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 Section 240.14a-11(c) or Section
240.14a-12
LUBY'S CAFETERIAS, INC.
_____________________________________________________________________________
(Name of Registrant as Specified in Its Charter)
_____________________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
_______________________________________________________________
2) Aggregate number of securities to which transaction applies:
_______________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
_______________________________________________________________
4) Proposed maximum aggregate value of transaction:
_______________________________________________________________
5) Total fee paid:
_______________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: ________________________________________
2) Form, Schedule or Registration Statement No.:
________________________________________________________________
3) Filing Party:
________________________________________________________________
4) Date Filed:
________________________________________________________________
December 1, 19971998
Dear Shareholders:
You are cordially invited to attend the 19981999 Annual Meeting of Shareholders of
Luby's Cafeterias, Inc. to be held on Friday, January 9, 1998,8, 1999, at 10:00 a.m., at
the Omni San Antonio Hotel, 9821 Colonnade Blvd.,Airport Hilton, 611 Northwest Loop 410, San Antonio, Texas. We
hope that you will be able to attend the meeting. Matters on which action will
be taken at the meeting are explained in detail in the notice and proxy
statement following this letter.
We hope as many of you as possible will attend the meeting in person. Whether
or not you expect to be present and regardless of the number of shares you own,
please mark, sign, and mail the enclosed proxy in the envelope provided.
Sincerely,
BARRY J.C. PARKER
__________________________
Barry J.C. Parker
President and
Chief Executive Officer
DAVID B. DAVISS
__________________________
David B. Daviss
Chairman of the Board
LUBY'S CAFETERIAS, INC.
2211 Northeast Loop 410
P. O. Box 33069
San Antonio, Texas 78265-3069
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 9, 19988, 1999
To the Shareholders of
LUBY'S CAFETERIAS, INC.
NOTICE IS HEREBY GIVEN that the 19981999 Annual Meeting of Shareholders of
Luby's Cafeterias, Inc., a Delaware corporation, will be held at the Omni
San Antonio
Hotel, 9821 Colonnade Blvd.,Airport Hilton, 611 Northwest Loop 410, San Antonio, Texas, on Friday,
January 9, 1998,8, 1999, at 10:00 a.m., local time, for the following purposes:
(1) To elect three directorsone director to serve until the 2001 Annual Meeting of
Shareholders and four directors to serve until the 2002 Annual Meeting
of Shareholders;
(2) To adopt an amendment to the Certificate of Incorporation to change
the corporate name to "Luby's, Inc.;"
(3) To approve the Luby's Incentive Stock Plan;
(4) To approve the appointment of auditors for the 19981999 fiscal year; and
(3)(5) To transact such other business as may properly come before the
meeting or any adjournment thereof.
In accordance with the Bylaws of the Company and a resolution of the Board
of Directors, the record date for the meeting has been fixed at November 12, 1997.10,
1998. Only shareholders of record at the close of business on that date will be
entitled to vote at the meeting or any adjournment thereof.
A complete list of shareholders entitled to vote at the meeting will be on
file at the Company's corporate office at 2211 Northeast Loop 410, San Antonio,
Texas, for a period of ten days prior to the meeting. During such time, the
list will be open to the examination of any shareholder during ordinary business
hours for any purpose germane to the meeting.
Shareholders who do not expect to attend the meeting in person are urged to
sign the enclosed proxy and return it promptly. A return envelope is enclosed
for that purpose.
LUBY'S CAFETERIAS, INC.
James R. Hale
Secretary
Dated: December 1, 19971998
LUBY'S CAFETERIAS, INC.
2211 Northeast Loop 410
P. O. Box 33069
San Antonio, Texas 78265-3069
PROXY STATEMENT
_______________
The accompanying proxy is solicited by the Board of Directors of Luby's
Cafeterias, Inc., a Delaware corporation (the "Company"), to be voted at the
19981999 Annual Meeting of Shareholders on January 9, 1998,8, 1999, or at any adjournment
thereof. This proxy statement and the accompanying proxy are being mailed to
shareholders on or about December 1, 1997.1998.
THE COMPANY
The Company was restructured into a holding company on February 1, 1997, at
which time all of the operating assets were transferred to Luby's Restaurants
Limited Partnership, a Texas limited partnership composed of two wholly owned
indirect corporate subsidiaries of the Company. All cafeteria operations are
conducted by the partnership. Unless the context indicates otherwise, the word
"Company" as used herein includes the partnership and the consolidated corporate
subsidiaries of Luby's Cafeterias, Inc.
VOTING AND PROXIES
Only holders of record of common stock of the Company as of the close of
business on November 12, 1997,10, 1998, will be entitled to vote at the meeting. There
were 23,270,67522,964,475 shares of common stock outstanding on the record date, exclusive
of 4,132,3924,438,592 treasury shares. Each share of common stock outstanding is
entitled to one vote. A majority of the shares outstanding will constitute a
quorum at the meeting.
All shares represented by proxies will be voted in accordance with the
shareholders' directions. If the proxy card is signed and returned without any
direction given, shares will be voted in accordance with the recommendations of
the Board of Directors as described in this proxy statement. Any shareholder
giving a proxy may revoke it at any time before the proxy is voted by giving
written notice of revocation to the Secretary of the Company, by submitting a
later-dated proxy, or by attending the meeting and voting in person.
The election of nominees for director requires a plurality of the votes
cast. Approval of the amendment to the certificate of incorporation to change
the corporate name requires the affirmative vote of a majority of the
outstanding shares entitled to vote at the meeting. Approval of the Luby's
Incentive Stock Plan requires the affirmative vote of a majority of the shares
present at the meeting in person and by proxy. Approval of the appointment of
auditors requires the affirmative vote of a majority of the shares present at
the meeting in person and by proxy. Abstentions and broker nonvotes will be
included in determining the presence of a quorum at the meeting. Broker
nonvotes and abstentions will not be included in determining the number of votes
cast on any matter.
The Company's Bylaws provide that candidates to stand for election as
directors at an annual meeting of shareholders shall be nominated by the Board
of Directors. Candidates may also be nominated by any shareholder of record
entitled to vote at the meeting, provided the shareholder gives timely notice
thereof. To be timely, such notice shall be delivered in writing to the
Secretary of the Company at the principal executive offices of the Company not
later than 90 days prior to the date of the meeting of shareholders at which
directors are to be elected and shall include (i) the name and address of the
shareholder who intends to make the nomination, (ii) the name, age, and business
address of each nominee, and (iii) such other information with respect to each
nominee as would be required to be disclosed in a proxy solicitation relating to
an election of directors pursuant to Regulation 14A under the Securities
Exchange Act of 1934.
SENIOR MANAGEMENT CHANGES
Ralph Erben served as Chief Executive Officer of the Company from 1988 to
1997. John E. Curtis, Jr. served as President, Chief Operating Officer, and
Chief Financial Officer of the Company from 1996 to 1997. In January 1997
Mr. Curtis was elected President and Chief Executive Officer.
Following the death of Mr. Curtis on March 13, 1997, the Board of
Directors met on March 17, 1997, at which time Mr. Erben resigned as Chairman
of the Board, and John B. Lahourcade was elected as Chairman of the Board
and Acting Chief Executive Officer. On May 9, 1997, Mr. Lahourcade resigned
as Acting Chief Executive Officer, and David B. Daviss was elected as Acting Chief Executive
Officer. EffectiveOn October 1, 1997, several changes occurred. Mr. Lahourcadehe resigned as Acting Chief Executive Officer and
was elected Chairman of the Board and was succeeded by Mr. Daviss in that
position.Board. On October 1, 1997, Barry J.C. Parker was
elected President and Chief Executive Officer, and Mr. DavissOfficer. On April 30, 1998, William E.
Robson resigned as Acting Chief Executive Officer.
Mr. Parker was elected as a director for a term expiring in the year 2000.Vice President-Operations.
ELECTION OF DIRECTORS
The Bylaws of the Company provide for a Board of Directors divided into
three classes, as nearly equal in number as possible, with the members of each
class to serve three-year terms. In accordance with the Bylaws, the Board has
fixed the number of directors at nine.eleven. The directors whose terms expire at
the 19981999 Annual Meeting of Shareholders who haveare Ronald K. Calgaard, Judith B.
Craven, David B. Daviss, Arthur R. Emerson, and Roger R. Hemminghaus.
Dr. Calgaard has been nominated by
the Board of Directors for reelection to serve until the 2001 Annual
Meeting of Shareholders and until his successor is duly elected and qualified.
Dr. Craven, Mr. Daviss, Mr. Emerson, and Mr. Hemminghaus have been nominated
for reelection to serve until the 2002 Annual Meeting of Shareholders and
until their successors are duly elected and qualified are
Lauro F. Cavazos, John B. Lahourcade, and George H. Wenglein.qualified. The Board of
Directors recommends a vote FOR such nominees.
The proxies named in the accompanying proxy, who have been designated by
the Board of Directors, intend to vote for the above mentioned nominees for
election as directors, unless otherwise specified. Such nominees have indicated
a willingness to serve as directors, but should any of them decline or be unable
to serve, the persons named as proxies may vote for another person in the place
of such nominee according to their best judgment in the interest of the Company.
The following information is furnished with respect to each of the nominees
and for each of the other six directors whose terms will continue after the
meeting. Such information includes all positions with the Company and principal
occupations during the last five years.
NomineesNominee for Election to TermsTerm Expiring in 2001
LAURO F. CAVAZOSRONALD K. CALGAARD is ProfessorPresident of Family Medicine and Community Health,
TuftsTrinity University School of Medicine (since 1996), Acting Chair,
Department of Family Medicine and Community Health, Tufts
University School of Medicine (since 1997), and education and
management consultant (since 1991). He was Acting Chair, Community
Health, Tufts University School of Medicine (1994-1997) and
Adjunct Professor, Community Health, Tufts University School of
Medicine (1992-1994)1979). He is
7061 and has been a director of the Company since 1993 andJuly 1998. He is Chairman of the Audit Committee and a
member of the Corporate GovernanceCompensation Committee. He is a director of New England Education Loan Marketing Corporation.
JOHN B. LAHOURCADEPlymouth
Commercial Mortgage Company and Valero Energy Corporation and is an investor. He served as
Chairman of the BoardThe Trust Company, N.A.
Nominees for Election to Terms Expiring in 2002
JUDITH B. CRAVEN is a Physician Administrator. She was President of
United Way of the Company from 1988 to 1996 and from March to October 1997. He
served as Acting Chief Executive Officer from March to May 1997. HeTexas Gulf Coast (1992-1998). She is a member of the Executive Committee. He has been employed by the
Company as a consultant since January 1996. He is 7353 and has
been a director of the Company since 1970.
GEORGE H. WENGLEIN is an investor and one of the founders of the Company.
HeJuly 1998. She is a member of
the Compensation Committee. He has been employed
by the Company as a consultant since 1988. HeShe is 80 and has been a director of A.H. Belo
Corporation, Sysco Corporation, and the Company since 1959.
Incumbent Directors Whose Terms Expire in 1999Houston Branch of the Federal
Reserve Bank of Dallas.
DAVID B. DAVISS is Chairman of the Board of the Company (since October
1997). He was Acting Chief Executive Officer from May to October
1997. He is an advisory director of Austin Trust Company. He is 6162 and has been a director of the Company since 1984. He
is Chairman of the Executive Committee and a member of the Corporate
Governance Committee. He served as Chairman of the Audit Committee
prior to May 1997. He is an advisory director of Austin Trust
Company.
ARTHUR R. EMERSON is Vice President and General Manager of the Texas
Stations of the Telemundo television network. He is 54 and has been a
director of the Company since July 1998. He is a member of the Audit
Committee. He is a director of the San Antonio Branch of the Federal
Reserve Bank of Dallas and USAA Federal Savings Bank and is a trustee
of City Public Service (San Antonio).
ROGER R. HEMMINGHAUS is Chairman of the Board, Chief Executive Officer, and
a director of Ultramar Diamond Shamrock Corporation, where he also
served as President until December 1996. He is also62 and has been a
director of the Company since 1989. He is Chairman of the
Compensation Committee and a member of the Executive Committee and the
Corporate Governance Committee. He is Chairman of the Federal Reserve
Bank, Eleventh District, and a director of New Century Energies, Inc. He is 61 and has been a director of the
Company since 1989 and is a member of the Executive Committee, the
Compensation Committee, the Audit Committee, and the Corporate
Governance Committee.
WILLIAM E. ROBSON is Executive Vice President-Operations of the Company.
He was Senior Vice President-Operations from 1992 to 1995 and was
Senior Vice President-Operations Development from 1988 to 1992. He
is 56 and has been a director of the Company since 1993 and an
officer since 1982.
Incumbent Directors Whose Terms Expire in 2000
BARRY J.C. PARKER is President and Chief Executive Officer of the Company
(since October 1997). From 1989 to 1996 he was Chairman of the Board,
President, and Chief Executive Officer of County Seat Stores, Inc., a
casual apparel chain. He was a principal of Hoak Capital Corporation
from January to October 1997. He is a trustee of
Prentiss Properties Trust. He is 5051 and has been a director and
officer of the Company and a member of the Executive Committee since
October 1997. He is a trustee of Prentiss Properties Trust.
WALTER J. SALMON is Emeritus Professor, Harvard Graduate School of Business
Administration (since 1996). Prior thereto he was Stanley Roth, Sr.
Professor of Retailing, Harvard Graduate School of Business
Administration. He is 6768 and has been a director of the Company
since 1979.Since1979. He is Chairmana member of the Compensation Committee, the Audit
Committee, and
a member of the Corporate Governance Committee. He is a director
of Circuit City Stores, Inc.,; Cole National Corporation,Corporation; The Neiman
Marcus Group,Group; Hannaford Bros. Co.,; Harrah's Entertainment, Inc.,;
Petsmart, Inc.,; The Quaker Oats Company,Company; and Tufts Associated Health
Plans, Inc.
JOANNE WINIK is President, General Manager, and a director of KLRN-TV, San
Antonio's Pubic Broadcasting Service affiliate. She is also a
director of Southern Educational Communications Association. She is
5758 and has
been a director of the Company since 1993. She is Chairman of the
Corporate Governance Committee and was formerly a member of the Audit
Committee. She is a director of Southern Educational Communications
Association.
Other Incumbent Directors Whose Terms Expire in 2001
LAURO F. CAVAZOS is Professor of Family Medicine and Community Health,
Tufts University School of Medicine (since 1996); Acting Chair,
Department of Family Medicine and Community Health, Tufts University
School of Medicine (since 1997); and education and management
consultant (since 1991). He was Acting Chair, Community Health, Tufts
University School of Medicine (1994-1997) and Adjunct Professor,
Community Health, Tufts University School of Medicine (1992-1994). He
is 71 and has been a director of the Company since 1993. He is
Chairman of the Audit Committee and a member of the Corporate
Governance Committee. He is a director of the Nellie Mae Foundation.
JOHN B. LAHOURCADE is an investor. He served as Chairman of the Board of
the Company from 1988 to 1996 and from March to October 1997. He
served as Acting Chief Executive Officer from March to May 1997. He
is a member of the Executive Committee. He has been employed by the
Company as a consultant since January 1996. He is 74 and has been a
director of the Company since 1970.
GEORGE H. WENGLEIN is an investor and one of the founders of the Company.
He was employed by the Company as a consultant prior to January 1998.
He is 81 and has been a director of the Company since 1959. He is a
member of the Executive Committee and was formerly a member of the
Compensation Committee.
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERSCOMMITTEES
Meetings and Compensation of Directors
During the fiscal year ended August 31, 1997,1998, the Board of Directors held
sevensix meetings. Each nonofficer director who is not an officer of the Company is paid $3,000an annual retainer of $20,000
plus a meeting fee of $1,500 for each meeting of the Board of Directors which he
or she attends plus $12,000 per year for his or her services asand a director. In addition,
each director who is not an officermeeting fee of the Company is paid $1,000 for each meeting of any Board
committee of the Board which he or she attends except(except that the meeting fee for the chair of
the committee is $1,200 per meeting). The Chairman of the Audit Committee andBoard, in his
discretion, may reduce meeting fees by 50% when the Chairman of the Compensation Committee
are each paid $1,200 for each meeting of such committee which he attends.
During the fiscal year ended August 31, 1997, Roger R. Hemminghaus
attended six of the seven meetings of the Board of Directors but he attended
fewer than 75 percent of the meetings of committees of the Board on which he
served. A number of these were specially called meetings during the search
for a new chief executive officer.involved is brief or
telephonic.
Nonemployee Director Stock Options
The Company has a Nonemployee Director Stock Option Plan (the "Nonemployee Director"Option
Plan") under which nonemployee directors are periodically granted nonqualified
options to purchase shares of the Company's common stock at an option price
equal to 100% of fair market value on the date of grant. Each option terminates
upon the expiration of ten years from the date of grant or one year after the
optionee ceases to be a director, whichever first occurs. An option may not be
exercised prior to the expiration of five years from the date of grant, subject
to certain exceptions specified in the Nonemployee DirectorOption Plan.
Pursuant to the provisions of the Nonemployee DirectorOption Plan, options were granted to nonemployee directors on
January 14, 1997,9, 1998, to Lauro F. Cavazos and George H. Wenglein for the following number
of option5,000 shares
each at an option price of $20.25$17.00 per share: Walter J. Salmon -
5,000share, and on July 24, 1998, to Ronald K.
Calgaard, Judith B. Craven, and Arthur R. Emerson for 1,666 shares and Joanne Winik - 5,000 shares.each at an
option price of $17.125 per share.
Nonemployee Director Phantom Stock Plan
The Company has a Nonemployee Director Phantom Stock Plan (the "Phantom
Stock Plan") which became effective on April 1, 1998. Under the Phantom Stock
Plan, nonemployee directors may elect to defer all or a portion of their
director retainer fees into a phantom share account which is credited with
dollar amounts in the form of phantom shares priced at current market value of
the Company's common stock. The phantom share accounts are also credited with
dollar amounts equal to dividends paid on the common stock. When a participant
ceases to be a director, the number of phantom shares in his or her account is
converted into an equal number of shares of common stock.
Audit Committee
The Audit Committee of the Board of Directors, which currently consists of
Lauro F. Cavazos Roger(Chairman), Arthur R. Hemminghaus,Emerson, and Joanne Winik,Walter J. Salmon, met two
times during the 19971998 fiscal year. The functions of the Audit Committee are to
review the qualifications and independence of the independent auditors; to
recommend the appointment of the independent auditors; to approve the assignment
of new audit partners; to review the scope of the annual audit and the annual
audit process; to review the annual audited financial statements; to review the
annual reporting process; to review internal audit, accounting, data processing,
financial functions, and personnel; to review accounting and data processing
controls and procedures; to review legal matters that may have a significant
effect on the financial statements; to review the internal audit function; to
provide regular opportunities for the director of internal audit and the
independent auditors to meet privately with the Audit Committee; to review the
Company's policies on standards of conduct; and to report the activities of the
Audit Committee to the Board of Directors on a regular basis.
Compensation Committee
The Compensation Committee of the Board of Directors currently consists of
Walter J. Salmon, Roger R. Hemminghaus (Chairman), Ronald K. Calgaard, Judith B. Craven, and
George H. Wenglein.Walter J. Salmon. The Compensation Committee met twofour times during the 19971998
fiscal year. The functions of the Compensation Committee are to review the
compensation of officers and other management personnel and to make
recommendations concerning such compensation. The Compensation Committee also
administers those employee benefit plans of the Company which provide for
administration by a Board committee.
Compensation Committee Interlocks and Insider Participation
Prior to January 1998, George H. Wenglein served as a member of the
Compensation Committee,Committee. He is a former officer of the Company and iswas
previously employed by the Company as a consultant at a salary of $10,417 per
month under a contract which expiresexpired in January 1998.
During fiscal 1997 income tax services were provided at the Company's expense
for Mr. Wenglein in the amount of $3,000.
Corporate Governance Committee
On October 17, 1997,The Corporate Governance Committee of the Board of Directors established a Corporate
Governance Committee composedcurrently
consists of Joanne Winik (Chairman), Lauro F. Cavazos, David B. Daviss,
Roger R. Hemminghaus, and Walter J. Salmon, and Joanne Winik.Salmon. The Corporate Governance Committee
met four times during the 1998 fiscal year. The functions of the Corporate
Governance Committee are to review and make recommendations to the Board
regarding matters of corporate governance and to nominate persons for election
as directors.
The Corporate Governance Committee will consider nominees for election as
directors recommended by shareholders. A shareholder desiring to submit such a
recommendation should deliver to the Secretary of the Company at the principal
offices of the Company not later than 90 days prior to the date of the meeting
of shareholders at which directors are to be elected a notice which includes
(i) the name and address of the shareholder making the recommendation, (ii) the
name, age, and business address of the proposed nominee, and (iii) such other
information regarding the proposed nominee as would be required in a proxy
solicitation relating to an election of directors pursuant to Regulation 14A
under the Securities Exchange Act of 1934.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
John E. Curtis, Jr., formerly President and Chief Executive Officer of
the Company, was the son-in-law of Paul A. Hesson. Mr. Hesson is a principal
in an architectural firm which regularly renders architectural services for
the Company. For the fiscal year ended August 31, 1997, the Company paid
Mr. Hesson's firm architectural fees of approximately $922,000. In the
opinion of the Company, such fees are comparable to those paid by the Company
to other architectural firms for similar services.
John B. Lahourcade, a director of the Company, is employed by the Company
as a consultant at a salary of $7,083 per month under a contract which expires
in 2001.
James R. Hale, Secretary of the Company, is a member of the law firm of
Cauthorn Hale Hornberger Fuller Sheehan & Becker Incorporated. The firm
performs legal services for the Company on a regular basis. For services
rendered during the fiscal year ended August 31, 1997, the Company paid
such firm approximately $584,000. In the opinion of the Company, such fees
are comparable to those charged by other law firms for similar services.
Barry J.C. Parker is employed as President and Chief Executive Officer of
the Company under a three-year employment contract effective October 1, 1997.
Mr. Parker's employment contract provides, among other things, for (i) a
minimum base salary of $360,000 per year, (ii) a guaranteed bonus for the
fiscal year ending August 31, 1998, of at least $132,000, (iii) the initial
grant of options to purchase 100,000 shares of the Company's common stock at an
option price of $20.75 per share, and (iv) a loan from the Company not to
exceed $200,000 to be applied to the purchase of 20,000 shares of the Company's
common stock (with forgiveness of principal over five years, contingent upon
continued employment). A copy of.The contract also provides that Mr. Parker'sParker will be
entitled to receive his compensation and benefits until September 30, 2000, if
prior to that date, the Company terminates his employment contract is filed with the Securities and Exchange Commission as an exhibit to
the Company's annual report on Form 10-K for the fiscal year ended August 31,
1997.without "cause" (as
defined) or if he resigns "for good reason" (as defined).
Mr. Parker was Chairman of the Board, President, and Chief Executive
Officer of County Seat Stores, Inc. from 1989 until his resignation in July
1996. County Seat Stores, Inc. filed a petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code in October 1996. The Board of Directors
of the Company does not believe that such filing reflects adversely upon
Mr. Parker's integrity or upon his abilities as a director and executive
officer of the Company.
John B. Lahourcade, a director of the Company, is employed by the Company
as a consultant at a salary of $7,083 per month under a contract which expires
in 2001.
James R. Hale, Secretary of the Company, is a member of the law firm of
Cauthorn Hale Hornberger Fuller Sheehan & Becker Incorporated. The firm
performs legal services for the Company on a regular basis. For services
rendered during the fiscal year ended August 31, 1998, the Company paid such
firm approximately $416,000. In the opinion of the Company, such fees are
comparable to those charged by other law firms for similar services.
William E. Robson resigned as a director and as Executive Vice President-
Operations of the Company effective as of April 30, 1998. In connection with
his resignation, the Company agreed to pay him $3,000 per month for 100 months
(until age 65) in satisfaction of his deferred compensation benefits and his
supplemental executive retirement plan (SERP) benefits. As a severance
benefit, the Company agreed to pay Mr. Robson $5,000 per month for 100 months,
subject to the Company's right to reduce or terminate such payments in the
event of certain contingencies relating to death, survivorship, employment
status, and competitive activities. The Company also paid Mr. Robson his
regular monthly salary through July 1, 1998, transferred to him a Company
automobile, and agreed to provide him with outplacement services at a cost to
the Company of $3,500. A copy of the agreement is on file with the Securities
and Exchange Commission as an exhibit to the Company's quarterly report on Form
10-Q for the fiscal quarter ended May 31, 1998.
SECTION 16(a) OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers, and any persons holding more than ten
percent of the Company's common stock to report their initial ownership of the
Company's common stock and any subsequent changes in that ownership to the
Securities and Exchange Commission and the New York Stock Exchange, and to
provide copies of such reports to the Company. Based upon the Company's review
of copies of such reports received by the Company and written representations
of its directors and executive officers, the Company believes that during the
year ended August 31, 1997,1998, all Section 16(a) filing requirements were
satisfied, except with respect to a late report filed
by Clyde C. Hays III, Senior Vice President-Operations. In October 1997 he
filed a late report on SEC Form 4 reflecting a transaction that was not
reported on a timely basis.satisfied.
PRINCIPAL SHAREHOLDERS
To the knowledge of the Company, no person owned beneficially as of
October 31, 1997,1998, more than five percent of the outstanding common stock of the
Company, except as follows:
Shares of Common Stock
NameNames and Address of Beneficially Owned as of Percent of
Beneficial Owner October 31, 19971998 Class
________________________________________ ________________________ _____________________
NBD Bank, N.A. (1)
611 Woodward Avenue
MS 8115
Detroit, MI 48226 1,235,270 5.31%1,308,940 5.70%
(1) The shares held by NBD Bank, N.A. ("NBD") are held in advisory and
discretionary accounts of investors. NBD has sole power to dispose
of 1,231,1201,307,640 shares in such accounts and has shared dispositive power
with respect to 1,6001,300 shares. NBD has sole power to vote 1,192,6261,308,940
shares held in such accounts and has no shared voting power. As of
October 31, 1997,1998, none of such accounts contained more than five
percent of the outstanding common stock of the Company.
The foregoing is based upon information furnished by NBD.
MANAGEMENT SHAREHOLDERS
According to information furnished by the persons concerned, each director,
each nominee for director, and all directors and executive officers of the
Company as a group, owned beneficially the indicated number and percentage of
outstanding shares of common stock of the Company as of November 12, 1997:10, 1998:
Name of Individual or Shares Beneficially Owned Percent
IdentityIdentify of Group as of November 12, 1997(1) of10, 1998 (1) Of Class
_____________________ __________________________ ____________________________________ ________
Ronald K. Calgaard -0- ---
Lauro F. Cavazos (2) 1,550 .01%0.01%
Judith B. Craven (3) 500 ---
David B. Daviss (3) 5,037 .02%(4) 5,135 0.02%
Arthur R. Emerson (5) 1,237 0.01%
Roger R. Hemminghaus 3,800 .02%(6) 4,100 0.02%
John B. Lahourcade (4) 199,405 .86%(7) 196,405 0.85%
Barry J.C. Parker 20,000 .09%
William E. Robson (5) 28,840 .12%(8) 59,500 0.26%
Walter J. Salmon (6) 2,255 .01%(9) 4,435 0.02%
George H. Wenglein 730,000 3.14%3.17%
Joanne Winik 1,910 .01%(10) 2,230 0.01%
All directors and executive
officers of the Company,
as a group (7) 1,367,262 5.85%(11) 1,066,773 4.63%
(1) Except as indicated in the following notes, eachEach person named in the table owns directly the number of shares
indicated and has the sole power to vote and to dispose of such
shares.shares, except as indicated in the following notes.
(2) The shares shown for Dr. Cavazos are held jointly with his wife. Such
shares do not include 433 shares of phantom stock held under the
Nonemployee Directors Phantom Stock Plan.
(3) The shares shown for Dr. Craven are held for her benefit in a
custodial account.
(4) The shares shown for Mr. Daviss are held for his benefit in custodial
accounts and include 98 shares held by a 401(k) custodian.
(5) The shares shown for Mr. Emerson include 1,000 shares held jointly
with his wife in a custodial account and 237 shares held for his
benefit in an Individual Retirement Account.
(6) The shares shown for Mr. Hemminghaus are held for his benefit in a
custodial account. (4)Such shares do not include 867 shares of phantom
stock held under the Nonemployee Directors Phantom Stock Plan.
(7) The shares shown for Mr. Lahourcade include 1,125 shares held jointly
with his wife.
(5)(8) The shares shown for Mr. RobsonParker include 20 shares held jointly with his
wife, 64 shares held jointly with his son, 866 shares held for his
benefit in an Individual Retirement Account, 15 shares held by his wife
as trustee for his grandchildren, 2,376 shares held for his benefit in
the Company's Dividend Reinvestment Plan, and 10,65037,500 shares which he has
the right to acquire within 60 days under the Company's employee
benefit
plans.
(6)(9) The shares shown for Dr. Salmon are held for his benefit in an
Individual Retirement Account. (7)Such shares do not include 433 shares
of phantom stock held under the Nonemployee Directors Phantom Stock
Plan.
(10) The shares shown for Ms. Winik are held for her benefit in a
custodial account. Such shares do not include 2,650 shares of
phantom stock held under the Nonemployee Directors Phantom Stock
Plan.
(11) The shares shown for all directors and executive officers as a group
include 81,44180,699 shares which they have the right to acquire within 60
days under the Company's employee benefit plans.
EXECUTIVE COMPENSATION
The table below contains information concerning annual and long-term
compensation of the chief executive officers and the other fourfive most highly
compensated executive officers (the "Named Officers") for services in all
capacities to the Company for the fiscal years ended August 31, 1998, 1997, 1996,
and
1995:1996:
Summary Compensation Table
Annual Compensation Long-Term Compensation
Awards Payouts
_____________________________________________________ ____________________________ ________
Securities All
Other Under- Other
Name and Annual Restricted lying LTIP Compen-
Principal Fiscal Compen- Stock Options/ Payouts sation
Position Year Salary Bonus(1) sation(2) Awards SARs(3) (4) (5)
_____________________________________________________ ____________________________ ________
Ralph Erben 1997 $179,167 $ ---Barry J.C. Parker 1998 $330,000 $132,000 $0 $0 4,500 $60,770 $770,000
Chairman of the 1996 350,000 ---170,000 $ 0 0 5,000 119,146 33,786
Board and Chief 1995 340,000 --- 0 0 4,500 65,629 32,027
Executive Officer
John E. Curtis, Jr. 1997 182,500 --- 0 0 2,500 28,359$ 0
President Chief 1996 283,333and 1997 --- 0 0 2,500 58,528 14,062
Operating Officer, 1995 240,000 --- 0 0 2,100 32,815 14,096
Chief Financial
Officer, and
Chief Executive
Officer
John B. Lahourcade 1997 198,400 --- 0 0 0 0 2,973
Chairman of the0
Chief Executive 1996 147,782--- --- 0 0 0 0 14,062
Board, Acting 1995 212,5000
Officer
David B. Daviss 1998 135,000 --- 0 0 0 0
14,096Acting Chief Executive
Officer, and
consultant
David B. Daviss 1997 125,000 --- 0 0 0 0 0
Acting ChiefExecutive Officer 1996 32,400 --- 0 0 5,000 0 0
Executive 1995 33,600and director
Laura M. Bishop 1998 165,000 34,000 0 0 20,000 0 4,015
Senior Vice 1997 146,667 --- 0 0 1,666850 0 2,862
President and 1996 108,750 --- 0 0 8,650 0 6,129
Chief Financial
Officer
and
DirectorRobert P. Burke 1998 165,000 34,000 0 0 20,000 0 4,015
Senior Vice 1997 153,333 --- 0 0 1,000 0 2,973
President- 1996 105,000 --- 0 0 13,000 0 0
Marketing
Raymond C. Gabrysch 1998 165,000 34,000 0 0 20,000 0 4,015
Senior Vice 1997 156,667 --- 0 0 1,000 0 2,973
President- 1996 148,750 3,761 0 0 1,200 0 14,062
Operations
Clyde C. Hays III 1998 200,000 40,000 0 0 20,000 0 4,015
Senior Vice 1997 190,000 --- 0 0 1,500 19,316 2,973
President- 1996 174,167 --- 0 0 1,600 22,993 14,062
Operations
William E. Robson 1998 256,667 --- 0 0 0 0 518,753
Executive Vice 1997 275,000 --- 0 0 2,300 28,359 9,279
Executive VicePresident- 1996 263,333 --- 0 0 2,500 58,527 19,795
President - 1995 240,000 --- 0 0 2,100 32,815 19,308
Operations
Jimmy W. Woliver 1997 197,500 --- 0 0 1,500 19,316 2,973
Senior Vice 1996 190,000 --- 0 0 1,600 31,354 14,062
President - 1995 182,500 --- 0 0 1,250 10,938 14,096
Operations
Clyde C. Hays III 1997 190,000 --- 0 0 1,500 19,316 2,973
Senior Vice 1996 174,167 --- 0 0 1,600 22,993 14,062
President - 1995 156,250 --- 0 0 1,250 0 14,096
Operations
Raymond C. Gabrysch 1997 156,667 --- 0 0 1,000 0 2,973
Senior Vice 1996 148,750 3,761 0 0 1,200 0 14,062
President - 1995 137,500 37,120 0 0 950 0 14,096
Human Resources
(1) Reflects incentive-based cash bonuses awarded under the Company's Incentive Bonus Plan
and Area Vice President Bonus Plan. Awards are stated as compensation in the year with
respect to which the award was earned, even if actually paid in the following year.
(2) Perquisites and other personal benefits received by the executive officers are not
included because the aggregate amount of such compensation does not exceed the lesser of
$50,000 or 10% of the total amount of annual salary and bonus for any Named Officer.
(3) The Company has not issued any stock appreciation rights to the Named Officers.
(4) The long-term incentive plan (LTIP) amounts paid out in fiscal 1997 1996, and 19951996 under the
Company's Performance Unit Plan relate to the three-year performance cycles ended
August 31, 1996 1995, and 1994,1995, respectively.
(5) Amounts for Mr. ErbenRobson include payments under a retirement agreementpaid and accrued in 1997connection with his
resignation on April 30, 1998, of $514,738 in 1998 and contributions under the Profit
Sharing Plan of $4,015, $2,973, and $14,062 in 1998, 1997, and $14,096 in 1996, and 1995, respectively.
Remaining amounts for Mr. ErbenRobson for 19961997 and 19951996 are for amounts accrued under a deferred
compensation agreement. Amounts for Mr. Curtis includeMs. Bishop and Messrs. Burke, Gabrysch, and Hays are
contributions under the Profit Sharing Plan of $14,062 and $14,096 in 1996 and 1995, respectively.
Amounts for Messrs. Lahourcade, Robson, Woliver, Hays, and Gabrysch for 1997, 1996,
and 1995, respectively, include contributions under the Profit Sharing Plan of $2,973,
$14,062, and $14,096, respectively. Remaining amounts for Mr. Robson are for amounts
under a deferred compensation agreement.Plan.
The following table reports the grant of stock options and stock
appreciation rights ("SARs") to the Named Officers during fiscal 1997.1998. Options
were granted under the Company's Management Incentive Stock Plan. The Company
has not granted SARs to any of the Named Officers.
Option/SAR Grants in Last Fiscal Year
Potential Realized
Value at
Assumed Annual
Rates of Stock
Price Appreciation
Individual Grants for Option Term (3)
________________________________________________________________________ ____________________
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or Base
Options/SARs Employees in Price Expiration
Name Granted (1) Fiscal Year (2) ($/sh) Date 5%($) 10%($)
________________________________________________________________________ ____________________
Ralph Erben 4,500 13.36% $23.125 10-16-2002 $35,373 $80,242
John E. Curtis, Jr. 2,500 7.42% 23.125 10-16-2002 19,651 44,579
William E. Robson 2,300 6.83% 23.125 10-16-2002 18,079 41,013
Jimmy W. Woliver 1,500 4.45% 23.125 10-16-2002 11,791 26,747Barry J.C. Parker 100,000 21.57% $20.750 09-30-2003 $705,327 $1,600,029
70,000 15.10% 19.125 12-08-2003 455,063 1,032,308
Laura M. Bihsop 20,000 4.31% 19.125 12-08-2003 130,018 294,945
Robert P. Burke 20,000 4.31% 19.125 12-08-2003 130,018 294,945
Raymond C. Gabrysch 20,000 4.31% 19.125 12-08-2003 130,018 294,945
Clyde C. Hays III 1,500 4.45% 23.125 10-16-2002 11,791 26,747
Raymond C. Gabrysch 1,000 2.97% 23.125 10-16-2002 7,861 17,83220,000 4.31% 19.125 12-08-2003 130,018 294,945
William E. Robson 30,000 6.47% 19.125 12-08-2003 195,027 442,418
(1) Options were granted at fair market value of the common stock on the date of grant.
Options may not be exercised during the first 12 months following the date of grant.
(2) Based upon a total of 33,675463,500 options granted to employees in fiscal 1997.1998.
(3) The dollar amounts in these columns are the result of calculations at the 5% and 10%
rates set by the Securities and Exchange Commission and should not be considered as a
forecast of future stock prices.
The table below reports exercises of stock options and SARs by the Named
Officers during fiscal 19971998 and the value of their unexercised stock options
and SARs as of August 31, 1997.1998. The stock options were granted under the
Company's Management Incentive Stock Plan. The Company has not granted SARs to
any of the Named Officers.
Aggregated Options/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options/SARS Options/SARs
Acquired at FY-End at FY-End(1)
on Value Exercisable/ Exercisable/
Name Exercise Realized Unexercisable Unexercisable
______________________________________________________________________________
Ralph Erben 35,600 $174,659 11,500/0Barry J.C. Parker --- $ --- 0/170,000 $0/$0
John E. Curtis, Jr. 23,000 80,163 5,450/0 0/0
David B. Daviss --- --- 0/6,666 0/0
William E. Robson 10,000 42,500 10,950/3,550 18,206/0
Jimmy W. WoliverLaura M. Bishop --- --- 3,300/2,3003,741/25,759 0/0
Robert P. Burke --- --- 5,500/28,500 0/0
Raymond C. Gabrysch 1,200 5,625 4,850/20,500 0/0
Clyde C. Hays III 3,358 14,272 5,750/2,300 8,109/1,200 5,925 6,100/20,750 0/0
Raymond C. Gabrysch 8,600 40,763 4,950/1,600 8,109/William E. Robson 2,700 11,138 10,650/31,150 0/0
(1) The value of unexercised options is based on a price of $19.6875$15.25 per
common share at August 31, 1997.
The following table reports performance units granted to the Named
Officers during fiscal 1997 under the Company's Performance Unit Plan and the
Company's Management Incentive Stock Plan:
Long-Term Incentive Plans - Awards in Last Fiscal Year
Performance Estimated Future Payouts under
Number or Other Non-Stock Price Based Plans
of Shares, Period Until ______________________________
Units, or Maturation
Name Other Rights or Payout Threshold Target Maximum
______________________________________________ ______________________________
Ralph Erben 4,500 1997-99 $48,837 $97,675 $146,512
John E. Curtis, Jr. 2,600 1997-99 28,217 56,434 84,651
William E. Robson 2,300 1997-99 24,961 49,923 74,884
Jimmy W. Woliver 1,200 1997-99 13,023 26,047 39,070
Clyde C. Hays III 1,200 1997-99 13,023 26,047 39,070
Raymond C. Gabrysch 800 1997-99 8,682 17,364 26,047
The performance units described in the above table were granted in
October 1996 for the three-year performance cycle ending August 31, 1999. At
the end of the performance cycle, performance awards are made in cash or in
shares of common stock, or both, based upon the attainment by the Company of
certain performance goals during the three-year cycle. Each performance unit
is assigned a performance factor, which is a percentage (not exceeding 150%)
resulting from achievement of the performance goals established at the date of
grant. Each performance unit is assigned a payment value, which is a dollar
amount determined by multiplying the performance factor by the average market
price of the common stock of the Company on 20 trading days immediately
preceding the end of the performance cycle. If the performance goals are not
achieved, a lesser performance factor is assigned (not below 50%), with no
future payouts if achievement is below 80% of goal - "Threshold." The values
included in the above table assume a 5% annual growth rate in the price of the
Company's common stock subsequent to August 31, 1997; however, this assumption
should not be considered as a forecast of future stock prices.1998.
DEFERRED COMPENSATION
The Company's Nonemployee Director Deferred Compensation Plan permits
nonemployee directors to defer all or a portion of their directors' fees in
accordance with applicable regulations under the Internal Revenue Code.
Deferred amounts bear interest at the average interest rate of U.S. Treasury
ten-year obligations. The Company's obligation to pay deferred amounts is
unfunded and is payable from general assets of the Company.
Nonemployee directors are permitted to defer all or a portion of their
director retainer fees pursuant to the Company's Nonemployee Director Phantom
Stock Plan. See the discussion under the caption "Nonemployee Director Phantom
Stock Plan."
The Company has deferred compensation agreements with several officers and
former officers of the Company. Under the agreements, the Company is obligated
to provide annual benefits for each such officer or his beneficiaries during a
period of ten years after his death, disability, or retirement. The agreements
are unfunded, but the Company has purchased life insurance as a means of
partially offsetting the cost of such benefits. No estimated annual benefits
are payable upon retirement at normal retirement age for any of the Named
Officers except $24,200 for William E. Robson.Officers.
The Company has a Supplemental Executive Retirement Plan which is
designed to provide benefits for selected officers at normal retirement age
with 25 years of service equal to 50% of their final average compensation
offset by Social Security, profit sharing benefits, and deferred compensation.
Three of the officers designated to participate in the plan have retired and
are receiving benefits under the plan. Accrued benefits of all actively
employed participants become fully vested upon termination of the plan or a
change in control (as defined in the plan). The plan is unfunded, and the
Company is obligated to make benefit payments solely on a current disbursement
basis.
The following table illustrates the approximate annual pension that the
Named Officers in the Summary Compensation Table would receive under the
Supplemental Executive Retirement Plan if the plan remained in effect and the
Named Officers retired at age 65 and elected an individual life annuity.
Pension Plan Table
Final Average Years of Service
Final Average ____________________________________________
Earnings 15 20 25
_______________ ___________ ___________________________________ ____________ ______________ _____________
$150,000 $ 45,000 $ 60,000 $ 75,000
300,000 90,000 120,000 150,000
450,000 135,000 180,000 225,000
600,000 180,000 240,000 300,000
Amounts shown as "final average earnings" in this table represent the
average of the last five years of compensation, which is substantially the same
as the total of salary, bonus, and LTIP payouts as shown in the Summary
Compensation Table for the Named Officers. As of December 1, 1997,November 30, 1998, the
credited years of service under the Supplemental Executive Retirement Plan for
Messrs. Robson,Barry J.C. Parker, Laura M. Bishop, Robert P. Burke, Raymond C. Gabrysch, and
Clyde C. Hays and GabryschIII are 31,2, 6, 3, 24, and 24,25, respectively.
Messrs. Erben, Lahourcade, and Daviss are not covered by the plan. The annual benefit
amounts shown above are subject to an offset by benefits payable under deferred
compensation agreements, if applicable, the profit sharing plan, and Social
Security. Net benefits under the plan are prorated by years of credited
service less than 25; after 25 years of service, the net benefits are
unchanged.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors (the "Committee")
presents the following report on executive compensation. The report describes
the Company's executive compensation programs and the bases on which the
Committee made compensation decisions for fiscal 19971998 with respect to the
Company's executive officers, including those named in the compensation tables.
Compensation Objectives
The Committee conducts an annual review of the Company's executive
compensation program. The objectives of the executive compensation program
include the following:
To offer fair and competitive base salaries consistent with the Company's
position in the food servicefoodservice industry;
To reward executives for corporate and individual performance through an
annual incentive bonus program;
To encourage future performance through the use of long-term incentives
such as stock options and performance units; and
To encourage executives to acquire and retain ownership of the Company's
common stock.
The Company's executive compensation program is designed to enable the
Company to attract, retain, and motivate the highest quality of management
talent. To achieve that objective, the Committee has developed a compensation
program which combines annual base salaries with annual and long-term
incentives tied to corporate performance and to increases in shareholder value.
Annual Base Salaries
The Committee annually establishes the base salaries to be paid to the
Company's executive officers during the coming year, subject to approval by the
Board of Directors. In setting base salaries, the Committee takes into account
several factors, including the executive's experience, responsibilities,
management abilities, and job performance, as well as performance of the
Company as a whole and competitive compensation data.
Annual Incentive Bonuses
The Company's annual incentive bonus plan for executive officers and other
key personnel directly links annual cash incentive payments to the attainment
of predetermined earnings per share goals established by the Committee and
approved by the Board of Directors. Eligible executives are assigned
threshold, target, and maximum bonus levels as a percentage of base salary,
based upon the executive's responsibility level and increase in earnings per
share over the prior year. ForBased upon the recommendation of the Committee, the
annual incentive bonus plan was suspended for fiscal 19971998 and replaced with a
discretionary cash bonus plan for fiscal 1998 based upon nonfinancial
objectives but subject to attainment of a threshold earnings goal by the
incentive compensation targetsCompany for executivefiscal 1998. Incentive bonuses earned by the Named Officers for
fiscal 1998 under the discretionary plan are included in the Summary
Compensation Table.
On October 22, 1998, based upon the recommendation of the Committee, the
Board of Directors adopted an Executive Bonus Plan for Fiscal 1999 for officers
rangedand key personnel providing for the payment of cash bonuses from 14%a bonus pool
to 30% of base salarybe established if targeteda minimum earnings per share were attained, with maximums rangingtarget is achieved for the
fiscal year. Bonuses may range from 20%10% to 45%60% of annual base salary. No cash
incentivecompensation.
Individual bonuses were paidare based upon an evaluation of individual performance in
relation to the executive officers for fiscal 1997.predetermined objectives.
Stock Options
The Committee normally grants incentive stock options annually to eligible
executive officers and other key employees. The options, which are granted at
100% of market price on the date of grant, are usually for six-year terms exercisable 50% after one year and 100% after two years.terms. The
number of option shares granted each year is normally determined by a formula
based upon the executive's responsibility level and base salary and the market
price of the common stock. The number of option shares granted will vary based
upon position level, with the more senior officers receiving larger grants.
The number of option shares held by an executive is not considered in
determining stock option awards.
Performance Units
ThePrior to fiscal 1998 the Committee normally grants performance unitsgranted annually to eligible
executive officers and other key employees performance units based upon
attainment by the Company of predetermined earnings and equity goals
established by the Committee over a performance cycle of three consecutive
years. The goals are established by the Committee.
During fiscal 1997 performance awards were granted to eligible executive
officers for the three-year performance cycle ending August 31, 1999.years. The number of performance units granted iswas normally determined
by a formula based upon the executive'sparticipant's responsibility level and base salary
and the market price of the common stock. Performance units are payable at the
end of each performance cycle in cash or shares of common stock, or both, if the
performance goals for the cycle are attained. No payments were made for the
three-year performance cycle whichcycles ended August 31, 1997.1997 and 1998.
The Committee did not grant any performance units during fiscal 1998,
based upon the Committee's determination that other types of incentive awards
were more appropriate during the development and implementation of the
Company's new strategic plan.
Stock Ownership Guidelines
In January 1996 pursuant to recommendations of the Compensation
Committee, the Board of Directors adopted guidelines for ownership of Company
common stock by executives and nonemployee directors. The guidelines provide
that each person in the following categories is expected to attain the
indicated level of stock ownership within five years:
(1)(a) Chief Executive Officer - shares having a value equal to four times
annual base salary;
(2) President, Executive Vice(b) President and Senior Vice President - shares having a value equal to
two times annual base salary; (3)and
(c) Vice President - shares having a value equal to annual base salary;
and
(4) Nonemployeesalary.
The guidelines were amended in 1998 to provide that each nonemployee
director - shares having a valueis expected to attain, over time, ownership of common stock in an
amount equal to 3.5five times his or her annual director retainer fees. Phantom
stock is considered common stock for purposes of the guidelines. Until a
nonemployee director attains the minimum level of stock ownership, he or she is
obligated to defer at least 50% of annual retainer fees.fees in the form of phantom
stock.
Compensation of Chief Executive Officer
Mr. Erben was paid a base salary of $350,000 per year for services as
Chief Executive Officer from March 1, 1995, until January 1, 1997. He was
paid a base salary of $250,000 per year for services as Chairman of the Board
from January 1, 1997, until his resignation on March 17, 1997. He was paid a
lump-sum severance payment of $550,000 and a lump-sum payment of $220,000 in
satisfaction of his deferred compensation benefits. Mr. Erben's base salary
was not increased subsequent to March 1, 1995.
Mr. Curtis was paid a base salary of $330,000 per year for services as
Chief Executive Officer from January 1, 1997, until his death in March 1997.
Prior to January 1, 1997, he was receiving a base salary of $300,000 per year
for services as President, Chief Operating Officer, and Chief Financial
Officer.
Mr. Lahourcade was paid a base salary of $25,000 per month for services
as Acting Chief Executive Officer from March 1997 until May 1, 1997. His base
salary as Chairman of the Board was $20,000 per month from May 1, 1997, to
October 1, 1997.
Mr. Daviss was paid a base salary of $25,000 per month for services as
Acting Chief Executive Officer from May 1, 1997, to October 1, 1997. His
salary as Chairman of the Board, effective October 1, 1997, is $120,000 per
year.
On October 17, 1996,1, 1997, Mr. ErbenParker was elected as President and Chief
Executive Officer. The Committee recommended a three-year employment contract
for Mr. Parker, which was approved by the Board of Directors. The contract
fixes his base annual salary at $360,000 per year and provides for a guaranteed
bonus for fiscal 1998 of at least $132,000. In accordance with the contract,
the Company reimbursed Mr. Parker for relocation expenses in the amount of
$90,000.
Pursuant to Mr. Parker's employment contract, he was granted stock options
on October 1, 1997, for 100,000 shares of common stock at an incentiveoption price of
$20.75 per share and was granted a loan by the Company in the amount of
$199,999. The loan proceeds were applied to Mr. Parker's purchase of 20,000
shares of common stock, which are pledged to secure the loan. The principal of
the loan is to be forgiven over five years, conditioned upon his continued
employment by the Company.
On December 9, 1997, Mr. Parker was granted a stock option for 4,50070,000
shares of common stock at an option price of $19.125 per share, which number of
shares was determined in accordance with the formula discussed above.
During fiscal 1997Salary Continuation Agreements
Mr. Parker's employment contract, referred to above, provides that he exercised options grantedwill
be entitled to him inreceive all of his compensation and benefits under the contract
until September 30, 2000, if his employment is terminated by the Company
without cause (as therein defined) or if he terminates his employment for good
reason (as therein defined).
On May 14, 1998, the Company entered into a contract with Sue Elliott,
Senior Vice President-Human Resources, which provides that if her employment is
terminated by the Company without good cause (as therein defined) prior years forto
May 14, 2000, the Company will continue to pay her monthly salary until the
later of May 14, 2000, or 12 months after termination, but not after she
accepts other employment.
On June 1, 1998, the Company entered into a total 35,600 shares. On January 14, 1997, Mr. Erben
was granted 4,500 performance units,contract with Alan M. Davis,
Senior Vice President-Real Estate Development, which numberprovides that if his
employment is terminated by the Company without good cause (as therein defined)
prior to June 1, 2000, the Company will continue to pay his monthly salary
until the later of units was determined in
accordance with the formula discussed above.
On October 17, 1996, Mr. Curtis was granted an incentive stock option for
2,500 shares, which number of shares was determined in accordance with the
formula discussed above. Prior to March 1997,June 1, 2000, or 12 months after termination, but not after
he exercised options granted to
him in prior years for a total of 17,500 shares. During the remaining months
of fiscal 1997, Mr. Curtis's executrix exercised options for 5,500 shares
which were granted to him in prior years. On January 14, 1997, Mr. Curtis
was granted 2,600 performance units, which number of units was determined in
accordance with the formula discussed above.accepts other employment.
Members of the Committee:
Walter J. Salmon, Chairman
Roger R. Hemminghaus, George H. WengleinChairman
Ronald K. Calgaard
Judith B. Craven
Walter J. Salmon
PERFORMANCE GRAPH
This year the Company has changed the equity market index and has altered the composition of the peer group used
to compare the cumulative total shareholder return on the Company's common
stock from that used in prior proxy statements. Effective January 1, 1997, Standard and Poor's transferred
the Company from the S&P 500 Index to the S&P SmallCap 600 Index as part of a
restructuringInformation on two of the
Restaurants industry group in the S&P Indexes. The
transfer was based on market capitalization. Therefore, the Company will now
use the S&P SmallCap 600 Index as the published industry index for comparison
purposes. In addition, in prior years the Company has included itself in
the peer group index. In the 1997 Peer Group, Luby's Cafeterias, Inc. has
been removed so as not to impact the performance of the peer group. The peer
groupcompanies in the prior year also included Hometown Buffet,year's peer group is no longer available. Morrison
Restaurants, Inc. which was
subsequently acquired by Buffets,Piccadilly Cafeterias, Inc. and Perkins
Family Restaurants, L.P. is no longer a public company. As a result, the
Company chose to expand the 1998 peer group to include several other companies
in the family dining segment of the restaurant industry.
The following graph compares the cumulative total shareholder return on
the Company's common stock for the five fiscal years ended August 31, 1997,1998,
with the cumulative total return on the S&P 500 Index, the S&P SmallCap 600 Index and an industry
peer group index. The 1997 Peer Group is comprised of Buffets, Inc.;
Morrison Restaurants,Piccadilly Cafeterias, Inc. (formerly Morrison Fresh Cooking,; Ryan's Family Steakhouses, Inc.); Perkins Family Restaurants, L.P.Shoney's, Inc.;
and Sizzler International, Inc. The 1998 Peer Group is comprised of Bob Evans
Farms, Inc.;Buffets, Inc.; Furr's/Bishop's, Inc.; Piccadilly Cafeterias, Inc.;
Ryan's Family Steak Houses,Steakhouses, Inc.; Shoney's, Inc.; and Sizzler International, Inc.;
and Vicorp Restaurants, Inc. These companies are multiunit family restaurant
operators in the mid-price range with similar stock market capitalization.
The cumulative total shareholder return computations set forth in the
performance graph assume the investment of $100 on August 31, 1992,1993, and the
reinvestment of all dividends. The returns of each company in the 19961997 Peer
Group and the 19971998 Peer Group have been weighted according to the respective
company's stock market capitalization.
The performance graph has been omitted in the EDGAR filing. A table of
the graph's data points is shown below.
Five-yearFive-Year Cumulative Return
Years Ended August 31,
____________________________________________
1992__________________________________
1993 1994 1995 1996 1997 1998
Luby's Cafeterias, Inc. $100 165 155 135 166 14394 82 100 87 70
1998 Peer Group $100 76 65 54 55 52
1997 Peer Group $100 114 90 76 71 68
1996 Peer Group $100 122 100 86 86 80
S&P 500 $100 115 122 148 175 24678 66 61 56 52
S&P SmallCap 600 $100 136 140 172 195 261104 127 144 193 134
CHANGE OF CORPORATE NAME
On October 16, 1998, the Board of Directors declared it advisable and
proposed that Article First of the Certificate of Incorporation be amended to
change the corporate name to "Luby's, Inc."
The name "Luby's" is well established in the Company's principal markets
as an indicator of quality food and service. As new concepts of food service
are developed, the word "cafeteria" is becoming too limited to identify the
Company's methods of food service. Accordingly, the Board of Directors
believes that the abbreviated corporate name, "Luby's, Inc.," will better serve
to identify the Company as it expands and diversifies its operations in the
coming century.
Adoption of the amendment requires the affirmative vote of a majority of
the outstanding shares entitled to vote thereon. The Board of Directors
recommends a vote "FOR" the amendment.
LUBY'S INCENTIVE STOCK PLAN
On October 16, 1998, the Board of Directors adopted the Luby's Incentive
Stock Plan (the "New Plan"), to be effective on January 1, 1999 (the "Effective
Date"), subject to approval by the shareholders at the 1999 Annual Meeting.
The New Plan is similar to, and is intended to replace, the Management
Incentive Stock Plan adopted in 1989 (the "1989 Plan"). No further grants will
be made under the 1989 Plan after December 31, 1998, if the New Plan is
approved by the shareholders at the 1999 Annual Meeting.
The following summary description of the New Plan is qualified in its
entirety by reference to the complete text attached as Appendix A to this Proxy
Statement. The term "Company" as used in this summary refers only to Luby's
Cafeterias, Inc.
Purpose. The New Plan is designed to benefit the shareholders of the
Company by encouraging and rewarding high levels of performance by individuals
who are key to the success of the Company. The New Plan authorizes incentive
awards ("Awards") in the form of stock options, restricted stock, and
performance shares.
Eligibility. The persons eligible to receive Awards under the New Plan
are all employees of the Company and all employees of any corporation or other
business entity in which the Company owns, directly or indirectly, more than
50% of the capital and profit interests.
Stock Available. Subject to provisions for adjustments, the number of
shares of common stock of the Company ("Common Stock") which may be issued
under the New Plan is equal to the sum of: (a) 2,000,000 shares; (b) any shares
of Common Stock available for future awards under the 1989 Plan as of the
Effective Date; and (c) any shares of Common Stock represented by awards
granted under the 1989 Plan which are forfeited, expire, or are canceled
without delivery of Common Stock after the Effective Date, or which result in
the forfeiture of Common Stock back to the Company. In no event will the
number of shares of Common Stock which may be issued under the New Plan exceed
2,500,000. Shares covered by an Award which are not issued become available
for further Awards. No participant may receive, under the New Plan, stock
options for more than 100,000 shares in any one year, except that a newly hired
employee may be granted options for not more than 200,000 shares in the first
year of employment.
Stock Options. A stock option is a right to purchase a specified number
of shares of Common Stock during a specified time not exceeding ten years at a
fixed price equal to fair market value on the date of grant. Stock options may
be either incentive stock options ("ISOs") which comply with Section 422 of the
Internal Revenue Code of 1986 (as amended from time to time) or nonstatutory
stock options ("nonqualified options") which do not comply with Section 422.
Restricted Stock. Restricted Stock is Common Stock which is subject to
restrictions on transfer and/or ownership for a required period of continued
employment. Stock Awards may be granted without payment of consideration by
the participant.
Performance Shares. A Performance Share is Common Stock or a unit valued
with reference to Common Stock that is subject to restrictions on transfer
and/or ownership. Performance Shares may be paid in Common Stock or cash or
both. Each Performance Share shall be subject to the attainment of performance
targets established by the Committee.
Award Agreements. Each Award will be evidenced by an Award agreement
containing provisions consistent with the New Plan and such other terms and
conditions as the Committee deems necessary or appropriate.
Limited Stock Purchase Loans. As a means of encouraging stock ownership
by officers, during the period from the Effective Date to March 25, 1999, the
Company may, with the approval of the Committee, make or guarantee loans to
Participants who are officers of the rank of Vice President and above for the
purpose of purchasing Common Stock. It is anticipated that the principal
amount of such loans, in the aggregate, will not exceed $2,500,000.
Administration. The New Plan is to be administered by the Compensation
Committee of the Board of Directors or other committee designated by the Board.
Amendments, etc. The Board of Directors may amend, modify, suspend, or
terminate the New Plan for any purpose permitted by law. Unless changes in
legal requirements permit otherwise, the Board may not amend the New Plan (i)
to increase the number of shares of Common Stock that may be issued (except
pursuant to adjustment provisions), (ii) to decrease the option price, (iii) to
materially modify eligibility requirements, (iv) to withdraw administration
from the Committee, or (v) to extend the period during which Awards may be
granted.
Adjustments. In the event of a change in the outstanding Common Stock by
reason of a stock split, stock dividend, combination or reclassification of
shares, recapitalization, merger, or other event, the Committee shall make
proportionate or other equitable adjustments in the number of shares of Common
Stock (i) reserved under the New Plan, (ii) for which Awards may be granted to
an individual participant, (iii) covered by outstanding Awards denominated in
stock or units of stock and shall make appropriate adjustments in (x) stock
prices related to outstanding Awards and (y) price determinations related to
outstanding Awards.
Change of Control. In the event of a "change of control" of the Company
(as defined in the New Plan) or in the event of a "Restructuring Event" (as
defined in the New Plan), the Committee may recommend that the Board of
Directors take action to (i) accelerate the vesting of outstanding Awards, (ii)
offer to purchase outstanding Awards, or (iii) modify the terms of outstanding
Awards.
Unfunded Plan. Insofar as the New Plan provides for Awards in cash and
Common Stock, it shall be an unfunded plan without any obligation on the part
of the Company to segregate assets relating to the New Plan.
Termination. The New Plan is to terminate on December 31, 2008, unless
sooner terminated by the Board of Directors, after which no Awards may be made
under the New Plan.
Tax consequences. The tax consequences of the issuance and exercise of
Awards are set forth in Appendix B to this Proxy Statement.
Stock Price. The closing price of the Common Stock on the New York Stock
Exchange on November 10, 1998, was $15.00 per share.
Shareholder Vote. The affirmative vote of a majority of the shares
present at the meeting in person and by proxy is required for approval of the
New Plan. The Board of Directors recommends that the shareholders vote FOR
approval of the New Plan. The affirmative vote of a majority of the shares
present at the meeting in person and by proxy is required for approval.
APPOINTMENT OF AUDITORS
The Board of Directors of the Company has appointed the firm of Ernst &
Young LLP to audit the accounts of the Company for the 19981999 fiscal year.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting of Shareholders with the opportunity to make a statement if they desire
to do so and are expected to be available to respond to appropriate questions.
Approval of the appointment of auditors is not a matter which is required
to be submitted to a vote of shareholders, but the Board of Directors considers
it appropriate for the shareholders to express or withhold their approval of
the appointment. If shareholder approval should be withheld, the Board would
consider an alternative appointment for the succeeding fiscal year. The Board
recommends that the shareholders vote FOR approval of the appointment of Ernst
& Young LLP. The affirmative vote of a majority of the shares present at the
meeting in person and by proxy is required for approval.
SHAREHOLDER PROPOSALS FOR 19992000 ANNUAL MEETING
Proposals of shareholders intended to be presented atfor inclusion in the 1999Company's proxy statement
and form of proxy for the Company's 2000 Annual Meeting of Shareholders
submitted pursuant to Rule 14a-8 under the Securities Exchange Act of 1934 must
be received in writing by the Company at its corporate office no later than
August 4, 1998. The2, 1999. Notice of a shareholder proposal submitted outside the process
of Rule 14a-8 with respect to the Company's corporate
office is located at 2211 Northeast Loop 410, P. O. Box 33069, San Antonio,
Texas 78265-3069.2000 Annual Meeting of Shareholders
will be considered untimely if received by the Company after October 16, 1999.
PROXY SOLICITATION
The cost of soliciting proxies will be borne by the Company. The
transfer agent and registrar for the Company's common stock, American Stock
Transfer & Trust Company, as a part of its regular services and for no
additional compensation other than reimbursement for out-of-pocket expenses,
has been engaged toTo assist in
the proxy solicitation.solicitation, the Company has engaged W.F. Doring and Co. for a fee
of $3,000 plus reimbursement of out-of-pocket expenses. Proxies may be
solicited through the mail and through telephonic or telegraphic communications
to, or by meetings with, shareholders or their representatives by directors,
officers, and other employees of the Company who will receive no additional
compensation therefor.
The Company requests persons such as brokers, nominees, and fiduciaries
holding stock in their names for others, or holding stock for others who have
the right to give voting instructions, to forward proxy material to their
principals and to request authority for the execution of the proxy, and the
Company reimburses such persons for their reasonable expenses.
OTHER MATTERS
No business other than the matters set forth in this proxy statement is
expected to come before the meeting, but should any other matters requiring a
vote of shareholders arise, including a question of adjourning the meeting, the
persons named in the accompanying proxy will vote thereon according to their
best judgment in the interest of the Company.
LUBY'S CAFETERIAS, INC.
James R. Hale
Secretary
Dated: December 1, 19971998
PROXYAPPENDIX A
LUBY'S INCENTIVE STOCK PLAN
1. Objectives. The Luby's Incentive Stock Plan (the "Plan") is designed
to benefit the shareholders of the Company by encouraging and
rewarding high levels of performance by individuals who are key to the
success of the Company by increasing the proprietary interest of such
individuals in the Company's growth and success. To accomplish these
objectives, the Plan authorizes incentive Awards through grants of
stock options, restricted stock, and performance shares to those
individuals whose judgment, initiative, and efforts are responsible
for the success of the Company.
2. Definitions.
"Award" means any award described in Section 5 of the Plan.
"Award Agreement" means an agreement entered into between the Company and a
Participant, setting forth the terms and conditions applicable to the Award
granted to the Participant.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to time.
"Committee" means the Compensation Committee of the Board or other committee
designated by the Board to administer the Plan. The Committee shall be
constituted to comply with Rule 16b-3 promulgated under the Securities Exchange
Act of 1934 or any successor rule.
"Common Stock" means the common stock of the Company (par value $.32 per share)
and shall include both treasury shares and authorized but unissued shares.
"Company" means Luby's Cafeterias, Inc.
"Fair Market Value" means the closing price of the Common Stock as reported by
the composite tape of New York Stock Exchange issues (or such other reporting
system as shall be selected by the Committee) on the relevant date, or if no
sale of Common Stock is reported for such date, the next following day for
which there is a reported sale.
"Participant" means an individual who has been granted an Award pursuant to the
Plan.
"1989 Plan" means the Management Incentive Stock Plan of the Company which was
adopted in 1989.
3. Eligibility. All employees of any of the following entities are
eligible to receive Awards under the Plan: (i) the Company, (ii) any
corporation or other entity that has elected to be taxed as a corporation for
federal income tax purposes (collectively "Entities"), other than the Company,
in an unbroken chain of Entities beginning with the Company if each of the
Entities other than the last Entity in the unbroken chain owns stock or
interests possessing more than fifty percent (50%) of the total combined voting
power of all classes of stock or interests in one of the other Entities in such
chain, (iii) partnerships and any other business entities in which the Company,
directly or indirectly, owns more than fifty percent (50%) of the capital and
profit interests. With regard to the issuance of incentive stock options, all
employees of any of the entities described in (i) and (ii) are eligible to
receive Awards under the Plan.
4. Common Stock Available for Awards. Subject to the adjustment
provisions of Section 10, the number of shares of Common Stock that may be
issued for Awards granted under the Plan is equal to the sum of: (a) 2,000,000
shares; (b) any shares of Common Stock available for future awards under the
1989 Plan as of the Effective Date; and (c) any shares of Common Stock
represented by awards granted under the 1989 Plan which are forfeited, expire,
or are canceled without delivery of Common Stock after the Effective Date, or
which result in the forfeiture of Common Stock back to the Company. In no
event will the number of shares of Common Stock which may be issued under the
Plan exceed 2,500,000. No Participant may receive, under the Plan, stock
options for more than 100,000 shares in any one year, except that stock options
may be granted to a newly hired employee for not more than 200,000 shares in
the first year of employment. Shares of Common stock related to Awards which
(i) are forfeited, (ii) expire unexercised, (iii) are settled in such manner
that all or some of the shares covered by an Award are not issued to a
Participant, (iv) are exchanged for Awards that do not involve Common Stock, or
(v) are tendered by a Participant upon exercise of a stock option in payment of
all or a portion of the option price shall be added back to the pool and shall
immediately become available for Awards.
5. Awards. The Committee shall select the persons who are to receive
Awards and shall determine the type or types of Award(s) to be made to each
Participant and shall set forth in the related Award Agreement the terms,
conditions, performance requirements, and limitations applicable to each Award
Awards may be granted singly, in combination, or in tandem. Awards may include
but are not limited to the following:
(a) Nonqualified Stock Options. A nonqualified stock option is a
right to purchase a specified number of shares of Common Stock at a fixed
option price equal to the Fair Market Value of the Common Stock on the date the
Award is granted, during a specified time, not to exceed ten years, as the
Committee may determine. The option price shall be payable:
(i) in U.S. dollars by personal check, bank draft, or by money order
payable to the order of the Company or by money transfer or
direct account debit; or
(ii) if the Committee so determines, through the delivery of shares
of Common Stock of the Company with a Fair Market Value equal to
all or a portion of the option price for the total number of
options being exercised; or
(iii) by a combination of the methods described in subsections (i) and
(ii) next above.
(b) Incentive Stock Options. An incentive stock option ("ISO") is an
Award which, in addition to being subject to applicable terms, conditions, and
limitations established by the Committee, complies with Section 422 of the
Code. Among other limitations, Section 422 of the Code currently provides
(i) that the aggregate Fair Market Value (determined at the time the option is
granted) of Common Stock for which ISOs are exercisable for the first time by
a Participant during any calendar year shall not exceed $100,000, (ii) that
ISOs shall be priced at not less than 100% of the Fair Market Value on the
date of the grant, and (iii) that ISOs shall be exercisable for a period of not
more than ten years. The Committee may provide that the option price under an
ISO can be paid by one or more of the methods described in subsection (a) next
above.
(c) Restricted Stock. Restricted Stock is Common Stock of the Company
that is subject to restrictions on transfer and/or such other restrictions on
incidents of ownership as the Committee may determine, for a required period of
continued employment of not less than three years as set by the Committee at
the time of Award. Restricted Stock Awards shall require no payments of
consideration by the Participant, either on the date of grant or the date the
restriction(s) are removed, unless specifically required by the terms of the
Award Agreement. The maximum number of shares of Restricted Stock which may be
issued under the Plan is 200,000.
(d) Performance Shares. A Performance Share is Common Stock of the
Company, or a unit valued by reference to Common Stock, that is subject to
restrictions on transfer and/or such other restrictions on incidents of
ownership as the Committee may determine. The elimination of restrictions on a
Performance Share and the number of shares ultimately earned by a Participant
shall be contingent upon achievement of one or more performance targets
specified by the Committee. Performance Shares may be paid in Common Stock,
cash, or a combination thereof. The Committee shall establish minimum
performance targets with respect to each Performance Share. Performance targets
may be based on financial criteria consisting of (i) revenue growth, (ii)
diluted earnings per share, (iii) net operating profit after taxes, (iv) cash
flow, (v) economic value added, or (vi) a combination of such criteria. No
Participant may receive, under the Plan, a Performance Share Award for any
award cycle in excess of 25,000 performance units or 25,000 shares of Common
Stock.
6. Certain Changes. Except as may be permitted under the provisions of
Section 10 or Section 11, no stock option issued pursuant to the Plan may be
(i) canceled by the Company or (ii) amended so as to reduce the option price,
unless such cancellation or amendment is approved by the shareholders of the
Company.
7. Award Agreements. Each Award under this Plan shall be evidenced by an
Award Agreement consistent with the provisions of the Plan setting forth the
terms and conditions applicable to the Award. Award Agreements shall include:
(a) Nonassignability. A provision that no Award shall be assignable or
transferable except by will or by the laws of descent and distribution and that
during the lifetime of a Participant, the Award shall be exercised only by such
Participant.
(b) Termination of Employment. Provisions governing the disposition of
an Award in the event of the retirement, disability, death, or other
termination of a Participant's employment or relationship to the Company or any
affiliate of the Company.
(c) Rights as a Shareholder. A provision that a Participant shall have
no rights as a shareholder with respect to any shares covered by an Award until
the date the Participant or his nominee becomes the holder of record. Except as
provided in Section 10 hereof, no adjustment shall be made for dividends or
other rights for which the record date is prior to such date, unless the Award
Agreement specifically requires such adjustment.
(d) Withholding. A provision requiring the withholding of all taxes
required by law from all amounts paid in cash. In the case of payments of
Awards in shares of Common Stock, the Participant may be required to pay the
amount of any taxes required to be withheld prior to receipt of such shares. A
Participant must in all instances pay the required withholding taxes in cash.
The withholding of shares to pay taxes shall not be permitted.
(e) Other Provisions. Such other terms and conditions, including the
criteria for determining vesting of Awards and the amount or value of Awards,
as the Committee determines to be necessary or appropriate. Without limiting
the generality of the foregoing, any stock option granted under the Plan may
provide, if the Committee so determines, that upon the occurrence of a "change
of control" (as defined in Section 11) the option shall immediately become
exercisable and shall remain exercisable for a period of one year after
termination of the optionee's employment but not later than the expiration date
of the option.
8. Administration. The Plan shall be administered by the Committee,
which shall have full and exclusive power to interpret the Plan, to grant
waivers of Award restrictions, and to adopt such rules, regulations, and
guidelines for carrying out the Plan as it may deem necessary or proper, all of
which powers shall be executed in the best interests of the Company and in
keeping with the objectives of the Plan. All questions of interpretation and
administration with respect to the Plan and Award Agreements shall be
determined by the Committee, and its determination shall be final and
conclusive. The Committee may delegate to the Chief Executive Officer of the
Company its administrative functions and authority to grant Awards under the
Plan pursuant to such conditions and limitations as the Committee may
establish, except that only the Committee may select, and grant Awards to,
Participants who are subject to Section 16 of the Securities Exchange Act of
1934.
9. Amendment, Modification, Suspension, or Discontinuance of the Plan.
The Board may amend, modify, suspend, or terminate the Plan for the purpose of
meeting or addressing any changes in legal requirements or for any other
purpose permitted by law. Subject to changes in law or other legal
requirements that would permit otherwise, the Plan may not be amended without
the consent of the holders of a majority of the shares of Common Stock then
outstanding (i) to increase the aggregate number of shares of Common Stock that
may be issued under the Plan (except for adjustments pursuant to Section 10 of
the Plan), (ii) to decrease the option price, (iii) to materially modify the
requirements as to eligibility for participation in the Plan, (iv) to withdraw
administration of the Plan from the Committee, or (v) to extend the period
during which Awards may be granted.
10. Adjustments. In the event of any change in the outstanding Common
Stock of the Company by reason of a stock split, stock dividend, combination or
reclassification of shares, recapitalization, merger, or similar event, the
Committee may adjust proportionally (a) the number of shares of Common Stock
(i) reserved under the Plan, (ii) for which Awards may be granted to an
individual Participant, and (iii) covered by outstanding Awards denominated in
stock or units of stock; (b) the stock prices related to outstanding Awards;
and (c) the appropriate Fair Market Value and other price determinations for
such Awards. In the event of any other change affecting the Common Stock or
any distribution (other than normal cash dividends) to holders of Common Stock,
such adjustments as may be deemed equitable by the Committee, including
adjustments to avoid fractional shares, may be made to give proper effect to
such event. In the event of a corporate merger, consolidation, acquisition of
property or stock, separation, reorganization or liquidation, the Committee
shall be authorized to issue or assume stock options, whether or not in a
transaction to which Section 424(a) of the Code applies, by means of
substitution of new stock options for previously issued stock options or an
assumption of previously issued stock options. The issuance of new stock
options for previously issued stock options or the assumption of previously
issued stock options in connection with a corporate merger, consolidation,
acquisition of property or stock, separation, reorganization or liquidation
shall not reduce the number of shares of Common Stock available for Awards
under the Plan.
11. Change of Control. (a) In the event of a change of control of the
Company, or if the Board reaches agreement to merge or consolidate with another
corporation and the Company is not the surviving corporation or if all, or
substantially all, of the assets of the Company are sold, or if the Company
shall make a distribution to shareholders that is nontaxable under the Code, or
if the Company shall dissolve or liquidate (a "Restructuring Event"), then the
Committee may, in its discretion, recommend that the Board take any of the
following actions as a result of, or in anticipation of, any such Restructuring
Event to assure fair and equitable treatment of Participants:
(i) accelerate time periods for purposes of vesting in, or realizing
gain from, any outstanding Award made pursuant to the Plan;
(ii) offer to purchase any outstanding Award made pursuant to the Plan
from the holder for its equivalent cash value, as determined by the
Committee, as of the date of the Restructuring Event; and
(iii) make adjustments or modifications to outstanding Awards as the
Committee deems appropriate to maintain and protect the rights and
interests of Participants following such Restructuring Event.
(b) Any such action by the Board shall be conclusive and binding on the
Company and all Participants. Notwithstanding the foregoing, the Committee
shall retain full authority to take, in its discretion, any of the foregoing
actions with respect to Awards held by Participants who are directors, and the
Board shall have no authority to act in any such matter.
(c) For purposes of this Section, "change of control" shall mean (i) the
acquisition by any person of voting shares of the Company, not acquired
directly from the Company, if, as a result of the acquisition, such person, or
any "group" as defined in Section 13(d)(3) of the Securities Exchange Act of
1934 of which such person is a part, owns at least 20% of the outstanding
voting shares of the Company; or (ii) a change in the composition of the Board
such that within any period of two consecutive years, persons who (a) at the
beginning of such period constitute the Board or (b) become directors after the
beginning of such period and whose election or nomination for election by the
shareholders of the Company was approved by a vote of at least two-thirds of
the persons who were either directors at the beginning of such period or whose
subsequent election or nomination was previously approved in accordance with
this clause (b), cease to constitute at least a majority of the Board; or
(iii) a merger, consolidation, reorganization, or similar restructuring
involving the Company is consummated and, as a result, the shareholders of the
Company immediately prior to such event own less than 50% of the voting shares
of the surviving entity outstanding immediately after such event.
12. Unfunded Plan. Insofar as it provides for Awards of cash and Common
Stock, the Plan shall be unfunded. Although bookkeeping accounts may be
established with respect to Participants who are entitled to cash, Common
Stock, or rights thereto under the Plan, any such accounts shall be used merely
as a bookkeeping convenience. The Company shall not be required to segregate
any assets that may at any time be represented by cash, Common Stock, or rights
thereto, nor shall the Plan be construed as providing for such segregation, nor
shall the Company or the Board or the Committee be deemed to be a trustee of
any cash, Common Stock, or rights thereto to be granted under the Plan. Any
liability of the Company or any of its affiliates to any Participant with
respect to a grant of cash, Common Stock, or rights thereto under the Plan
shall be based solely upon any contractual obligations that may be created by
the Plan and any Award Agreement; no such obligation of the Company or any of
its affiliates shall be deemed to be secured by any pledge or other encumbrance
on any property of the Company. Neither the Company nor the Board nor the
Committee shall be required to give any security or bond for the performance of
any obligation that may be created by the Plan.
13. Right of Discharge Reserved. Nothing in the Plan or in any Award
shall confer upon any employee or other individual the right to continue in the
employment or service of the Company or any affiliate of the Company or affect
any right the Company or any affiliate of the Company may have to terminate the
employment or service of any such employee or other individual at any time for
any reason.
14. Nature of Payments. All Awards made pursuant to the Plan are in
consideration of services performed for the Company or an affiliate of the
Company. Any gain realized pursuant to such Awards constitutes a special
incentive payment to the Participant and shall not be taken into account as
compensation for purposes of any of the employee benefit plans of the Company
or any affiliate of the Company.
15. Limited Stock Purchase Loans. During the period from the Effective
Date to March 25, 1999, the Company may, with the approval of the Committee,
make or guarantee loans to Participants who are officers of the rank of Vice
President and above, for the purpose of purchasing Common Stock. Each such
loan shall be for a maximum of five years, shall not exceed an amount equal to
50% of the Participant's annual base salary, and shall be subject to such
conditions as the Committee may prescribe with respect to recourse, interest,
security, and payment.
16. Notice. Any notice to the Company required by any of the provisions
of the Plan shall be addressed to the chief human resources officer or to the
Chief Executive Officer of the Company in writing and shall become effective
when it is received by the office of either of them.
17. Governing Law. The Plan shall be governed by, construed, and enforced
in accordance with the laws of the State of Texas without regard to the
conflicts of law provisions in any jurisdiction.
18. Effective and Termination Dates. The Plan shall become effective on
January 1, 1999, subject to approval of the shareholders of the Company at the
1999 annual meeting of shareholders. The Plan shall terminate on December 31,
2008, unless sooner terminated by the Board, after which no Awards may be made
under the Plan, but any such termination shall not affect Awards then
outstanding or the authority of the Committee to continue to administer the
Plan.
APPENDIX B
CERTAIN FEDERAL INCOME TAX ASPECTS
The following is only a general summary of the federal income tax effects
to the Participant and the Company of stock options, restricted stock, and
performance units to be granted under the New Plan. There are a number of
special tax rules which may be applicable under certain circumstances. This
discussion is based on the provisions of the Internal Revenue Code of 1986 as
amended (the "Code") and regulations and rulings in effect on the date of this
Proxy Statement, all of which are subject to change at any time. This summary
does not address state, local, or non-U.S. taxation of Awards under the New
Plan, which may differ significantly from federal income tax rules and
regulations.
Stock Options. Options granted under the Plan may be either "incentive
stock options," as defined in Section 422 of the Code, or "nonqualified
options," which are options that do not meet the requirements of Section 422.
To the extent that the aggregate fair market value of stock with respect to
which incentive stock options are exercisable for the first time by any
individual during any calendar year exceeds $100,000, such options shall be
treated as nonqualified options.
Incentive Stock Options. For federal income tax purposes, the grant or
exercise of an incentive stock option will not generally cause recognition of
income by the optionee; however, the amount by which the fair market value of a
share of common stock at the time of exercise of an incentive stock option
exceeds the option price will be treated as an "item of adjustment" for
purposes of the alternative minimum tax. In the event of a sale of the shares
received upon exercise of an incentive stock option more than two years from
the date of grant and more than one year from the date of exercise, any amount
received in excess of the exercise price should qualify as long-term capital
gain. However, if shares acquired pursuant to the exercise of an incentive
stock option are sold by the optionee before the completion of such holding
periods (and if the sale is a transaction with respect to which a loss, if
sustained, would be recognized to the optionee), so much of the gain as does
not exceed the difference between the option price and the lesser of the fair
market value of the shares at the date of exercise or the fair market value at
the date of disposition will be taxable as ordinary income for the taxable year
in which the sale occurs. Any additional gain realized on the sale should
qualify as a capital gain.
In some cases, the exercise of an incentive stock option after termination
of employment will not qualify for favorable tax treatment and will be treated
for tax purposes as the exercise of a nonqualified stock option. If employment
is terminated by reason of disability, the incentive stock option must be
exercised within one year thereafter in order to qualify for favorable tax
treatment. If employment is terminated for any other reason (except death),
the incentive stock option must be exercised within three months thereafter in
order to qualify for favorable tax treatment.
Nonqualified Stock Options. For federal income tax purposes, the grant of
a nonqualified stock option should not result in recognition of income by the
optionee. Upon exercise of a nonqualified stock option by an employee who is
not an officer or director, the excess of the fair market value of the shares
on the exercise date over the option price will be considered as compensation
taxable as ordinary income. If, however, at the time of exercise of the
option, the optionee is a director of the Company or an "officer" as defined in
Rule 16a-1 of the Securities and Exchange Commission, and if the sale of the
stock at a profit within six months could subject such person to suit under
Section 16(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), the
fair market value of the stock is determined, and the tax applicable thereto is
incurred, at the end of such six-month period or at such earlier time as may be
determined (i) by such person's election made within 30 days of the date of
exercise to be taxed sooner, or (ii) by the occurrence of an event which causes
Section 16(b) of the Exchange Act to become inapplicable to such person. In
the event of a gain or loss realized upon the sale of the shares received upon
exercise of a nonqualified stock option, the optionee will recognize long-term
or short-term capital gain or loss, depending on the optionee's holding period
for the shares.
The amount of compensation income realized as a result of the exercise of
nonqualified stock options is subject to income tax withholding by the Company.
An optionee may be required to pay to the Company the amount of taxes required
to be withheld even though no cash compensation has been received at the time
of exercise.
Performance Awards. The grant of performance awards under the Plan will
not result in recognition of income to the holder of an award. Upon payment of
a performance award, the amount paid (whether paid in cash or stock, or both)
is taxable for federal income tax purposes as ordinary income to the holder of
the award. The Company is generally entitled to a tax deduction for the amount
of such payment and is required to withhold income taxes on such amount. If
any part of the payment is made in stock to a director of the Company or an
"officer" of the Company as defined in Rule 16a-1 of the Securities and
Exchange Commission and if the sale of the stock at a profit within six months
could subject such person to suit under Section 16(b) of the Exchange Act,
the fair market value of the stock is determined, and the tax applicable
thereto is incurred and the deduction allowed, at the end of such six-month
period or at such earlier time as may be determined (i) by such person's
election made within 30 days of the date of payment to be taxed sooner or
(ii) by the occurrence of an event which causes Section 16(b) of the Exchange
Act to become inapplicable to such person.
Upon the sale of shares of common stock received in payment or in partial
payment of a performance award, the participant realizes long-term or short-
term capital gain or loss, and the Company receives no further tax deduction.
Restricted Stock. In general, the grant of restricted stock is not
taxable. Instead, at the time restricted stock vests, an employee will
recognize ordinary income equal to (1) the excess of the fair market value of
such restricted stock on the date the shares vest over (2) the price, if any,
paid for the restricted stock. Dividends paid on the shares before they vest
will be taxed as additional compensation to the employee. An employee may,
however, elect to recognize income as of the date of grant of the restricted
stock in an amount equal to (1) the excess of the fair market value of the
restricted stock on the date of grant over (2) the price, if any, paid for the
restricted stock. Such employee will not recognize a loss for tax purposes in
the event of a subsequent forfeiture of the shares.
Tax Consequences to the Company. With regard to nonqualified stock
options, the Company will generally be entitled to a deduction for federal
income tax purposes at the same time and in the same amount as the ordinary
income will be recognized by the optionee, provided that the amount of the
compensation is reasonable and any Federal income tax reporting and withholding
requirements are satisfied. With regard to incentive stock options, if the
holding period requirements outlined above that pertain to an incentive stock
option are satisfied, no deduction will be available to the Company either upon
the grant or exercise of an incentive stock option.
Under certain circumstances, the Company's deduction may also be limited
by the provisions of Section 162(m) of the Code. Section 162(m) generally
limits the Company's deduction for certain types of compensation paid to each
of its Chief Executive Officer and its four highest compensated officers (other
than the Chief Executive Officer) to no more than $1 million per year.
Under the so-called "golden parachute" provisions of the Code, certain
awards vested or paid in connection with a change of control may also be
nondeductible by the Company and may be subject to an additional twenty percent
(20%) federal excise tax. Nondeductible "parachute payments" will in general
reduce the $1 million limit on deductible compensation described above.
LUBY'S CAFETERIAS, INC.
c/o American Stock Transfer & Trust Company
40 Wall Street, New York, New York 10005
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints John B. Lahourcade, George H. Wenglein,
and David B. Daviss, and each of them, as Proxies, each with the power to
appoint his substitute, and hereby authorizes each of them to represent and to
vote, as designated below, all the shares of Common Stock of Luby's Cafeterias,
Inc. held on record by the undersigned on November 12, 1997,10, 1998, at the Annual
Meeting of Shareholders to be held on January 9, 1998,8, 1999, or any adjournment
thereof.
Nominees: Lauro F. Cavazos, John B. Lahourcade, George H. Wenglein
[x][X] Please mark your votes as in this example.
1. Election of DirectorsELECTION OF DIRECTORS
[ ] FOR [ ] WITHHELD
Nominees: Ronald K. Calgaard
Judith B. Craven
David B. Daviss
Arthur R. Emerson
Roger R. Hemminghaus
For, except vote withheld from the following nominee(s):
_______________________________________________________________________________________________________________
2. Proposal to amend the Certificate of Incorporation to change the corporate
name to "Luby's, Inc."
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to approve the Luby's Incentive Stock Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to approve the appointment of Ernst & Young LLP as the
independent public accountants of the corporation.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3.5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy
will be voted for proposals 1, 2, 3, and 2.4.
PLEASE MARK, SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE.
SIGNATURE _______________________________________________________________________ DATE _________________________________
SIGNATURE _______________________________________________________________________ DATE _________________________________
IF HELD JOINTLY
Note: Please sign exactly as name appears. 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.