SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.)
Filed by the Registrant [_]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-12
SILVER DINER, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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[GRAPHIC SILVER DINER LOGO APPEARS HERE]
11806 Rockville Pike
Rockville, Maryland 20852
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 15, 2001
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The annual meeting of stockholders of Silver Diner, Inc., a Delaware
corporation (the "Company"), will be held on Friday, June 15, 2001 at 10:00 a.m.
(Eastern time), at the Homewood Suites Hotel, 8130 Porter Road, Falls Church,
Virginia 22042, for the following purposes:
1. To elect the Company's directors; and
2. To transact such other business as may properly come before the
meeting and at any adjournment thereof.
The Board of Directors (the "Board") has fixed the close of business
on May 4, 2001 as the record date to determine stockholders entitled to notice
of, and to vote at, the annual meeting and at any adjournment thereof.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN AND DATE
YOUR PROXY AND MAIL IT IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF
MAILED WITHIN THE UNITED STATES OF AMERICA. IF YOU ATTEND THE MEETING, YOU MAY,
IF YOU WISH, REVOKE YOUR PROXY AND VOTE YOUR SHARES PERSONALLY.
By Order of the Board
Ype Von Hengst
Secretary
May 10, 2001
[GRAPHIC LOGO SILVER DINER APPEAR HERE]
11806 Rockville Pike
Rockville, Maryland 20852
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PROXY STATEMENT
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ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 15, 2001
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors (the "Board") of Silver Diner, Inc., a
Delaware corporation (the "Company"), for use at the annual meeting of
stockholders to be held on Friday, June 15, 2001 at 10:00 a.m. (Eastern time),
at the Homewood Suites Hotel, 8130 Porter Road, Falls Church, Virginia 22042,
and at any adjournment thereof (the "Meeting").
Stockholders at the close of business on May 4, 2001 (the "Record
Date") are entitled to notice of, and to vote at, the Meeting. The stockholders
will be entitled to one vote for each share of Common Stock, par value $.00074
per share, (the "Shares") held of record at the close of business on the Record
Date. To take action at the Meeting, a quorum which is composed of holders of a
majority of the outstanding Shares must be represented by proxy or in person at
the Meeting. On May 4, 2001 there were 11,904,093 Shares outstanding.
Shares represented by valid proxies received by the Company in time
for the Meeting will be voted as specified in such proxies. Any stockholder
giving a proxy has the right to revoke it at any time before it is exercised by
attending the Meeting and voting in person or by filing with the Company's
secretary an instrument of revocation or a duly executed proxy bearing a later
date.
Votes cast by proxy or in person at the Meeting will be tabulated by
the judge of elections appointed for the Meeting. The judge of elections will
treat abstentions as Shares that are present and entitled to be voted for
purposes of determining the presence of a quorum but as not voted for purposes
of determining the approval of any matter submitted to stockholders for a vote.
If a broker indicates on a proxy that such broker does not have discretionary
authority as to certain Shares to vote on a particular matter, such Shares will
not be considered as present and entitled to vote with respect to that matter.
This proxy statement, the accompanying proxy, and the Company's annual
report to stockholders for the year ended December 31, 2000 (the "Annual
Report"), were first sent or given to stockholders on or about May 10, 2001.
ADDITIONAL COPIES OF THE ANNUAL REPORT, NOT INCLUDING EXHIBITS, WILL BE
FURNISHED WITHOUT CHARGE TO ANY STOCKHOLDER UPON WRITTEN REQUEST TO: SILVER
DINER, INC., ATTENTION: INVESTOR RELATIONS, 11806 ROCKVILLE PIKE, ROCKVILLE,
MARYLAND 20852. EXHIBITS TO THE ANNUAL REPORT MAY BE FURNISHED TO STOCKHOLDERS
UPON THE PAYMENT OF AN AMOUNT EQUAL TO THE REASONABLE EXPENSES INCURRED IN
FURNISHING SUCH EXHIBITS. A LIST OF THE STOCKHOLDERS OF RECORD ON THE RECORD
DATE WILL BE AVAILABLE FOR INSPECTION AT THE ABOVE ADDRESS FOR TEN (10) DAYS
PRECEDING THE DATE OF THE ANNUAL MEETING.
-1-
BENEFICIAL OWNERSHIP OF THE SHARES
As of May 4, 2001, the Company had 11,904,093 Shares issued and
outstanding. The following table sets forth, to the Company's knowledge as of
May 4, 2001, the beneficial ownership of Shares by each person or entity
beneficially owning more than 5% of the Shares, each director, each nominee, and
certain executive officers, individually, and all directors and executive
officers as a group.
Amount and Nature of
Name and Address (1) of Beneficial Owner Beneficial Ownership (2) Percent(3)
---------------------------------------- ------------------------ ----------
Catherine Britton............................................... 2,470,612 (4),(5) 20.74%
Michael Collier................................................. 83,928 (6) *
Robert T. Giaimo................................................ 689,565 (7) 5.66%
Ype Von Hengst.................................................. 348,881 (8) 2.89%
Edward H. Kaplan................................................ 1,012,000 (9),(5) 8.49%
Craig Kendall................................................... 62,222 (10) *
Patrick Meskell................................................. 297,586 (11) 2.45%
Louis P. Neeb................................................... 33,906 (12),(5) *
Charles M. Steiner.............................................. 576,729 (13),(5) 4.84%
Jon Abbott...................................................... 100,000 (14) *
All directors and executive officers as a group (10 persons).... 5,675,429 (15) 47.68%
"*" means less than 1%
________________________________
(1) The address for each beneficial owner listed above is Silver Diner, Inc.,
11806 Rockville Pike, Rockville, Maryland 20852.
(2) Unless otherwise stated in Notes 4 through 14 below, all references to
options are to options exercisable currently and within 60 days of May 4,
2001.
(3) Each percentage of beneficial ownership is calculated using a different
denominator, consisting of the total number of Shares outstanding
(11,904,093), increased by the number of options owned by the beneficial
owner that are exercisable within 60 days. The denominator used to
calculate the percentage of beneficial ownership of all directors and
executive officers as a group is the sum of the total number of Shares
outstanding (11,904,093) and all outstanding options held by directors and
executive officers that are exercisable within 60 days.
(4) Includes: (a) 2,443,609 directly owned Shares; (b) options to purchase
7,000 Shares granted under the 1996 Non-Employee Director Stock Option
Plan, exercisable at the prices set forth in Note 5 below; and (c) 20,003
Shares assigned to Ms. Britton by Robert T. Giaimo which are subject to an
option held by Mr. Clinton A. Clark at an exercise price of $3.60 per Share
through April 5, 2004. Does not include 689,565 Shares beneficially owned
by Mr. Giaimo, Ms. Britton's spouse. Ms. Britton disclaims beneficial
ownership of the Shares beneficially owned by Mr. Giaimo.
(5) Each non-employee director other than Mr. Collier (five persons, excluding
Mr. Collier) holds options for 7,000 Shares granted under the 1996 Non-
Employee Director Stock Option Plan, exercisable at the following prices:
(a) 1,000 at $0.969 per Share; (b) 1,000 at $0.8125 per Share; (c) 1,000 at
$0.938 per Share; and (d) 4,000 at $1.00 per Share.
-2-
(6) Includes: (a) 52,857 directly owned Shares; (b) options to purchase 26,071
Shares granted under the 1991 Stock Option Plan at an exercise price of
$.003 per Share; and (c) options to purchase 5,000 Shares granted under the
Non-Employee Director Stock Option Plan, 1,000 of which have an exercise
price of $0.938 per Share and 4,000 of which have an exercise price of
$1.00 per Share.
(7) Includes: (a) 409,565 directly owned Shares; and (b) options to purchase
280,000 Shares granted under the Stock Option Plan at an exercise price of
$1.238 per Share. The 689,565 Shares beneficially owned by Mr. Giaimo do
not include any Shares beneficially owned by Catherine Britton, Mr.
Giaimo's spouse. Mr. Giaimo disclaims beneficial ownership of Shares
beneficially owned by Catherine Britton.
(8) Includes: (a) 183,881 directly owned Shares; (b) options to purchase
105,000 Shares granted under the Stock Option Plan at an exercise price of
$1.125 per Share; and (c) options to purchase 60,000 Shares under the Stock
Option Plan at an exercise price of $1.00 per Share.
(9) Includes: (a) 1,000,000 directly owned Shares; (b) options to purchase
7,000 Shares granted under the 1996 Non-Employee Director Stock Option
Plan, exercisable at the prices set forth in Note 5 above; and (c) options
to purchase 5,000 Shares granted under the 1991 Stock Option Plan at an
exercise price of $4.05 per Share.
(10) Includes: (a) 22,222 directly owned Shares; and (b) options to purchase
40,000 Shares granted under the Stock Option Plan at an exercise price of
$1.125 per Share. Such options will expire 30 days after the termination
of Mr. Kendall's employment, unless sooner exercised. Mr. Kendall's
employment will terminate effective May 13, 2001.
(11) Includes: (a) 47,570 directly owned Shares; (b) options to purchase 25,004
Shares granted under the Earned Ownership Plan at an exercise price of
$.0003 per Share; (c) options to purchase 75,012 Shares granted under the
1991 Stock Option Plan at an exercise price of $4.05 per Share; (d) options
to purchase 70,000 Shares granted under the Stock Option Plan at an
exercise price of $1.125 per Share; and (e) options to purchase 80,000
Shares granted under the Stock Option Plan at an exercise price of $1.00
per Share.
(12) Includes: (a) 14,334 Shares held of record by Neeb Enterprises, Inc., a
corporation wholly-owned by Mr. Neeb and of which Mr. Neeb is President and
a Director; (b) options to purchase 12,572 Shares granted under the 1991
Stock Option Plan at the exercise price of $.003 per Share; and (c) options
to purchase 7,000 Shares granted under the 1996 Non-Employee Director Stock
Option Plan, exercisable at the prices set forth in Note 5 above.
(13) Includes: (a) 564,729 Shares held of record by the Steiner Family
Partnership (Mr. Steiner owns a 25% interest in and is the managing partner
of The Steiner Family Partnership and, therefore, may be deemed to
beneficially own all Shares held of record by such partnership. Except to
the extent of his 25% ownership interest in The Steiner Family Partnership,
Mr. Steiner disclaims beneficial ownership of such Shares); (b) options to
purchase 5,000 Shares under the 1991 Stock Option Plan at the exercise
price of $4.05 per Share; and (c) options to purchase 7,000 Shares under
the 1996 Non- Employee Director Stock Option Plan, exercisable at the
prices set forth in Note 5 above.
(14) Includes 100,000 directly-owned Shares.
(15) The total Shares beneficially owned by all directors and executive officers
as a group was calculated by taking the sum of all Shares beneficially-
owned by each director and executive officer, as reflected in the table.
-3-
ELECTION OF DIRECTORS
DIRECTORS
The Board currently consists of seven directors whose terms continue
until the next annual meeting of stockholders, or until their respective
successors are elected and have qualified. At each annual meeting, directors are
elected for a term of one year to succeed those directors whose term expires.
The election of each director requires the affirmative vote by holders
of a plurality of the outstanding Shares present and entitled to be voted at the
Meeting. The persons named in the proxy solicited by the Board will vote, unless
the proxy is marked otherwise, to elect the persons identified in the table
below. If a nominee is unable to serve as a director, the persons acting under
the proxy may vote the proxy for the election of a substitute. It is not
currently contemplated that any nominee will be unable to serve. The board
recommends that stockholders vote FOR the nominees listed below.
Director
Name Age Since Position
---- --- ----- --------
Robert T. Giaimo.......................... 50 1996 Chairman of the Board, President, Chief Executive
Officer, and Treasurer
Catherine Britton......................... 47 1996 Director
Michael Collier........................... 46 1999 Director
Ype Von Hengst............................ 51 1996 Director, Vice President, Executive Chief, and
Secretary
Edward H. Kaplan.......................... 61 1996 Director
Louis P. Neeb............................. 62 1996 Director
Charles M. Steiner........................ 60 1996 Director
Robert T. Giaimo has been the Company's Chairman of the Board,
President, Chief Executive Officer and Treasurer since March 1996. In 1987 Mr.
Giaimo developed and popularized the Silver Diner concept with Ype Von Hengst
after conducting a one-year national tour of diner-style restaurants. Mr. Giaimo
has been the Co-Founder, Director, President, Chief Executive Officer and
Treasurer of Silver Diner Development, Inc. since its inception in 1987. Mr.
Giaimo was president, chief executive officer and director of Monolith
Enterprises, Inc. ("Monolith") from 1971 to January 1987. From 1972 through
1976, Mr. Giaimo co- founded and operated, through Monolith, Blimpies Restaurant
in Georgetown. In 1977, Mr. Giaimo co-founded and operated, through Monolith,
The American Cafe restaurant, an innovative, award-winning restaurant chain
which was one of the first restaurants to promote "American cuisine" and helped
popularize the croissant sandwich. In 1985, Mr. Giaimo sold The American Cafe to
W.R. Grace & Co. Mr. Giaimo graduated from the Business School of Georgetown
University in 1974 and Harvard University's Smaller Company Management Program
in 1982. He is a member of the Young President's Organization and serves as a
Director and Co- chairman of Development. In 1993, Mr. Giaimo received an
"Entrepreneur of the Year" award from Inc. Magazine in conjunction with Ernst &
Young and Merrill Lynch. Mr. Giaimo is married to Catherine Britton. Mr. Giaimo
currently serves on the board of directors of Panera Bread Co., a publicly
traded company headquartered in St. Louis, Missouri, with annual sales in excess
of $200 million.
Catherine Britton has been a Director since March 1996 and was a
director of Silver Diner Development, Inc. from July 1995 until March 1996. She
assisted with marketing and design of Silver Diner restaurants and has been
involved with menu development and concept evolution since Silver Diner
Development, Inc.'s inception. She also participated extensively in the
development of Silver Diner restaurants. Ms. Britton graduated from Georgetown
University in 1975, receiving a Bachelor of Arts degree in Philosophy. Ms.
Britton earned a Masters Degree in Special Education from George Washington
University in 1978. Ms. Britton is married to Robert T. Giaimo.
Michael Collier has been a Director since March 1999, when he was
elected to fill the vacancy left by Clinton A. Clark's resignation. Mr. Collier
is the President of Uniwest Group, Inc. and Uniwest Construction, Inc.,
companies which handle business in the area of real estate development and
general contracting and which serve as the developer and general contractor for
the Company's diners. He is also President of Atlantic Environmental Services,
Incorporated, a full-service environmental company.
-4-
Ype von Hengst has been a Director, Vice President, Executive Chef and
Secretary since March 1996 and co-founder, director, vice president of culinary
operations, and executive chef of Silver Diner Development, Inc. since 1987. Mr.
Hengst was a director of operations of "Dominiques" restaurant in Washington,
D.C. from May through September 1987. From 1984 to 1987, Mr. Hengst was
corporate executive chef and director for Food Service for The American Cafe and
was responsible for the central kitchen and bakeshop, menu changes, and food
preparation for all seven American Cafe restaurants. From 1981 to 1984, Mr.
Hengst was corporate executive chef for Restaurant Associates in New York, New
York, where he supervised over fifteen diverse full-service restaurants. From
1976 to 1981, Mr. Hengst held executive chef positions in Charlotte, North
Carolina, Cleveland, Ohio, Houston, Texas, and New York, New York. Prior to
1976, Mr. Hengst worked as a chef in Europe.
Edward H. Kaplan has been a Director since March 1996 and was a
director of Silver Diner Development, Inc. from 1987 until March 1996. He is a
real estate developer and investor and has served since 1983 as a Director of
Palmer National Bank, Washington, D.C. and subsequently, its successor, George
Mason Bankshares until April 2, 1998, when George Mason merged into United
Bankshares and now serves on the board of directors of United Bank of Virginia.
Mr. Kaplan received his B.A. from the University of Pennsylvania, Wharton School
in 1961. He currently is a member of the Maryland Public Television Commission
and the Maryland Public Television Foundation board of directors.
Louis P. Neeb has been a Director since March 1996 and was a director
of Silver Diner Development, Inc. from 1994 until March 1996. Mr. Neeb is
currently the president of Neeb Enterprises, Inc., a corporation that provides
management consulting services and chairman of the board of Mexican Restaurants,
Inc. He was the president and chief executive officer of The Spaghetti
Warehouse, Inc. from July 1991 until January 1994 and of Geest Food USA from
1989 until 1991. From 1982 until 1987, he served as president and chief
executive officer of Creative Food N Fun, a subsidiary of W.R. Grace & Co. From
1985 until 1987, he served as president and chief executive officer of a W.R.
Grace & Co. affiliate; Taco Villa, Inc. Mr. Neeb was employed by The Pillsbury
Company from 1973 until 1982. From 1980 to 1982, he served as an executive vice
president of The Pillsbury Company and as chairman and chief executive officer
of its affiliate, Burger King Corporation. In 1973, he was director of
operations at Steak & Ale Restaurants, Inc. another affiliate of The Pillsbury
Company. His leadership role with Steak & Ale Restaurants, Inc. continued until
1980, after serving as vice president of operations and eventually president and
chief operating officer. Currently, Mr. Neeb serves as a director of CEC
Entertainment and Franchise Finance Corporation of America, Inc., both publicly
traded companies. Mr. Neeb received a BBA in marketing from the University of
Notre Dame in 1961 and an MBA from George Washington University in 1969.
Charles M. Steiner has been a Director since March 1996. Mr. Steiner
was a director of Silver Diner Development, Inc. from 1987 until March 1996. He
was the chief executive officer of Branch Group, Inc., an electric distributor.
In 1975, Mr. Steiner founded IMARK, an electric cooperative, and in 1991 founded
EDIC, a distribution insurance company. He is a former director and officer of
the National Association of Electric Distributors (NAED). He received a B.B.A.
in Accounting from the University of Pittsburgh in 1963. Mr. Steiner is
currently an investor.
There is no family relationship between any of the Company's directors or
officers except that Catherine Britton is the wife of Robert T. Giaimo. There
are no arrangements between any director of the Company and any other person
pursuant to which he was selected as a director.
Non-Director Executive Officers
Jon Abbott joined the Company in April 2000 and assumed the duties and
responsibilities of Vice President of Operations. Mr. Abbott has twenty years
of operating experience in casual dining restaurant concepts, most recently with
Damons International, Inc., where he served as Director of Operations from 1997
to 2000. Prior thereto, Mr. Abbott served as Regional Manager for Cooker
Restaurant Corporation from 1985 to 1997.
Patrick Meskell has been Senior Vice President, Human Resources since
January 1996. Mr. Meskell was an independent consultant to institutions,
specializing in the areas of risk management system design and implementation
from 1988 to 1992 and Director of Organizational Development & Management &
Operations Training for the Student Loan Marketing Association from 1992 to
1995.
MEETINGS OF THE BOARD OF DIRECTORS
The Board held four (4) meetings (including telephonic meetings) during
the year ended December 31, 2000. During the year ended December 31, 2000, each
director attended at least 75% of the aggregate of the total number of meetings
of the Board (held during the period for which he/she was a director) and the
total number of meetings held by all Board committees on which he/she served
(during the periods that he/she served as a member). The Board has a standing
audit committee, a standing compensation committee, but it does not have a
standing nominating committee.
-5-
AUDIT COMMITTEE
The audit committee is composed of Messrs. Steiner, Chairman, Neeb and
Kaplan, each of whom is independent as defined in Rule 4310 ( c)(26)(B)(i) of
the National Association of Securities Dealers' listing standards. The Board
adopted an Audit Committee Charter, a copy of which is attached as Appendix A
hereto. The audit committee had five (5) meetings (as defined in the Audit
Committee Charter) during the year ended December 31, 2000. The principal
functions of the audit committee are to make recommendations to the Board
regarding the selection of the Company's independent accountants, to consult
with the Company's independent accountants and financial and accounting staff,
to review and report to the Board with respect to the scope of audit procedures,
accounting practices, and internal accounting and financial controls, to review
all quarterly and annual financial statements prior to filing them with the
Securities and Exchange Commission and to discuss such statements, together with
the annual auditor report, with management.
AUDIT COMMITTEE REPORT
The audit committee oversees the Company's financial process on behalf
of the Board. Management has the primary responsibility for the financial
statements and the reporting process, including the systems of internal
controls. In fulfilling its oversight responsibilities, the audit committee (i)
in consultation with the independent accountants, reviews the integrity of the
Company's financial reporting processes, both internal and external, (ii)
considers the independent accountants' judgments about the quality and
appropriateness of the Company's application of generally accepted accounting
principles to its financial reporting and (iii) considers and approves, if
appropriate, major changes to the Company's accounting principles and practice
as suggested by the independent accountants or management.
The audit committee discussed with the Company's independent auditor
the overall scope and plans for the audit. The audit committee met with the
independent auditor, with and without management present, to discuss the results
of the auditor examination, the auditor evaluation of the Company's internal
controls and the overall quality of the Company's financial reporting.
The audit committee reviewed with the independent auditor the quality,
and not just the acceptability, of the Company's accounting principles and such
other matters as are required to be discussed with the audit committee under
generally accepted auditing standards. In addition, the audit committee has
discussed with the independent auditor the auditor's independence from
management and the Company.
In reliance on the reviews and discussions referred to above, the audit
committee recommended to the Board (and the Board has approved) that the audited
financial statements be included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2000 for filing with the Securities and Exchange
Commission.
AUDIT COMMITTEE
Charles M. Steiner, Chairman
Louis P. Neeb, Audit Committee Member
Edward H. Kaplan, Audit Committee Member
COMPENSATION COMMITTEE
The compensation committee, composed of Messrs. Steiner, Chairman,
Collier and Neeb, held one (1) meeting during the year ended December 31, 2000.
The principal functions of the compensation committee are to review and make
recommendations to the Board on all compensation and hiring issues that relate
to officers and senior staff members.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the Company's knowledge, based solely upon a review of reports and
other information furnished to it by its directors, officers, greater than 10%
beneficial owners of the Company, and other persons subject to the reporting
requirements (collectively, the "Reporting Persons"), all reports required to be
filed by such Reporting Persons under Section 16(a) of the Securities Exchange
Act of 1934, as amended, were duly filed during the year ended December 31,
2000, with one exception. Mr. Kaplan did not timely file a report on Form 4 to
report a purchase of shares of the Company's Common Stock made in May 2000. Mr.
Kaplan has since made such filing.
-6-
Executive Compensation
The following table sets forth summary information concerning
compensation paid by the Company to each of the Company's executive officers
whose aggregate annual cash compensation exceeded $100,000 for fiscal year 2000.
Summary Compensation Table
Annual Compensation Long-Term Compensation
----------------------------------- ------------------------------------------------------
Awards Payouts
------------------------------ ---------------------
Securities
Other Annual Restricted Underlying LTIP All Other
Salary Bonus Compensation Stock Options/ Payouts Compensation
Name and Principal Position Year ($) ($) ($) Award(s)($) SARS(#) ($) ($)
- -----------------------------------------------------------------------------------------------------------------------------------
Robert T. Giaimo 2000 268,697 0 18,000 0 0 0 57,827 (3)
Chairman of the Board, 1999 258,315 0 18,000 0 0 0 57,061 (3)
President, Chief Executive 1998 269,544 0 18,000 0 550,000 (1),(2) 0 56,358 (3)
Officer and Treasurer
Ype Von Hengst 2000 153,029 0 26,000 0 0 0 27,535 (7)
Director, Vice President, 1999 145,173 0 26,000 0 150,000 (4) 0 27,535 (7)
Executive Chef and Secretary 1998 129,144 0 6,000 0 55,000 (5),(6) 0 27,573 (7)
Patrick Meskell 2000 109,769 0 6,000 0 0 0 0
Senior Vice President, Human 1999 101,769 5,000 6,000 0 200,000 (8) 0 0
Resources 1998 103,579 5,000 6,000 0 55,000 (9),(6) 0 0
Craig Kendall 2000 129,808 0 6,000 0 0 0 0
Vice President, Finance 1999 120,192 0 6,000 0 100,000 (10) 0 0
1998 17,875 10,000 0 0 55,000 (11),(6) 0 0
Jon Abbott 2000 103,846 0 4,500 100,000 (12) 100,000 (13) 0 0
Vice President, Operations 1999 0 0 0 0 0 0 0
1998 0 0 0 0 0 0 0
_______________________
1) Includes an option to purchase up to 400,000 Shares at $1.238 per Share
through December 14, 2003, which vests, or has vested, except as provided
in Note 2 below, as follows: (a) 120,000 on December 29, 1998, (b) 80,000
on December 29, 1999, (c) 80,000 on December 29, 2000, and (d) 120,000 on
December 29, 2001. Also included is an option to purchase up to 150,000
Shares, which option Mr. Giaimo elected to cancel.
(2) An additional 18% of the option may vest earlier each time the market price
of the Shares is initially greater than $5.00 per Share, $7.50 per Share
and $10 per Share, with the option vesting 100% when the market price is
greater than $12.00 per Share.
(3) Includes the annual premiums the Company paid on a $3,000,000 split dollar
life insurance policy on the life of Mr. Giaimo.
(4) Includes an option to purchase up to 150,000 Shares at $1.00 per Share
through December 7, 2009, which vests or has vested 30,000 Shares annually
commencing on January 1, 2000.
(5) Includes an option to purchase up to 55,000 Shares at $0.625 per Share
through December 14, 2008, which vests 100% at December 31, 2005, except as
provided in Note 6 below.
(6) The terms of the stock option agreement governing the option provide that
the option could vest earlier if certain performance criteria were met in
fiscal year 2000. However, such criteria were not met. The Board has the
ability to set other performance criteria for accelerating the vesting of
the option in future years.
(7) Includes the annual premiums the Company paid on a $1,500,000 split dollar
life insurance policy on the life of Mr. Von Hengst.
(8) Includes an option to purchase up to 200,000 Shares at $1.00 per Share
through December 7, 2009, which vests or has vested 40,000 Shares annually
commencing on January 1, 2000.
-7-
(9) Includes an option to purchase up to 55,000 Shares at $0.625 per Share
through December 14, 2008, which vests 100% at December 31, 2005, except as
provided in Note 6 above.
(10) Includes an option to purchase up to 100,000 Shares at $1.125 per Share
through March 17, 2009, of which 40,000 Shares have vested. Mr. Kendall
has resigned as an officer effective May 13, 2001. Any vested options as
of such date expire within 30 days of such termination date unless
exercised prior thereto.
(11) Includes an option to purchase up to 55,000 Shares at $0.625 per Share
through December 14, 2008, which vests 100% at December 31, 2005, except as
provided in Note 6 above.
(12) Mr. Abbott acquired 100,000 Shares in connection with his initial
employment in March of 2000 by the Company, for an aggregate purchase price
of $50,000, representing 50% of the fair market value of the Shares on
March 24, 2000, i.e., 50% of $1.00 per Share. Under the terms of Mr.
Abbott's employment agreement, the Company has the right to buy back the
shares at their purchase price within 60 days if Mr. Abbott terminates his
employment with the Company during the first three years. Also, the
Company may apply up to 55,000 of the Shares purchased by Mr. Abbott from
the Company, at the original purchase price of $.50 per Share, to repay
the outstanding balance on a non-interest bearing promissory note from Mr.
Abbott to the Company in the amount of $32,500, if Mr. Abbott terminates
his employment with the Company prior to December 31, 2001. The proceeds
of the promissory note were used by Mr. Abbott to defray moving expenses.
(13) Consists of an option to purchase 100,000 Shares at $1.00 per Share through
March 23, 2010, which vests as follows: 30,000 Shares on December 31, 2001,
20,000 Shares on December 31, 2002, 20,000 Shares on December 31, 2003, and
30,000 Shares on December 31, 2004.
Stock Options
No stock appreciation rights have been granted or are outstanding. No stock
options were granted to the Company's executive officers during the year ended
December 31, 2000, except for Mr. Jon Abbott who received an option for 100,000
Shares. The terms of the options are described in note 12 above. Such options
represent 54.60% of total options granted to employees in the fiscal year ended
December 31, 2000, and have a grant date present value of $0.53 per Share.
The following table provides information as to the outstanding options at
December 31, 2000 held by the following executive officers. No stock
appreciation rights are outstanding.
Aggregated Option/SAR Exercises in Last Fiscal Year
And Fiscal Year End Option/SAR Values
Number of Securities Underlying Value of Unexercised
Unexercised Options/SARS at In-the-money Options/SARs
Fiscal Year End at Fiscal Year End *
---------------------------------- ----------------------------------
Shares
Acquired
On Value
Name Exercise (#) Realized ($) Exercisable (#) Unexercisable (#) Exercisable (#) Unexercisable (#)
- ----------------- ------------ ------------ --------------- ----------------- --------------- -----------------
Robert T. Giaimo 0 0 280,000 120,000 0 0
Ype Von Hengst 0 0 165,000 190,000 0 8,580
Patrick Meskell 0 0 250,016 205,000 19,521 8,580
Craig Kendall 0 0 20,000 135,000 0 8,580
Jon Abbott 0 0 0 100,000 0 0
* Represents the difference between the fair market value of the Shares subject
to the options, based on the closing price of $0.781 for the Shares on
December 29, 2000 (the final trading day for the fiscal year ended December
31, 2000), and the exercise prices of the options.
Benefit Plans
The Company provides insurance benefits to its officers and other
employees, including health, dental, and life insurance, subject to certain
deductibles and co-payments by employees.
-8-
Employment Agreements
Founder's Employment Agreement. The Company and Robert T. Giaimo entered
into a Founder's Employment Agreement on August 28, 1995, effective as of March
27, 1996, and amended on November 9, 1998. The base compensation under the
Founder's Employment Agreement is $240,000 per annum, increased annually at a
minimum amount equal to the increase in the Consumer Price Index for the
Washington, D.C., Maryland, and Virginia metropolitan area (the "Base
Compensation"). Benefits under the agreement include four weeks paid vacation,
health and dental insurance, life and disability insurance, director and officer
liability insurance and a $3,000,000 "split-dollar" life insurance agreement.
Perquisites include an up to $500 per month car allowance, an education fee of
$1,000 per month, and free shift meals.
The Founder's Employment Agreement had an initial term of five years and,
starting on its first anniversary, was renewable for five years from each
anniversary. If at any such anniversary the Board does not renew, the agreement
will expire five years from such anniversary (the five-year period beginning on
such anniversary is referred to as the "Expiration Term"). The Founder's
Employment Agreement was renewed on December 15, 1999 and, as renewed, expires
in March 2005.
During the Expiration Term, Mr. Giaimo may, upon at least sixty days prior
written notice, terminate the Founder's Employment Agreement immediately and
such termination shall be an "Involuntary Resignation." If an Involuntary
Resignation occurs, Mr. Giaimo shall be entitled to a severance amount equal to:
(i) his base compensation, including all bonuses, for the immediately preceding
fiscal year (the "Annual Amount"), (ii) divided by 365, and (iii) multiplied by
the number of days remaining in the Expiration Term, provided that the severance
amount paid to Mr. Giaimo due to an Involuntary Resignation shall not exceed
three times the Annual Amount.
Mr. Giaimo may also terminate the agreement by reason of a material breach
by the Company (as specified in the Founder's Employment Agreement). If Mr.
Giaimo terminates the Founder's Employment Agreement within the first five years
of the agreement for a material breach by the Company, he shall be entitled to
receive the Annual Amount multiplied by ten. If the material breach occurs after
the first five years of the agreement, the Annual Amount shall be multiplied by
five. Additionally, if a termination for a material breach occurs prior to the
earlier of (i) the end of the first five years of the agreement, or (ii) the
completion of an underwritten public offering of the Company's Shares from which
it realizes $15,000,000, then the Company shall be obligated, at the employee's
option, to purchase all of Mr. Giaimo's Shares at fair market value.
The Company may terminate the agreement upon the death or disability of Mr.
Giaimo or for cause. If terminated for death, the Mr. Giaimo's estate shall be
entitled to receive all accrued compensation plus a severance amount equal to
one year's Base Compensation (as adjusted to the date of death). The decedent's
family will also be provided health insurance for one year from date of death.
If terminated for disability, Mr. Giaimo shall be entitled to receive all
accrued compensation plus a severance amount equal to his then current Base
Compensation for a period of five years, but reduced dollar for dollar by all
amounts received by the employee under disability insurance. If terminated for
cause, Mr. Giaimo shall be entitled to receive all accrued compensation.
Executive Employment Agreement. The Company and Ype Von Hengst entered into
an Employment Agreement effective as of November 9, 1998. The base salary under
the Employment Agreement is $125,000 per annum through December 31, 1998,
$150,000 per annum from January 1, 1999 through December 31, 1999, and increased
annually at a minimum amount equal to the increase in the Consumer Price Index
for the Washington, D.C., Maryland, and Virginia metropolitan area beginning
January 1, 2000 (the "Base Salary"). Benefits under the agreement include health
and dental insurance, life and disability insurance, and participation in stock
options, bonus plans and other benefit plans customarily made available to
executive employees of the Company.
In consideration of Mr. Von Hengst entering into the agreement, the Company
extended a $100,000 non-recourse loan (the "Loan") to Mr. Von Hengst, subject to
his execution of a promissory note and secured by his 182,881 Shares in the
Company (the "Collateral"). Beginning December 31, 1999, Mr. Von Hengst is also
entitled to an annual bonus of an amount equal to $20,000 plus accrued and
unpaid interest on the Loan (the "Bonus"). The Bonus is not paid directly to Mr.
Von Hengst, but is applied to repay the outstanding principal and interest under
the Loan. The term of the Employment Agreement is from November 9, 1998 to
December 31, 2003.
Under the Employment Agreement, Mr. Von Hengst agrees, except as required
by the performance of his duties, not to disclose or use any Confidential
Information of the Company or its affiliates, which is defined as all
information disclosed to him or known by him as a consequence of or through his
employment with the Company where such information is not generally known in the
trade or industry and where such information refers or relates in any manner to
the business activities of the Company. During the term of the Employment
Agreement and for a period of twelve consecutive months after the termination of
the Employment Agreement, Mr. Von Hengst agrees, except as required by the
performance of his duties, not to induce, attempt to induce, counsel, advise,
solicit or encourage any person to leave the employ of the Company or, with
respect to any person who
-9-
had left the employ of the Company within the previous six months, not to engage
in any of the above activities in connection with such former employee's
acceptance of employment with any person or entity other than the Company. For a
period of twelve consecutive months after the termination of the Employment
Agreement for any reason other than a termination without cause, Mr. Von Hengst
agrees not to (i) engage in the "diner business" anywhere in the United States;
(ii) engage in competition with the Company within a 10 mile radius of any
Company owned or franchised facility or planned facility; or (iii) directly or
indirectly, either individually or in any other capacity, work for, consult with
or otherwise assist Movenpick, its parent corporation, affiliates and
subsidiaries, in the development of "diners."
Mr. Von Hengst may terminate his Employment Agreement at any time upon
sixty days written notice ("Voluntary Resignation"). Upon receipt of such
notice, the Company may elect to relieve Mr. Von Hengst of any or all of his
duties or terminate him immediately. The Company may terminate the agreement for
cause (as that term is defined in the Employment Agreement), upon the death or
disability of Mr. Von Hengst, or without cause. If the agreement is terminated
by Voluntary Resignation or for cause, (i) the Company's obligation to pay the
Base Salary, Bonus and medical benefits shall cease immediately on the date of
termination; and (ii) the principal balance under the Loan shall be
extinguished, and all right, title and interest in the Collateral shall vest
immediately with the Company. If the agreement is terminated for death (i) the
Company's obligation to pay the Base Salary, Bonus and medical benefits shall
cease immediately on the date of termination; and (ii) the principal balance
under the Loan shall be extinguished, and all right, title and interest in the
Collateral shall vest with Mr. Von Hengst (or his estate or heirs). If
terminated for disability, defined as the inability to perform the essential
function of the job, with or without accommodation, for at least 180 consecutive
days, (i) Mr. Von Hengst's right to the Base Salary and Bonus shall cease on the
date of termination, (ii) the Company shall make the medical benefits available
to Mr. Von Hengst for a period of eighteen months following termination, the
costs of which shall be paid by the Company for the first twelve months of such
period; and (iii) the principal balance under the Loan shall be extinguished,
and all right, title and interest in the Collateral shall vest with Mr. Von
Hengst (or his estate or heirs). If terminated without cause, (i) Mr. Von Hengst
shall be entitled to the Base Salary, Bonus, and medical benefits for a one year
period commencing with the date of termination; and (ii) the principal balance
under the Loan shall be extinguished, and all right, title and interest in the
Collateral shall vest with Mr. Von Hengst (or his estate or heirs).
Officer Employment Agreements. The Company entered into letter agreements
on March 4, 1999, with Craig Kendall, Timothy Cusick, and Patrick Meskell. Mr.
Meskell's letter agreement on March 4, 1999, supersedes his letter agreement
with the Company dated December 4, 1995. In addition, the Company entered into a
letter agreement dated March 24, 2000, with Jon Abbott, who joined the Company
on April 10, 2000. The agreements provide for Mr. Kendall's employment as Vice
President, Finance with a base salary of $125,000 per annum, which employment
will terminate on May 13, 2001 subject to the compensation continuation
provisions of this agreement, Mr. Cusick's employment as Area Director of
Operations with a base salary of $104,000 per annum, which employment terminated
September 1, 2000, Mr. Meskell's employment as Senior Vice President, Human
Resources with a base salary of $104,000, and Mr. Abbott's employment as Vice
President of Operations with a base salary of $150,000, with future adjustments
to each employee's base salary to be determined by the Board. In addition, each
employee is entitled to (i) participate in bonus and stock option plans made
available to executive employees of the Company; (ii) receive a $500 per month
car allowance, (iii) receive life insurance coverage in the amount of $500,000;
(iv) participate in group health and dental plans generally offered to employees
of the Company; (v) receive long term disability insurance coverage in amount of
approximately 60% of the employee's base salary per month, subject to a 90 day
initial waiting period; (vi) receive three weeks paid vacation that does not
accrue or carry over from one year to the next; and (vii) receive sick leave and
other benefits, in accordance with the Company's policies for its executives.
Each employee agrees to enter into confidentiality and non-competition
agreements with the Company. Mr. Abbott's agreement also provides for a $32,500
loan to cover the cost of relocation, plus $5,000 to cover the cost of temporary
housing in connection with relocating. The $32,500 loan is to be forgiven on
December 31, 2001 if Mr. Abbott remains in the employment of the Company through
such date. Under the agreement, Mr. Abbott was granted an option to purchase
100,000 shares, which vest as follows: 30% on December 31, 2001; 20% per year on
December 31, 2002; 20% on December 31, 2003; and 30% on December 31, 2004. The
agreement also provides for the investment by Mr. Abbott of $50,000 in the
Company by acquiring shares at 50% of the market price at March 23, 2000. Mr.
Abbott acquired 55,000 shares for $27,500 on March 24, 2000, and subsequently
acquired an additional 45,000 shares for $22,500. Under the agreement, the
Company has the right to buy back the shares at their purchase price within 60
days if Mr. Abbott terminates his employment with the Company during the first
three years. Also, the Company may apply up to 55,000 of the Shares purchased by
Mr. Abbott, at the original purchase price of $.50 per Share, to repay the
outstanding balance on the $32,500 loan to Mr. Abbott, if Mr. Abbott terminates
his employment with the Company prior to December 31, 2001.
Each of the agreements is terminable at any time by either party thereto.
However, if the Company terminates the agreement, the Company will pay the
employee all base salary earned but unpaid on the date of resignation plus three
months base salary, except for Mr. Abbott who will continue to receive his base
salary through a period which will be the greater of (i) 12 months from the date
his employment began, or (ii) the earlier of (x) six months from the date of
termination or (y) Mr. Abbott's employment by another employer. If the employee
resigns after providing at least three months prior notice, the Company will pay
the employee all base salary earned but unpaid on the date of resignation plus
three months base salary payable after resignation on the same schedule as the
salary that was paid before resignation. If the employee resigns without
providing at least three months prior notice, (i) all stock options and all
stock purchase rights granted under the Stock Option Plan to the employee
-10-
(a) subsequent to March 1, 1999, (b) on December 15, 1997, and (c) to Mr. Cusick
and Mr. Meskell on December 29, 1997 will be terminated on the date of
resignation; and (ii) the employee will sell and the Company will purchase all
Shares of the Company acquired by the employee pursuant to stock options or
stock purchase rights within six months prior to the date of resignation at a
purchase price equal to the price paid for the Shares.
Non-Employee Director Compensation
During the year ended December 31, 2000, each of the Company's non-employee
directors received an option to purchase 4,000 Shares on June 16, 2000 under the
1996 Non-Employee Director Stock Option Plan. Such options may be exercised at
$0.844 per Share, which is equal to 100% of the fair market value on the date of
grant, are exercisable at any time in whole or in part for a period commencing
one year after the date of grant, and expire on June 15, 2010. Other than the
option grants and the reimbursement of certain expenses, non-employee directors
received no other compensation for service as directors for the year ended
December 31, 2000.
COMPENSATION COMMITTEE REPORT TO STOCKHOLDERS
The Compensation Committee of the Board is composed solely of non-employee
directors. The Compensation Committee determines all aspects of the compensation
to be paid to the Company's executive officers. The Company's executive
compensation program is designed to promote the following objectives: (i) to
provide competitive compensation that will help attract, retain and reward
highly qualified executives who contribute to the long term success of the
Company; (ii) to align management's interests with the Company's by tying a
portion of the executive's compensation to the Company's performance; and (iii)
to align management's interests with stockholders by including long term equity
incentives as part of the executive's compensation. The compensation of the
Company's executive officers includes cash compensation, long-term incentive
compensation in the form of stock options, and participation in various benefit
plans, most of which are generally available to employees of the Company.
Cash Compensation. Cash compensation of the Company's executive officers
consists of a base salary and, if earned, an annual performance bonus. The
Compensation Committee reviews salaries recommended by the Chief Executive
Officer for executive officers other than the Chief Executive Officer. In
formulating these recommendations, the Chief Executive Officer considers the
overall performance of the Company and base salaries of executive officers at
similarly situated restaurant companies, taking into consideration the
individual experience of these officers, and conducts an informal evaluation of
individual officer performance. Final decisions on any adjustments to the base
salary for executives, other than the Chief Executive Officer, are made by the
Committee in conjunction with the Chief Executive Officer. The Committee's
evaluation of the recommendations by the Chief Executive Officer considers the
same factors outlined above and is subjective with no particular weight assigned
to any one factor. The Committee considers the factors outlined above in
evaluating the base salary of Robert T. Giaimo, the Company's Chief Executive
Officer.
The Company's management, including executive officers, are eligible to
receive annual incentive awards based on the Company's financial performance and
the efforts of its executives. Performance is measured based on restaurant-level
profitability, control of corporate overhead expenses and timely achievement of
store development schedule. No executive officer received a cash bonus for the
year ended December 31, 2000.
Stock Options. The executive officers, as well as other key employees, are
eligible to participate in the Company's Stock Option Plan. The purpose of the
Stock Option Plan is to provide increased incentives to salaried employees, to
encourage new employees to become affiliated with the Company and to align the
interests of such persons with those of the Company's stockholders. The Stock
Option Plan is administered by the Compensation Committee. The Compensation
Committee has the authority to determine the individuals to whom the stock
options are awarded, the terms upon which option grants shall be made and the
number of Shares subject to each option, all subject to the terms and conditions
of the Stock Option Plan.
In the year ended December 31, 2000, no options were granted to executive
officers other than to Mr. Abbott, who was granted an option to purchase 100,000
shares under the Stock Option Plan. Each option granted under the Stock Option
Plan is an incentive option that is exercisable at a price equal to 100% of the
fair market value of the Shares on the date of grant.
-11-
Other Compensation. The Company provides certain other benefits to the
executive officers, such as health insurance, that are generally available to
Company employees. In addition, officers and key employees of the Company may be
eligible to receive supplemental disability coverage, automobile allowance and
insurance benefits.
THE COMPENSATION COMMITTEE
Charles M. Steiner, Compensation Committee Chairman
Michael Collier, Compensation Committee Member
Louis P. Neeb, Compensation Committee Member
Performance Graph
Set forth below is a line graph comparing the total cumulative return on
the Shares from December 29, 1994 through December 31, 2000 with the CRSP Total
Returns Index for U.S. companies traded on the Nasdaq Stock Market (the "Market
Group") and an index group of peer companies, the CRSP Total Returns Index for
U.S. Nasdaq Stocks for (SIC 5800-5899) eating and drinking companies (the "Peer
Group"). The companies in each of the Market Group and the Peer Group were
weighted by market capitalization. Returns are based on monthly changes in price
and assume reinvested dividends. These calculations assume an initial investment
of $100 in the Shares, the Market Group and the Peer Group, with the
reinvestment of all dividends paid thereafter. The Company's Shares were traded
on the OTC Bulletin Board under the symbol FDTR until March 27, 1996 when it
began trading on the Nasdaq National Market under the symbol SLVR.
Comparison of Five Year
Cumulative Total Return
[GRAPH APPEARS HERE]
$600
$550
$450
$400
$350
$300
$250
$200
$150
$100
$50
$0
12/29/95 12/27/96 12/28/97 01/03/99 01/02/00 12/31/00
Total Returns Index 12/29/95 12/27/96 12/28/97 01/03/99 01/02/00 12/31/00
Silver Diner, Inc. 100.00 73.42 23.41 15.22 22.71 27.29
The Market Group 100.00 101.84 103.90 156.03 149.81 142.45
The Peer Group 100.00 123.12 144.99 212.30 386.27 237.76
Related Party Transactions
Silver Diner Potomac Mills, Inc. Pursuant to lease agreements dated October
14, 1991 and May 27, 1992, the Company leases the Silver Diner restaurant in
Potomac Mills, Virginia (the "Potomac Mills Restaurant") from Silver Diner
Potomac Mills, Inc. ("SDPMI"), a corporation wholly owned by Robert T. Giaimo,
the Chairman and President of the Company. The leases require the payment of an
annual base rent, with annual adjustments based on the Consumer Price Index, and
the payment of percentage rent based on gross receipts. The leases expire in
late 2011. For the year ended December 31, 2000, occupancy costs were $355,000
in rent and related pass through costs associated with the leases.
-12-
Robert Giaimo Development, Inc. On June 17, 1997, the Company purchased
from Robert Giaimo Development, Inc. ("RGDI"), a corporation wholly owned by
Robert T. Giaimo, the Chairman and President of the Company, an undivided 70%
interest in the parcel of land used as a parking lot for the Potomac Mills
Restaurant. The remaining 30% is owned by RGDI. The total purchase price of the
land was $408,000, of which $267,000 was borrowed from a bank, secured by the
land, bearing interest at the prime rate (9.5% at December 31, 2000), and due to
mature in June 2003.
The Company assumed a management agreement entered into between RGDI with
SDPMI (the "Management Agreement"), which provides that the Company is the
exclusive manager of the Potomac Mills Restaurant, is entitled to receive all of
the net profits (as defined in the Management Agreement) from the Potomac Mills
Restaurant, and is responsible for paying all operating costs and expenses of
the restaurant, including rent. The Management Agreement is unlimited in
duration and can only be terminated by mutual agreement of the Company and
SDPMI, or following notice that the Company failed to meet its management
obligations and responsibilities. RGDI has granted the Company an option to
purchase the Potomac Mills Restaurant for an amount equal the fair market value,
on the date of purchase, as determined by an appraisal.
Loan To Ype Von Hengst. In connection with his entering into an employment
agreement with the Company on November 9, 1998, Ype Von Hengst, a Director and
officer of the Company, received a $100,000 loan from the Company, secured by
his 182,881 Shares in the Company and bearing interest at 5.25% annually. The
loan and accrued interest is to be repaid annually by applying an annual bonus
received by Mr. Von Hengst beginning December 31, 1999. The amount outstanding
as of December 31, 2000 was $60,000.
Michael Collier And Uniwest Group, Inc. and Affiliates. The Company has
from time to time entered into contracts with Michael Collier, a Director, and
with Uniwest Group, Inc., a construction corporation and certain of its
affiliates, a company of which Michael Collier is the President and a
stockholder, as follows: the Company paid Michael Collier approximately $5,400
for real estate consulting services provided to the Company during fiscal year
2000; the Company paid Uniwest Management Inc., a company which manages the real
estate operations, approximately $189,500, as rent on the Merrifield lease; and
the Company paid Uniwest Construction, Inc. approximately $1,050,000 for the
construction of the Virginia Beach, Virginia and Gaithersburg, Maryland
locations and for miscellaneous construction and renovation to the existing
diners.
In 1995, the Company entered into a ground lease with 2909 Gallows LC,
landlord, covering the Merrifield facility. The landlord is a partnership in
which Michael Collier owns a significant limited partnership interest. The lease
provides for minimum annual rent of $110,000 in 1998 with fixed escalations in
rent payments over the lease term through 2012. Rent and real estate payments
for the year ended December 31, 2000 were $189,359.
Uniwest Construction, Inc. acted as the general contractor for the
construction of the diner on the Merrifield property. Michael Collier was not a
director of the Company when the lease and construction contract were entered
into.
In January 2000, as an agent for Interface Properties, Inc., the landlord,
the Company entered into a construction contract with Uniwest Construction, Inc.
for the construction of the Virginia Beach, VA Silver Diner. The contract was a
fixed fee contract in the amount of $800,000. Pursuant to the lease agreement,
the landlord is liable for all payments and terms under the construction
contract agreement.
In February 2000, the Company entered into a construction contract with
Uniwest Construction, Inc. for the construction of the Lakeforest Mall Silver
Diner. The contract was a fixed fee contract in the amount of $735,000. Uniwest
Construction, Inc. acted as the general contractor and was paid a fee for
coordinating and supervising the development of both facilities. All work and
materials were provided by subcontractors whose prices are subject to bid.
INDEPENDENT ACCOUNTANTS
Following the Company's merger with and into Silver Diner Development, Inc.
("SDDI"), the Company retained Deloitte & Touche LLP ("Deloitte & Touche") to
audit its financial statements for the years ended December 29, 1996, December
28, 1997 and January 3, 1999. During 1999, Deloitte & Touche submitted a fee
proposal to audit the Company's financial statements for the 1999 fiscal year.
Based thereon, the Board and the audit committee, in an attempt to reduce
substantially the Company's audit costs, talked to a number of accounting firms
and on September 29, 1999, the Company notified Deloitte & Touche of its
dismissal as the Company's independent auditors and the retention of Reznick
Fedder & Silverman ("Reznick") as its independent auditors for the 1999 fiscal
year. On September 29, 1999, the Company engaged Reznick to audit the financial
statements of the Company for the year ended January 2, 2000. Reznick served as
the independent auditors of SDDI prior to its merger with the Company on March
27, 1996.
During the three fiscal years ended January 3, 1999 and through the date of
termination on September 29, 1999, the Company had no disagreements with
Deloitte & Touche on any matter of accounting principles or practices, financial
statement
-13-
disclosure, or auditing scope or procedure, which, had they not been resolved,
would have caused Deloitte & Touche to make reference to the subject matter of
the disagreement in connection with its report.
Reznick continued to serve as the Company's independent auditors during
fiscal year 2000. Representatives of Reznick are expected to attend the Meeting,
will be provided with an opportunity to make a statement, should they desire to
do so, and will be available to respond to appropriate questions from the
stockholders. The audit committee has recommended, and the Board has approved,
the selection of Reznick to serve as the Company's independent auditors for the
year ending December 30, 2001.
The table below sets forth the aggregate fees billed to the Company for the
year ended December 31, 2000 by Reznick. The audit committee has considered
whether the provision of non-audit services is compatible with maintaining
Reznick's independence, and concluded that providing such non-audit services
does not interfere with Reznick's independence.
Reznick Compensation for 2000 Amount
(approximate)
Annual Audit Fees and Quarterly Report Review $ 70,000
Financial Information Systems,
Design and Implementation Fees -0-
All Other Fees 31,000
--------
Total: $101,000
OTHER MATTERS
The Board knows of no other business which may come before the Meeting. If,
however, any other matters are properly presented to the Meeting, it is the
intention of the persons named in the accompanying proxy to vote, or otherwise
act, in accordance with their judgment on such matters.
STOCKHOLDER PROPOSALS
Any proposal of a stockholder to be presented at the Company's annual
meeting of stockholders in 2002, including the nomination of persons to serve on
the Board, must be received not later than January 18, 2002 to be considered
timely for inclusion in the proxy materials for that meeting. Stockholders
submitting proposals should submit them in writing and direct them to the
Company's secretary at the Company's principal executive offices via certified
mail, return receipt requested, to ensure timely delivery.
METHOD OF PROXY SOLICITATION
The entire cost of this solicitation of proxies will be borne by the
Company. The Company's directors, officers, and regular employees, without
additional remuneration, may solicit proxies by telephone, telegraph and
personal interviews. The Company will, if requested, reimburse banks, brokerage
houses, and other custodians, nominees and certain fiduciaries for their
reasonable out-of-pocket expenses incurred in connection with the distribution
of proxy materials to their principals.
By Order of the Board,
Ype Von Hengst
Secretary
-14-
Appendix A
SILVER DINER, INC.
AUDIT COMMITTEE CHARTER
I. PURPOSE
The primary function of the Audit Committee is to assist the Board of Directors
in fulfilling its oversight responsibilities by reviewing the financial reports
and other financial information provided by Silver Diner, Inc. (the "Company")
to any governmental body or the public; the Company's systems of internal
controls regarding finance and accounting that management and the Board have
established; and the Company's auditing, accounting and financial reporting
processes generally. Consistent with this function, the Audit Committee shall
encourage continuous improvement of, and foster adherence to, the Company's
policies, procedures and practices at all levels. The Audit Committee's primary
duties and responsibilities are to:
. Serve as an independent and objective party to monitor the
Company's financial reporting process and internal control
system.
. Review the audit efforts of the Company's independent
accountants.
. Provide an open avenue of communication among the independent
accountants, financial and senior management, and the Board of
Directors.
The Audit Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in Section IV of this Charter.
II. COMPOSITION
(1) Composition of Audit Committee Members.
(a) The Audit Committee shall consist of at least three directors, all of
whom have no relationship to the Company that may interfere with the
exercise of their independence from management and the Company
("Independent").
(b) Each member of the Audit Committee shall be financially literate, as
such qualification is interpreted by the Company's Board of Directors
in its business judgment, or must become financially literate within a
reasonable period of time after his or her appointment to the Audit
Committee.
(c) At least one member of the Audit Committee must have accounting or
related financial management expertise, as the Board of Directors
interprets such qualification in its business judgment.
(2) Independence Requirement of Audit Committee Members.
In addition to the definition of Independent provided above in II(1)(a),
the following restrictions shall apply to every Audit Committee member:
(a) Employees. A director who is an employee (including non-employee
---------
executive officers) of the Company or any of its affiliates may not
serve on the Audit Committee until three years following the
termination of his or her employment. In the event the employment
relationship is with a former parent or predecessor of the Company,
the director may serve on the Audit Committee after three years
following the termination of the relationship between the Company and
the former parent or predecessor.
(b) Business Relationship. A director (i) who is a partner, controlling
---------------------
shareholder, or executive officer of an organization that has a
business relationship with the Company, or (ii) who has a direct
business relationship with the Company (e.g., a consultant) may serve
on the Audit Committee only if the Company's Board of Directors
determines in its business judgment that the relationship does not
interfere with the director's exercise of independent judgment or if
the business relationship did not result in the payment by the Company
to the organization in which the director was a partner, controlling
shareholder, or executive officer, or the receipt by the Company from
such organization, by the Company of an amount that exceeds the
greater of five percent (5%) of the Company's consolidated revenues
for the most recently completed fiscal year or $200,000. In
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making a determination regarding the independence of a director
pursuant to this paragraph, the Board of Directors should consider,
among other things, the materiality of the relationship to the
Company, to the director and, if applicable, to the organization with
which the director is affiliated.
"Business relationships" can include commercial, industrial, banking,
consulting, legal, accounting and other relationships. A director can
have this relationship directly with the Company, or the director can
be a partner, officer or employee of an organization that has such a
relationship. The director may serve on the Audit Committee without
the above-referenced Board of Director's determination after three
years following the termination of, as applicable, (1) the
relationship between the organization with which the director is
affiliated and the Company, (2) the relationship between the director
and his or her partnership status, shareholder interest or executive
officer position, or (3) the direct business relationship between the
director and the Company.
(c) Cross Compensation Committee Link. A director who is employed as an
---------------------------------
executive of another corporation where any of the Company's
executives serves on the corporation's compensation committee may not
serve on the Company's Audit Committee.
(d) Immediate Family. A director who is an immediate family member of an
----------------
individual who is an executive officer of the Company or any of its
affiliates cannot serve on the Audit Committee until three years
following the termination of such employment relationship.
The members of the Audit Committee shall be elected by the Board at the
Directors Meeting following the Annual Meeting of Shareholders and the members
shall serve until their successors shall be duly elected and qualified. Unless
a Chair is elected by the full Board, the members of the Committee shall
designate a Chair by majority vote of the full Committee membership.
III. MEETINGS
The Committee shall meet at least four (4) times annually, or more frequently as
circumstances dictate, including the meetings described below. To foster open
communication, the Committee shall meet at least annually with management and
the independent accountants in separate executive sessions to discuss any
matters that the Committee or each of these groups believe should be discussed
privately. In addition, the Committee shall meet with management to review the
Company's financial statements consistent with IV 3. and IV 4. below. For
purposes hereof, meetings may consist of telephonic, electronic or written
communications or informal meetings between members of the Committee and between
members of the Committee and Company management or the independent accountants.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
Documents/Reports Review
- ------------------------
1. Review and update this Charter, at least annually, as conditions dictate.
2. Review the Company's annual financial statements: Form 10-K and Annual
Report. Review and discuss the regular internal quarterly reports issued
by management.
4. Review with management the Form 10-Q prior to its filing with the
Securities and Exchange Commission. The Chair of the Committee may
represent the entire Committee for purposes of this review.
Independent Accountants
- -----------------------
5. Inasmuch as the Company's independent accountants are ultimately
accountable to the Board of Directors and Audit Committee, join with the
Board of Directors in exercising the authority and responsibility to
select, evaluate and, where appropriate, replace the independent
accountants (or to nominate the independent accountants for shareholder
approval in any proxy statement).
6. Require that the independent accountants submit on a periodic basis to the
Audit Committee a formal written statement delineating all relationships
between the independent accountants and the Company, actively engage in a
dialogue with the independent accountants with respect to any disclosed
relationships or services that may impact the objectivity and
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independence of the independent accountants, and recommend that the Board
of Directors take appropriate action to ensure such independence.
7. Periodically consult with the independent accountants out of the presence
of management about internal controls and the fullness and accuracy of the
Company's financial statements.
Financial Reporting Processes
- -----------------------------
8. In consultation with the independent accountants, review the integrity of
the Company's financial reporting processes, both internal and external.
9. Consider the independent accountants' judgments about the quality and
appropriateness of the Company's application of generally accepted
accounting principles to its financial reporting.
10. Consider and approve, if appropriate, major changes to the Company's
accounting principles and practice as suggested by the independent
accountants or management.
Process Improvement
- -------------------
11. Establish regular and separate systems of reporting to the Audit Committee
by each of management and the independent accountants regarding any
significant judgments made in management's preparation of the financial
statements and the view of each as to appropriateness of such judgments.
12. Following completion of the annual audit, review separately with each of
management and the independent accountants any significant issues
encountered during the course of the audit, including any restrictions on
the scope of work or access to required information.
13. Review any significant disagreement among management and the independent
accountants in connection with the preparation of the financial
statements.
14. Review with the independent accountants and management (i) the annual
management letter issued by the independent accountants and to determine
what, if any, actions are deemed necessary to address the issues raised by
the independent accountants in such management letter, and (ii) the extent
to which changes or improvements in financial or accounting practices, as
previously approved by the Audit Committee, have been implemented. (This
review should be conducted at an appropriate time subsequent to
implementation of changes or improvements, as decided by the Committee.)
General
- -------
15. Perform any other activities consistent with this Charter, the Company's
Bylaws and governing law, as the Committee or the Board deems necessary or
appropriate.
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SILVER DINER, INC.
FOR USE AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 15, 2001.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF SILVER
DINER, INC. (THE "COMPANY"). The undersigned holder of shares of Common Stock of
the Company (the "Shares") hereby appoints Robert T. Giaimo, Chairman of the
Board, President, Chief Executive Officer and Treasurer, or failing him, Ype Von
Hengst, Director, Vice President, Executive Chef and Secretary, as proxy for the
undersigned to attend, vote, and act for and on behalf of the undersigned at the
annual meeting of stockholders of the Company to be held on Friday, June 15,
2001 at 10:00 a.m. (Eastern time), at the Homewood Suites Hotel, 8130 Porter
Road, Falls Church, Virginia 22042, and at any adjournments thereof (the
"Meeting"), and hereby revokes any proxy previously given by the undersigned. If
this proxy is not dated, it shall be deemed to be dated on the date on which
this proxy was mailed by the Company.
Without limiting the general powers hereby conferred, with respect to the
following Company proposals, the Shares represented by this proxy are to be:
1. [_] VOTED FOR the election as directors of all nominees listed below
(except as marked to the contrary below), or
[_] WITHHELD FROM VOTING for all nominees listed below.
INSTRUCTIONS: To withhold authority to vote for any individual nominee, strike a
line through the nominee's name in the list below.
- --------------------------------------------------------------------------------
Robert T. Giaimo Catherine Britton Michael Collier Ype Von Hengst
Edward H. Kaplan Louis P. Neeb Charles M. Steiner
2. Voted, in the discretion of Robert T. Giaimo or Ype Von Hengst, on any
other matters that may properly come before the meeting or any adjournment
thereof.
(CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE.)
(CONTINUED FROM PREVIOUS SIDE)
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 each of the proposals set forth above.
Please sign exactly as name appears below. When Shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Dated_______________, 2001
_______________________________________
Signature
_______________________________________
Signature, if Held Jointly
Please Mark, Sign, Date and Return the Proxy Card Promptly Using the Enclosed
Envelope.