SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /x/
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Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, For Use of the Commission Only (as permitted by
Rule No 14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec. 240.14a-12
Garden Fresh Restaurant Corp.
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Garden Fresh Restaurant Corp.
- -------------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (Check the appropriate box):
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1).
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(5) Total Fee Paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
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(1) Amount Previously Paid:
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<PAGE>
GARDEN FRESH RESTAURANT CORP.
January 13, 1998
Dear Stockholder:
This year's Annual Meeting of Stockholders will be held on March 5,
1998 at 9:00 a.m. local time, at the offices of the Company located at 17180
Bernardo Center Drive, San Diego, California 92128. You are cordially invited
to attend.
The Notice of Annual Meeting of Stockholders and a Proxy Statement,
which describe the formal business to be conducted at the meeting, follow this
letter.
After reading the Proxy Statement, please promptly mark, sign, and
return the enclosed Proxy in the postage-prepaid envelope to ensure that your
shares will be represented. Your shares cannot be voted unless you date, sign,
and return the enclosed Proxy or attend the Annual Meeting in person.
Regardless of the number of shares you own, your careful consideration of, and
voting upon, the matters before our stockholders are important.
A copy of the Company's 1997 Annual Report is also enclosed.
The Board of Directors and Management look forward to seeing you at
the Annual Meeting.
Very truly yours,
Michael P. Mack
Chairman of the Board
Chief Executive Officer and President
<PAGE>
GARDEN FRESH RESTAURANT CORP.
17180 Bernardo Center Drive
San Diego, CA 92128
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 5, 1998
Dear Stockholder:
You are invited to attend the Annual Meeting of the Stockholders of
Garden Fresh Restaurant Corp. (the "Company"), which will be held on March 5,
1998 at 9:00 a.m., local time, at the principal offices of the Company located
at 17180 Bernardo Center Drive, San Diego, California 92128 for the following
purposes:
1. To elect two (2) directors to hold office for a three-year term and
until their successors are duly elected and qualified. Management's
nominees to be Michael M. Minchin, Jr. and Robert A. Gunst.
2. To consider and vote upon a proposal to approve the 1998 Stock
Option Plan.
3. To ratify the appointment of Price Waterhouse LLP as the Company's
independent accountants for the fiscal year ending September 30,
1998.
4. To transact such other business as may properly come before the
meeting.
Stockholders of record at the close of business on January 8, 1998
are entitled to notice of and to vote at this meeting and any continuation or
adjournments thereof. For ten days prior to the meeting, a complete list of
the stockholders entitled to vote at the meeting will be available for
examination by any stockholder for any purpose relating to the meeting during
ordinary business hours at the principal office of the Company.
By order of the Board of Directors,
DAVID W. QUALLS
Chief Financial Officer
Executive Vice President-Finance and Real Estate
Secretary
San Diego, California
January 13, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO SIGN AND
PROMPTLY MAIL THE ENCLOSED PROXY IN THE RETURN ENVELOPE SO THAT YOUR STOCK MAY
BE REPRESENTED AT THE MEETING. IF YOU ARE ABLE TO ATTEND THE MEETING, AND WISH
TO VOTE YOUR SHARES PERSONALLY, YOU MAY DO SO AT ANY TIME BEFORE THE PROXY IS
EXERCISED.
IMPORTANT: Please fill in, date, sign and promptly mail the enclosed proxy
card in the accompanying postage-prepaid envelope to ensure that your shares
are represented at the meeting. If you attend the meeting, you may choose to
vote in person even if you have previously sent in your proxy card.
<PAGE>
TABLE OF CONTENTS
Page
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .1
Annual Report. . . . . . . . . . . . . . . . . . . . . . . . . .. .1
Voting Securities. . . . . . . . . . . . . . . . . . . . . . . .. .1
Solicitation of Proxies. . . . . . . . . . . . . . . . . . . . .. .1
Voting of Proxies. . . . . . . . . . . . . . . . . . . . . . . .. .1
Stock Ownership of Certain Beneficial Owners and Management. . .. .1
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . .. .2
ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . .. .3
COMMITTEES OF THE BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . .. .5
EXECUTIVE COMPENSATION AND OTHER MATTERS. . . . . . . . . . . . . . . . . .. .5
Summary Compensation Table . . . . . . . . . . . . . . . . . . .. .5
Option Grants in Last Fiscal Year. . . . . . . . . . . . . . . .. .6
Aggregate Option Exercises and Fiscal Year-Ended Values. . . . .. .6
Compensation of Directors. . . . . . . . . . . . . . . . . . . .. .7
Section 16(a) Beneficial Ownership Reporting Compliance. . . . .. .7
CERTAIN TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .. .7
Arrangements with Directors and Executive Officers . . . . . . .. .7
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION . . . . . . . . . .. .8
Deductibility of Executive Compensation. . . . . . . . . . . . .. .9
COMPARISON OF STOCKHOLDER RETURN. . . . . . . . . . . . . . . . . . . . . .. 10
PROPOSAL TO APPROVE THE COMPANY'S STOCK OPTION PLAN . . . . . . . . . . . .. 11
Summary of the Option Plan . . . . . . . . . . . . . . . . . . .. 11
Summary of United States Federal Income Tax Consequences . . . .. 14
Vote Required and Board of Directors Recommendation. . . . . . .. 15
New Plan Benefits. . . . . . . . . . . . . . . . . . . . . . . .. 15
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS. . . . . . . . . . .. 16
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING. . . . . . . .. 16
TRANSACTION OF OTHER BUSINESS . . . . . . . . . . . . . . . . . . . . . . .. 16
<PAGE>
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
Garden Fresh Restaurant Corp.
17180 Bernardo Center Drive
San Diego, CA 92128
(619) 675-1600
The accompanying proxy is solicited by the Board of Directors of
Garden Fresh Restaurant Corp., a Delaware corporation (the "Company"), for use
at the Annual Meeting of Stockholders to be held March 5, 1998 or any
adjournment thereof, for the purposes set forth in the accompanying Notice of
Annual Meeting. The date of this Proxy Statement is January 13, 1998, the
approximate date on which this Proxy Statement and the accompanying form of
proxy were first sent or given to stockholders.
GENERAL INFORMATION
Annual Report. An annual report for the fiscal year ended September
30, 1997 is enclosed with this Proxy Statement.
Voting Securities. Only stockholders of record as of the close of
business January 8, 1998, will be entitled to vote at the meeting and any
adjournment thereof. As of that date, there were 4,289,621 shares of Common
Stock of the Company, par value $.01 per share, issued and outstanding.
Stockholders may vote in person or in proxy. Each holder of shares of Common
Stock is entitled to one (1) vote for each share of stock held on the proposals
presented in this Proxy Statement. The Company's Bylaws provide that a
majority of all of the shares of the stock entitled to vote, whether present in
person or represented by proxy, shall constitute a quorum for the transaction
of business at the meeting.
Solicitation of Proxies. The cost of soliciting proxies will be
borne by the Company. In addition to soliciting stockholders by mail through
its regular employees, the Company will request banks and brokers, and other
custodians, nominees and fiduciaries, to solicit their customers who have stock
of the Company registered in the names of such persons and will reimburse them
for their reasonable, out-of- pocket costs. The Company may use the services
of its officers, directors, and others to solicit proxies, personally or by
telephone, without additional compensation. The Company may determine to use a
proxy solicitor, and if it does, it would pay a fee, which it reasonably
expects would not exceed $2,500.
Voting of Proxies. All valid proxies received prior to the meeting
will be voted. All shares represented by a proxy will be voted, and where a
stockholder specifies by means of the proxy a choice with respect to any matter
to be acted upon, the shares will be voted in accordance with the specification
so made. If no choice is indicated on the proxy, the shares will be voted in
favor of the proposal. A stockholder giving a proxy has the power to revoke
his or her proxy, at any time prior to the time it is voted, by delivery to the
Secretary of the Company of a written instrument revoking the proxy or a duly-
executed proxy with a later date, or by attending the meeting and voting in
person.
Stock Ownership of Certain Beneficial Owners and Management. The
following table sets forth certain information, as of September 30, 1997, with
respect to the beneficial ownership of the Company's Common Stock by (i) all
persons known by the Company to be the beneficial owners of more than 5% of the
outstanding Common Stock of the Company; (ii) each director and
director-nominee of the Company; (iii) each officer of the Company whose salary
and incentive compensation for the fiscal year ended September 30, 1997
exceeded $100,000; and (iv) all executive officers and directors of the Company
as a group.
1
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Shares Beneficially
Owned
Names of Beneficial Owner* Number Percent**
Bank of America
555 California Street
San Francisco, CA 94104 . . . . . . . . . . . . . . . . . . . 215,300 5.05%
D3 Family Fund
19605 NE 8th Street
Camas, CA 98607 . . . . . . . . . . . . . . . . . . . . . . . 338,325 7.93%
St. Paul Venture Capital, Inc.
8500 Normandale Lake Boulevard, Suite 1940
Bloomington, Minnesota 55437 . . . . . . . . . . . . . . . . 595,346 13.96%
Michael P. Mack (1)
c/o Garden Fresh Restaurant Corp . . . . . . . . . . . . . . . 257,626 6.04%
David W. Qualls (2) . . . . . . . . . . . . . . . . . . . . . 111,554 2.62%
R. Gregory Keller (3) . . . . . . . . . . . . . . . . . . . . 103,360 2.42%
Edgar F. Berner (4) . . . . . . . . . . . . . . . . . . . . . 14,300 .34%
Robert A. Gunst (4) . . . . . . . . . . . . . . . . . . . . . 15,000 .35%
Michael M. Minchin, Jr (5) . . . . . . . . . . . . . . . . . 86,509 2.03%
John M. Robbins, Jr. (4) . . . . . . . . . . . . . . . . . . . 31,500 .74%
All directors and executive officers as a
group (7 persons) (6) . . . . . . . . . . . . . . . . . . . 619,849 14.53%
* Except as otherwise indicated, the address of each beneficial owner
is c/o the Company, 17180 Bernardo Center Drive, San Diego,
California 92128.
** Percent of the outstanding shares of Common Stock, treating as
outstanding all shares of Common Stock issuable on exercise of stock
options within 60 days of September 30, 1997, held by the particular
beneficial owner that are included in the first column.
(1) Includes 110,053 shares issuable upon exercise of stock options and
375 shares held by his wife, Ruth Mack.
(2) Includes 88,394 shares issuable upon exercise of stock options.
(3) Includes 87,610 shares issuable upon exercise of stock options.
(4) Includes 10,000 shares issuable upon exercise of stock options.
(5) Includes 86,509 shares issuable upon exercise of stock options.
(6) Includes 382,566 shares issuable upon exercise of stock options.
2
<PAGE>
ELECTION OF DIRECTORS
The Company has a classified Board of Directors consisting of one
Class A director (Michael P. Mack), two Class B directors (Edgar F. Berner
and John M. Robbins, Jr.), and two Class C directors (Michael M. Minchin, Jr.
and Robert A. Gunst) who will serve until the Annual Meetings of Stockholders
to be held in 2000, 1999 and 1998, respectively, and until their respective
successors are duly elected and qualified. At each Annual Meeting of
Stockholders, directors are elected for a full term of three years to succeed
those directors whose terms expire on the Annual Meeting dates.
Management's nominees for election at the Annual Meeting of
Stockholders to Class C of the Board of Directors are Michael M. Minchin, Jr.
and Robert A. Gunst. If elected, the nominees will serve as directors until
the Company's Annual Meeting of Stockholders in 2001, and until their
successors are elected and qualified. If the nominees decline to serve or
become unavailable for any reason, or if a vacancy occurs before the election
(although management knows of no reason to anticipate that this will occur),
the proxies may be voted for such substitute nominees as management may
designate.
If a quorum is present and voting, the two nominees for Class C
directors receiving the highest number of votes will be elected as Class C
directors. Abstentions and shares held by brokers that are present but not
voted, because the brokers are prohibited from exercising discretionary
authority (i.e., "broker non-votes"), will be counted as present for purposes
of determining whether a quorum is present.
The table below sets forth the current directors, including the
Class C nominees to be elected at this meeting and certain information with
respect to age and background:
POSITIONS WITH DIRECTOR
NAME AGE THE COMPANY SINCE
Class A director whose term expires at
the 2000 Annual Meeting of Stockholders:
Michael P. Mack 46 Chairman of the Board 1984
Director, Chief Executive
Officer, and President
Class B directors whose terms expire at
the 1999 Annual Meeting of Stockholders:
Edgar F. Berner 66 Director 1996
John M. Robbins, Jr. 50 Director 1996
Class C directors whose terms expire at
the 1998 Annual Meeting of Stockholders:
Michael M. Minchin, Jr. 71 Director 1993
Robert A. Gunst 49 Director 1996
3
<PAGE>
Michael M. Minchin, Jr. joined the Company's Board of Directors in
November 1993 and assumed the role of Chairman of the Board from February 1994
to December 1997. From May 1992 to November 1993, Mr. Minchin served as an
independent consultant to Sizzler International, a restaurant company, and
several other publicly-held restaurant chains. Prior to that, Mr. Minchin
served as the Executive Vice President of Sizzler International from May 1980
to May 1992. Mr. Minchin received a B.A. from Stanford University and an
M.B.A. from Harvard University. Currently, Mr. Minchin serves as Managing
Director of the John Douglas French Alzheimer's Foundation as well as an
independent consultant to several publicly-held restaurant chains.
Michael P. Mack co-founded the Company in 1983 and was the President
and Chief Operating Officer from the Company's inception until April 1991 and
the Chief Executive Officer from September 1990 to April 1991. Mr. Mack
assumed the role of Chairman of the Board of Directors in December 1997. Mr.
Mack has also been a director of the Company since its inception. Since
February 1994, Mr. Mack has been the Company's President and Chief Executive
Officer. From April 1991 to February 1994, Mr. Mack served as the President
of MPM Management, Inc., a consulting firm. Prior to joining the Company, from
1977 to 1983, Mr. Mack worked for Bain & Company, a management consulting firm,
where he specialized in the development and implementation of business
strategies. Mr. Mack received a B.A. from Brown University and an M.B.A.
from Harvard University.
Edgar F. Berner currently serves as Chairman and was formerly the
CEO of Sweet Factory, Inc., a national candy specialty chain. From 1969 to
1980, Mr. Berner was founder and President of Fashion Conspiracy, a 280 store
junior apparel chain which was sold to Edison Brothers Stores. He previously
served on the Board of Clothestime, Inc. (Nasdaq), and Edison Brothers Stores
(NYSE). In addition to serving on the Board of the Company, Berner is a
Director of Hot Topic (Nasdaq), a youth oriented specialty retail chain.
John M. Robbins currently serves as Chairman of the Board of
Directors and CEO of American Residential Investment Trust, and Home Asset
Management Corp. He currently serves as a Director of Pacific Research and
Engineering, National Bankcard, Accredited Home Lenders, and as Chairman of the
Board of Neighborhood Bankcorp. He was formerly President and Chief Executive
Officer of American Residential Holding Corporation and its subsidiary American
Residential Mortgage Corporation (AmRes) which was one of the country's leading
residential lenders, from 1983 to 1994.
Robert A. Gunst has more than 25 years of experience in food and
retailing. President and Chief Executive Officer of The Good Guys, Inc. since
1993, he joined the Company's board as an outside director in 1996. In 1990,
he became President and Chief Operating Officer of the Good Guys, Inc. while
remaining a member of its board. Prior to The Good Guys, Inc., Gunst served as
Senior Vice President, Chief Financial Officer and a board member of San
Francisco-based Shaklee Corporation. Previously, he served in several senior
positions with PepsiCo, Inc. including Senior Vice President of Marketing/
Manufacturing and Franchising for La Petite Boulangrie, Inc., and as Chief
Financial Officer and Vice President of Finance and Administration for PepsiCo
Foods International. Prior to PepsiCo, Gunst was a Senior Vice President and
Chief Financial Officer for Victoria Station Incorporated, a chain of
restaurants. Gunst holds a Master's Degree in Business Administration from the
University of Chicago's Graduate School of Business and a Bachelor of Arts
Degree from Dartmouth College.
During the fiscal year ended September 30, 1997, the Board held
seven meetings. Messrs. Berner, Gunst, Mack and Minchin attended all the
Board meetings and Mr. Robbins attended 57% of the Board meetings. THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF MICHAEL M.
MINCHIN, JR. AND ROBERT A. GUNST AS CLASS C DIRECTORS TO SERVE UNTIL THE
ANNUAL MEETING OF STOCKHOLDERS IN 2001.
4
<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS
The Company does not have a standing Nominating Committee, but does
have an Audit Committee and a Compensation Committee.
The Audit Committee's function is to review, with the Company's
independent accountants and management, the results of the examination of the
Company's financial statements by the independent accountants and the
independent accountants' opinion. The Audit Committee also approves all
professional services performed by the independent accountants, recommends the
retention of the independent accountants to the Board, subject to ratification
by the stockholders, and periodically reviews the Company's accounting policies
and internal accounting and financial controls. During fiscal 1997, the
members of the Audit Committee were Messrs. Berner and Gunst. The Audit
Committee held two meetings during the fiscal year ended September 30, 1997. A
meeting was held on December 4, 1996 and September 30, 1997.
The Compensation Committee's function is to review and recommend
executive compensation, including officer salary levels, incentive compensation
programs, and stock option grants. During fiscal 1997, the members of the
Compensation Committee were Messrs, Gunst, Minchin, and Robbins. The
Compensation Committee held two meeting one on December 19, 1996 and the other
on October 28, 1997. For additional information concerning the Compensation
Committee, see "COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION" and
"EXECUTIVE COMPENSATION AND OTHER MATTERS."
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth information concerning the annual and
long-term compensation of the Chief Executive Officer of the Company and the
other executive officers of the Company as of September 30, 1997 whose total
salary and incentive compensation for the fiscal year ended September 30, 1997
exceeded $100,000 for services in all capacities to the Company.
The following table also sets forth the total salary and incentive compensation
for each of such executive officers for the fiscal years ended September 30,
1997, September 30, 1996 and September 30, 1995:
SUMMARY COMPENSATION TABLE
(Annual Compensation)
Long-Term
Compensation
Shares Other
Name and Principal Underlying Annual
Position Year Salary Bonus Options Compensation
Michael P. Mack (1) 1997 $256,823 $ 0 18,000 $ 0
Chief Executive Officer, 1996 208,843 90,000 40,000 $ 0
President 1995 179,250 50,000 90,000 $ 0
David W. Qualls (2) 1997 $176,151 $ 0 12,000 $ 0
Chief Financial Officer, 1996 153,175 60,000 30,000 $ 0
Executive Vice President 1995 139,826 50,000 75,000 $ 0
Finance and Real Estate,
Secretary
R. Gregory Keller (3) 1997 $153,836 $ 0 10,000 $ 0
Vice President of 1996 131,875 60,000 30,000 $ 0
Operations 1995 115,767 50,000 75,000 $ 0
1 Mr. Mack was granted an increase in annual salary to $287,500 for
fiscal year 1998.
2 Mr. Qualls was granted an increase in annual salary to $195,500 for
fiscal year 1998.
3 Mr. Keller was granted an increase in annual salary to $172,500 for
fiscal year 1998.
5
<PAGE>
The following table provides the specified information concerning
grants of options to purchase the Company's Common Stock made during the year
ended September 30, 1997 to the persons named in the Summary Compensation
Table:
OPTION GRANTS IN LAST FISCAL YEAR (3)
Potential Realizable
Value Assumed Annual
Rates of Stock Price
Appreciation for
Individual grants in Fiscal 1997 Option Term (1)
% of Total
Options
Granted to
Options Employees Exercise
Granted In Fiscal or Base Expiration
Name (#)(2) Year Price (2) Date 5% 10%
Michael P. Mack 18,000 14.0% $ 8.50 2/26/07 $ 96,221 $243,843
David W. Qualls 12,000 9.4% $ 8.50 2/26/07 $ 64,147 $162,562
R. Gregory Keller 10,000 7.8% $ 8.50 2/26/07 $ 53,456 $135,468
1 Potential gains are net of exercise price, but before taxes
associated with exercise. These amounts represent certain assumed
rates of appreciation only, based on the Securities and Exchange
Commission rules. Actual gains, if any, on stock option exercises
are dependent on the future performance of the Common Stock, overall
market conditions and the optionholders' continued employment
through the vesting period. The amounts reflected in this table may
not necessarily be achieved. One share of stock purchased in 1997
at $8.50 would yield profits of $5.35 per share at 5% appreciation
over ten years, or $13.54 per share at 10% appreciation over the
same period.
2 All options were granted at market value on the date of grant. All
options vest equally at 1/36 per month over 36 months.
The following table provides information concerning exercises of
options to purchase the Company's Common Stock in the fiscal year
ended September 30, 1997, and unexercised options held at fiscal
year end by the persons named in the Summary Compensation Table:
3 Grants were based on performance for fiscal year 1996.
<TABLE>
<CAPTION>
AGGREGATE OPTION EXERCISES AND FISCAL YEAR-END VALUES (1)
Number of Unexercized Value of Unexercized In-The
Shares Options at 9/30/97 Money Options at 9/30/97 (2,3)
Acquired Value
Name On Exercise Realized (1) Exercisable Unexercisable Exercisable (2) Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Michael P. Mack 34,500 $123,510 101,831 46,169 $646,856 $313,144
David W. Qualls 29,175 $146,818 81,896 35,104 $516,633 $237,118
R. Gregory Keller 0 $ 0 99,224 33,776 $698,733 $228,818
<FN>
1 Amounts shown represent the value realized upon the exercise of
stock options during 1997, which equals the difference between the
exercise price of the options and the closing market price of the
underlying Common Stock on the date preceding the exercise date.
2 Values are net of exercise price.
3 Based on the 1997 year-end market price per share of $14.75 on
September 30, 1997, the last trading date prior to the end of the
Company's fiscal year. The values shown equal the difference
between the exercise price of unexercised in-the- money options and
the closing market price of the underlying Common Stock at September
30, 1997. Options are in-the- money if the fair market value of the
Common Stock exceeds the exercise price of the option.
</TABLE>
6
<PAGE>
Compensation of Directors
The outside directors of the Company each receive $6,000 per year as
a cash compensation for attendance at each meeting of the Board of Directors.
The outside directors who are members of each committee of the Board of
Directors receive $750 cash compensation for attendance at each committee
meeting. Additionally, the directors of the Company are reimbursed for
expenses incurred in connection with attendance at Board of Directors or
committee meetings.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors and persons who beneficially own more
than 10% of the Company's Common Stock to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission
("SEC"). Such persons are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms filed by such persons.
Based solely on the Company's review of such forms furnished to the
Company and written representations from certain reporting persons, the Company
believes that all filing requirements applicable to the Company's executive
officers, directors and more than 10% stockholders were timely complied with
during the fiscal year ended September 30, 1997.
CERTAIN TRANSACTIONS
Arrangements with Directors and Executive Officers
In July 1997, the Company entered into employment agreements with
Michael Mack, the Company's Chief Executive Officer and President; David
Qualls, Executive Vice President and Chief Financial Officer; and Gregory
Keller, Vice President, which provides them, upon termination without cause,
with a severance equal to one half of their then current annual salary.
Additionally, in the event of a change of control they are provided additional
severance based upon certain conditions and termination without cause.
The Company has entered into indemnification agreements with its
officers and directors containing provisions that are in some respects broader
than the specific indemnification provisions contained in the Delaware General
Corporation Law.
Certain of the officers and directors and their affiliates and
certain other holders of the Company's Common Stock are entitled to certain
registration rights with respect to the Common Stock issued or issuable upon
conversion thereof.
In addition, in the event of a change in control as defined under
the proposed 1998 Stock Option Plan, any unexercisable or unvested portion of
the outstanding options will become immediately exercisable and vested in full
prior to the change in control.
The Company's policy has been and continues to be that all
transactions between the Company and its officers, directors and other
affiliates must (i) be approved by a majority of the members of the Company's
Board of Directors and by a majority of the disinterested members of the
Company's Board of Directors and (ii) be on terms no less favorable to the
Company than could be obtained from unaffiliated third parties. In addition,
this policy requires that any loans by the Company to its officers, directors
or other affiliates be for bona fide business purposes only.
7
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors during the 1997
comprised of the non-employee directors of the Company, Messrs. Gunst,
Minchin, and Robbins. The Compensation Committee is responsible for setting and
administering the policies governing compensation of the executive officers of
the Company, including cash compensation, stock ownership programs and other
benefits. The goals of the Company's compensation policy are to attract and
retain executive officers who contribute to the overall success of the Company
by offering compensation which is competitive in the restaurant industry for
companies of the Company's size and to motivate executives to achieve the
Company's business objectives and reward them for their achievements. The
Company uses salary, incentive compensation and stock options to meet these
goals.
For fiscal 1997, salaries were set for each executive officer within
the range of salary for similar positions in other companies in Garden Fresh's
industry and of similar size, based on surveys conducted by the Company's Human
Resources Department and through the services of an outside compensation
consultant. In preparing the performance graph set forth in the section
entitled "COMPARISON OF STOCKHOLDER RETURN", the Company has selected the Dow
Jones Industry Group as its published industry index. The companies included
in the Company's salary surveys should be included in the index as all of the
companies used by the Company are publicly traded. Salaries were set within
the applicable range based on the officer's experience, tenure and prior
performance. Performance was judged by the Chief Executive Officer for all
executive officers other than himself. The Compensation Committee evaluated
the Chief Executive Officer's performance, increasing his salary for fiscal
1998 based primarily on the Chief Executive Officer's increased
responsibilities as a result of the Company's increased size and the Company's
performance in 1997. The Chief Executive Officer's total compensation for
fiscal 1997 approximates the mean of the compensation for chief executive
officers in similar-sized companies in the restaurant industry.
No incentive compensation was awarded to the executive officers for
fiscal 1997.
The Company believes that employee equity ownership provides
significant additional motivation to executive officers to maximize value for
the Company's stockholders. Because the stock options will be granted at the
prevailing market price, the stock options will only have value if the
Company's stock price increases over the exercise price. Therefore, the
Committee believes that stock options will serve to align the interest of
executive officers closely with other stockholders because of the direct
benefit executive officers receive through improved stock performance.
The Compensation Committee reviewed the performance for fiscal year
1997 and did not recommend to the Board of Directors, and the Board of Directors
did not approve stock option grants for the performance for fiscal year 1997 to
the executive officers, including the Chief Executive Officer, under the
Company's Option Plan.
Additionally, to effectively retain the Officers and certain other
senior employees of the Company, the Compensation Committee recommended to the
Board for fiscal year 1998 that the Company implement a nonqualified deferred
compensation plan for the Officers, which would provide 100% Company matching
for the first $20,000.00 dollars of deferred compensation for each Officer.
The Plan also covers other Company employees at a lower rate of contribution.
These individuals receive 50% Company matching on the first $6,000 of deferred
compensation. The Plan also offers life insurance in the amount of $500,000
for the Officers and $100,000 for the other employees covered by the Plan.
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Deductibility of Executive Compensation
Effective January 1, 1994, the Internal Revenue Code (the "Code")
was amended to impose a limit under section 162(m) on the amount of
compensation which may be deducted by a publicly-held corporation with respect
to the corporation's chief executive officer and its four other most highly-
compensated offers, set at $1,000,000 per executive per year. Exemptions from
this deductibility limit are provided for certain types of "performance-based
compensation", including compensation related to stock option plans meeting
certain criteria. The Compensation Committee does not believe that other
components of the Company's compensation will be likely in the aggregate to
exceed $1,000,000 for any executive officer in any year in the foreseeable
future, and therefore concluded that no further action with respect to
qualifying its executive compensation for deductibility of such compensation
was necessary at this time. The policy of the Committee is to qualify
executive compensation for deductibility under the applicable tax laws as
practicable. In the future, the Committee will continue to evaluate the
advisability of qualifying the deductibility of such compensation in the
future.
COMPENSATION COMMITTEE
Robert A. Gunst
Michael M. Minchin Jr.
John M. Robbins Jr.
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COMPARISON OF STOCKHOLDER RETURN
Set forth below is a line graph comparing the annual percentage
change in the cumulative total return on the Company's Common Stock with the
cumulative total return of the Nasdaq National Market and the Dow Jones
Industry Group for Restaurants for the period commencing on May 16, 1995 (1)
and ending on September 30, 1997 (2).
Garden Fresh Restaurant Corp. Inc., Index for Nasdaq National Market and Dow
Jones Industry Group for Restaurants
The graph referenced plots three lines; GARDEN FRESH, NASDAQ NATIONAL
MARKET, and DOW JONES INDUSTRY GROUP FOR RESTAURANTS.
Data points are at 5/16/95 (public offering), 9/30/95, 9/30/96 and
9/30/97.
The data line for GARDEN FRESH shows a decline from the public offering
to fiscal year end 9/30/95, and an increase from there to the fiscal
year end 9/30/97.
May 15, Sept. 30, Sept. 30, Sept. 30,
1995 1995 1996 1997
Garden Fresh $100.00 $ 86.11 108.33 141.13
Nasdaq National Market 100.00 120.91 142.16 236.16
Dow Jones Industry 100.00 102.09 122.45 125.12
Groups Restaurants
1 The effective date of the Company's initial public offering was May
16, 1995. For purposes of this presentation, the Company has
assumed that its initial offering price of $9.00 would have been the
closing sales price on May 15, 1995, the day prior to commencement
of trading.
2 Assumes that $100.00 was invested on May 16, 1995 in the Company's
Common Stock at the Company's initial offering price of $9.00 and at
the closing sales price for each index on that date and that all
dividends were reinvested. No dividends have been declared on the
Company's Common Stock. Stockholder returns over the indicated
period should not be considered indicative of future stockholder
returns.
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PROPOSAL TO APPROVE THE COMPANY'S 1998 STOCK OPTION PLAN
At the annual meeting, the stockholders will be asked to approve the
Garden Fresh Restaurant Corp. 1998 Stock Option Plan (the "Option Plan").
The Option Plan is intended to replace the Company's Restaurant
Management Stock Option Plan, 1995 Key Employee Stock Option Plan, and 1995
Outside Directors Stock Option Plan (collectively, the "Prior Plans"). Under
the Prior Plans, as of January 8, 1998, options to purchase an aggregate of
755,318 shares of Common Stock were outstanding, 343,923 shares had been issued
upon the exercise of previously granted options, and only 75,000 shares
remained available for future grants, a number that the Board of Directors has
determined to be insufficient to meet the Company's current and anticipated
needs. The Board of Directors believes that the additional shares authorized
by the Option Plan are necessary to enable it to maintain an adequate equity
incentive program.
In addition to enabling the Company to continue to provide necessary
incentives, the Option Plan is designed to preserve the Company's ability to
deduct in full for federal income tax purposes the compensation recognized by
its executive officers in connection with options granted under the plan.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
sets a limit of $1 million on the amount of compensation paid to each of the
Company's chief executive officer and four other most highly compensated
executive officers that the Company may deduct as an expense for federal income
tax purposes in any fiscal year. In combination with other types of
compensation received by an executive officer, it is possible that
option-related compensation could cause his or her total compensation to exceed
this limit in a particular year. However, Section 162(m) of the Code exempts
certain "performance-based compensation" from this limit. To permit
compensation attributable to options granted under the Option Plan to qualify
as performance-based compensation, the Option Plan limits the number of shares
for which options may be granted in any fiscal year to any employee, including
the Company's executive officers, to 100,000. This grant limit is subject to
appropriate adjustment in the event of certain changes in the Company's capital
structure.
The Board adopted the Option Plan on December 11, 1997, (the
"Effective Date"). Because competition for highly qualified individuals in the
Company's industry is intense, the Board of Directors believes that to
successfully attract the best candidates, the Company must continue to offer a
competitive equity incentive program. It expects that the Option Plan will be
an important factor in attracting and retaining the high caliber employees,
directors and consultants essential to the success of the Company and will
serve an important role in motivating employees to contribute to the Company's
growth and profitability. The proposed Option Plan is intended to ensure that
the Company will continue to have available a reasonable number of shares to
meet these goals.
Summary of the Option Plan
The following summary of the Option Plan is qualified in its
entirety by the specific language of the Option Plan, a copy of which is
available to any stockholder upon request.
General. The purpose of the Option Plan is to advance the interests
of the Company and its stockholders by providing an incentive to attract,
retain and reward the Company's employees, directors and consultants and by
motivating such persons to contribute to the Company's growth and
profitability. The Option Plan provides for the grant to employees of
incentive stock options within the meaning of section 422 of the Code and the
grant to employees, directors and consultants of nonstatutory stock options.
Shares Subject to Plan. The maximum number of the authorized but
unissued or reacquired shares of Common Stock of the Company which may be
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<PAGE>
issued under the Option Plan is 1,080,318 which amount is comprised of the sum
of (a) 250,000 shares, (b) the number of shares, as of the Effective Date,
subject to outstanding options granted under the Prior Plans, plus (c) the
number of shares available for future grant under the Prior Plans as of the
Effective Date. However, the number of shares available for issuance under the
Option Plans, at any time, is reduced by the number of shares which remain
subject to outstanding options granted under the Prior Plans, are issued upon
exercise of such options, or are issued pursuant to options granted under the
Prior Plans after the Effective Date. Furthermore, in order to comply with the
requirements of the exemption under Section 162(m) of the Code for
performance-based compensation, the Option Plan provides that no employee may
be granted in any fiscal year of the Company options which in the aggregate are
for more than 100,000 shares (the "Grant Limit"). Appropriate adjustments will
be made to the shares subject to the Option Plan, the Grant Limit, the
automatic nonemployee director grants discussed below and to outstanding
options upon any stock dividend, stock split, reverse stock split,
recapitalization, combination, reclassification, or similar change in the
capital structure of the Company. If any outstanding option expires,
terminates or is canceled, or if shares acquired pursuant to an option are
repurchased by the Company, the expired or repurchased shares are returned to
the Option Plan and again become available for grant.
Administration. The Option Plan will be administered by the Board
of Directors or a duly appointed committee of the Board, which, in the case of
options intended to qualify for the performance- based compensation exemption
under Section 162(m) of the Code, must be comprised solely of two or more
"outside directors" within the meaning of Section 162(m) (hereinafter referred
to collectively as the "Board"). Subject to the provisions of the Option Plan,
the Board determines the persons to whom options are to be granted, the number
of shares to be covered by each option, whether an option is to be an incentive
stock option or a nonstatutory stock option, the timing and terms of
exercisability and vesting of each option, the purchase price and the type of
consideration to be paid to the Company upon the exercise of each option, the
time of expiration of each option, and all other terms and conditions of the
options. The Board may amend, modify, extend, cancel, renew, or grant a new
option in substitution for, any option, waive any restrictions or conditions
applicable to any option, and accelerate, continue, extend or defer the
exercisability or vesting of any option, including with respect to the period
following an optionee's termination of service with the Company. The Option
Plan provides, subject to certain limitations, for indemnification by the
Company of any director, officer or employee against all reasonable expenses,
including attorneys' fees, incurred in connection with any legal action arising
from such person's action or failure to act in administering the plan. The
Board will interpret the Option Plan and options granted thereunder, and all
determinations of the Board will be final and binding on all persons having an
interest in the Option Plan or any option.
Eligibility. Options may be granted under the Option Plan to
employees , directors and consultants of the Company or of any present or
future parent or subsidiary corporations of the Company. In addition, options
may be granted to prospective service providers in connection with written
employment offers, provided that no shares may be purchased prior to such
person's commencement of service. As of January 8, 1998, the Company had
approximately 3,339 employees, including 3 executive officers, 18 directors and
no consultants who would be eligible under the Option Plan. While any eligible
person may be granted a nonstatutory stock option, only employees may be
granted incentive stock options.
Terms and Conditions of Options. Each option granted under the
Option Plan is evidenced by a written agreement between the Company and the
optionee specifying the number of shares subject to the option and the other
terms and conditions of the option, consistent with the requirements of the
plan. The exercise price of each incentive stock option may not be less than
the fair market value of a share of the Common Stock on the date of grant,
while the exercise price of a nonstatutory stock option may not be less than
85% of such fair market value. However, any incentive stock option granted to
a person who at the time of grant owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or any
parent or subsidiary corporation of the Company (a "Ten Percent Stockholder")
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<PAGE>
must have an exercise price equal to at least 110% of the fair market value of
a share of Common Stock on the date of grant. As of January 8, 1998, the
closing price of the Company's Common Stock, as reported on the Nasdaq National
Market, was $14.63 per share.
The Option Plan provides that the option exercise price may be paid
in cash, by check, or in cash equivalent, by the assignment of the proceeds of
a sale or loan with respect to some or all of the shares being acquired upon
the exercise of the option, to the extent legally permitted, by tender of
shares of Common Stock owned by the optionee having a fair market value not
less than the exercise price or by means of a promissory note if the optionee
is an employee, by such other lawful consideration as approved by the Board, or
by any combination of these. Nevertheless, the Board may restrict the forms of
payment permitted in connection with any option grant. No option may be
exercised until the optionee has made adequate provision for federal, state,
local and foreign taxes, if any, relating to the exercise of the option.
Options will become vested and exercisable at such times or upon
such events and subject to such terms, conditions, performance criteria or
restrictions as specified by the Board. The maximum term of an incentive stock
option granted under the Option Plan is ten years, provided that an incentive
stock option granted to a Ten Percent Stockholder must have a term not
exceeding five years. Unless his or her service is terminated for cause, an
optionee's option generally will remain exercisable for three months following
termination of service, provided that if termination results from the
optionee's death or disability, the option generally will remain exercisable
for 12 months following the optionee's termination of service. In addition,
the right to exercise the option will generally expire upon a termination of
service for cause. In any event the option must be exercised no later than its
expiration date. The Board, in its discretion, may provide for longer or
shorter post-service exercise periods in particular instances.
Incentive stock options are nontransferable by the optionee other
than by will or by the laws of descent and distribution, and are exercisable
during the optionee's lifetime only by the optionee. Nonstatutory stock
options granted under the Option Plan may be assigned or transferred to the
extent permitted by the Board and set forth in the optionee's option agreement.
Automatic Grant of Nonemployee Director Options. In addition to
authorizing the Board to grant options to employees, directors and consultants
on a discretionary basis, the Option Plan provides for the nondiscretionary,
automatic grant of options to directors who, at the time of grant, are not
employees of the Company or of any parent or subsidiary corporation of the
Company (a "Nonemployee Director"). Subject to stockholder approval automatic
grants to Nonemployee Directors after the Effective Date will be made pursuant
to the Option Plan and no further grants will be made pursuant to the Company's
1995 Outside Directors Stock Option Plan. Each person first elected or
appointed as a Nonemployee Director on or after the Effective Date will be
granted automatically on the date of such initial election or appointment an
option to purchase 10,000 shares of Common Stock (an "Initial Option"). In
addition, on the day immediately following each annual meeting of the
stockholders, each Nonemployee Director remaining in office will be granted
automatically an option to purchase 5,000 shares of Common Stock (an "Annual
Option"). The exercise price per share of each Nonemployee Director option
will equal the fair market value of a share of Common Stock on the date of
grant, generally the closing price reported on the Nasdaq National Market.
Unless earlier terminated under the terms of the Option Plan, Nonemployee
Director options will expire ten years after grant. Initial Options and Annual
Options will become vested and exercisable in full on their first anniversary,
subject to the Nonemployee Director's continuous service. Nonemployee
Directors options will remain exercisable for six months following the
director's termination of service unless such termination results from the
director's death or disability, in which case the option will remain
exercisable for 12 months, provided that in no event may the option be
exercised after its expiration date.
Change in Control. The Option Plan provides that in the event of a
"Change in Control" (as defined below), any unexercisable or unvested portion
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<PAGE>
of the outstanding options will become immediately exercisable and vested in
full prior to the Change in Control. In addition, the surviving, continuing,
successor or purchasing corporation or parent corporation thereof may either
assume the Company's rights and obligations under the outstanding options or
substitute substantially equivalent options for such corporation's stock. To
the extent that the outstanding options are not assumed, replaced or exercised
prior to the Change in Control, they will terminate. For purposes of the
Option Plan, a "Change in Control" means (i) a sale or exchange by the
stockholders in a single or series of related transactions or more than 50% of
the Company's voting stock, (ii) a merger or consolidation in which the Company
is a party, (iii) the sale, exchange or transfer of all or substantially all of
the assets of the Company, or (iv) a liquidation or dissolution of the Company
wherein, upon any such event, the stockholders of the Company immediately
before such event do not retain immediately after such event direct or indirect
beneficial ownership of more than 50% of the total combined voting power of the
voting stock of the Company, its successor, or the corporation to which the
assets of the Company were transferred.
Termination or Amendment. The Option Plan will continue in effect
until the earlier of its termination by the Board or the date on which all
shares available for issuance under the plan have been issued and all
restrictions on such shares under the terms of the plan and the agreements
evidencing options granted under the plan have lapsed, provided that all
incentive stock options must be granted within ten years of December 11, 1997,
the date on which the Board adopted the Option Plan. The Board may terminate
or amend the Option Plan at any time. However, without stockholder approval,
the Board may not amend the Option Plan to increase the total number of shares
of Common Stock issuable thereunder, change the class of persons eligible to
receive incentive stock options, or effect any other change that would require
stockholder approval under any applicable law, regulation or rule. No
termination or amendment may adversely affect an outstanding option without the
consent of the optionee, unless the amendment is required to preserve an
option's status as an incentive stock option or is necessary to comply with any
applicable law, regulation or rule.
Summary of United States Federal Income Tax Consequences
The following summary is intended only as a general guide as to the
United States federal income tax consequences under current law of
participation in the Option Plan and does not attempt to describe all possible
federal or other tax consequences of such participation or tax consequences
based on particular circumstances.
Incentive Stock Options. An optionee recognizes no taxable income
for regular income tax purposes as the result of the grant or exercise of an
incentive stock option qualifying under section 422 of the Code. Optionees who
do not dispose of their shares for two years following the date the option was
granted nor within one year following the exercise of the option will normally
recognize a long-term capital gain or loss equal to the difference, if any,
between the sale price and the purchase price of the shares. If an optionee
satisfies such holding periods upon a sale of the shares, the Company will not
be entitled to any deduction for federal income tax purposes. If an optionee
disposes of shares within two years after the date of grant or within one year
from the date of exercise (a "disqualifying disposition"), the difference
between the fair market value of the shares on the determination date (see
discussion under "Nonstatutory Stock Options" below) and the option exercise
price (not to exceed the gain realized on the sale if the disposition is a
transaction with respect to which a loss, if sustained, would be recognized)
will be taxed as ordinary income at the time of disposition. Any gain in
excess of that amount will be a capital gain. If a loss is recognized, there
will be no ordinary income, and such loss will be a capital loss. A capital
gain or loss will be mid-term or long-term if the optionee's holding period is
more than 12 months. Any ordinary income recognized by the optionee upon the
disqualifying disposition of the shares generally should be deductible by the
Company for federal income tax purposes, except to the extent such deduction is
limited by applicable provisions of the Code or the regulations thereunder.
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The difference between the option exercise price and the fair market
value of the shares on the determination date of an incentive stock option (see
discussion under "Nonstatutory Stock Options" below) is an adjustment in
computing the optionee's alternative minimum taxable income and may be subject
to an alternative minimum tax which is paid if such tax exceeds the regular tax
for the year. Special rules may apply with respect to certain subsequent sales
of the shares in a disqualifying disposition, certain basis adjustments for
purposes of computing the alternative minimum taxable income on a subsequent
sale of the shares and certain tax credits which may arise with respect to
optionees subject to the alternative minimum tax.
Nonstatutory Stock Options. Options not designated or qualifying as
incentive stock options will be nonstatutory stock options. Nonstatutory stock
options have no special tax status. An optionee generally recognizes no
taxable income as the result of the grant of such an option. Upon exercise of
a nonstatutory stock option, the optionee normally recognizes ordinary income
in the amount of the difference between the option exercise price and the fair
market value of the shares on the determination date (as defined below). If
the optionee is an employee, such ordinary income generally is subject to
withholding of income and employment taxes. The "determination date" is the
date on which the option is exercised unless the shares are subject to a
substantial risk of forfeiture and are not transferable, in which case the
determination date is the earlier of (i) the date on which the shares are
transferable or (ii) the date on which the shares are not subject to a
substantial risk of forfeiture. If the determination date is after the
exercise date, the optionee may elect, pursuant to section 83(b) of the Code,
to have the exercise date be the determination date by filing an election with
the Internal Revenue Service no later than 30 days after the date the option is
exercised. Upon the sale of stock acquired by the exercise of a nonstatutory
stock option, any gain or loss, based on the difference between the sale price
and the fair market value on the determination date, will be taxed as capital
gain or loss. A capital gain or loss will be mid-term or long-term if the
optionee's holding period following the determination date is more than 12
months. No tax deduction is available to the Company with respect to the grant
of a nonstatutory stock option or the sale of the stock acquired pursuant to
such grant. The Company generally should be entitled to a deduction equal to
the amount of ordinary income recognized by the optionee as a result of the
exercise of a nonstatutory stock option, except to the extent such deduction is
limited by applicable provisions of the Code or the regulations thereunder.
Vote Required and Board of Directors Recommendation
The affirmative vote of a majority of the votes present or
represented by proxy and entitled to vote at the Annual Meeting of
Stockholders, at which a quorum representing a majority of all outstanding
shares of Common Stock of the Company is present, either in person or by proxy,
is required for approval of this proposal. Abstentions and broker non-votes
will each be counted as present for purposes of determining the presence of a
quorum. Abstentions will have the same effect as a negative vote on this
proposal. Broker non-votes will have no effect on the outcome of this vote.
The Board of Directors believes that adoption of the proposed Option
Plan is in the best interests of the Company and the stockholders for the
reasons stated above. THEREFORE, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE "FOR" THE PROPOSAL TO APPROVE THE OPTION PLAN.
New Plan Benefits
No options will be granted under the Option Plan prior to its
approval by the stockholders of the Company. No grants have been made to any
officer under the Option Plan. With the exception of the automatic grant of
options to Nonemployee Directors, future grants under the Option Plan will be
made at the discretion of the Board, and, accordingly, are not yet
determinable. In addition, benefits under the Option Plan will depend on a
number of factors, including the fair market value of the Company's Common
15
<PAGE>
Stock on future dates and the exercise decisions made by the optionees.
Consequently it is not possible to determine the benefits that might be
received by optionees receiving discretionary grants under the Option Plan.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has selected Price Waterhouse
LLP to serve as independent accountants to audit the financial statements of
the Company for the fiscal year ending September 30, 1998. A representative of
Price Waterhouse LLP is expected to be present at the Annual Meeting, will be
given the opportunity to make a statement if the representative desires to do
so, and is expected to be available to respond to appropriate questions.
The affirmative vote of a majority of the votes cast at the Annual
Meeting of Stockholders, at which a quorum representing a majority of all
outstanding shares of Common Stock of the Company is present and voting, either
in person or by proxy, is required for approval of this proposal. Abstentions
and broker non-votes will each be counted as present for purposes of
determining the presence of a quorum, but will not be counted as having been
voted on the proposal. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
"FOR" THE APPOINTMENT OF PRICE WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 1998.
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
Proposals of stockholders intended to be presented at the next
Annual Meeting of the Stockholders of the Company must be received by the
Company at its offices at 17180 Bernardo Center Drive, San Diego, California
92128, no later than November 1, 1998, and must satisfy the conditions
established by the Securities and Exchange Commission for stockholder proposals
in order to be included in the Company's proxy statement for that meeting.
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the only business which the
Board of Directors intends to present or knows that others will present at the
meeting is as set forth above. If any other matter or matters are properly
brought before the meeting or any adjournment thereof, it is the intention of
the persons named in the accompanying form of proxy to vote the proxy on such
matters in accordance with their best judgement.
By Order of the Board of Directors
DAVID W. QUALLS
Chief Financial Officer,
Executive Vice President-Finance and Real Estate,
and Secretary
Dated: January 13, 1998
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<PAGE>
GARDEN FRESH RESTAURANT CORP.
17180 BERNARDO CENTER DRIVE
SAN DIEGO, CA 92128
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned hereby appoints, David W. Qualls and Michael P. Mack as
proxies, each with full power of substitution, and hereby authorizes them or
either of them to represent and to vote as designated below all the shares of
Common Stock of Garden Fresh Restaurant Corp., held of record by the
undersigned on January 8, 1998 at the Annual Meeting of Stockholders to be held
March 5, 1998 or at any adjournment thereof.
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 IN FAVOR OF ELECTING THE NOMINEES LISTED AS DIRECTORS AND "FOR" ITEMS 204
ON THE REVERSE SIDE. ANY PROXY WHICH IS RETURNED CONTAINING A DIRECTION TO
VOTE WITH RESPECT TO A MATTER AS TO WHICH THE STOCKHOLDER IS NOT ENTITLED TO
VOTE WILL BE DISREGARDED WITH RESPECT TO THAT PARTICULAR MATTER.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE.
/ X / Please mark votes as in this example.
1. ELECTION OF TWO CLASS C DIRECTORS
Nominees: Michael M. Minchin, Jr. and Robert A. Gunst
FOR / / WITHHELD / /
/ / ______________________________________
For all nominees except as noted above
2. TO CONSIDER AND VOTE UPON A PROPOSAL TO APPROVE THE 1998 STOCK
OPTION PLAN.
FOR / / AGAINST / / ABSTAIN / /
3. RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS.
FOR / / AGAINST / / ABSTAIN / /
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY FORM PROMPTLY USING THE ENCLOSED
SELF-ADDRESSED ENVELOPE.
Please sign exactly as your name appears on your stock certificate. If 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 shares are held of record by a corporation, please sign in full corporate
name by president or other authorized officer. Partnerships should sign in
partnership name by an authorized signatory.
Signature: Date:
Signature: Date:
