SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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Check the appropriate box:
/ / Preliminary Proxy Statement
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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.
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(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of filing fee (Check the appropriate box):
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(1) Title of each class 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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(1) Amount Previously Paid:
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<PAGE>
GARDEN FRESH RESTAURANT CORP.
March 8, 1999
Dear Stockholder:
This year's Annual Meeting of Stockholders will be held on April 20, 1999
at 9:00 a.m. local time, at the Radisson Suite Hotel located at 11520 W.
Bernardo Court, San Diego, California 92127, (619) 451-6600. 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 1998 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 APRIL 20, 1999
Dear Stockholder:
You are invited to attend the Annual Meeting of the Stockholders of Garden
Fresh Restaurant Corp., a Delaware corporation (the "Company"), which will be
held on April 20, 1999 at 9:00 a.m., local time, at the Radisson Suite Hotel
located at 11520 W. Bernardo Court, San Diego, California 92127, (619)
451-6600 for the following purposes:
1. To elect two (2) Class B Directors to hold office for a three-year term
and until their successors are duly elected and qualified. Management's
nominees are Edgar F. Berner and John M. Robbins, Jr.
2. To consider and vote upon a proposal to amend the Company's 1998 Stock
Option Plan to increase the maximum aggregate number of shares reserved
for issuance thereunder by 300,000.
3. To consider a proposal to ratify the appointment of KPMG LLP as the
Company's independent accountants for the fiscal year ending September 30,
1999.
4. To transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on February 19, 1999 are
entitled to notice of, and to vote at, this meeting and any 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
March 8, 1999
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
ELECTION OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . . . . 3
COMMITTEES OF THE BOARD OF DIRECTORS . . . . . . . . . . . . . . . . 4
EXECUTIVE COMPENSATION AND OTHER MATTERS . . . . . . . . . . . . . . 5
Summary Compensation Table . . . . . . . . . . . . . . . . . . 5
Aggregate Option Exercises and Fiscal Year-Ended Values. . . . 5
Compensation of Directors. . . . . . . . . . . . . . . . . . . 6
Compensation Committee Interlocks and Insider Participation. . 6
Certain Transactions . . . . . . . . . . . . . . . . . . . . . 6
Severance and Change of Control Arrangments. . . . . . . . . . 6
Section 16(a) Beneficial Ownership Reporting Compliance. . . . 7
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION . . . 7
Deductibility of Executive Compensation. . . . . . . . . . . . 8
COMPARISON OF STOCKHOLDER RETURN . . . . . . . . . . . . . . . . . 9
PROPOSAL TO AMEND THE COMPANY'S 1998 STOCK OPTION PLAN . . . . . . 10
Summary of the 1998 Stock Option Plan. . . . . . . . . . . . . 10
Summary of United States Federal Income Tax Consequences . . . 12
Vote Required and Board of Directors' Recommendation . . . . . 13
New Plan Benefits. . . . . . . . . . . . . . . . . . . . . . . 13
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS . . . . . . 14
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING . . . 14
TRANSACTION OF OTHER BUSINESS. . . . . . . . . . . . . . . . . . . 14
<PAGE> 1
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 April 20, 1999 or any adjournment
thereof, for the purposes set forth in the accompanying Notice of Annual
Meeting. The date of this Proxy Statement is March 8, 1999, 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,
1998 is enclosed with this Proxy Statement.
VOTING SECURITIES. Only stockholders of record as of the close of
business February 19, 1999, will be entitled to vote at the meeting and any
adjournment thereof. As of that date, there were 5,549,481 shares of Common
Stock of the Company ("Common Stock"), par value $.01 per share, issued and
outstanding. Stockholders may vote in person or by 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 by-laws
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. 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.
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 December 31, 1998, 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 executive officer of the Company named in the Summary
Compensation Table; and (iv) all executive officers and directors of the
Company as a group.
<PAGE> 2
Shares Beneficially
Owned
Name and Address of Beneficial Owner (2) Number Percent(3)
T. Rowe Price Associates, Inc
100 E Pratt Street
Baltimore, MD 21202 . . . . . . . . . . . . . . . . . . . .510,000 9.17%
Entities and individuals affiliated with
The D3 Family Fund, L.P. (4)
19605 NE 8th Street
Camas, WA 98607 . . . . . . . . . . . . . . . . . . . . . 352,175 6.33%
Entities affiliated with
St. Paul Venture Capital, Inc. (5)
10400 Viking Drive, Suite 550
Eden Prairie, MN 55344 . . . . . . . . . . . . . . . . . . 595,346 10.71%
Michael P. Mack (6) . . . . . . . . . . . . . . . . . . . . . 288,462 5.06%
David W. Qualls (7) . . . . . . . . . . . . . . . . . . . . . 75,817 1.35%
R. Gregory Keller (8) . . . . . . . . . . . . . . . . . . . . 108,295 1.91%
Kenneth J. Keane (9) . . . . . . . . . . . . . . . . . . . . . 667 *
Edgar F. Berner (10) . . . . . . . . . . . . . . . . . . . . . 19,300 *
Robert A. Gunst (10) . . . . . . . . . . . . . . . . . . . . . 20,000 *
Michael M. Minchin, Jr (11) . . . . . . . . . . . . . . . . . 84,000 1.49%
John M. Robbins, Jr. (10). . . . . . . . . . . . . . . . . . . 18,500 *
All directors and executive officers as a
group (8 persons) (12) . . . . . . . . . . . . . . . . . . . 615,041 10.22%
* Less than one percent.
(1) Except as indicated in the footnotes to this table, the persons named in
the table have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them, subject to
community property laws, where applicable.
(2) Except as otherwise indicated, the address of each beneficial owner is
c/o the Company, 17180 Bernardo Center Drive, San Diego, California
92128.
(3) Calculated on the basis of 5,561,233 shares of Common Stock outstanding,
except that shares of Common Stock underlying options exercisable within
60 days of December 31, 1998 are deemed to be outstanding for purposes of
calculating the beneficial ownership of securities of the holders of such
options.
(4) Includes shares held by the following: The Nierenberg Family 1993 Trust
(44,975); Lawrence K. Orr, Trustee for the David and Patricia Nierenberg
1993 Irrevocable Trust (3,200); Florence Cies (1,300); Haredale Limited
(10,100); Sharptown Limited (1,700); Toxford Corporation (1,700); and
James Henry Hildebrandt (4,000).
(5) St. Paul Venture Capital, Inc. is an affiliate of St. Paul Fire and
Marine Insurance Company which is the record owner of 445,346 shares and
St. Paul Venture Capital IV, LLC which is the record owner of 150,000
shares.
(6) Includes 144,500 shares issuable upon exercise of stock options and 375
shares held by his wife, Ruth Mack.
(7) Includes 75,157 shares issuable upon exercise of stock options.
(8) Includes 106,033 shares issuable upon exercise of stock options.
(9) Includes 667 shares issuable upon exercise of stock options.
(10) Includes 15,000 shares issuable upon exercise of stock options.
(11) Includes 84,000 shares issuable upon exercise of stock options.
(12) Includes 455,357 shares issuable upon exercise of stock options.
<PAGE> 3
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 2001, 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 at such annual meeting.
Management's nominees for election at the Annual Meeting of Stockholders
to fill the Class B positions on the Board of Directors are Edgar F. Berner
and John M. Robbins, Jr. If elected, the nominees will serve as directors
until the Company's Annual Meeting of Stockholders in 2002, 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 B directors
receiving the highest number of votes will be elected as Class B directors.
Abstentions and broker non-votes will have no effect on the outcome of the
vote.
The table below sets forth the current directors, including the Class B
nominees to be elected at this meeting and certain information, as of December
31, 1998, 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 47 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 67 Director 1996
John M. Robbins, Jr. 51 Director 1996
Class C directors whose terms expire at
the 2001 Annual Meeting of Stockholders:
Michael M. Minchin, Jr. 72 Director 1993
Robert A. Gunst 50 Director 1996
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, Inc. (NYSE) 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 Bachelor of Arts Degree from
Stanford University and an Master's Degree in Business Administration 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
been a director of the Company since its inception. Since February 1994, Mr.
<PAGE> 4
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 Bachelor of Arts Degree from Brown University and an Master's
Degree in Business Administration from Harvard University.
Edgar F. Berner joined the Company's Board of Directors in 1996. Mr.
Berner is a private investor and is the former Chairman (from 1991 to 1996) and
CEO (from 1991 to 1998) 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, Inc. (Nasdaq). He previously served on the Board of The Clothestime,
Inc. and Edison Brothers Stores, Inc. In addition to serving on the Board of
the Company, Mr. Berner is a Director of Hot Topic (Nasdaq), a youth oriented
specialty retail chain, and a Director of Barbeque Galore (Nasdaq) the nation's
largest barbeque chain store.
John M. Robbins, Jr. joined the Company's Board of Directors in 1996. Mr.
Robbins currently serves as Chairman of the Board of Directors and CEO of
American Residential Investment Trust, Inc. (NYSE) ("ARIT") and Home Asset
Management Corp. Prior to joining ARIT, Mr. Robbins was Chairman of the Board
of American Residential Mortgage Corporation ("AMRES Mortgage") from 1990 until
1994 and President of AMRES Mortgage from the time he co-founded it in 1983
until 1994. He currently serves as a Director of Pacific Research & Engineering
Corporation (AMEX), National Bankcard and the University of San Diego.
Robert A. Gunst joined the Company's Board of Directors in 1996. Mr.
Gunst has more than 25 years of experience in food and retailing. Mr. Gunst
has been President and Chief Executive Officer of The Good Guys, Inc. (Nasdaq)
since 1993. 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., Mr. 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. (NYSE) 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, Inc., Mr.
Gunst was a Senior Vice President and Chief Financial Officer for Victoria
Station Incorporated, a chain of restaurants. Mr. 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, 1998, the Board held five
meetings. Messrs. Berner, Gunst, Mack and Minchin attended all the Board
meetings and Mr. Robbins attended 80% of the Board meetings.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF
EDGAR F. BERNER AND JOHN M. ROBBINS, JR. AS CLASS B DIRECTORS TO SERVE UNTIL
THE ANNUAL MEETING OF STOCKHOLDERS IN 2002.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has two standing committees: 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 1998, the members of
the Audit Committee were Messrs. Berner and Gunst. The Audit Committee held
two meetings; one on September 23, 1998 and one on December 7, 1998.
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 1998, the members of the Compensation
Committee were Messrs. Gunst, Minchin and Robbins. The Compensation Committee
held one meeting during the fiscal year ended September 30, 1998. For
<PAGE> 5
additional information concerning the Compensation Committee, see "COMPENSATION
COMMITTEE REPORT ON EXECUTIVE COMPENSATION."
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth information for the fiscal years ended
September 30, 1998, 1997 and 1996 concerning the compensation of the Chief
Executive Officer of the Company and the other executive officers of the
Company whose salary and bonus for the year ended September 30, 1998, exceeded
$100,000.
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) 1998 $298,620 $115,000 - $ 15,833 (4)
Chief Executive Officer, 1997 $256,823 $ 93,000 18,000 $ 0
President 1996 $208,843 $ 90,000 40,000 $ 0
David W. Qualls (2) 1998 $204,359 $ 78,000 - $ 15,833 (4)
Chief Financial Officer, 1997 $176,151 $ 57,000 12,000 $ 0
Executive Vice President 1996 $153,175 $ 60,000 30,000 $ 0
Finance and Real Estate,
Secretary
R. Gregory Keller (3) 1998 $179,016 $ 69,000 - $ 15,833 (4)
Vice President of 1997 $153,836 $ 50,000 10,000 $ 0
Operations 1996 $131,875 $ 60,000 30,000 $ 0
(1) Mr. Mack was granted an increase in annual salary to $301,875 for fiscal
year 1999.
(2) Mr. Qualls was granted an increase in annual salary to $205,275 for
fiscal year 1999.
(3) Mr. Keller was granted an increase in annual salary to $181,125 for
fiscal year 1999.
(4) Consists of deferred compensation match.
The following table provides information concerning exercises of options
to purchase the Company's Common Stock during the fiscal year ended
September 30, 1998, and unexercised options held as of September 30, 1998
by the persons named in the Summary Compensation Table:
<TABLE>
<CAPTION>
AGGREGATE OPTION EXERCISES AND FISCAL YEAR-END VALUES
Number of Unexercized Value of Unexercized In-The
Shares Options at 9/30/98 Money Options at 9/30/98 (2,3)
Acquired Value
Name On Exercise Realized (1) Exercisable Unexercisable Exercisable (2) Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Michael P. Mack - $ - 138,663 9,337 $894,970 $ 65,030
David W. Qualls 27,500 $213,125 82,981 6,519 $549,859 $ 45,766
R. Gregory Keller 4,000 $ 36,900 123,137 5,863 $844,484 $ 41,666
<FN>
<PAGE> 6
(1) Amounts shown represent the value realized upon the exercise of stock
options during the year ended September 30, 1998, which equals the
difference between the aggregate 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) The value of "in-the-money" stock options represents the difference
between the exercise price of such option and the fair market value of
$14.75 per share of Common Stock as of September 30, 1998, the closing
price of the Common Stock reported on the Nasdaq National Market on such
date.
COMPENSATION OF DIRECTORS
The outside directors of the Company each receive $10,000 per year as a
cash compensation for attendance at Board of Directors and committee meetings.
Additionally, the directors of the Company are reimbursed for expenses incurred
in connection with attendance at Board of Directors or committee meetings.
Each outside director remaining in office is granted an option to purchase
6,640 shares of Common Stock on the day following each annual meeting of
stockholders.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended September 30, 1998, executive compensation was
administered by the Compensation Committee comprised of three non-employee
directors of the Company, Robert A. Gunst, Michael M. Minchin and John M.
Robbins Jr. Mr. Mack, the Company's President and Chief Executive Officer,
participated in the deliberations of the Compensation Committee regarding
executive compensation that occurred during fiscal 1998, but did not take part
in deliberations regarding his own compensation. Mr. Mack's participation in
the deliberations of the Compensation Committee included providing information
on the performance of people who work at the Company and advisory
recommendations regarding the appropriate levels of compensation for the
Company's officers.
CERTAIN TRANSACTIONS
The Company has entered into employment agreements with certain of its
officers. See "Severance and Change of Control Arrangements."
The Company's officers and directors are indemnified pursuant to certain
provisions of Delaware General Corporation Law, the Company's charter documents
and indemnification agreements with the Company. The indemnification
agreements contain provisions that are in some respects broader than the
specific indemnification provisions contained in the Delaware General
Corporation Law.
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.
SEVERANCE AND CHANGE OF CONTROL ARRANGEMENTS
In July 1997, the Company entered into employment agreements with Michael
Mack, Chief Executive Officer and President, David Qualls, Executive Vice
President and Chief Financial Officer-Finance and Real Estate, and Gregory
Keller, Vice President of Operations, which provides them, upon termination
without cause, with a severance equal to one half of their then current annual
salary and certain other benefits. Additionally, in the event of a termination
without cause following a change of control, their employment agreements
provide for a severance equal to two years of base salary plus two years of
bonus. Under the respective employment agreements, the minimum base annual
salary for Mr. Mack is $250,000, for Mr. Qualls is $170,000 and for Mr.
Keller is $150,000.
In the event of a change in control, as defined under the Company's 1998
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 other stock option plans also contain provisions that
could lead to the vesting and exercisability of all outstanding options prior
to a change in control of the Company.
<PAGE> 7
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, 1998.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors during the 1998
fiscal year was 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 1998, salaries were set for each executive officer within the
range of salaries for similar positions in other comparably sized companies in
Garden Fresh's industry. The salaries were based in part on surveys conducted
by the Company's Human Resources Department and by utilizing information
provided by 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 for Restaurants as its
published industry index. The companies included in the Company's salary
surveys are included in the comparison index. 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
1999 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 1998. The Chief Executive Officer's total compensation for
fiscal 1998 approximates the mean of the compensation for chief executive
officers in similar sized companies in the restaurant industry.
The Compensation Committee granted incentive compensation to each of the
executive officers based upon the performance of the Company relative to the
profit performance criteria set forth in the fiscal year 1998 bonus program
which was implemented at the beginning of the year.
The Company believes that employee equity ownership provides significant
additional motivation to executive officers to maximize value for the Company's
stockholders. Because stock options are granted at the prevailing market
price, they 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 did recommend to the Board of Directors, and
the Board of Directors did approve stock option grants, based on the Company's
performance in fiscal year 1998, to the executive officers, including the Chief
Executive Officer, under the Company's Option Plan. The grants were issued and
vest pursuant to the standard form of option agreement used in connection with
the Option Plan. The grants were issued as follows: Michael P. Mack (36,000
shares at an exercise price of $14.31), David W. Qualls (24,000 shares at an
exercise price of $14.31), R. Gregory Keller (20,000 shares at an exercise
price of $14.31) and Kenneth J. Keane (10,000 shares at an exercise price of
$12.75).
<PAGE> 8
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Effective January 1, 1994, Section 162(m) of the Internal Revenue Code
was amended to impose a $1,000,000 per executive per year limit on the amount
of compensation which may be deducted by a publicly-held corporation for
compensation paid to the corporation's chief executive officer and its four
other most highly- compensated officers. 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 is 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.
<PAGE> 9
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, 1998 (2).
Comparison of Cumulative Total Return From May 15, 1995 through
September 30, 1998 (2).
Garden Fresh Restaurant Corp., 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, 9/30/97
and 9/30/98.
The data line for GARDEN FRESH shows a decline from the public offering
to fiscal year end 9/30/95, an increase from there to 8/30/97, then
unchanged to fiscal year end 9/30/98.
May 15, Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1995 1995 1996 1997 1998
Garden Fresh $100.00 $ 86.11 $108.33 $163.89 $163.89
Nasdaq National Marke 100.00 120.91 142.16 195.32 196.26
Dow Jones Industry 100.00 102.09 122.49 122.55 144.94
Group for 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.
<PAGE> 10
PROPOSAL TO AMEND THE COMPANY'S 1998 STOCK OPTION PLAN
The Garden Fresh Restaurant Corp. 1998 Stock Option Plan (the OPTION
PLAN) was adopted by the Board of Directors on December 11, 1997, (the
"Effective Date") and approved by the Company's stockholders in January 1998.
The stockholders are now being asked to approve an amendment to increase by
300,000 shares the maximum aggregate number of shares issuable under the Option
Plan. The Board of Directors believes that this amendment to the Option Plan
is in the best interest of the Company and its stockholders because the
availability of an adequate stock option program is 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 amendment to the 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 Internal Revenue Code of 1986, as
amended (the "Code") and the grant to employees, directors and consultants of
nonstatutory stock options. As of December 31, 1998, options to purchase
approximately 634 shares granted under the Option Plan had been exercised,
options to purchase an aggregate of approximately 129,683 shares remained
outstanding and approximately 119,683 shares remained available for future
grant under the Option Plan.
SHARES SUBJECT TO PLAN. Currently, the maximum number of the authorized
but unissued or reacquired shares of Common Stock of the Company which may be
issued under the Option Plan is 1,080,318 , of this amount, the number of
shares issuable under the Option Plan is reduced by the number of shares which
(a) remain subject to outstanding options granted under the Company's prior
stock option plans, and (b) are issued upon exercise of options granted under
such prior plans. The stockholders are being asked to approve an amendment to
the Option Plan which would increase the maximum number of shares issuable
thereunder to 1,380,318 shares, which amount at any time is reduced by the
amounts described in (a) and (b) of the preceeding sentence. 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 is administered by the Board of Directors
or a duly appointed committee of the Board (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 interprets 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.
<PAGE> 11
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 31, 1999, the Company had approximately 314 employees,
including 4 executive officers, 5 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) 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 December 31, 1998, the closing price of the
Company's Common Stock, as reported on the Nasdaq National Market, was $14.375
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). 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 6,640 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 Director options
will remain exercisable for six months following the director's termination of
service unless such termination results from the director's death or
<PAGE> 12
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
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 of 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 with respect to
stock options granted under the Option Plan and does not attempt to describe
all possible federal or other tax consequences of such options 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 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.
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
<PAGE> 13
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 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 will have the same effect as a negative vote. Broker non-votes, on
the other hand, will have no effect on the outcome of the vote.
The Board of Directors believes that an amendment to increase the share
reserve of the 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 INCREASE IN THE
SHARE RESERVE OF THE OPTION PLAN.
NEW PLAN BENEFITS
Currently, no grant of options conditioned on stockholder approval of an
increase in the share reserve under the Option Plan have been made to any
person. 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 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. Accordingly, what follows is a
description of the grants of stock options under the Option Plan during the
fiscal year ended September 30, 1998:
(i) No executive officers were granted any such options;
(ii) As a group, the current directors who are not also executive officers,
received a total of 26,560 options to purchase shares of the Company's
Common Stock at a weighted average exercise price of $17.14; and
(iii) As a group, all employees who are not also executive officers,
received a total of 73,900 options to purchase shares of the Company's
Common Stock at a weighted average exercise price of $12.75.
<PAGE> 14
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
On February 19, 1999, the Company elected to replace
PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") as its independent
accountants. The reports of PricewaterhouseCoopers on the Company's financial
statements for the fiscal years ending September 30, 1997 and 1998, contained
no adverse opinion or disclaimer of opinion and was not qualified or modified
as to uncertainty, audit scope or accounting principles. The Company's audit
committee approved the Company's dismissal of PricewaterhouseCoopers and the
engagement of KPMG LLP as the Company's independent accountants.
During the Company's two most recent fiscal years and through February
19, 1999, there were no disagreements with PricewaterhouseCoopers on any matter
of accounting principles or practices, financial statement disclosure or
auditing scope or procedure, which disagreements if not resolved to the
satisfaction of PricewaterhouseCoopers would have caused them to make reference
thereto in their report. During the two most recent fiscal years and through
February 19, 1999, there have been no reportable events (as defined in
Regulation S-K Item 304(a)(1)(v)). PricewaterhouseCoopers has furnished the
Company with a letter addressed to the SEC stating that it agrees with the
above statements.
The Company engaged KPMG LLP as its new independent accountants as of
March 4, 1999. During the two most recent fiscal years and through March 4,
1999, the Company has not consulted with KPMG LLP on items which (i) are
described in Regulation S-K Item 304(a)(2)(i) or (ii) concerned the subject
matter of a disagreement or reportable event with the former accountants (as
described in Regulation S-K Item 304(a)(2)(ii)).
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 have no effect on the outcome of the vote. THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPOINTMENT OF KPMG LLP AS
THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING SEPTEMBER 30,
1999.
STOCKHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
Proposals of stockholders intended to be included in the Company's proxy
statement for the next Annual Meeting of Stockholders of the Company must be
received by the Company at its offices at 17180 Bernardo Center Drive, San
Diego, CA, 92128, not later than November 29, 1999, and satisfy the conditions
established by the Securities and Exchange Commission for stockholder proposals
to be included in the Company's proxy statement for that meeting.
Pursuant to new amendments to Rule 14a-4(c) of the Securities Exchange
Act of 1934, as amended, if a stockholder who intends to present a proposal at
the next Annual Meeting of Stockholders does not notify the Company of such
proposal on or prior to January 23, 2000, then management proxies would be
allowed to use their discretionary voting authority to vote on the proposal
when the proposal is raised at the annual meeting, even though there is no
discussion of the proposal in the proxy statment prepared for the next annual
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: March 8, 1999
<PAGE>
AMENDMENT OF THE
GARDEN FRESH RESTAURANT CORP.
1998 STOCK OPTION PLAN
Section 4.1 of the Garden Fresh Restaurant Corp. 1998 Stock Option Plan
attached hereto shall be amended in its entirety to read as follows:
"4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as
provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be the sum of (a) Five Hundred Fifty
Thousand (550,000) shares, (b) the number of shares of Stock, as of the
Effective Date, subject to outstanding options granted pursuant to the Prior
Plans (the "PRIOR PLAN OPTIONS"), and (c) the number of shares of Stock
available for future grant under the Prior Plans as of the Effective Date (the
"PRIOR PLAN AVAILABLE SHARES"), resulting in an aggregate total of One Million
Three Hundred Eighty Thousand Three Hundred Eighteen (1,380,318) shares (the
"SHARE RESERVE") and shall consist of authorized but unissued or reacquired
shares of Stock or any combination thereof. Notwithstanding the foregoing, the
Share Reserve, determined at any time, shall be reduced by (a) the number of
shares remaining subject to outstanding Prior Plan Options, (b) the number of
shares issued upon the exercise of Prior Plan Options, and (c) the number of
shares, if any, of the Prior Plan Available Shares which are issued upon the
exercise of options granted under the Prior Plans subsequent to the Effective
Date. If an outstanding Option for any reason expires or is terminated or
canceled, or if shares of Stock acquired, subject to repurchase, upon the
exercise of an Option are repurchased by the Company, the shares of Stock
allocable to the unexercised portion of such Option or such repurchased shares
of Stock shall again be available for issuance under the Plan."
<PAGE>
PROXY
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 February 19, 1999 at the Annual Meeting of Stockholders to be
held April 20, 1999 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 B Directors
Nominee: Edgar F. Berner FOR / / WITHHELD / /
Nominee: John M. Robbons, Jr. FOR / / WITHHELD / /
2. To consider and vote upon a proposal to amend the Company's
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: ___
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