Lyle B. Stewart, P.C.
3751 South Quebec Street
Denver, Colorado 80237
Telephone: 303-267-0920
Fax: 303-267-0922
April 29, 1998
United States Securities and Exchange Commission
Division of Corporate Finance
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549-1004
Re: The Quizno's Corporation
Commission File No. 000-23174
Preliminary Proxy Material
Dear Sir or Madam:
On behalf of my client, The Quizno's Corporation (the
"Corporation"), and pursuant to Rule 101(a)(1)(iii) under Regulation S-T
promulgated by the U.S. Securities and Exchange Commission, we are filing
herewith the definitive copy of the Proxy Statement and form of Proxy Card
relating to the upcoming annual meeting of the Corporation, scheduled for June
25, 1998. The form of Proxy Card is attached at the end of the enclosed Proxy
Statement. The Company will mail its definitive Proxy Statement to its
shareholders, accompanied by a copy of its Annual Report to Shareholders as
required by Rule 14a-3(b) on or about May 15, 1998.
If you have any questions with respect to this filing or if comments
are to be made regarding the enclosed material, please contact the undersigned
at the telephone number above.
Very truly yours,
/s/ Lyle B. Stewart
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
[AMENDMENT NO. ______]
Filed by Registrant x
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
x Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
The Quizno's Corporation
--------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
The Quizno's Corporation
--------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT)
Payment of Filing Fee (Check the appropriate box):
x No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. Set forth amount on which filing fee is
calculated and state how it was determined.
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
THE QUIZNO'S CORPORATION
1099 EIGHTEENTH STREET, SUITE 2850
DENVER, COLORADO 80202
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 25, 1998
To the Stockholders of
The Quizno's Corporation:
The 1998 Annual Meeting of Stockholders (the "Annual Meeting") of
The Quizno's Corporation, a Colorado corporation (the "Company"), will be held
on Thursday, June 25, 1998, at 10:00 a.m. (Denver time), in the Brahms Room,
of the Executive Tower Inn, 1405 Curtis Street, Denver, Colorado 80202, for
the following purposes:
1) to elect six directors of the Company to serve until the next
annual meeting of stockholders or until their successors are duly elected and
qualified;
2) to ratify the selection by the Board of Directors of Ehrhardt
Keefe Steiner & Hottman, P.C. as independent auditors of the Company for the
1998 fiscal year; and
3) to transact such other business as may properly come before
the Annual Meeting, or any adjournment(s) or postponement(s) thereof.
The Board of Directors has fixed the close of business on Friday,
April 24, 1998, as the record date for determining the stockholders entitled
to notice of, and to vote at, the Annual Meeting. A complete list of
stockholders entitled to vote at the Annual Meeting will be available, upon
written demand, for inspection during normal business hours by any stockholder
of the Company prior to the Annual Meeting, for a proper purpose, at the
Company's offices located at the address set forth above. Only stockholders
of record at that time are entitled to notice of, and to vote at, the Annual
Meeting and any and all adjournments or postponements thereof.
A copy of the Company's Annual Report for the fiscal year ended
December 31, 1997, a Proxy Statement and a proxy card accompany this notice.
These materials will be sent to stockholders on or about May 15, 1998.
Stockholders are cordially invited to attend the Annual Meeting in
person. However, to assure your representation at the Annual Meeting, please
complete and sign the enclosed proxy card and return it promptly. If you
choose, you may still vote in person at the Annual Meeting even though you
previously submitted a proxy card.
By Order of the Board of Directors,
/s/ RICHARD F. SCHADEN
Secretary
Denver, Colorado
April 30, 1998
THE QUIZNO'S CORPORATION
1099 EIGHTEENTH STREET, SUITE 2850
DENVER, COLORADO 80202
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 25, 1998
This Proxy Statement and the accompanying proxy card are being
furnished to the stockholders of The Quizno's Corporation (the "Company"), in
connection with the solicitation of proxies by and on behalf of the Board of
Directors of the Company (the "Board") for use at its 1998 Annual Meeting of
Stockholders to be held on Thursday, June 25, 1998, at 10:00 a.m. (Denver
time), in the Brahms Room of the Executive Tower Inn, 1405 Curtis Street,
Denver, Colorado 80202, and at any adjournment(s) or postponement(s) thereof
(the "Annual Meeting"). This Proxy Statement, the accompanying proxy card and
the Company's Annual Report for the fiscal year ended December 31, 1997 (the
"Annual Report"), will be mailed to stockholders on or about May 15, 1998.
The Annual Report is not to be considered a part of the Company's proxy
solicitation materials.
PURPOSE OF ANNUAL MEETING
At the Annual Meeting, stockholders will be asked to (i) elect six
directors of the Company to serve until the next annual meeting of
stockholders or until their successors are duly elected and qualified; (ii)
ratify the selection by the Board of Ehrhardt Keefe Steiner & Hottman, P.C. as
the Company's auditors for the year ending December 31, 1998 ("Fiscal 1998");
and (iii) transact such other business as may properly come before the Annual
Meeting. For election of directors, those candidates receiving the most votes
shall be elected, if a quorum exists. Action on other matters will be
approved by the shareholders if the number of votes cast for the action
exceeds the number of votes cast against the action, and a quorum exists. The
Board recommends a vote "FOR" (a) the election of the six nominees for
director of the Company listed below, and (b) the ratification of Ehrhardt
Keefe Steiner & Hottman, P.C. as the Company's auditors for Fiscal 1998.
QUORUM AND VOTING RIGHTS
The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock is necessary to constitute a quorum at
the Annual Meeting. Only stockholders of record at the close of business on
Friday, April 24, 1998 (the "Record Date"), will be entitled to notice of, and
to vote at, the Annual Meeting. As of the Record Date, there were 2,989,682
shares of Common Stock outstanding and entitled to vote. Holders of Common
Stock as of the Record Date are entitled to one vote for each share held.
All shares of Common Stock represented by properly executed proxies
will, unless such proxies have previously been revoked, be voted in accordance
with the instructions indicated in such proxies. If no such instructions are
indicated, such shares will be voted in favor of (i.e., "FOR") (i) the
election of the nominees for director of the Company listed below, and (ii)
the ratification of Ehrhardt Keefe Steiner & Hottman, P.C. as the Company's
auditors for Fiscal 1998. Abstentions and broker non-votes will not be
counted as votes cast and will have no effect on the result of a vote on
matters identified in clauses (i) and (ii) above, although both will count
towards the presence of a quorum. Any stockholder executing a proxy has the
power to revoke such proxy at any time prior to its exercise. A proxy may be
revoked prior to exercise by (a) filing with the Company a written revocation
of the proxy, (b) appearing at the Annual Meeting and casting a vote contrary
to that indicated on the proxy or (c) submitting a duly executed proxy bearing
a later date.
The cost of preparing, printing, assembling and mailing this Proxy
Statement and other material furnished to stockholders in connection with the
solicitation of proxies will be borne by the Company. In addition to the
solicitation of proxies by use of the mails, officers, directors and regular
employees of the Company may solicit proxies by written communication, by
telephone, telegraph or personal call. Such persons are to receive no special
compensation for any solicitation activities. The Company will reimburse
banks, brokers and other persons holding Common Stock in their names, or
those of their nominees, for their expenses in forwarding proxy solicitation
materials to beneficial owners of Common Stock.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding
beneficial ownership of the Company's equity securities (common stock and
three classes of preferred stock) as of April 24, 1998, (a) by each person
known to the Company to own beneficially more than 5% of the such securities,
(b) each of the Company's directors and (c) by all officers and directors of
the Company named herein as a group.
Name and Address Common Stock Percent Preferred
of Owner Owned (1) Ownership Stock Owned
----------------- --------------- --------- -------------------------
Class A Class B Class C
------- ------- -------
Richard E. Schaden(2) 854,166 27.9% 73,000 N.A. N.A.
1099 Eighteenth St.,
Suite 2850
Denver, CO 80202
Richard F. Schaden(2) 883,667 28.5% 73,000 N.A. 34,000
11870 Airport Way
Broomfield, CO 80021
Retail & Restaurant
Growth 415,056 12.2% N.A. 100,000 N.A.
Capital, L.P.(3)
10000 N. Central Expressway
Suite 1060
Dallas, TX 75231
Brownell M. Bailey 38,000(4) 1.3% N.A. N.A. 20,000
10 Parkway Drive
Englewood, CO 80110
Mark L. Bromberg 6,000(4) 0.2% N.A. N.A. N.A.
1801 Kings Isle Drive
Plano, TX 75093
J. Eric Lawrence 8,000(4) 0.3% N.A. N.A. N.A.
10000 N. Central Expressway
Suite 1060
Dallas, TX 75231
Frederick H. Schaden 20,000(4) 0.7% N.A. N.A. 2,000
123 North Wacker Drive
24th Floor
Chicago, IL 60606
All Named Officers
and Directors 1,850,964 56.4% 146,000 0 56,000
as a Group (10 persons)
________________________
Continued below.
Preferred Stock
Name and Address of Owner Percentage Ownership
- - ------------------------- ------------------------
Class A Class B Class C
------- ------- -------
Richard E. Schaden (2) 50% N.A. N.A.
Richard F. Schaden (2) 50% N.A. 20.4%
Retail & Restaurant Growth N.A. 100% N.A.
Brownell M. Bailey N.A. N.A. 12.0%
Mark L. Bromberg N.A. N.A. N.A.
J. Eric Lawrence N.A. N.A. N.A.
Frederick H. Schaden N.A. N.A. 1.1%
All Named Officers and Directors
as a Group (10 persons) 100% 0 33.5%
(1) The persons named in the table have sole voting power with respect to
all shares of Common Stock shown as beneficially owned by them.
A person is deemed to be the beneficial owner of securities that can be
acquired by such person within sixty (60) days from the Record
Date upon the exercise of options or warrants or conversion of
convertible securities. The record ownership of each beneficial owner
is determined by assuming that options or warrants or convertible
securities that are held by such person and that are exercisable or
convertible within sixty (60) days from the Record Date have
been exercised or converted. The total outstanding shares used to
calculate each beneficial owner's percentage includes such option
shares. Quizno's Class A and Class C Preferred Stock are currently
convertible into Quizno's Common Stock.
(2) Richard E. Schaden and Richard F. Schaden hold all of their Common
Stock and Preferred Stock of the Company in a voting trust pursuant to
which they are joint voting trustees (excluding 499 shares allocated to
Richard E. Schaden under the Company's 401(K) Plan, 2,913 shares
owned by Richard E. Schaden as a result of exercising Company stock
options and 34,000 shares of Class C Preferred Stock owned by Richard F.
Schaden). However, each of them, individually, has been given a proxy
by the voting trust to vote 50% of the shares owned by the voting trust.
The remaining duration of the voting trust agreement is 6 years,
subject to extension.
(3) Retail & Restaurant Growth Capital, L.P. ("RRGC") loaned the Company
$2,000,000 on December 31, 1996, a portion of which is convertible
into 372,847 shares of Common Stock at a conversion price of $3.10,
subject to adjustment in certain circumstances. In October, 1997, RRGC
agreed to convert $500,000 of such loan principal to 100,000
shares of Quizno's Class B Preferred Stock of the Company. In
connection with such conversion, RRGC was issued a Warrant to purchase up
to 42,209 shares of the Company's Common Stock
at $5.00 per share. The voting trust referred to in footnote (2)
above has pledged 67.5% of the shares of Common Stock and Preferred Stock
owned by it to Retail & Restaurant Growth Capital, L.P., subject to
the Schadens continuing to exercise voting control so long as there
is no default under the loan documents. So long as there is no default,
the number of shares pledged will ratably decrease over the next
three years. See "Certain Transactions."
(4) Messrs. Frederick Schaden, Lawrence, Bromberg and Bailey, each own
options to purchase shares of the Company's Common Stock, which are
currently exercisable, and Messrs. Frederick Schaden and Bailey
each own Class C Preferred Stock of the Company.
ELECTION OF DIRECTORS
NOMINEES
The Board currently consists of six (6) members: Richard E.
Schaden, Richard F. Schaden, Frederick H. Schaden, Brownell M. Bailey, Mark L.
Bromberg and J. Eric Lawrence. Mr. Richard E. Schaden and Mr. Richard F.
Schaden have been on the Company's Board of Directors since 1991. Messrs.
Bailey and Frederick Schaden were elected to the Board in December 1993, just
before the Company's initial public offering. Messrs. Lawrence and Bromberg
were elected to the Board in 1997. Richard E. Schaden is the son of Richard
F. Schaden. Frederick H. Schaden is the brother of Richard F. Schaden. The
Board proposes that the six current directors, listed below as nominees, be
re-elected as directors of the Company to hold office until the next annual
meeting of stockholders or until their successors are duly elected and
qualified. Each nominee has consented to serve if elected to the Board. In
the event that any nominee is unable to serve as a director at the time of the
Annual Meeting (which is not expected), proxies with respect to which no
contrary direction is made will be voted "FOR" such substitute nominee as
shall be designated by the Board to fill the vacancy.
The names of the nominees, their ages at the Record Date and certain
other information about them are set forth below:
Nominee Age Position(s) with Company Director Since
------- --- -------------------------- --------------
Richard E.
Schaden 34 President, Chief Executive
Officer and Director 1991
Richard F.
Schaden 60 Vice President, Secretary
and Director 1991
Frederick H.
Schaden 51 Director 1993
J. Eric
Lawrence 30 Director 1997
Brownell E.
Bailey 44 Director 1993
Mark L.
Bromberg 47 Director 1997
Mr. Richard E. Schaden has been President and a Director of the
Company since its inception on January 7, 1991. Mr. Schaden had been a
principal and the chief operating officer of Schaden & Schaden, Inc., a
company that owned and operated Quizno's franchised restaurants from 1987 to
1994 when it was sold to the Company. Mr. Schaden graduated Magna Cum Laude
from the University of Colorado with a degree in Business Management and
Finance. See "Certain Transactions."
Mr. Richard F. Schaden has been a Vice President, Secretary and a
Director of the Company since its inception on January 7, 1991. Mr. Schaden
had been a principal of Schaden & Schaden, Inc., a company that owned and
operated Quizno's franchised restaurants from 1987 to 1994 when it was sold to
the Company. Mr. Schaden is the founding partner of the law firm of Schaden,
Katzman & Lampert with offices in Bloomfield Hills, Michigan and Broomfield,
Colorado. Mr. Schaden graduated from the University of Detroit with a
Bachelor of Science in Aeronautical Engineering, received his Juris Doctorate
from the University of Detroit Law School and is an internationally known,
well-published attorney, specializing in aviation law. Prior to entering the
legal profession, Mr. Schaden was an aeronautical engineer for Boeing Aircraft
and Continental Aviation and Engineering. Mr. Schaden has been on the board
of numerous private companies. See "Certain Transactions."
Mr. Brownell M. Bailey is a self-employed real-estate development
consultant, land planner and design engineer. He has been self-employed for
over five years. Prior employment included the management of field operations
and contract services for the acquisition, development and construction of
resort properties, including residential, mixed use, and commercial projects.
Mr. Bailey has a B.A. degree from Union College and a B.S. degree in Urban
Planning and Engineering from Worcester Polytechnic Institute.
Mr. Frederick H. Schaden is an Executive Vice President of the
Automotive Consulting Group of Aon Consulting, Inc. Aon Consulting, Inc. is a
subsidiary of Aon Corporation, a publicly held company with annual revenues of
nearly $6 billion. He has been employed by Aon for over 25 years and has
served as a senior officer of its affiliates since 1981. Mr. Schaden earned a
B.S. in Business Administration from Xavier University in Cincinnati, Ohio.
See "Certain Transactions."
Mr. J. Eric Lawrence has been the General Partner of Retail &
Restaurant Growth Capital, L.P. ("RRGC"), a $60 million investment fund
focused on providing growth and expansion capital to small businesses in the
retail and restaurant industries, since December 1995. RRGC is a Small
Business Investment Company, federally licensed by the Small Business
Administration. RRGC loaned $2,000,000 to the Company in 1996, and Mr.
Lawrence serves on the Board pursuant to a contractual arrangement between the
Company and RRGC. Mr. Lawrence has been extensively involved in the analysis
of the financial, operational and managerial aspects of retail and restaurant
companies throughout his career. Prior to RRGC, he served as Vice President
of Strategic Retail Ventures, Inc., a boutique financial consulting and
private investment firm focusing on the needs of specialty retail and
restaurant companies from March 1993 to December 1995. Prior to SRV, Mr.
Lawrence was a Senior Consultant with Arthur Andersen, in Dallas, Texas. Mr.
Lawrence is a licensed C.P.A., and is a graduate of Southern Methodist
University with a B.B.A. in Accounting and Minor in Economics, which included
study abroad at Oxford University, Oxford, England.
Mr. Mark L. Bromberg has been a self-employed management consultant
providing strategic planning, positioning and senior management consulting
services to the hospitality industry, for over five years. Mr. Bromberg is
the former President & CEO of East Side Mario's Restaurants Inc., the Dallas
based subsidiary of Pepsico which he grew from one restaurant in 1988 to 30 in
1993 when it was sold to Pepsico. Mr. Bromberg has been the founder and
President of a number of causal dining restaurant chains, including Mr.
Greenjeans, Ginsberg & Wong and Lime Rickey's and served as President of Prime
Restaurant Group, the largest privately-held restaurant chain in Canada. He
holds a B.S. and an M.B.A. from Cornell University and remains highly involved
in foodservice education as a curriculum advisor and guest lecturer. He is a
past chairman of the Canadian Restaurant and Foodservice Association and is a
past director of the National Restaurant Association of the U.S. Mr. Bromberg
was elected to the Board of Directors pursuant to a contractual arrangement
with RRGC that required the election of an additional Board member acceptable
to RRGC.
BOARD COMMITTEES AND MEETINGS
Messrs. Frederick Schaden and Bailey are the members of the
Compensation Committee of the Board of Directors. Messrs. Richard E. Schaden,
Bromberg and Bailey are members of the Audit Committee of the Board of
Directors. There is no nominating committee of the Board of Directors.
The Board held a total of four (4) regular meetings and two (2)
special meeting during Fiscal 1997. One special meeting of directors was held
by execution of a unanimous consent.
During 1997, the Audit Committee held one (1) meeting. The Audit
Committee is primarily responsible for reviewing recommendations made by the
Company's independent auditors and evaluating the Company's
adoption/implementation of such recommendations.
During 1997, the Compensation Committee held three (4) regular
meetings. One regular meeting was held by execution of a unanimous consent.
The Compensation Committee is responsible for initiating, evaluating and
recommending to the Board matters relating to employee compensation and the
Company's employee benefit plans.
During 1997, all members of the Board attended over 75% of the
aggregate number of regular and special meetings of the Board and of their
respective committees.
DIRECTOR COMPENSATION
Directors who are not officers or employees of the Company are paid
$500 per day for each Board and Committee meeting they attend and they are
reimbursed for their reasonable expenses of attending such meetings. In
addition, such directors receive an annual grant of options to purchase 4,000
shares of Company Common Stock, which immediately vest.
During 1997, the Company paid Messrs. Bailey, Lawrence, Bromberg and
Frederick Schaden ("Outside Directors") $2,000, $1,500, $1,000 and $1,500,
respectively, as compensation for their attendance at Board and Committee
meetings. For their service during 1997, the Outside Directors each received
a grant of options to purchase 4,000 shares of Company Common Stock that
immediately vested, except Mr. Bromberg, who joined the Board in September,
1997 and received a grant of options to purchase 2,000 shares.
ADVISORY BOARD
The Board of Directors have appointed three members to an Advisory
Board of persons with substantial experience in areas of importance to the
franchise restaurant industry and public companies. The Advisory Board
members attend Board meetings and provide Directors with the benefit of their
expertise. They do not vote on matters before the Board. They are
compensated in the same manner as Directors who are not officers or employees
of the Company are compensated. The three current members of the Advisory
Board are Mr. Lewis G. Rudnick, Mr. Bruce H. Gulbas and Mr. Lyle B. Stewart.
Their backgrounds are as follows:
Lewis G. Rudnick is an internationally recognized authority on
franchising and distribution law and has practiced in this area for 32 years.
He is counsel to the International Franchise Association, was a member of the
Governing Committee of the American Bar Association Forum on Franchising from
1977-1984 and served as Forum Chairman from 1981-1983. He is an editor of the
Journal of International Franchising and Distribution Law and the Franchise
Legal Digest, has authored and edited numerous articles and books on
franchising law and is a frequent speaker on the topic of franchising and
distribution law. He has testified before Congress and other legislative
bodies on the subject of franchising.
Bruce H. Gulbas has been the President and owner of National
Restaurant Supply Co. since 1976. He is a graduate of the University of Texas
where he obtained his BBA degree in marketing. He currently serves on the
Boards of Directors of Food Service Dealers Association ("FEDA") and Allied
Buying Corporation (a national food service equipment buying group). He is
also a member of Young Presidents Organization (YPO).
Lyle B. Stewart is an experienced securities attorney who has
represented public companies for over 25 years. He has written articles for
legal periodicals and spoken on securities law matters. He was appointed by
the Governor of Colorado to the Colorado Securities Board in 1995 and served
as its Chairman from 1995 to 1998. He has represented the Company as legal
counsel since the Company's initial public offering.
EXECUTIVE OFFICERS
The following table sets forth (i) the names of the executive
officers, (ii) their ages at the Record Date and (iii) the capacities in which
they serve the Company:
Name Age Position(s) with the Company
- - ---- --- ----------------------------
Richard E. Schaden 34 President, Chief Executive Officer and
Director
John F. Fitchett 36 Executive Vice President - Franchise
Support Services
Richard F. Schaden 60 Vice President, Secretary and Director
Patrick E. Meyers 38 Vice President and General Counsel
John L. Gallivan 51 Chief Financial Officer, Treasurer
and Assistant Secretary
See "Election of Directors - Nominees" above for a description of
the backgrounds of Richard E. Schaden and Richard F. Schaden.
John F. Fitchett joined the Company as Executive Vice President in
1996. Prior to joining the Company, he served as an employee of an Area
Director for Quizno's from December 1995 to April 1996. From December 1990 to
June 1995, he was President of Colonial Pizza, Inc., a Domino's Pizza
franchisee in Williamsburg, Virginia. Prior to that he held several positions
in the Domino's Pizza, Inc. organization, from 1985 to 1990, including
Regional Director, overseeing corporate owed stores and Franchise Operations
Director, acting as a liaison with franchisees. He graduated from Elon
College in North Carolina with a BA degree.
Patrick E. Meyers joined the Company in 1997. He had been an
associate with the Denver law firm of Moye, Giles, O'Keefe, Vermeire & Gorrell
since September 1991, and was selected as a partner of that firm in 1996.
Before that he served as a judicial law clerk to a Justice of the Colorado
Supreme Court from July 1990 to September 1991. Mr. Meyers received his J.D.
degree from the University of California, Hastings College of Law and his B.A.
degree from the University of Colorado - Denver. Mr. Meyers served as a
director of the Company from 1993 to 1997, when he resigned to become a
full-time employee of the Company.
John L. Gallivan joined the Company as Chief Financial Officer in
1994. He was later elected Treasurer and Assistant Secretary. Prior to his
joining the Company, he was a director and Executive Vice President of Grease
Monkey Holding Corporation of Denver, a franchisor, owner, and operator of
over 200 ten minute oil change and fluid maintenance centers in the U.S. and
Mexico from 1979 through April 1994. He is a member of the Colorado Society
and the American Institute of CPAs. He graduated from the University of
Colorado at Boulder with a bachelors degree in accounting.
EXECUTIVE COMPENSATION
The compensation information discussed below is set forth for those
four officers of the Company who received salary and bonus compensation in
excess of $100,000 during 1997 ("Named Officers").
SUMMARY COMPENSATION TABLE. The following table provides certain
----------------------------
summary information for fiscal 1997, 1996 and 1995, concerning compensation
awarded or paid to, or earned by, the Named Officers:
Long-Term and Other
Annual Compensation Compensation
------------------------------------ ---------------------
Option 401(K) Plan
Name and Position Year Salary Bonus Other(1) Shares(2) Shares(3)
- - ----------------- ---- ------ ----- ----- -------- ----------
Richard E. Schaden, 12/31/95 $108,500 $ 52,212 $ 9,506 0 0
President and
Chief Executive
Officer 12/31/96 $108,500 $ 0 $11,039 0 211
12/31/97 $108,500 $125,731 $10,168 4,000 288
Richard F.
Schaden, 12/31/95 $ 83,500 $ 34,127 $ 0 0 0
Vice President
and 12/31/96 $ 83,500 $ 0 $ 0 0 0
Secretary 12/31/97 $ 83,500 $ 75,439 $ 0 0 0
John F. Fitchett 12/31/96 $ 55,385 $ 0 $ 0 4,000 0
Executive Vice
President 12/31/97 $ 82,176 $ 30,778 $ 0 4,000 127
Scott K. Adams 12/31/95 $ 66,168 $ 25,490 $ 0 6,899 0
Senior Vice
President for
Development 12/31/96 $ 62,936 $ 64,747 $ 0 9,773 10
12/31/97 $220,347(4) $ 0 $ 0 4,000 0
_________________
(1) The Company provides Mr. Richard E. Schaden with an automobile
allowance for both business and personal use and pays certain
insurance premiums on his behalf.
(2) The Company, as an incentive for its eligible employees to endeavor to
enhance the Company's performance and assure its future success,
grants options to purchase shares of its Common Stock to successful
employees from time to time under its Employee Stock Option Plan. All
options indicated in this table have been granted under such Plan.
(3) The Company has provided its employees with a 401(K) Employee's
Savings Plan, pursuant to which the Company contributes to each
eligible employee's account an amount equal to 50% of such
employee's annual contribution, up to 6% of such employee's total
annual compensation. The Company has issued shares of its Common
Stock for 50% of its annual contribution to each account under
its 401(K) Plan.
(4) Mr. Adam's compensation during 1997 was totally commission based.
STOCK OPTION AWARDS. The Company adopted its Employee Option Plan
---------------------
(the "Employee Plan") in 1993. The purposes of the Employee Plan are to
enable the Company to provide opportunities for certain officers and key
employees to acquire a proprietary interest in the Company, to increase
incentives for such persons to contribute to the Company's performance and
further success, and to attract and retain individuals with exceptional
business, managerial and administrative talents, who will contribute to the
progress, growth and profitability of the Company. The Company has issued
9,587 shares upon exercise of options under the Employee Plan and has 310,413
shares currently reserved for issuance under the Employee Plan.
Options granted under the Employee Plan include both incentive stock
options ("ISOs"), within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), and non-qualified stock options
("NQOs"). Under the terms of the Employee Plan, all officers and employees of
the Company are eligible for ISOs. The Company determines in its discretion,
which persons will receive ISOs, the applicable exercise price, vesting
provisions and the exercise term thereof. The terms and conditions of option
grants do differ and are set forth in the optionees individual stock option
agreement. Such options generally vest over a period of one or more years and
expire after up to ten years. In order to qualify for certain preferential
treatment under the Code, ISOs must satisfy the statutory requirements
thereof. Options that fail to satisfy those requirements will be deemed NQOs
and will not receive preferential treatment under the Code. Upon exercise,
shares will be issued upon payment of the exercise price in cash, by delivery
of shares of Company Common Stock, by delivery of options granted under the
Employee Plan or a combination of any of these methods.
Option information for 1997 relating to the Named Officers is set
forth below:
OPTION GRANTS IN 1997
---------------------
Number of Shares of Percentage of Total
Common Stock Options Granted to
Underlying Options Employees in Exercise Expiration
Name Granted in 1997 1997 Price Date
- - ------- ------------------ ------------ -------- ----------
Richard E. Schaden 4,000 4.2% $4.263 06/06/02
Richard F. Schaden 0 N.A. N.A. N.A.
John F. Fitchett 4,000 4.2% $3.875 06/06/07
Scott K. Adams 4,000 4.2% $3.875 06/06/07
OPTION EXERCISES AND YEAR-END VALUES IN 1997
--------------------------------------------
Number of Securities
Underlying Unexercised Options
at Year End
Shares Value -----------------------------
Name Exercised Realized Exercisable Unexercisable
- - ------- --------- -------- ----------- -------------
Richard E.
Schaden 2,913 $350.00 1,087 0
Richard F.
Schaden 0 N.A. N.A. N.A.
John F. Fitchett 0 N.A. 800 7,200
Scott K. Adams 2,282 $2,720.00 6,421 20,290
Continued below
Value of Unexercised
In-the-Money Options
at Year End (1)
-------------------------------
Name Exercisable Unexercisable
- - ----- ----------- -------------
Richard E. Schaden $665.00 0
Richard F. Schaden N.A. N.A.
John F. Fitchett $1,400 $11,600
Scott K. Adams $3,214.00 $22,190
______________
(1) The dollar values are calculated by determining the difference between
$4.875 per share, the fair market value of the Common Stock at
December 31, 1997, and the exercise price of the respective
options.
EMPLOYMENT CONTRACTS. Richard E. Schaden has entered into an
---------------------
Employment Agreement with the Company that terminates on December 31, 2003.
His contract provides that he will serve as President and Chief Executive
Officer of the Company. Mr. Schaden will devote his full time to the Company.
His annual base salary was increased to $150,000, effective January 1, 1998.
Such amount may be adjusted from time to time by mutual agreement between Mr.
Schaden and the Board of Directors. The contract provides an annual bonus
equal to 10% of any positive increase in earnings before interest, taxes,
depreciation and amortization for such full calendar year over the level of
such amount for the prior full calendar year. Such percentage was reduced to
7% for the 1995 bonus reported above. Mr. Schaden will receive a monthly
automobile allowance of up to $620.00 plus up to $150.00 for insurance
coverage. He will also receive a per diem travel allowance of $30.00 per day
while travelling on Company business. The contract provides that the Company
will pay one-half of Mr. Schaden's medical insurance coverage and one-half of
the cost of disability insurance. The Company will pay for $1,000,000 of term
life insurance for Mr. Schaden, payable to his designated beneficiary. The
Company may terminate the Employment Agreement for cause upon ninety days
notice. Mr. Schaden may terminate the Employment Agreement upon ninety days
notice.
Richard F. Schaden has entered into an Employment Agreement with the
Company that terminates on December 31, 1998. His contract provides that he
will serve as Vice President and Secretary of the Company. Mr. Schaden will
not devote his full time to the Company, but he will devote such time to the
Company as the Company requests. His current base salary is set at $83,500
per year under the contract, which may be adjusted from time to time by mutual
agreement between Mr. Schaden and the Board of Directors. Mr. Schaden may
take on special projects for the Company at the direction of the Board of
Directors and receive additional compensation for such projects. The contract
provides an annual bonus equal to 6% of any positive increase in earnings
before interest, taxes, depreciation and amortization for such full calendar
year over the level of such amount for the prior full calendar year. The
Company may terminate the Employment Agreement for cause upon ninety days'
notice. Mr. Schaden may terminate the Employment Agreement upon ninety days'
notice.
CERTAIN TRANSACTIONS
On December 31, 1996, Retail & Restaurant Growth Capital, L.P.
("RRGC") made a $2,000,000 loan to the Company, a portion of which continues
to be convertible into 372,847 shares of the Company's Common Stock. The loan
is repayable over five years, with interest only at 12.75% per annum due for
eighteen months and principal and interest due over the remaining 42 months.
If the loan is repaid before conversion, RRGC will receive warrants to
purchase the Company's Common Stock, which may be exercisable until December
31, 2004. On October 8, 1997, the Company and RRGC amended their loan
agreement to provide for the conversion of $500,000 of the principal amount of
the loan into 100,000 shares of the Company's Class B Preferred Stock,
reducing the outstanding principal amount of the loan to $1,500,000. The
Class B Preferred Stock is non-voting, bears a cumulative dividend of 12.75%,
is redeemable by the Company upon 30 days notice and is convertible after
October 15, 2002 at the then market value. In addition, the Company issued a
Warrant to RRGC that grants it the right to purchase up to 42,209 shares of
the Company's Common Stock at $5.00 per share. Such number of shares of
Common Stock is subject to downward adjustment if the Company meets certain
net income goals for 1998 through 2000. In no case will the warrant be
exercisable for less than 20,597 shares of the Company's Common Stock.
Effective October 1, 1994, a wholly-owned subsidiary of the Company
acquired by merger all of the assets and obligations of Schaden & Schaden,
Inc., a Colorado corporation ("SSI"), owned by Richard E. Schaden and Richard
F. Schaden. The assets of SSI included five wholly-owned Quizno's Classic
Subs restaurants located in and near Denver, a majority interest in a sixth
Quizno's Classic Subs restaurant located near Denver, and interests in two
Area Directors for the Company owning three Quizno's Classic Subs restaurants
in the Chicago area and two Quizno's Classic Subs restaurants in Michigan as
well as other assets. The consideration paid by the Company to the Schadens,
as selling shareholders, was $1,139,000, of which $263,000 was paid in cash
and $876,000 was paid in the Company's Preferred Stock. The Class A Preferred
Stock is non-voting, bears a 6.5% cumulative dividend, and became convertible
on November 1, 1997 into 146,000 shares of the Company's Class A Common Stock.
The Company may call the Class A Preferred Stock upon 60 days notice. During
1996 and 1997 each preferred shareholder received dividends of $28,470,
annually.
Through the Company's acquisition of SSI, the Company acquired three
notes payable to Richard E. Schaden and Richard F. Schaden, individually, in
the aggregate principal amount of $149,051. During 1996, the Company paid
these notes in full.
Richard F. Schaden and Frederick H. Schaden, directors of the
Company, each own an interest in one of the Company's Area Directors. The
Company also owns approximately 12% of such entity, and the Company loaned
such entity $31,959 in 1994 to purchase certain equipment. Such loan bears
interest at 12.5% per annum and will mature on October 1, 1999. In 1996, the
Company paid the Area Director $7,309 and $8,500 as commissions on the sale of
new franchises and royalties, respectively, and in 1997, $0 and $0 in such
amounts. In early 1996, such Area Director requested that the Company extend
the payment terms relating to amounts owed to the Company by the Area
Director. As a result of such request, the Company agreed to defer payment of
$63,547. The Area Director has issued to the Company a promissory note in
such amount payable over 6 years with an interest rate of 12% per annum. At
December 31, 1997, $55,167 was owed to the Company on this promissory note.
During 1996 and 1997, interest payments on such note were $3,130.56 and
$4,655.00, respectively. The Area Director has also agreed to repay to the
Company $18,186 in connection with the closure of a Restaurant in 1997 once
operated by the Area Director by off-setting commissions on royalty fees from
that location otherwise due to the Area Director. Such location has been
subleased by the Company to a new franchisee.
In 1995, the Company sold the Area Director rights for the Detroit,
Michigan area to a company wholly-owned by Richard F. Schaden. The fee to the
Company was $150,000, which is consistent with the then fees received for the
sale of Area Directorships to unaffiliated parties, and was paid in cash.
During 1996 and 1997, the Company paid the Area Director $4,618 and $0 in sale
commissions and, $22,771 and $9,259 in royalties, respectively.
Thomas Schaden, a brother of Richard F. Schaden and Frederick H.
Schaden, is in the insurance brokerage business and has acted as a broker for
the Company's insurance policies, including the directors and officers
policies that the Company has purchased.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board has appointed Ehrhardt Keefe Steiner & Hottman, P.C.,
independent certified public accountants, as auditors to examine the financial
statements of the Company for Fiscal 1998 and to perform other appropriate
accounting services and is requesting ratification of such appointment by the
stockholders. Ehrhardt Keefe Steiner & Hottman, P.C. has served as the
Company's auditors since October 1993.
A representative of Ehrhardt Keefe Steiner & Hottman, P.C. is
expected to attend the Annual Meeting and will have an opportunity to make a
statement if he desires to do so and to respond to appropriate questions.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, officers (including a person performing a policy-making
function) and persons who own more than 10% of a registered class of the
Company's equity securities ("10% Holders") to file with the Securities and
Exchange Commission ("SEC") initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the
Company. Directors, officers and 10% Holders are required by SEC regulations
to furnish the Company with copies of all of the Section 16(a) reports they
file. Based solely upon such reports, the Company believes that during 1997
its directors, advisors, officers and 10% Holders complied with all filing
requirements under Section 16(a) of the Exchange Act, except for Mr. Richard
Crete, Vice President, Mr. Lyle B. Stewart and Mr. J. Eric Lawrence, who
inadvertently failed to file their respective Forms 3 in a timely manner, and
Messrs. Richard E. Schaden, Frederick Schaden, John L. Gallivan and Scott K.
Adams, who inadvertently failed to file a Form 4 in a timely manner. In
addition, it was determined that Mr. Adams, Mr. Crete, Ms. Susan Hoover and
Mr. George Boedecker, Jr., both Vice Presidents had inadvertently failed to
include certain holdings in their Forms 3, all of which were remedied in their
respective Forms 5 for 1997.
STOCKHOLDER PROPOSALS
Stockholders may submit proposals on matters appropriate for
stockholder action at the Company's annual meetings consistent with
regulations adopted by the SEC. For such proposals to be considered for
inclusion in the proxy statement and form of proxy relating to the 1999 annual
meeting, they must be received by the Company not later than December 31,
1998. Such proposals should be addressed to the Company at 1099 18th Street,
Suite 2850, Denver, CO 80202, Attn: Patrick E. Meyers, Vice President and
General Counsel.
OTHER MATTERS
Management does not intend to present, and has no information as of
the date of preparation of this Proxy Statement that others will present, any
business at the Annual Meeting other than business pertaining to matters set
forth in the Notice of Annual Meeting and Proxy Statement. However, if other
matters requiring the vote of the stockholders properly come before the Annual
Meeting, it is the intention of the persons named in the enclosed proxy to
vote the proxies held by them in accordance with their best judgment on such
matters.
THE QUIZNO'S CORPORATION
1099 EIGHTEENTH STREET, SUITE 2850
DENVER, COLORADO 80202
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 25, 1998
The undersigned hereby appoints each of Richard E. Schaden and Patrick E.
Meyers, individually, as proxy and attorney-in-fact for the undersigned with
full power of substitution to vote on behalf of the undersigned at the
Company's 1998 Annual Meeting of Stockholders to be held on June 25, 1998, and
at any adjournment(s) or postponement(s) thereof, all shares of the Common
Stock $.001 par value, of the Company standing in the name of the undersigned
or which the undersigned may be entitled to vote as follows:
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" ITEMS 1, 2 AND 3. In their discretion, the proxies are
authorized to vote upon such other business as may properly come before the
Annual Meeting or any adjournments or postponements thereof, hereby revoking
any proxy or proxies heretofore given by the undersigned.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
1. ELECTION OF DIRECTORS FOR all nominees WITHHOLD AUTHORITY
(except as indicated below) to vote
for all nominees
Nominees: Richard E. Schaden, Richard F. Schaden, Frederick H. Schaden,
J. Eric Lawrence, Mark L. Bromberg and Brownell M. Bailey.
To withhold authority to vote for any individual nominee, write that
individual's name in the space below:
2. Ratify the selection by the Board of Directors of Ehrhardt Keefe
Steiner & Hottman as independent auditors of the Company for the 1997
fiscal year.
FOR AGAINST ABSTAIN
Please sign exactly as name appears at left:
Dated:
Signature
Signature (if held jointly)
When shares are held by joint tenants,
both should sign. When signing as attorney,
executor, administrator, trustee
or guardian, please give full title as such.
If a corporation, please sign in
the corporate name by president or other
authorized officer. If a
partnership, please sign in partnership
name by authorized person.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
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