EXHIBIT 99
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as to the
number of shares of Common Stock of the Company beneficially
owned by the principal shareholders of the Company.
Beneficial Ownership
Number of
Name and Address Shares Percent
The Capital Group Companies, Inc. 6,300,000 (1) 9.57%
333 South Hope Street
Los Angeles, California 90071
Capital Guardian Trust Company,
Capital International Limited,
and Capital International S.A. 5,427,460 (2) 8.24%
333 South Hope Street
Los Angeles, California 90071
FMR Corp. 5,107,400 (3) 7.76%
82 Devonshire Street
Boston, Massachusetts 02109
________________
(1) Based on information contained in Schedule 13G dated as
of December 31, 1997.
(2) Based on information contained in Schedule 13G dated as
of December 31, 1997. The listed companies are affiliated
entities.
(3) Based on information contained in Schedule 13G dated as
of December 31, 1997.
_____________
SECURITY OWNERSHIP OF MANAGEMENT
AND ELECTION OF DIRECTORS
Twelve (12) directors are to be elected at the meeting.
Each nominee will be elected to hold office until the next annual
meeting of the shareholders or until his or her successor is
elected and qualified. To be elected a director, each nominee
must receive a plurality of all of the votes cast at the meeting
for the election of directors. Should any nominee become unable
or unwilling to accept nomination or election, the proxy holders
may vote the proxies for the election, in his or her stead, of
any other person the Board of Directors may recommend. All
nominees have expressed their intention to serve the entire term
for which election is sought. The following table sets forth
certain information concerning security ownership of management
and nominees for election as directors of the Company:
Number of Shares Number Attributable to
of Common Stock Options Exercisable Percent
Beneficially Owned Within 60 Days of of
Name as of September 1, 1998 (1)(2) September 1, 1998 Class
Norman E. Brinker 1,984,009 (3) 1,183,750 2.96%
Douglas H. Brooks 414,294 327,470 *
Gerard V. Centioli 64,462 (4) 60,000 *
Ronald A. McDougall 965,022 940,000 1.45%
Russell G. Owens 136,469 115,447 *
Roger F. Thomson 176,000 172,500 *
Donald J. Carty 10,000 -0- *
Dan W. Cook, III -0- -0- *
Marvin J. Girouard -0- -0- *
J.M. Haggar, Jr. 77,687 23,917 *
Frederick S. Humphries 18,413 17,333 *
Ronald Kirk -0- -0- *
Jeffrey A. Marcus -0- -0- *
James E. Oesterreicher 20,500 20,000 *
Roger T. Staubach 31,500 21,000 *
All executive officers
and directors as a
group (20 persons) 4,225,094 3,143,970 6.12%
________________________
* Less than one percent (1%)
(1) Beneficial ownership has been determined in accordance
with the rules of the Securities and Exchange Commission.
Except as noted, and except for any community property
interests owned by spouses, the listed individuals have sole
investment power and sole voting power as to all shares of
stock of which they are identified as being the beneficial
owners.
(2) Includes shares of Common Stock which may be acquired
by exercise of options vested, or vesting within 60 days of
September 1, 1998, under the Company's 1983 Incentive Stock
Option Plan, 1984 Non-Qualified Stock Option Plan, 1992
Incentive Stock Option Plan and 1991 Stock Option Plan for
Non-Employee Directors and Consultants, as applicable.
(3) Includes 20,250 shares of Common Stock held of record by a
family trust of which Mr. Brinker is trustee.
(4) Includes 2,000 shares of Common Stock held of record by a
family trust of which Mr. Centioli is trustee.
The Company has established a guideline that all senior
officers of the Company own stock in the Company, believing that
it is important to further encourage and support an ownership
mentality among the senior officers that will continue to align
their personal financial interests with the long-term interests
of the Company's shareholders. Pursuant to the guideline, the
minimum amount of Company Common Stock that a senior officer will
be required to own will be determined by such officer's position
within the Company as well as annual compensation. The Company
has established a program with a third-party lender pursuant to
which the senior officers will be able to obtain financing for
purposes of attaining the stock ownership levels referred to
above. Any loans obtained by such senior officers to finance
such stock acquisitions are facilitated by the Company pursuant
to an agreement in which the senior officer pledges the
underlying stock and future incentive payments which may be
receivable from the Company as security for the loan.
DIRECTORS AND EXECUTIVE OFFICERS
Directors
A brief description of each person nominated to become a
director of the Company is provided below. All nominees are
currently serving as directors of the Company. Each of the
current directors was elected at the last annual meeting of the
Company's shareholders held on November 6, 1997, except Donald J.
Carty, who was appointed to the Board of Directors in June 1998,
and Marvin J. Girouard, who was appointed to the Board of
Directors in September 1998.
Norman E. Brinker, 67, served as Chairman of the Board of
Directors and Chief Executive Officer of the Company from
September 1983 to June 1995, with the exception of a brief period
during which Mr. Brinker was incapacitated due to an injury.
Mr. Brinker continues to serve as Chairman of the Board of
Directors. Mr. Brinker is a member of the Executive and
Nominating Committees of the Company. He was the founder of S&A
Restaurant Corp., having served as its President from February
1966 through May 1977 and as its Chairman of the Board of
Directors and Chief Executive Officer from May 1977 through July
1983. From June 1982 through July 1983, Mr. Brinker served as
Chairman of the Board of Directors and Chief Executive Officer of
Burger King Corporation, while simultaneously occupying the
position of President of The Pillsbury Company Restaurant Group.
Mr. Brinker currently serves as a member of the Board of
Directors of Haggar Clothing Company.
Ronald A. McDougall, 56, was elected President and Chief
Executive Officer of the Company in June 1995 having formerly
held the office of President and Chief Operating Officer since
1986. Mr. McDougall joined the Company in 1983 and served as
Executive Vice President - Marketing and Strategic Development
until his promotion to President. Prior to joining the Company,
Mr. McDougall held senior management positions at Proctor and
Gamble, Sara Lee, The Pillsbury Company and S&A Restaurant Corp.
Mr. McDougall has served as a member of the Board of Directors of
the Company since September 1983 and is a member of the Executive
and Nominating Committees of the Company. Mr. McDougall serves on
the Board of Directors of Excel Communications, Inc.
Gerard V. Centioli, 44, was elected Senior Vice President -
Emerging Concepts President and Chief Executive Officer in April
1997. Mr. Centioli joined the Company as Senior Vice President -
Maggiano's/Corner Bakery Concepts President and Chief Executive
Officer in August 1995 and was named Senior Vice President -
Italian Concepts President and Chief Executive Officer in January
1996. Mr. Centioli previously served as Senior Partner of
Lettuce Entertain You Enterprises, Inc. (restaurants) and
President and Chief Executive Officer of the Maggiano's Little
Italy and The Corner Bakery Divisions. Prior to joining Lettuce
Entertain You Enterprises, Inc. in 1984, Mr. Centioli served as
Vice President - Division President of Collins Foods
International, Inc. Mr. Centioli has served as a member of the
Board of Directors of the Company since November 1995.
Donald J. Carty, 51, was named Chairman, President and Chief
Executive Officer of AMR Corp. and American Airlines, Inc. in May
1998, after serving as President from March 1995 until May 1998.
From 1989 to 1995, he served American and AMR as Executive Vice
President - Finance and Planning. He joined American in 1978 and
held numerous finance and planning positions, with the exception
of a two-year hiatus as President and Chief Executive Officer of
CP Air in Canada. He is a graduate of Queen's University in
Kingston, Ontario and of the Harvard Graduate School of Business
Administration. He serves on the Board of Directors of Dell
Computer Corporation, the Canada - U.S. Foundation for
Educational Exchange, the Greater Dallas Chamber of Commerce and
the Dallas Citizens Council. He was elected to the Board of
Directors in June 1998.
Dan W. Cook, III, 63, is a limited partner with The Goldman
Sachs Group, L.P. (investment banking). Mr. Cook started with
The Goldman Sachs Group, L.P. in 1961 and was a partner when he
retired in 1992. Mr. Cook is a member of the Executive and
Compensation Committees of the Company and has served as a member
of the Board of Directors since October 1997. Mr. Cook also
serves on the Board of Directors for Centex Corporation. Mr.
Cook is a member of the Board of Trustees of Southern Methodist
University as well as Vice-Chair of the Edwin L. Cox School of
Business Executive Board.
Marvin J. Girouard, 59, is the President and Chief Executive
Officer of Pier 1 Imports, Inc., having been elected to the
position of President in August 1988 and Chief Executive Officer
in June 1998. Mr. Girouard also served as Chief Operating
Officer from 1988 to 1998. Mr. Girouard joined Pier 1 Imports in
1975 and has served on its Board of Directors since 1988. He
serves as a Director for Tandy Brands Accessories, Inc. and is a
member of the Executive Committee for the United States Committee
for UNICEF-The United Nations Children's Emergency Fund. Mr.
Girouard has served as a member of the Board of Directors of the
Company since September 1998.
J. M. Haggar, Jr., 73, is currently the owner of J.M.
Haggar, Jr. Investments, a business he has operated since
retiring as Chairman of the Board of Directors of Haggar Clothing
Company in February 1995. Mr. Haggar previously held the
positions of President and Chief Executive Officer of Haggar
Clothing Company until 1991. Mr. Haggar is a member of the
Compensation and Audit Committees of the Company and has served
as a member of the Company's Board of Directors since April 1985.
Frederick S. Humphries, 62, is the President of Florida A&M
University in Tallahassee, Florida, having held this position
since 1985. Prior to joining Florida A&M University,
Dr. Humphries was President of Tennessee State University in
Nashville for over 10 years. Dr. Humphries serves as a member of
the USDA Task Force of 1890 Land-Grant Institutions in addition
to being involved in various civic and community activities.
Dr. Humphries has served on the Board of Directors of the Company
since May 1994 and is a member of the Audit Committee of the
Company. He is also a member of the Board of Directors of Wal-
Mart, Inc.
Ronald Kirk, 44, is currently Mayor of the City of Dallas
and a partner in the law firm of Gardere & Wynne. He was elected
Mayor in 1995, and previously served as Secretary of State of the
State of Texas from 1994 to 1995. Mr. Kirk was engaged in the
private practice of law from 1989 to 1994, served as an Assistant
City Attorney for Dallas from 1983 to 1989 and as a legislative
aide to U.S. Senator Lloyd Bentsen from 1983 to 1989. Mayor Kirk
is an honors graduate of Austin College and earned his law degree
from The University of Texas. Mayor Kirk has served on the Board
of Directors since January 1997 and is a member of the Nominating
Committee of the Company.
Jeffrey A. Marcus, 51, is President and Chief Executive
Officer of Chancellor Media Corporation (radio broadcasting), a
position he has held since May 1998. Previously, Mr. Marcus was
Chairman, President and Chief Executive Officer of Marcus Cable
Company, a company he formed in 1990 after spending more than 20
years in the cable television industry. Mr. Marcus is active in
several civic and charitable organizations. Mr. Marcus has
served on the Board of Directors since January 1997 and is a
member of the Executive Committee of the Company.
James E. Oesterreicher, 57, is the Chairman of the Board and
Chief Executive Officer of J.C. Penney Company, Inc., having been
elected to the position of Chairman of the Board in January 1997
and to the position of Chief Executive Officer in January 1995.
Mr. Oesterreicher served as Vice Chairman of the Board from 1995
to 1997, as President of JCPenney Stores and Catalog from 1992 to
1995 and as Director of JCPenney Stores from 1988 to 1992.
Mr. Oesterreicher has been with the J.C. Penney Company since
1964 where he started as a management trainee. He serves as a
Director for various entities, including Texas Utilities Company,
Presbyterian Healthcare Systems, National Retail Federation,
Circle Ten Council--Boy Scouts of America, National 4-H Council,
National Organization on Disability and March of Dimes Birth
Defects Foundation. He also serves as a member of the Policy
Committee of the Business Roundtable. Mr. Oesterreicher has
served as a member of the Board of Directors of the Company since
May 1994 and is a member of the Compensation and Nominating
Committees of the Company.
Roger T. Staubach, 56, has been Chairman of the Board and
Chief Executive Officer of The Staubach Company, a national real
estate company specializing in tenant representation, since 1982.
He has served as a member of the Board of Directors of the
Company since May 1993 and is a member of the Executive Committee
of the Company. Mr. Staubach is a 1965 graduate of the
U.S. Naval Academy and served four years in the Navy as an
officer. In 1968 he joined the Dallas Cowboys professional
football team as quarterback and was elected to the National
Football League Hall of Fame in 1985. He currently serves on the
Board of Directors of American AAdvantage Funds and International
Home Foods, Inc., and is active in numerous civic, charity and
professional organizations.
Executive Officers
The following persons are executive officers of the Company
who are not nominated to serve on the Company's Board of
Directors:
Douglas H. Brooks, 46, joined the Company as an Assistant
Manager in February 1978 and was promoted to General Manager in
April 1978. In March 1979 Mr. Brooks was promoted to Area
Supervisor and in May 1982 to Regional Director. He was again
promoted in March 1987 to Senior Vice President-Central Region
Operations and to the position of Concept Head and Senior Vice
President - Chili's Operations in June 1992. Mr. Brooks became
Senior Vice President - Chili's Grill & Bar Concept President in
June 1994 and was promoted to his current position of Executive
Vice President and Chief Operating Officer in May 1998.
Leslie Christon, 44, was elected Senior Vice President - On
The Border President in April 1997, having previously served as
Vice President of Operations/On The Border since joining the
Company in July 1996. Prior to this time, Ms. Christon held the
position of Senior Vice President of Operations of Red Lobster
Restaurants from November 1994 to June 1996 and she was with El
Chico Restaurants, Inc. from June 1981 to November 1994. Ms.
Christon serves on the Board of Directors of the Women's
Foodservice Forum and is the past president of the Roundtable for
Women in Foodservice, Inc.
Kenneth D. Dennis, 45, joined the Company as a Manager in
November 1976 and was promoted to General Manager in June 1978.
In February 1979, he became Director of Internal Systems and in
September 1983 became Director of Marketing. Mr. Dennis was
promoted to Vice President of Marketing in August 1986 and to
Senior Vice President of Marketing in August 1993. In February
1997, Mr. Dennis became Senior Vice President - Chief Operating
Officer of Cozymel's and was elected to Senior Vice President -
Cozymel's President in September 1997. Mr. Dennis serves on the
Board of Directors of the Marketing Executives Group and is the
past Co-Chairman.
Todd E. Diener, 41, joined the Company as a Chili's Manager
Trainee in November 1981. In May 1983, Mr. Diener was promoted
to General Manager and in April 1985 to Area Director. He was
promoted to Regional Director in 1987, Regional Vice President in
1989, Senior Vice President/Chief Operating Officer in July 1996
and in May 1998, Mr. Diener was promoted to Senior Vice President
- - Chili's Grill & Bar Concept President.
Carol E. Kirkman, 41, was appointed Executive Vice President
of Human Resources in June 1997 after serving as Senior Vice
President of Human Resources since April 1996. Ms. Kirkman
joined the Company as Corporate Counsel in 1990 and was promoted
to Vice President/Assistant General Counsel in 1994. Ms. Kirkman
was an attorney in private practice in Dallas, Texas, from 1982
until 1987 and worked as a commercial and retail real estate
broker in southern California from 1987 until 1990.
John C. Miller, 43, joined the Company as Vice President-
Special Concepts in September 1987. In October 1988, he was
elected as Vice President - Joint Venture/Franchise and served in
this capacity until August 1993 when he was promoted to Senior
Vice President - New Concept Development. Mr. Miller was named
Senior Vice President - Mexican Concepts in September 1994 and
was subsequently elected Senior Vice President - Mexican Concepts
President in October 1995. In April 1997, Mr. Miller was elected
Senior Vice President - Romano's Macaroni Grill President. Prior
to joining the Company, Mr. Miller worked in various capacities
with the Taco Bueno Division of Unigate Restaurants.
Russell G. Owens, 39, joined the Company in 1983 as
Controller. He was elected Vice President of Planning in 1986
and Vice President of Operations Analysis in 1991. Mr. Owens was
promoted to Senior Vice President of Operations Analysis in 1993
and was named Senior Vice President of Strategic Development -
Italian Concepts in 1996. Mr. Owens was elected Executive Vice
President and Chief Strategic Officer in June 1997 and became
Chief Financial and Strategic Officer in September 1997. Prior
to joining the Company, Mr. Owens worked for the public
accounting firm, Deloitte & Touche.
Roger F. Thomson, 49, joined the Company as Senior Vice
President, General Counsel and Secretary in April 1993 and was
promoted to Executive Vice President, General Counsel and
Secretary in March 1994. In June 1996, Mr. Thomson was promoted
to the position of Executive Vice President, Chief Administrative
Officer, General Counsel and Secretary and was a Director of the
Company from 1993 until 1995. From 1988 until April 1993,
Mr. Thomson served as Senior Vice President, General Counsel and
Secretary for Burger King Corporation. Prior to 1988,
Mr. Thomson spent ten years at S & A Restaurant Corp. where he
was Executive Vice President, General Counsel and Secretary.
Classes of Directors
For purposes of determining whether non-employee directors
will be nominated for reelection to the Board of Directors, the
non-employee directors have been divided into four classes. Each
non-employee director will continue to be subject to reelection
by the shareholders of the Company each year. However, after a
non-employee director has served on the Board of Directors for
four years, such director shall be deemed to have been advised by
the Nominating Committee that he or she will not stand for
reelection at the subsequent annual meeting of shareholders and
shall be considered a "Retiring Director." Notwithstanding this
policy, the Nominating Committee may determine that it is
appropriate to renominate any or all of the Retiring Directors
after first considering the appropriateness of nominating new
candidates for election to the Board of Directors. The four
classes of non-employee directors are as follows: Messrs.
Girouard, Humphries and Oesterreicher comprise Class 1 and will
be considered Retiring Directors as of the annual meeting of
shareholders following the end of the 2002 fiscal year. There
are no members of Class 2. Messrs. Haggar, Kirk and Marcus
comprise Class 3 and will be considered Retiring Directors as of
the annual meeting of shareholders following the end of the 2000
fiscal year. Messrs. Carty, Cook and Staubach comprise Class 4
and will be considered Retiring Directors as of the annual
meeting of shareholders following the end of the 2001 fiscal
year.
Committees of the Board of Directors
The Board of Directors of the Company has established an
Executive Committee, Audit Committee, Compensation Committee, and
Nominating Committee. The Executive Committee (currently
comprised of Messrs. Brinker, McDougall, Cook, Marcus, and
Staubach) met four (4) times during the fiscal year. The
Executive Committee reviews material matters during the intervals
between Board meetings, provides advice and counsel to Company
management during such intervals, and has the authority to act
for the Board on most matters during the intervals between Board
meetings. In addition, the Executive Committee is also charged
with assuring that the Company has a satisfactory succession
management plan for all key management positions.
All of the members of the Audit and Compensation Committees
are directors independent of management who are not and never
have been officers or employees of the Company. The Audit
Committee is currently comprised of Messrs. Haggar and Humphries
and met four (4) times during the fiscal year. Included among the
functions performed by the Audit Committee are: the review with
independent auditors of the scope of the audit and the results of
the annual audit by the independent auditors, consideration and
recommendation to the Board of the selection of the independent
auditors for the next year, the review with management and the
independent auditors of the annual financial statements of the
Company, and the review of the scope and adequacy of internal
audit activities.
The Compensation Committee is currently comprised of
Messrs. Cook, Haggar and Oesterreicher and it met four (4) times
during the fiscal year. Functions performed by the Compensation
Committee include: reviewing the performance of the Chief
Executive Officer, approving key executive promotions, ensuring
the reasonableness and appropriateness of senior management
compensation arrangements and levels, the adoption, amendment and
administration of stock-based incentive plans (subject to
shareholder approval where required), management of the various
stock option plans of the Company, approval of the total number
of available shares to be used each year in stock-based plans,
and approval of the adoption and amendment of significant
compensation plans. The specific nature of the Committee's
responsibilities as they relate to executive officers is set
forth below under "Report of the Compensation Committee."
The purposes of the Nominating Committee are to recommend to
the Board of Directors potential non-employee members to be added
as new or replacement members to the Board of Directors, to
review the compensation paid to non-management Board members, and
to recommend corporate governance guidelines to the full Board of
Directors. The Nominating Committee will consider a shareholder-
recommended nomination for director to be voted upon at the 1999
annual meeting of shareholders provided that the recommendation
must be in writing, set forth the name and address of the
nominee, contain the consent of the nominee to serve, and be
submitted on or before May 21, 1999. The Nominating Committee is
composed of Messrs. Brinker, McDougall, Kirk and Oesterreicher
and it met two (2) times during the fiscal year.
Directors' Compensation
Directors who are not employees of the Company receive
$1,000 for each meeting of the Board of Directors attended and
$1,000 for each meeting of any committee of the Board of
Directors attended. The Company also reimburses directors for
costs incurred by them in attending meetings of the Board.
Directors who are not employees of the Company receive
grants of stock options under the Company's 1991 Stock Option
Plan for Non-Employee Directors and Consultants. A new director
who is not an employee of the Company will receive as
compensation (a) 20,000 stock options at the beginning of such
director's term, and (b) an annual payment of $36,000, at least
25% of which must be taken in the form of stock options. If a
director is appointed to the Board of Directors at any time other
than at an annual meeting of shareholders, the director will
receive a prorated portion of the annual cash compensation for
the period from the date of election or appointment to the Board
of Directors until the meeting of the Board of Directors held
contemporaneous with the next annual meeting of shareholders. If
a director elects to receive cash, the first payment will be made
at the Board of Directors' meeting held contemporaneous with the
next annual meeting of shareholders. The stock options will be
granted as of the 60th day following such meeting (or if the 60th
day is not a business day, on the first business day thereafter)
at the fair market value on the date of grant. One-third (1/3)
of the options will vest on each of the second, third and fourth
anniversaries of the date of grant. If a director is a Retiring
Director who is being nominated for an additional term on the
Board of Directors, each such renominated director will receive
an additional grant of 10,000 stock options at the beginning of
such director's new term.
For purposes of applying this compensation program to the
current non-employee directors of the Company, the previous
compensation program was blended with this compensation program
in order to determine annual compensation payable to non-employee
directors until such directors become Retiring Directors and
leave the Board or are approved by the Nominating Committee to
serve for an additional four years. Dr. Humphries previously has
received a grant of 15,000 stock options and has received an
annual cash retainer of $16,000; Mr. Oesterreicher previously has
received a grant of 15,000 stock options and has received an
annual cash retainer of $6,000. As Messrs. Humphries and
Oesterreicher are currently Retiring Directors, if they are re-
elected to the Board of Directors, they will be compensated
according to the new compensation plan. If Mr. Girouard is
elected to the Board of Directors, he will be compensated
according to the new compensation plan. Messrs. Carty, Cook,
Haggar, Kirk, Marcus, and Staubach are being compensated
according to the new compensation plan.
During the year ended June 24, 1998, the Board of Directors
held six (6) meetings; each incumbent director attended at least
75% of the aggregate total of meetings of the Board of Directors
and Committees on which he or she served.
EXECUTIVE COMPENSATION
The following summary compensation table sets forth the
annual compensation for the Company's five highest compensated
executive officers, including the Chief Executive Officer, whose
salary and bonus exceeded $100,000 in fiscal 1998.
Summary Compensation Table
Long-Term Compensation
Awards Payouts
Securities Long-Term
Name and Annual Compensation Underlying Incentive All Other
Principal Position Year Salary Bonus Options Payouts Compensation (1)
Ronald A. McDougall
President and Chief 1998 $ 861,442 $1,033,731 200,000 $ 76,633 $ 30,397
Executive Officer 1997 $ 825,000 $ 396,000 200,000 $ 67,289 $ 29,194
1996 $ 744,808 $ -0- 375,000 $ 69,860 $ 18,396
Douglas H. Brooks
Executive Vice 1998 $ 387,308 $ 255,623 60,000 $ 45,980 $ 16,595
President and Chief 1997 $ 333,654 $ 120,462 50,000 $ 33,645 $ 20,818
Operating Officer 1996 $ 311,058 $ -0- 90,000 $ 31,049 $ 12,830
Roger F. Thomson
Executive Vice 1998 $ 334,692 $ 267,754 50,000 $ 57,475 $ 16,501
President, Chief 1997 $ 317,231 $ 104,940 50,000 $ 40,374 $ 16,680
Administrative Officer,1996 $ 256,827 $ -0- 90,000 $ 31,049 $ 6,641
General Counsel and
Secretary
Gerard V. Centioli
Senior Vice President 1998 $ 289,841 $ 231,783 50,000 $ 30,653 $ 58,686
- Emerging Concepts 1997 $ 276,768 $ 100,000 50,000 $ -0- $ 19,791
President and Chief 1996 $ 127,739 $ -0- 90,000 $ -0- $ 5,315
Executive Officer
Russell G. Owens
Executive Vice 1998 $ 286,577 $ 229,262 50,000 $ 37,473 $ 13,319
President and Chief 1997 $ 187,231 $ 41,931 20,000 $ 26,916 $ 12,589
Financial and 1996 $ 168,846 $ -0- 90,000 $ 23,287 $ 7,437
Strategic Officer
_________________
(1) All other compensation represents Company match on deferred
compensation.
Option Grants During 1998 Fiscal Year
The following table contains certain information concerning
the grant of stock options pursuant to the Company's 1992
Incentive Stock Option Plan to the executive officers named in
the above compensation table during the Company's last fiscal
year:
% of Total Realizable Value of
Options Assumed Annual Rates of
Granted to Stock Price Appreciation
Options Employees in Exercise or Expiration for Option Term (1)
Name Granted Fiscal Year Base Price Date 5% 10%
Ronald A. McDougall 200,000 12.04% $14.00 10/31/07 $1,760,905 $4,462,479
Douglas H. Brooks 60,000 3.61% $14.00 10/31/07 $ 528,271 $1,338,744
Roger F. Thomson 50,000 3.01% $14.00 10/31/07 $ 440,226 $1,115,620
Gerard V. Centioli 50,000 3.01% $14.00 10/31/07 $ 440,226 $1,115,620
Russell G. Owens 50,000 3.01% $14.00 10/31/07 $ 440,226 $1,115,620
_________________
(1) The dollar amounts under these columns are the result of
calculations at the 5% and 10% rates set by the Securities and
Exchange Commission and, therefore, are not intended to forecast
possible future appreciation, if any, of the Company's stock
price.
Stock Option Exercises and Fiscal Year-End Value Table
The following table shows stock option exercises by the
named officers during the last fiscal year, including the
aggregate value of gains on the date of exercise. In addition,
this table includes the number of shares covered by both
exercisable and non-exercisable stock options at fiscal year-end.
Also reported are the values for "in-the-money" options which
represent the position spread between the exercise price of any
such existing options and the $19.75 fiscal year-end price of the
Company's Common Stock.
Shares Value of Unexercised
Acquired Number of Unexercised In-the-Money Options at
On Value Options at Fiscal Year End Fiscal Year End
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
Ronald A. McDougall -0- -0- 877,500 712,500 $2,815,553 $5,046,875
Douglas H. Brooks 98,603 $1,739,315 369,425 185,000 $3,131,433 $1,297,500
Roger F. Thomson -0- -0- 157,500 175,000 $ 261,930 $1,240,000
Gerard V. Centioli -0- -0- 30,000 190,000 $ 183,750 $1,307,500
Russell G. Owens -0- -0- 100,447 145,000 $ 610,099 $ 981,250
Long-Term Performance Share Plan and Awards
Executives of the Company participate in the Long-Term
Performance Share Plan. See "Report of the Compensation
Committee - Long-Term Incentives" for more information regarding
this plan. The following table represents awards granted in the
last fiscal year under the Long-Term Performance Share Plan.
Number of Estimated Future Payouts
Name Units Awarded Under Non-Stock Based Plans
(Dollars)
Threshold Target Maximum
Ronald A. McDougall 1,000 * $100,000 *
Douglas H. Brooks 600 * $ 60,000 *
Roger F. Thomson 750 * $ 75,000 *
Gerard V. Centioli 400 * $ 40,000 *
Russell G. Owens 575 * $ 57,500 *
______________________
* Future payouts under the Long-Term Performance Share
Plan have no minimum threshold and have no maximum
limit as set forth in more detail in "Report of the
Compensation Committee - Long Term Incentives."
REPORT OF THE COMPENSATION COMMITTEE
Compensation Philosophy
The executive compensation program is designed as a tool to
reinforce the Company's strategic principles - to be a premier
and progressive growth company with a balanced approach towards
people, quality and profitability and to enhance long-term
shareholder value. To this end, the following principles have
guided the development of the executive compensation program:
Provide competitive levels of compensation to attract and
retain the best qualified executive talent. The Committee
strongly believes that the caliber of the Company's
management group makes a significant difference in the
Company's sustained success over the long term.
Embrace a pay-for-performance philosophy by placing
significant amounts of compensation "at risk" - that is,
compensation payouts to executives must vary according to
the overall performance of the Company.
Directly link executives' interests with those of
shareholders by providing opportunities for long-term
incentive compensation based on changes in shareholder
value.
The executive compensation program is intended to
appropriately balance the Company's short-term operating goals
with its long-term strategy through a careful mix of base salary,
annual cash incentives and long-term performance compensation
including cash incentives and incentive stock options.
Base Salaries
Executives' base salaries and total compensation are
targeted to be competitive between the 75th and 90th percentiles
of the market for positions of similar responsibility and scope
to reflect the exceptionally high level of executive talent
required to execute the growth plans of the Company. Positioning
executives' base salaries at these levels is needed for
attracting, retaining and motivating executives with the
essential qualifications for managing the Company's growth. The
Company defines the relevant labor market for such executive
talent through the use of third-party executive salary surveys
that reflect both the chain restaurant industry as well as a
broader cross-section of companies from many industries.
Individual base salary levels are determined by considering
market data for each officer's position, level of responsibility,
performance, and experience. The overall amount of base salary
increases awarded to executives reflects the financial
performance of the Company, individual performance and potential,
and/or changes in an officer's duties and responsibilities.
Annual Incentives
The Company's Profit Sharing Plan is a non-qualified annual
incentive arrangement in which all corporate employees, including
executives, participate. The program is designed to reflect
employees' contribution to the growth of the Company's common
stock value by increasing the earnings of the Company. The plan
reinforces a strong teamwork ethic by making the basis for
payouts to non-restaurant concept executives the same as for all
other non-restaurant concept corporate employees and by making
the basis for payouts to executives of one of the Company's
restaurant concepts the same as for all other members of such
restaurant concept's corporate team.
At the beginning of a fiscal year, each executive is
assigned an Individual Participation Percentage ("IPP") which is
tied to the base salary for such executive and targets overall
total cash compensation for executives between the 75th and 90th
percentiles of the market. The IPPs reflect the Committee's
desire that a significant percentage of executives' total
compensation be derived from variable pay programs.
401(k) Savings Plan and Savings Plan II
On January 1, 1993, the Company implemented the 401(k)
Savings Plan ("Plan I") and Savings Plan II ("Plan II"). These
Plans are designed to provide the Company's salaried employees
with a tax-deferred long-term savings vehicle. The Company
provides a matching contribution equal to 25% of a participant's
contribution, up to a maximum of 5% of such participant's
compensation.
Plan I is a qualified 401(k) plan. Participants in Plan I
elect the percentage of pay they wish to contribute as well as
the investment alternatives in which their contributions are to
be invested. The Company's matching contribution for all Plan I
participants is made in Company common stock. All participants
in Plan I are considered non-highly compensated employees as
defined by the Internal Revenue Service. Participants'
contributions vest immediately while Company contributions vest
25% annually, beginning in the participant's second year of
eligibility since Plan I inception.
Plan II is a non-qualified deferred compensation plan.
Plan II participants elect the percentage of pay they wish to
defer into their Plan II account. They also elect the percentage
of their deferral account to be allocated among various
investment options. The Company's matching contribution for all
non-officer Plan II participants is made in Company common stock,
with corporate officers receiving a Company match in cash.
Participants in Plan II are considered a select group of
management and highly compensated employees according to the
Department of Labor. A participant's contributions vest
immediately while Company contributions vest 25% annually,
beginning in the participant's second year of eligibility since
Plan II inception.
Long-Term Incentives
All salaried employees above a specified grade level of the
Company, including executives, are eligible for annual grants of
tax-qualified and non-qualified stock options. By tying a
significant portion of executives' total opportunity for
financial gain to increases in shareholder wealth as reflected by
the market price of the Company's common stock, executives'
interests are closely aligned with shareholders' long-term
interests. In addition, because the Company does not maintain
any qualified retirement programs for executives, the stock
option plan is intended to provide executives with opportunities
to accumulate wealth for later retirement.
Stock options are rights to purchase shares of the Company's
Common Stock at the fair market value on the date of grant.
Grantees do not receive a benefit from stock options unless and
until the market price of the Company's common stock increases.
Fifty percent (50%) of a stock option grant becomes exercisable
two years after the grant date; the remaining 50% of a grant
becomes exercisable three years after the grant date.
The number of stock options granted to an executive is
determined by the Compensation Committee and is based on grant
guidelines set by the Compensation Committee that reflect market
data and the officer's position within the Company.
Executives also participate in the Long-Term Executive
Profit Sharing Plan, a non-qualified long-term performance cash
plan. This plan provides an additional mechanism for focusing
executives on the sustained improvement in operating results over
the long term. This is a performance-related plan using
overlapping three-year cycles paid annually. Performance units
(valued at $100 each) are granted to individuals and paid in cash
based upon the Company's attainment of predetermined performance
objectives. Long-term operating results are measured by
evaluating both pre-tax net income (weighted 70%) and changes in
shareholders' equity (weighted 30%) over three-year cycles. The
Long-Term Executive Profit Sharing Plan will continue in effect
through the cycle which includes fiscal years 1997, 1998, and
1999. The Long-Term Executive Profit Sharing Plan has been
replaced by the Long-Term Performance Share Plan commencing with
the cycle which includes fiscal years 1998, 1999, and 2000. The
Long-Term Performance Share Plan is based on the Company's total
shareholder return in comparison to the S&P 500 Index and the S&P
Restaurant Industry Index. For executives to receive the target
payout, the Company must perform at the 75th percentile of each
index over the three-year cycle and must average at least 90% of
its planned annual profit before taxes over the same three-year
cycle.
Pay/Performance Nexus
The Company's executive compensation program has resulted in
a direct relationship between the compensation paid to executive
officers and the Company's performance. See "Five-Year Total
Shareholder Return Comparison" below.
CEO Compensation
The Compensation Committee made decisions regarding Mr.
McDougall's compensation package according to the guidelines
discussed in the preceding sections. Mr. McDougall was awarded a
salary increase in the amount of 6.3%, effective June 25, 1998,
to recognize his vast experience in the restaurant industry, the
Company's performance under his leadership and his significant
contributions to the Company's continued success. Mr. McDougall
was granted 1,000 units under the Long-Term Executive Profit
Sharing Plan for the cycle which includes fiscal years 1998,
1999, and 2000. Mr. McDougall was also granted 200,000 stock
options under the Company's stock option plan. Approximately
51.6% of Mr. McDougall's compensation for 1998 was incentive pay
pursuant to the Company's Profit Sharing Plan. Like all Company
executives, Mr. McDougall's compensation is significantly
affected by the Company's performance. In the 1998 fiscal year,
Mr. McDougall's total compensation increased 52% from its level
in the 1997 fiscal year.
Federal Income Tax Considerations
The Compensation Committee has considered the impact of
Section 162(m) of the Internal Revenue Code adopted under the
Omnibus Budget Reconciliation Act of 1993. This section
disallows a tax deduction for any publicly-held corporation for
individual compensation to certain executives of such corporation
exceeding $1,000,000 in any taxable year, unless compensation is
performance-based. It is the intent of the Company and the
Compensation Committee to qualify to the maximum extent possible
its executives' compensation for deductibility under applicable
tax laws. The Compensation Committee believes that the Company's
compensation programs provide the necessary incentives and
flexibility to promote the Company's performance-based
compensation philosophy while being consistent with Company
objectives.
The Compensation Committee's administration of the executive
compensation program is in accordance with the principles
outlined at the beginning of this report. The Company's
financial performance supports the compensation practices
employed during the past year.
Respectfully submitted,
COMPENSATION COMMITTEE
DAN W. COOK, III
J.M. HAGGAR, JR.
JAMES E. OESTERREICHER