion Capital
Corporation ("BECC"). BECC invests in developing enterprises capable of
expansion through replication of successful prototype operation. Boston Chicken
and MCC were organized with the assistance of BECC during BECC's first 15 months
of operations. From 1987 until the present, he has been the sole officer,
director and stockholder of BECC. Since 1995, Mr. Naddaff has been a director of
Vie de France, a publicly-traded manufacturer of frozen foods. In September
1995, Mr. Naddaff was named as vice-chairman of First Mortgage Network, Inc., a
privately held national company providing mortgage services, and in November
1996, Mr. Naddaff became the chairman and chief executive officer of Ranch *1, a
New York restaurant chain.
LOUIS P. NEEB has been a Director since March 1996 and was a director of
SDDI from 1994 until the Merger. Mr. Neeb is currently the president of Neeb
Enterprises, Inc., a corporation which provides management consulting services
and oversees the operation of an affiliated restaurant company, and chairman of
the board and chief executive officer of Casa Ole Restaurants, Inc. He was the
president and chief executive officer of The Spaghetti Warehouse, Inc. from July
1991 until January 1994 and of Geest Food USA from 1989 until 1991. From 1982
until 1987, he served as president and chief executive officer of Creative Food
N Fun, a subsidiary of W.R. Grace & Co. From 1985 until 1987, be served as
president and chief executive officer of a W.R. Grace & Co. affiliate, Taco
Villa, Inc. Mr. Neeb was employed by The Pillsbury Company from 1973 until 1982.
From 1980 to 1982, he served as an executive vice president of The Pillsbury
Company and as chairman and chief executive officer of its affiliate, Burger
King Corporation. In 1973, he was director of operations at Steak & Ale
Restaurants, Inc. another affiliate of The Pillsbury Company. His leadership
role with Steak & Ale Restaurants, Inc. continued until 1980, after serving as
vice president of operations and eventually president and chief executive
officer. Currently, Mr. Neeb serves as a director of Showbiz Pizza Time, Inc.
and Franchise Finance Corporation of America, Inc., both publicly traded
companies, and Blue Marlin Restaurants, Inc. Mr. Neeb received a BBA in
marketing from Notre Dame University in 1961 and an MBA from George Washington
University in 1969.
CHARLES M. STEINER has been a Director since March 1996. Mr. Steiner was a
director of SDDI from 1987 until the Merger. He is the chief executive officer
of Branch Group, Inc., an electric distributor. In 1975, Mr. Steiner founded
IMARK, an electric cooperative, and in 1991 founded EDIC, a distribution
insurance company. He is a director of the National Association of Electric
Distributors (NAED). He received a B.B.A. in Accounting from the University of
Pittsburgh in 1963.
DOUGLAS M. SULIMAN, JR. has been a Director since the Company's
organization in 1994. Mr. Suliman was also president, treasurer and secretary
from the Company's organization until March 1996. In September 1992, he
co-founded OWB
5
<PAGE>
with Mr. Naddaff. From September 1992 until July 1993, Mr. Suliman served as
OWB's president and from August 1993 to December 1994, served as its vice
chairman. In 1988, he founded Island Partners Ltd. ("IPL"), a privately owned
investment banking firm, and has served as its president since then. IPL
performs corporate finance services for privately owned and public companies
with particular emphasis on institutional private placements of debt and equity
securities and on merger and acquisition advisory engagements. From 1987 until
1988, Mr. Suliman served as managing director of First Reserve Corporation, an
investment management company, where he shared responsibility for originating
new investments and for fund raising activities. From 1985 until 1987 Mr.
Suliman was president, and from 1982 until 1985 he was vice president, of The
Boston Company Energy Advisers, Inc. ("TBCEA"). During that time, TBCEA was a
wholly owned subsidiary of The Boston Company, Inc. and an indirect subsidiary
of Shearson Lehman American Express. TBCEA originated and managed direct
investments in the domestic energy industry for institutional clients. Mr.
Suliman's responsibilities with TBCEA included the origination, negotiation and
management of such investments and management of the reorganization of TBCEA and
its investment portfolio following the oil price decline in December 1985. From
1980 until 1982, Mr. Suliman was a loan officer for the First National Bank of
Boston. Mr. Suliman received a Bachelor of Science degree from the University of
Massachusetts (Amherst) and a Masters of Business Administration degree from
Northeastern University.
There is no family relationship between any of the Company's directors or
officers except that Catherine Britton is the wife of Robert T. Giaimo. There
are no arrangements between any director of the Company and any other person
pursuant to which he was selected as a director.
NON-DIRECTOR EXECUTIVE OFFICERS
TIMOTHY CUSICK, who has been Area Director of Operations since July 1996,
has been recognized as a member of the executive management since April 1998.
Mr. Cusick joined the Company in October 1992 and served as a restaurant manager
and owner operator until 1996. Mr. Cusick has over eight years of restaurant
management experience.
PATRICK MESKELL has been Senior Vice President, Human Resources since
January 1996. Mr. Meskell was an independent consultant to institutions,
specializing in the areas of risk management system design and implementation
from 1988 to 1992 and Director of Organizational Development & Management &
Operations Training for the Student Loan Marketing Association from 1992 to
1995.
DANIEL BRANNAN has been Vice President, Finance since March 1997 and was
the Company's controller from January 1996 to March 1997. Previously, Mr.
Brannan was corporate controller for Greenstone Industries, a public
manufacturing company with annual sales exceeding $30 million, from 1995 to
1996, and was an auditor with KPMG Peat Marwick LLP from 1991 to 1995. Mr.
Brannan is a certified public accountant.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board held four meetings (including telephonic meetings) during 1997.
During 1997, each director attended at least 75% of the aggregate of the total
number of meetings of the Board (held during the period for which he was a
director) and the total number of meetings held by all Board committees on which
he served (during the periods that he served as a member). The Board has a
standing audit committee and a standing compensation committee, but does not
have a standing nominating committee. The audit committee, composed of Messrs.
Steiner, Suliman, and Kaplan, held one meeting during 1997. The principal
functions of the audit committee are to make recommendations to the Board
regarding the selection of the Company's independent accountants, to consult
with the Company's independent accountants and financial and accounting staff,
and to review and report to the Board with respect to the scope of audit
procedures, accounting practices, and internal accounting and financial
controls. The compensation committee, composed of Messrs. Clark, Neeb, and
Steiner, held eight meetings during 1997. The principal functions of the
compensation committee are to review and make recommendations to the Board on
all compensation and hiring issues that relate to officers and senior staff
members.
SECTION 16 COMPLIANCE
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and other information provided by persons
subject to the reporting requirements under the Exchange Act, the Company's
directors, officers, and greater than 10% beneficial owners complied with all
applicable Section 16(a) filing requirements.
EXECUTIVE COMPENSATION
The following table sets forth summary information concerning compensation
paid by the Company with respect to fiscal years 1997, 1996 and 1995 to Robert
T. Giaimo, the Company's Chief Executive Officer and President, and to each of
6
<PAGE>
the Company's executive officers as whose aggregate annual cash compensation
rate exceeded $100,000 for fiscal year 1997. The following summary information
concerning compensation includes service with SDDI prior to the Merger.
References to shares subject to option, including those granted by SDDI prior to
the Merger, reflect the numbers of shares of Common Stock of the Company
issuable, and corresponding exercise prices, after giving effect to the Merger.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------------
AWARDS PAYOUTS
------------------------ ----------
ANNUAL COMPENSATION SECURITIES
-------------------------------------- RESTRICTED UNDERLYING
OTHER ANNUAL STOCK OPTIONS/ LTIP
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARD(S)($) SARS(#) PAYOUTS($)
- - --------------------------- ----- --------- -------- --------------- ----------- ---------- ----------
<S><C>
Robert T. Giaimo..................... 1997 250,000 50,000 18,000 0 0 0
President, Chief Executive 1996 240,000 0 18,000 0 0 0
Officer and Chairman of the 1995 220,000 0 18,000 0 0 0
Board
Ype Von Hengst....................... 1997 105,000 12,500 6,000 0 0 0
Vice President, Executive Chef, 1996 105,000 11,814 6,000 0 0 0
Corporate Secretary and Director 1995 88,000 0 7,962 0 0 0
Patrick Meskell...................... 1997 93,690 17,500 6,000 0 0 0
Senior Vice President, Human 1996 90,000 0 6,000 0 0 0
Resources 1995 0 0 0 0 100,016(2) 0
Timothy Cusick....................... 1997 94,792 12,500 6,000 0 0 0
Area Director of Operations 1996 75,186 0 6,000 0 0 0
1995 50,375 0 3,000 0 26,508(3) 0
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION COMPENSATION($)
- - --------------------------- ---------------
<S><C>
Robert T. Giaimo..................... 49,037(1)
President, Chief Executive 44,691(1)
Officer and Chairman of the 12,000(1)
Board
Ype Von Hengst....................... 25,573(1)
Vice President, Executive Chef, 17,049(1)
Corporate Secretary and Director 0
Patrick Meskell...................... 0
Senior Vice President, Human 0
Resources 0
Timothy Cusick....................... 0
Area Director of Operations 0
0
</TABLE>
- - ---------------
(1) Amount of annual premiums the Company is paying on a $3,000,000 split
dollar life insurance policy on the life of Mr. Giaimo and a $1,500,000
split dollar life insurance policy on the life of Mr. Von Hengst. The 1996
and 1995 amounts for Mr. Giaimo include $12,000 in term life insurance
premiums paid by SDDI.
(2) Includes option to purchase 25,004 shares, of which 40%, representing
10,002 shares, were exercisable at December 28, 1997, and the remainder,
representing 15,002 shares, vest 20% each year commencing on December 31,
1997. The options are exercisable at 3/100th of one cent per share through
December 30, 2005. Also includes option to purchase up to 75,012 shares at
a price of $4.05 per share, which vest in annual increments as follows: 20%
on December 31, 1997; 20% on December 31 1998; 25% on December 31, 1999;
and 35% on December 31, 2000. Such options are exercisable through December
30, 2005.
(3) Includes options to purchase 1,400 and 1,770 shares, of which 60% and 40%,
respectively, representing 840 and 708 shares, respectively, were
exercisable at December 28, 1997, and the remainder, representing 560 and
1,062 shares, respectively, vest 20% each year commencing on February 8,
1998, and December 31, 1997, respectively. The options are exercisable at
3/100th of one cent per share through February 7, 2005 and December 30,
2005, respectively. Also includes option to purchase up to 11,669 shares at
a price of $4.05 per share, of which 20%, representing 2,334 shares, were
exercisable at December 28, 1997, and the remainder, representing 9,335
shares, vest in annual increments as follows: 20% on August 21, 1998; 25%
on August 21, 1999; and 35% on August 21, 2000. Such options are
exercisable through August 20, 2005. Also includes option to purchase up to
11,669 shares at a price of $4.05 per share, of which 20%, representing
2,334 shares, were exercisable at December 28, 1997, and the remainder,
representing 9,335 shares, vest in annual increments as follows: 20% on
December 31, 1997; 25% on December 31, 1998; and 35% on December 31, 2000.
Such options are exercisable through December 30, 2005.
STOCK OPTIONS
No grants of options were made to any executive officer during fiscal 1997.
The following table provides information as to the number and value of
unexercised stock options at December 28, 1997 held by the following executive
officers. No stock appreciation rights with respect to the Common Stock were
outstanding at such date.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES(1)
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
NUMBER OF SECURITIES OPTIONS/SARS
SHARES UNDERLYING UNEXERCISED AT FISCAL YEAR
ACQUIRED OPTIONS/SARS AT FISCAL YEAR END END(2)
ON VALUE ---------------------------------- --------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE(#) UNEXERCISABLE(#) EXERCISABLE($)
- - ---- ----------- ----------- -------------- ---------------- --------------
<S><C>
Robert T. Giaimo.................... 0 0 0 0 0
Ype Von Hengst...................... 0 0 0 0 0
Patrick Meskell..................... 0 0 30,004 70,012 18,707
Timothy Cusick...................... 0 0 10,217 17,324 4,010
Daniel Brannan...................... 0 0 7,401 14,802 5,538
<CAPTION>
NAME UNEXERCISABLE($)
- - ---- ----------------
<S><C>
Robert T. Giaimo.................... 0
Ype Von Hengst...................... 0
Patrick Meskell..................... 12,472
Timothy Cusick...................... 1,232
Daniel Brannan...................... 3,691
</TABLE>
- - ---------------
(1) Information pertains to options as there were no stock appreciation rights
issued or outstanding during the period concerned for the named individuals.
(2) Represents the difference between the fair market value of the Common Stock
subject to the options, based on the closing price of $1.25 for the Common
Stock on December 26, 1997 (the final trading day of the Company's fiscal
year), and the exercise prices of the options.
7
<PAGE>
BENEFIT PLANS
The Company provides insurance benefits to its officers and other
employees, including health, dental, and life insurance, subject to certain
deductibles and copayments by employees.
EMPLOYMENT AGREEMENTS
FOUNDER'S EMPLOYMENT AGREEMENT. The Company and Robert T. Giaimo have
entered into a Founder's Employment Agreement effective March 27, 1996. The base
compensation under the agreement is $240,000 per annum, increased annually at a
minimum amount equal to the increase in the Consumer Price Index for the
Washington, D.C., Maryland, and Virginia metropolitan area. Benefits under the
agreement include four weeks paid vacation, health and dental insurance, life
and disability insurance, director and officer liability insurance and a
$3,000,000 "split-dollar" life insurance agreement. Perquisites include an up to
$500 per month car allowance, an education fee of $1,000 per month, and free
shift meals.
The Founder's Employment Agreement has an initial term of five years and,
starting on its first anniversary, is renewable for five years from each
anniversary. If at any such anniversary the Board does not renew, the agreement
will expire five years from such anniversary (the five-year period beginning on
such anniversary shall hereinafter be referred to as the "Expiration Term"). Mr.
Giaimo's Employment Agreement was renewed on April 13, 1998 and, as renewed,
expires in March 2003. During the Expiration Term, the employee may, upon at
least sixty days prior written notice, terminate the agreement immediately and
such termination shall be an "Involuntary Termination." The Company may
terminate the agreement upon the death or disability of the employee or for
cause. If terminated for death, the employee's estate shall be entitled to
receive all accrued compensation plus a severance amount equal to one year's
base compensation (as adjusted to the date of death). The decedent's family will
also be provided health insurance for one year from date of death. If terminated
for disability, the employee shall be entitled to receive all accrued
compensation plus a severance amount equal to his then current base compensation
for a period of five years, but reduced dollar for dollar by all amounts
received by the employee under disability insurance. If terminated for cause,
the employee shall be entitled to receive all accrued compensation. Mr. Giaimo
may terminate the agreement by reason of an Involuntary Termination or a
material breach by the Company. If an Involuntary Termination occurs, the
employee shall be entitled to a severance amount equal to: (i) his base
compensation, including all bonuses, for the immediately preceding fiscal year
(the "Annual Amount"), (ii) divided by 365, and (iii) multiplied by the number
of days remaining in the Expiration Term. If Mr. Giaimo terminates the Founder's
Employment Agreement within the first five years of the agreement for a material
breach by the Company (as specified in the Founder's Employment Agreement), he
shall be entitled to receive the Annual Amount multiplied by ten. If the
material breach occurs after the first five years of the agreement, the Annual
Amount shall be multiplied by five. Additionally, if a termination for a
material breach occurs prior to the earlier of (i) the end of the first five
years of the agreement, or (ii) the completion of an underwritten public
offering of the Company's Common Stock from which it realizes $15,000,000, then
the Company shall be obligated, at the employee's option, to purchase all of Mr.
Giaimo's Common Stock at fair market value.
OFFICER EMPLOYMENT AGREEMENTS. The Company entered into letter agreements
with Patrick Meskell on December 4, 1995 and Daniel Brannan on December 31, 1995
(amended in March 1997), which are terminable at any time by either party
thereto. However, if the Company terminates the agreement in the first three
years, the Company will pay the base salary for 12 months for Mr. Meskell and 6
months for Mr. Brannan, or until the employee has found alternate employment.
During this same three-year period, the employee must give the Company at least
six months notice in advance of termination. The agreements provide for (i) Mr.
Meskell's employment as senior vice president of human resources with a base
salary of $90,000, and Mr. Brannan's employment as controller (vice president of
finance as amended in March 1997) with an initial base salary of $56,000
($80,000 as amended in March 1997), with future adjustments to each to be
determined by the Board, and (ii) eligibility for a bonus pursuant to a bonus
plan which has been established by the Board. However, with respect to Mr.
Meskell, the annual increase cannot be less than the annual increase in the
Consumer Price Index for Washington, D.C. Both employees receive a $500 per
month car allowance and maximum coverage under the Company's life and health
insurance plans. Each employee agrees not to compete with the Company within the
continental United States for a period of one year following termination.
DIRECTOR COMPENSATION
Pursuant to the 1996 Non-Employee Director Stock Option Plan, each
Non-Employee Director was granted an option to purchase 1,000 shares of Common
Stock on the first day of each calendar quarter in fiscal 1997. Options granted
may be exercised at a price equal to 100% of the fair market value on the date
of grant. Options granted under the plan are exercisable at any time in whole or
in part for a period of three years from the date of grant, and vest
immediately. Other than the previously described option grants, and the
reimbursement of certain expenses, Non-Employee Directors currently receive no
8
<PAGE>
other compensation for service as directors. See "PROPOSAL TO APPROVE THE
ADDITION OF 75,000 SHARES OF COMMON STOCK TO SILVER DINER, INC. 1996
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN."
RELATED PARTY TRANSACTIONS
SILVER DINER POTOMAC MILLS, INC. To obtain the funds required to satisfy
the obligation of Silver Diner Limited Partnership ("SDLP") under the SDLP
partnership agreement to open a Silver Diner restaurant at Potomac Mills, Robert
T. Giaimo formed Robert Giaimo Development, Inc. ("RGDI"), which is wholly owned
by Robert T. Giaimo. RGDI then borrowed an aggregate of $2,470,000 from the
Small Business Administration and from three commercial banks, which amounts
were guaranteed by Robert T. Giaimo. These funds were used by RGDI to purchase
the site on which the Potomac Mills Silver Diner restaurant is located, to
purchase an adjacent parking lot, and to construct and equip the Potomac Mills
Silver Diner restaurant. RGDI then leased the Potomac Mills restaurant and
adjacent parking lot pursuant to lease agreements dated October 14, 1991 and May
27, 1992 (the "Potomac Leases"), to Silver Diner Potomac Mills, Inc. ("SDPMI"),
which is wholly owned by Robert T. Giaimo. On June 17, 1997, the Company
purchased from RGDI an undivided 70% interest in that portion of the adjacent
property used as a parking lot for the Silver Diner Restaurant. The total
purchase price was $408,000, of which $267,000 was borrowed from a bank and
bears interest at 9.25% annually, matures in June, 1999 and is secured by the
land.
The Potomac Leases have terms of 20 years commencing on December 1, 1991
and May 27, 1992. The amounts of property leased were reduced by the land
purchase described above. As a result of the purchase, the aggregate payments of
annual base rent are $358,000 in 1998 and increase annually based on the
Consumer Price Index. The Potomac Leases also require the payment of percentage
rent based on Gross Receipts (as defined in the leases) from the Potomac Mills
Silver Diner restaurant and the parking lot. The rental receipts are used to
service the debt incurred by RGDI in connection with the construction of the
Potomac Mills Silver Diner restaurant and the acquisition of the parking lot. At
December 28, 1997, annual lease payments were $342,000 and annual debt service
was $261,000.
At the time of entering into the Potomac Lease, SDPMI entered into a
management agreement (the "Management Agreement") with SDLP, since assumed by
SDDI. The Management Agreement provides that SDDI is the exclusive manager of
the Potomac Mills Silver Diner restaurant and receives all of the Net Profits
(as defined in the agreement) from the restaurant and is responsible for paying
all operating costs and expenses, including rent. The Management Agreement is
unlimited in duration and can only be terminated by mutual agreement of SDPMI
and SDDI or, following notice, failure of the manager to meet its management
obligations and responsibilities. Through December 28, 1997, the Potomac Mills
Silver Diner has not generated any Net Profits. RGDI has granted the Company an
option to purchase the Potomac Mills Silver Diner for an amount equal the fair
market value, on the date of purchase, as determined by an appraisal. The
Management Agreement between SDPMI and SDDI remains in effect.
REPORT TO STOCKHOLDERS ON COMPENSATION
The Compensation Committee of the Board of Directors is composed solely of
non-employee Directors. The Compensation Committee determines all aspects of the
compensation to be paid to the Company's executive officers. The Company's
executive compensation program is designed to promote the following objectives:
(i) to provide competitive compensation that will help attract, retain and
reward highly qualified executives who contribute to the long term success of
the Company; (ii) to align management's interests with the Company's by tying a
portion of the executive's compensation to the Company's performance; and (iii)
to align management's interests with stockholders by including long term equity
incentives as part of the executive's compensation. The compensation of the
Company's executive officers includes cash compensation, long-term incentive
compensation in the form of stock options, and participation in various benefit
plans, most of which are generally available to employees of the Company.
CASH COMPENSATION. Cash compensation of the Company's executive officers
consists of a base salary and, if earned, an annual performance bonus. The
Compensation Committee reviews salaries recommended by the Chief Executive
Officer for executive officers other than the Chief Executive Officer. In
formulating these recommendations, the Chief Executive Officer considers the
overall performance of the Company and base salaries of executive officers at
similarly situated restaurant companies, taking into consideration the
individual experience of these officers, and conducts an informal evaluation of
individual officer performance. Final decisions on any adjustments to the base
salary for executives, other than the Chief Executive Officer, are made by the
Committee in conjunction with the Chief Executive Officer. The Committee's
evaluation of the recommendations by the Chief Executive Officer considers the
same factors outlined above and is subjective with no particular weight assigned
to any one factor.
9
<PAGE>
The Committee considers the factors outlined above in evaluating the base
salary of Robert T. Giaimo, the Company's Chief Executive Officer. Additionally,
the Committee's evaluation of Mr. Giaimo's base salary also included reviewing
national and regional compensation information for executives in the restaurant
industry, including a compensation report regarding the compensation of
restaurant executives prepared by a compensation consultant for the Committee
and information contained in proxy statements filed by other restaurant
companies.
The Company's management, including executive officers, are eligible to
receive annual incentive awards based on the Company's financial performance and
the efforts of its executives. Performance is measured based on restaurant-level
profitability, control of corporate overhead expenses and timely achievement of
store development schedule. The executive officers received $100,000 in cash
bonuses for 1997 based on attainment of restaurant operating margin goals.
STOCK OPTIONS. The executive officers, as well as other key employees, are
eligible to participate in the Company's Stock Option Plan. The purpose of the
Stock Option Plan is to provide increased incentives to salaried employees, to
encourage new employees to become affiliated with the Company and to align the
interests of such persons with those of the Company's stockholders. The Stock
Option Plan is administered by the Compensation Committee. The Compensation
Committee has the authority to determine the individuals to whom the stock
options are awarded, the terms upon which option grants shall be made and the
number of shares subject to each option, all subject to the terms and conditions
of the Stock Option Plan.
OTHER COMPENSATION. The Company provides certain other benefits to the
executive officers, such as health insurance, that are generally available to
Company employees. In addition, officers and key employees of the Company may be
eligible to receive supplemental disability coverage, automobile allowance and
insurance benefits.
10
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the total cumulative return on
the Common Stock from December 29, 1994 through December 28, 1997 with the CRSP
Total Returns Index for U.S. companies traded on the Nasdaq Stock Market (the
"Market Group") and an index group of peer companies, the CRSP Total Returns
Index for U.S. Nasdaq Stocks for (SIC 5800-5899) eating and drinking companies
(the "Peer Group"). The companies in each of the Market Group and the Peer Group
were weighted by market capitalization. Returns are based on monthly changes in
price and assume reinvested dividends. These calculations assume the value of an
investment in the Common Stock, the Market Group and the Peer Group was $100 on
December 29, 1994. The Company's Common Stock was traded on the OTC Bulletin
Board under the symbol FDTR until March 27, 1996 when it began trading on the
Nasdaq National Market under the symbol SLVR.
[LINE GRAPH APPEARS BELOW WITH PLOT POINTS]
Company Market Peer
Index Index Index
------- ------ -------
100.000 100.000 100.000
100.000 101.118 104.101
98.958 105.809 109.776
97.222 109.538 107.770
97.222 111.774 110.384
97.222 116.685 119.315
100.000 124.204 120.175
100.000 133.898 126.366
100.000 136.903 130.543
109.722 139.352 128.677
109.722 136.809 122.672
111.111 138.573 126.128
109.722 141.823 122.825
106.250 140.034 117.725
116.667 149.764 125.439
136.111 147.299 133.878
152.778 160.203 141.262
144.444 168.748 141.337
133.333 156.121 137.273
130.556 146.130 123.545
108.333 154.175 129.590
113.889 166.432 128.428
122.222 164.558 119.696
108.333 173.021 126.054
80.556 174.650 119.414
108.333 184.400 121.783
83.333 180.894 112.370
77.778 171.272 108.678
69.444 163.135 97.063
75.000 187.768 106.909
66.667 194.267 110.199
63.889 212.314 114.352
59.733 215.852 109.184
45.844 227.791 116.937
44.444 224.064 114.775
34.733 216.655 100.456
25.689 206.076 101.501
<TABLE>
<CAPTION>
TOTAL RETURNS INDEX 12/29/94 12/29/95 12/27/96 12/28/97
- - ------------------- -------- -------- -------- --------
<S><C>
Silver Diner, Inc.............. 100.000 109.722 80.556 25.689
The Market Group............... 100.000 141.823 174.650 206.076
The Peer Group................. 100.000 122.825 119.414 101.501
</TABLE>
11
<PAGE>
PROPOSED AMENDMENTS TO THE COMPANY'S STOCK OPTION PLAN
The Board believes that the Company's policy of encouraging stock ownership
by its officers and key employees, through the granting of stock options, is a
key element in the Company's growth and success by enhancing its ability to
attract and retain high quality personnel. The level of competition for highly
qualified employees is intense in the food service industry. The Board therefore
continues to believe that a competitive stock option program is an important
factor in recruiting, retaining and motivating officers and key employees.
PROPOSED AMENDMENT TO INCREASE SHARES OF COMMON STOCK SUBJECT TO THE STOCK
OPTION PLAN
The Company's Stock Option Plan currently authorizes the grant of options
to purchase a maximum of 350,000 shares of Common Stock, subject to adjustment
for stock splits and similar capital changes. As of December 28, 1997, options
to purchase 10,000 shares of Common Stock have been granted, of which none have
been exercised. Assuming that all of the above-described options were granted
and exercised, the shares of Common Stock issued would constitute approximately
2.9% of the Company's currently outstanding Common Stock.
The Board of Directors proposes that the Stock Option Plan be amended to
increase the number of shares of Common Stock available for grant under the
Stock Option Plan from 350,000 shares to 1,200,000 shares. The Board of
Directors believes that equity participation is a key element in its overall
compensation program and has developed a formal framework to govern the granting
of stock options to officers and key employees. In order to continue the
framework for granting options, the additional 850,000 shares must be made
available for grant under the Stock Option Plan. If the amendment to the Stock
Option Plan is approved by stockholders holding a majority of the outstanding
Common Stock present and entitled to be voted at the Meeting, all of the
Company's outstanding options granted under the Stock Option Plan, if granted
and exercised, would constitute approximately 9.4% of the Company's currently
outstanding Common Stock.
Since the end of the Company's 1997 fiscal year, the Board of Directors has
granted options to purchase an aggregate of 810,000 shares of Common Stock as
follows: 400,000 shares to Mr. Giaimo; 150,000 shares to Mr. Hengst; 100,000
shares to Mr. Meskell; 100,000 shares to Mr. Cusick; and 60,000 shares to Mr.
Brannan. Of such options, those granted to the following persons, aggregating
options for 470,000 shares, are subject to the stockholders approving the
increase in the shares of Common Stock under the Stock Option Plan: 232,098
shares to Mr. Giaimo; 87,037 shares to Mr. Hengst; 58,024 shares to Mr. Meskell;
58,024 shares to Mr. Cusick; and 34,814 shares to Mr. Brannan. The options are
exercisable at a price of $1.25 per share, which was equal to 100% of the market
price per share when granted, except for the options granted to Mr. Giaimo,
which have an exercise price of $1.375 per share representing 110% of the market
price per share when granted. The options vest at a rate of 10% per year. An
additional 18% of the options shall vest when the market price of the Common
Stock is greater than $5.00 per share, $7.50 per share, and $10.00 per share,
and the options shall vest 100% when the market price of the stock is greater
than $12.00 per share.
DESCRIPTION OF THE STOCK OPTION PLAN
ADMINISTRATION. The Stock Option Plan is to be administered by the Board or
the Compensation Committee. The Board or the Compensation Committee, however,
will only have the authority to determine terms and conditions of the Common
Stock issuances to participants under the Stock Option Plan to the extent such
terms and conditions are not otherwise stated in the Stock Option Plan.
EFFECTIVE DATE. The Stock Option Plan became effective as of September 11,
1996, and will continue in effect for a term of ten years unless terminated
sooner as provided in the Stock Option Plan.
ELIGIBILITY. All of the Company's officers and other key employees are
eligible to participate in the Stock Option Plan (the "participants").
SHARES SUBJECT TO THE STOCK OPTION PLAN. The aggregate number of shares
subject to the Stock Option Plan will not exceed 350,000 shares, subject to
anti-dilution adjustments and to the proposal to increase the number of shares
subject to the Stock Option Plan to 1,200,000 if approved by stockholders
holding a majority of the outstanding Common Stock present and entitled to be
voted at the Meeting. If any change is made to the Common Stock subject to the
Stock Option Plan (whether by reason of a recapitalization, stock split or
reverse, combination or exchange of shares, or other capital change affecting
the Common Stock), the Board is authorized to make appropriate adjustments to
the maximum number of shares subject to the Stock Option Plan. The Company plans
to file a post-effective amendment to its registration statement on Form S-8 to
register the additional shares to be issued under the Stock Option Plan.
12
<PAGE>
PROVISIONS OF THE STOCK OPTION PLAN. Options granted under the Stock Option
Plan will either be incentive stock options as such term is defined under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
stock options not intended to qualify as such ("non-qualified stock options").
The exercise price of each share of Common Stock underlying an incentive stock
option equals 100% of the fair market value of the Common Stock on the date of
grant of such option; provided, however, that the exercise price of incentive
stock options granted to holders of at least 10% of the Company's Common Stock
may not be less than 110% of such fair market value. The exercise price of each
share of Common Stock underlying a non-qualified stock option may not be less
than the par value of a share of Common Stock on the date of grant of the
option.
Options are exercisable in whole or in part at any time over the exercise
period, but in no event may the exercise period exceed 10 years from the date of
grant of each incentive stock option or non-qualified stock option; provided,
however, that the exercise period for incentive stock options granted to holders
of at least 10% of the Company's Common Stock may not exceed five years from the
date of grant of such options. Unless otherwise provided by the Compensation
Committee, all options vest over a five year period with no options vesting
prior to two years from the date of grant. The option exercise price must be
paid in full, at the time of exercise, in cash or, with Board approval, in
shares of Common Stock having a fair market value in the aggregate equal to the
option exercise price or in a combination of cash and such shares.
In the event that a participant (other than an independent consultant)
ceases to maintain continuous service to the Company, for any reason other than
death, disability or termination for cause, an exercisable stock option will
continue to be exercisable for thirty days but in no event after the expiration
date of such option. If a participant dies or is disabled, exercisable stock
options will continue to be exercisable for nine months, to the extent
exercisable by the participant immediately prior to his death or disability. A
stock option terminates automatically and is no longer exercisable as of the
date a participant is terminated for cause.
Options are nontransferable except in the event of death or disability in
which case the options may be exercised by the successor or representative of
the deceased participant at any time within nine months after the date of death
but in no event after the expiration date of such options. Notwithstanding the
foregoing, the Board may permit transfer of non-qualified stock options during
the exercise period. The shares issued on exercise of the options will not be
subject to any transfer restriction except those mandated by applicable federal
and state securities laws.
CERTAIN TAX MATTERS. The following is a summary, and does not purport to be
a complete description, of certain federal income tax aspects of the Stock
Option Plan and transactions thereunder. Furthermore, no information is given
with respect to any state, local, or foreign taxes which may be applicable.
Under the Stock Option Plan, a participant will not recognize taxable
income, and the Company will not be entitled to a deduction, upon the grant of
either an incentive stock option or a non-qualified stock option.
Upon exercise of a non-qualified stock option, the participant will
recognize ordinary income in an amount equal to the amount by which the fair
market value of each share of common stock on the date of exercise exceeds the
option price. The amount so recognized as income will be deductible by the
Company. Upon any subsequent sale of shares acquired through a non-qualified
stock option by a participant, the participant's basis in the shares purchased
for determining gain or loss will be their fair market value on the date of
exercise of the non-qualified stock option, if such shares were acquired for
cash. If the exercise of the option is made by delivery of shares of common
stock in payment of the option price, the shares delivered are deemed to be
exchanged in a tax-free transaction for the equivalent number of new shares of
common stock. Such equivalent number of new shares has the same basis and
holding period as the shares exchanged. The number of shares received in excess
of the number of shares delivered is included in the participant's income at the
fair market value thereof at the time of exercise. Any gain or loss recognized
upon the sale or other disposition of such shares will be capital gain or loss,
either long-term or short-term depending upon the holding period of such shares
(which begins on the date the participant recognizes income with respect to such
shares).
Upon exercise of an incentive stock option, the participant will generally
not recognize ordinary income and the Company will generally not be entitled to
a deduction at the time of exercise. Upon subsequent sales by a participant of
shares acquired through the exercise of an incentive stock option, the
participant's basis in the shares purchased for determining gain or loss will be
the option price paid for the stock. Any gain will be capital gain unless the
shares are sold within one year from the date of the exercise of the option to
which the shares relate or within two years from the date of the issuance of the
option to which they relate, in which case a portion of the gain may be treated
as ordinary income. The ordinary income portion of the gain would equal the
lesser of (i) the amount of gain recognized upon the sale or (ii) the amount by
which the
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<PAGE>
fair market value of the shares exceeded the option price on the date of
exercise. The amount so treated as ordinary income will be deductible by the
Company.
The foregoing is not to be considered as tax advice to any persons who may
be Stock Option Plan participants and any such persons are advised to consult
their own tax counsel.
AMENDMENTS AND TERMINATION. The Board may from time to time suspend,
terminate, modify, or amend the Stock Option Plan, provided that no suspension,
termination, modification, or amendment of the Stock Option Plan may adversely
affect any rights under the Stock Option Plan unless the written consent of
those affected is obtained. Unless terminated earlier by the Board, the Stock
Option Plan will terminate on September 11, 2006.
PROPOSED AMENDMENTS TO THE 1996 NON-EMPLOYEE
DIRECTOR STOCK OPTION PLAN
The Board believes that it is desirable that individuals who serve as
directors of, but who are not employees of, the Company ("Non-Employee
Directors") have a financial interest in the Company's performance. As a result,
on May 29, 1996, the Board adopted the 1996 Non-Employee Director Stock Option
Plan (the "Director Plan").
PROPOSED AMENDMENT TO INCREASE SHARES OF COMMON STOCK SUBJECT TO THE DIRECTOR
PLAN
The Company's Director Plan currently authorizes the grant of options to
purchase a maximum of 75,000 shares of Common Stock, subject to adjustment for
stock splits and similar capital changes. As of December 28, 1997, options to
purchase 63,000 shares of Common Stock were granted and none have been
exercised. Assuming that all of the above-described options were granted and
exercised, the shares of Common Stock issued would constitute approximately 0.6%
of the Company's currently outstanding Common Stock.
The Board of Directors proposes that the Director Plan be amended to
increase the number of shares of Common Stock available for grant under the
Director Plan from 75,000 shares to 150,000 shares. In order to continue the
framework for granting options, the additional 75,000 shares must be made
available for grant under the Director Plan. If the amendment to the Director
Plan is approved by the Company's stockholders, all of the Company's outstanding
options granted under the Director Plan, if granted and exercised, would
constitute approximately 1.3% of the Company's currently outstanding Common
Stock.
DIRECTOR PLAN ACTIVITY IN FISCAL 1997
Under the plan, each non-employee director is granted an option to purchase
1,000 shares of the Company's Common Stock at fair market value on the first day
of each calendar quarter. Other than the Director Plan and the reimbursement of
certain expenses, Non-Employee Directors currently receive no other compensation
for service as directors. During fiscal 1997, each of the Company's seven
Non-Employee Directors received options to purchase an aggregate of 4,000 shares
of the Company's Common Stock, none of which were exercised during fiscal 1997.
DESCRIPTION OF THE DIRECTOR PLAN
ADMINISTRATION. The Director Plan is administered by the Board. The Board
or any Board committee has the authority to administer the plan.
EFFECTIVE DATE. The Director Plan became effective as of May 29, 1996, and
will continue in effect for a term of ten years unless terminated sooner as
provided in the Director Plan.
ELIGIBILITY. All Non-Employee Directors participate in the Director Plan
(the "participants").
SHARES SUBJECT TO THE DIRECTOR PLAN. The aggregate number of shares subject
to the Director Plan may not exceed 75,000 shares, subject to anti-dilution
adjustments and to the proposal to increase the number of shares subject to the
Director Plan to 150,000 if approved by stockholders holding a majority of the
outstanding Common Stock present and entitled to be voted at the Meeting. If any
change is made to the Common Stock subject to the Director Plan (whether by
reason of a recapitalization, stock split or reverse, combination or exchange of
shares, or other capital change affecting the Common Stock), the Board is
authorized to make appropriate adjustments to the maximum number of shares
subject to the Director Plan. The Company plans to file a post-effective
amendment to its registration statement on Form S-8 to register the additional
shares to be issued under the Director Plan.
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<PAGE>
PROVISIONS OF THE DIRECTOR PLAN. Options are exercisable in whole or in
part at any time over the exercise period, but in no event will the exercise
period exceed three years from the date of grant of each option. All options
vest immediately and are non-transferable except in the event of death or
disability in which case the options may be exercised by the successor or
representative of the deceased or disabled Non-Employee Director during the
exercise period. The shares issued upon the exercise of the options are not
subject to any transfer restriction except those mandated by applicable federal
and state securities laws.
CERTAIN TAX MATTERS. The following is a summary, and does not purport to be
a complete description, of certain federal income tax aspects of the Director
Plan and transactions thereunder. Furthermore, no information is given with
respect to any state, local, or foreign taxes which may be applicable.
Under the Director Plan, a participant will not recognize taxable income,
and the Company will not be entitled to a deduction, upon the grant of an
option. Upon exercise of such option, the participant will recognize ordinary
income in an amount equal to the amount by which the fair market value of each
share of common stock on the date of exercise exceeds the option price. The
amount so recognized as income will be deductible by the Company. Upon any
subsequent sale of shares by a participant, the participant's basis in the
shares purchased for determining gain or loss will be their fair market value on
the date of exercise, if such shares were acquired for cash. If the exercise of
the option is made by delivery of shares of common stock in payment of the
option price, the shares delivered are deemed to be exchanged in a tax-free
transaction for the equivalent number of new shares of common stock. Such
equivalent number of new shares has the same basis and holding period as the
shares exchanged.
The number of shares received in excess of the number of shares delivered
is included in the participant's income at the fair market value thereof. Any
gain or loss recognized upon the sale or other disposition of such shares will
be capital gain or loss, either long-term or short-term depending upon the
holding period of such shares (which begins on the date the participant
recognizes income with respect to such shares).
The foregoing is not to be considered as tax advice to any persons who may
be Director Plan participants and any such persons are advised to consult their
own tax counsel.
AMENDMENTS AND TERMINATION. The Board may from time to time suspend,
terminate, modify, or amend the Director Plan, provided that no suspension,
termination, modification, or amendment of the Director Plan may adversely
affect any rights under the Director Plan unless the written consent of those
affected is obtained. Unless terminated earlier by the Board, the Director Plan
shall continue in effect for a term of 10 years.
INDEPENDENT ACCOUNTANTS
The firm of Deloitte & Touche LLP serve as the Company's independent
accountants. Representatives of Deloitte & Touche LLP are expected to attend the
Meeting, will be provided with an opportunity to make a statement, should they
desire to do so, and will be available to respond to appropriate questions from
the stockholders.
OTHER MATTERS
The Board knows of no other business which may come before the Meeting. If,
however, any other matters are properly presented to the Meeting, it is the
intention of the persons named in the accompanying proxy to vote, or otherwise
act, in accordance with their judgment on such matters.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Any proposal of a stockholder intended to be presented at the Company's
annual meeting of stockholders in 1999 must be received by the Company's
secretary at the Company's principal executive offices not later than February
10, 1999 for inclusion in the proxy statement for that meeting.
15
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METHOD OF PROXY SOLICITATION
The entire cost of this solicitation of proxies will be borne by the
Company. The Company's directors, officers, and regular employees, without
additional remuneration, may solicit proxies by telephone, telegraph and
personal interviews. The Company will, if requested, reimburse banks, brokerage
houses, and other custodians, nominees and certain fiduciaries for their
reasonable out-of-pocket expenses incurred in connection with the distribution
of proxy materials to their principals.
By Order of the Board of Directors,
Ype Von Hengst
Secretary
April 27, 1998
16
<PAGE>
SILVER DINER, INC.
FOR USE AT THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 10, 1998.
This Proxy is solicited on behalf of the Board of Directors of Silver Diner,
Inc. (the "Company"). The undersigned holder of shares of common stock
("Shares") of the Company hereby appoints Robert T. Giaimo, Chairman, President,
Chief Executive Officer, and Treasurer, or failing him, Ype Von Hengst,
Director, Vice President, Executive Chef, and Secretary, as Proxy for the
undersigned to attend, vote, and act for and on behalf of the undersigned at the
annual meeting (the "Meeting") of shareholders of the Company to be held on
Wednesday June 10, 1998 at 10:00 a.m. (Eastern time), at the Hyatt Regency
Reston, 1800 Presidents Street, Reston, Virginia 20190, and at any adjournments
thereof, and hereby revokes any Proxy previously given by the undersigned. If
this Proxy is not dated, it shall be deemed to be dated on the date on which
this Proxy was mailed by the Company.
Without limiting the general powers hereby conferred, the Shares represented
by this Proxy are to be:
1. [ ] VOTED FOR the election as directors of all nominees listed below (except
as marked to the contrary below), or
[ ] WITHHELD FROM VOTING for all nominees listed below.
INSTRUCTIONS: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name in the list below.
<TABLE>
<S><C>
Robert T. Giaimo Catherine Britton Clinton A. Clark Ype Von Hengst Edward H. Kaplan
George A. Naddaff Louis P. Neeb Charles M. Steiner Douglas M. Suliman, Jr.
</TABLE>
2. Voted FOR [ ], or AGAINST [ ], or ABSTAIN FROM [ ] the increase in the number
of shares of Common Stock that may be granted pursuant to the Silver Diner,
Inc. Stock Option Plan from 350,000 shares to 1,200,000 shares.
3. Voted FOR [ ], or AGAINST [ ], or ABSTAIN FROM [ ] the increase in the number
of shares of Common Stock that may be granted pursuant to the Silver Diner,
Inc. 1996 Non-Employee Director Stock Option Plan from 75,000 shares to
150,000 shares.
(CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE.)
<PAGE>
(CONTINUED FROM PREVIOUS SIDE)
This Proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, this Proxy will be
voted in favor of each of the nominees in Proposal 1 and in favor of each of
Proposals 2 and 3 set forth above.
Please sign exactly as name appears
below. 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 full
corporate name by President or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
Dated , 1998
____________________________________
Signature
____________________________________
Signature, if Held Jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
