SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the 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 ss.240.14a-11(c) or ss.240.14a-12
TOTAL ENTERTAINMENT RESTAURANT CORP.
________________________________________________________________________________
(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)(4) and 0-11.
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3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
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the Form or Schedule and the date of its filing.
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<PAGE>
TOTAL ENTERTAINMENT RESTAURANT CORP.
9300 East Central Avenue
Suite 100
Wichita, Kansas 67206
----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held on May 22, 2000
----------
To the Stockholders:
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders (the
"Meeting") of TOTAL ENTERTAINMENT RESTAURANT CORP., a Delaware corporation (the
"Company"), will be held at the Spaghetti Warehouse, 101 West Worthington,
Charlotte, NC 28203, on May 22, 2000 at 2:00 p.m. local time, for the following
purposes:
1. To elect three (3) members of the Board of Directors to serve until
the 2003 Annual Meeting of Stockholders and until their successors
have been duly elected and qualified;
2. To ratify the appointment of Grant Thornton, LLP as the Company's
independent auditors for the fiscal year ending December 26, 2000;
and
3. To transact such other business as may properly be brought before
the Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 14, 2000
as the record date for the Meeting. Only stockholders of record on the stock
transfer books of the Company at the close of business on that date are entitled
to notice of, and to vote at, the Meeting.
By Order of the Board of Directors
JAMES K. ZIELKE
Secretary
Dated: April 21, 2000.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, YOU ARE URGED TO FILL
IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE THAT IS PROVIDED,
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
TOTAL ENTERTAINMENT RESTAURANT CORP.
9300 East Central Avenue
Suite 100
Wichita, Kansas 67206
----------
PROXY STATEMENT
FOR
2000 ANNUAL MEETING OF STOCKHOLDERS
May 22, 2000
----------
INTRODUCTION
This Proxy Statement is being furnished to stockholders by the Board of
Directors of Total Entertainment Restaurant Corp., a Delaware corporation (the
"Company"), in connection with the solicitation of the accompanying Proxy for
use at the 2000 Annual Meeting of Stockholders of the Company (the "Meeting") to
be held at the Spaghetti Warehouse, 101 West Worthington, Charlotte, North
Carolina 28203, on May 22, 2000 at 2:00 p.m. local time, or at any adjournments
thereof.
The principal executive offices of the Company are located 9300 East
Central Avenue, Suite 100, Wichita, Kansas 67206. The approximate date on which
this Proxy Statement and the accompanying Proxy will first be sent or given to
stockholders is April 21, 2000.
RECORD DATE AND VOTING SECURITIES
Only stockholders of record at the close of business on April 14, 2000,
the record date (the "Record Date") for the Meeting, will be entitled to notice
of, and to vote at, the Meeting and any adjournments thereof. As of the close of
business on the Record Date, there were outstanding 9,466,571 shares of the
Company's common stock, $.01 par value (the "Common Stock"). Each outstanding
share of Common Stock is entitled to one vote. There was no other class of
voting securities of the Company outstanding on the Record Date. A majority of
the outstanding shares of Common Stock present in person or by proxy is required
for a quorum.
ATTENDANCE AT THE ANNUAL MEETING
For admission to the Annual Meeting, stockholders who own shares of Common
Stock in their own names should come to the stockholders check-in table, where
their ownership will be verified. Those who have beneficial ownership of Common
Stock that is held of record by a bank or broker (often referred to as "holding
in street name") should also come to the stockholders check-in table; they must
bring acccount statements or letters from their banks or brokers indicating that
they owned the Company's Common Stock as of the Record Date.
VOTING OF PROXIES
Shares of Common Stock represented by Proxies, which are properly
executed, duly returned and not revoked, will be voted in accordance with the
instructions contained therein. If no specification is indicated on the Proxy,
the shares of Common Stock represented thereby will be voted (i) for the
election as Directors of the persons who have been nominated by the Board of
Directors, (ii) for the ratification of the appointment of Grant Thornton, LLP
as the Company's independent auditors for the fiscal year ending December 26,
2000 and (iii) for any other matter that may properly be brought before the
Meeting in accordance with the judgment of the person or persons voting the
Proxy. The execution of a Proxy will in no way affect a stockholder's right to
attend the Meeting and vote in person. Any Proxy executed and returned by a
stockholder may be revoked at any time thereafter if written notice of
revocation is given to the Secretary of the Company prior to the vote to be
taken at the Meeting, or by execution of a subsequent proxy which is presented
to the Meeting, or if the stockholder attends the Meeting and votes by ballot,
except as to any matter or matters upon which a vote shall have been cast
pursuant
<PAGE>
to the authority conferred by such Proxy prior to such revocation. For purposes
of determining the presence of a quorum for transacting business at the Meeting,
abstentions and broker "non-votes" (i.e., proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owner or other persons entitled to vote shares on a particular matter with
respect to which the brokers or nominees do not have discretionary power) will
be treated as shares that are present but which have not been voted.
The cost of solicitation of the Proxies being solicited on behalf of the
Board of Directors will be borne by the Company. In addition to the use of the
mails, proxy solicitation may be made by telephone, telegraph and personal
interview by officers, directors and employees of the Company. The Company will,
upon request, reimburse brokerage houses and persons holding Common Stock in the
names of their nominees for their reasonable expenses in sending soliciting
material to their principals.
SECURITY OWNERSHIP
The following table sets forth information concerning ownership of the
Company's Common Stock, as of April 14, 2000, by each person known by the
Company to be the beneficial owner of more than five percent of the Common
Stock, each director, nominee for director, each executive officer as defined in
Item 402(a)(3) of Regulation S-K ("Item 402(a)(3)") and by all directors and
executive officers of the Company as a group. Unless otherwise indicated, the
address for five percent stockholders, directors and executive officers of the
Company is 9300 East Central Avenue, Suite 100, Wichita, Kansas 67206.
<TABLE>
<CAPTION>
Name and Address Shares Percentage
of Beneficial Owner Beneficially Owned of Class
------------------- ------------ --------------
<S> <C> <C>
Dennis L. Thompson (1) .......................................... 629,612 6.6
Stephen P. Hartnett(2) .......................................... 404,573 4.3
Steven M. Johnson (3) ........................................... 159,583 1.7
Gary M. Judd (4) ................................................ 186,667 2.0
Christopher L. Wettig (5) ....................................... 150,602 1.6
James K. Zielke (6) ............................................. 80,000 *
J. Chris Weinberg (7) ........................................... 99,000 1.0
Thomas A. Hager (8) ............................................. 765,517 8.1
C. Wells Hall, III (9) .......................................... 72,633 *
E. Gene Street (10) ............................................. 9,833 *
John D. Harkey, Jr. (11) ........................................ 7,333 *
Jamie B. Coulter (12) ........................................... 2,129,667 22.1
2808 McKinnney
Dallas, Texas 75204
Organized Capital II, Ltd. (2) .................................. 526,800 5.6
4504 Winewood Court
Colleyville, Texas 76034
United II Strategic Trading, Inc (2) ............................ 641,240 6.8
4504 Winewood Court
Colleyville, Texas 76034
Cracken, Harkey, Street & Co., L.L.C. (10,11) ................... 37,500 *
12200 Stemmons Freeway, Suite 100
Dallas, Texas 75234
All directors and executive officers as a group (11 persons) (10) 2,565,353 26.7
</TABLE>
- ----------
* Less than 1%
(1) Includes (a) presently exercisable options to purchase 7,667 shares of
Common Stock, (b) 267,795 shares held by Mr. Thompson's wife, Sharon K.
Thompson, of which Mr. Thompson disclaims beneficial ownership, and (c)
55,000 shares held by the Thompson Family Limited Partnership, of which
Mr. Thompson is the general partner. Mr. Thompson disclaims beneficial
ownership of these shares except to the extent of his equity
2
<PAGE>
interest therein. Excludes 40,000 shares held by Mr. Thompson's adult
children to which Mr. Thompson disclaims beneficial ownership.
(2) Includes presently exercisable options to purchase 3,333 shares of Common
Stock. Excludes 526,800 shares held by Organized Capital II, Ltd. Mr.
Hartnett is a trading advisor to this entity and is the sole stockholder
of its corporate general partner. Mr. Hartnett holds 3.7137% and Mr.
Hartnett's wife, Sandra Hartnett, holds 25.5792% of the partnership
interests of such company. Also excludes 641,240 shares held by United II
Strategic Trading, Inc. Sandra Hartnett holds 33.146% of the stock of such
company. Mr. Hartnett disclaims beneficial interest of such excluded
shares.
(3) Includes (a) presently exercisable options to purchase 13,333 shares of
Common Stock and (b) 5,250 shares held by Mr. Johnson as custodian for the
benefit of his three minor children.
(4) Includes presently exercisable options to purchase 46,667 shares of Common
Stock.
(5) Includes (a) presently exercisable options to purchase 6,667 shares of
Common Stock and (b) 2,445 shares held of record by an IRA for the benefit
of Mr. Wettig's wife, Lynne M. Wettig, of which Mr. Wettig disclaims
beneficial ownership.
(6) Includes presently exercisable options to purchase 30,000 shares of Common
Stock.
(7) Includes presently exercisable options to purchase 19,000 shares of Common
Stock.
(8) Includes (a) presently exercisable options to purchase 7,667 shares of
Common Stock, (b) 72,000 shares held by Mr. Hager as custodian for the
benefit of his two children and (c) 326,600 shares of Common Stock held by
Mr. Hager's wife, of which Mr. Hager disclaims beneficial ownership.
(9) Includes presently exercisable options to purchase 3,333 shares of Common
Stock.
(10) Includes presently exercisable options to purchase 3,333 shares of Common
Stock. Excludes 37,500 shares held by Cracken, Harkey, Street & Co.,
L.L.C. of which Mr. Harkey is a trading advisor and owns a 33.33% interest
in the units of such company.
(11) Includes presently exercisable options to purchase 3,333 shares of Common
Stock. Excludes 37,500 shares held by Cracken, Harkey, Street & Co.,
L.L.C. of which Mr. Street is a trading advisor and owns a 33.33% interest
in the units of such company.
(12) Includes presently exercisable options to purchase 166,667 shares of
Common Stock.
(13) Includes the shares deemed to be beneficially owned by the directors and
executive officers of the Company (see footnotes (1) through (8) to this
table).
PROPOSAL I - ELECTION OF DIRECTORS
Article Fifth, Paragraph A of the Certificate of Incorporation of the
Company, and Article Two, Section 2.2 of its By-Laws provide for the
organization of the Board of Directors into three classes. The number of
Directors is established by the By-Laws pursuant to Board authorization.
Currently, the By-Laws, as amended, provide for nine (9) Directors. All nominees
for Director are currently directors of the Company. C. Wells Hall, III, James
K. Zielke and E. Gene Street were all appointed to the Board of Directors in
January 1999. All Directors are chosen for a full three-year term to succeed
those whose terms expire. It is therefore proposed that three (3) Directors be
elected to serve until the Annual Meeting of Stockholders to be held in 2003 and
until their successors are elected and shall have qualified.
Unless otherwise specified, all Proxies received will be voted in favor of
the election of C. Wells Hall, III, James K. Zielke and E. Gene Street, the
three (3) nominees. Directors shall be elected by a plurality of the votes cast,
in person or by proxy, at the Meeting. Abstentions from voting and broker
non-votes on the election of Directors will have no effect since they will not
represent votes cast at the Meeting for the purpose of electing Directors. The
terms of the nominees expire at the Meeting and when their successors are duly
elected and shall have qualified. Management has no reason to believe that any
of the nominees will be unable or unwilling to serve as a Director, if elected.
Should any of the nominees not remain a candidate for election at the date of
the Meeting, the Proxies will be voted in favor of those nominees who remain
candidates and may be voted for substitute nominees selected by the Board of
Directors.
3
<PAGE>
The following table sets forth the ages and terms of office of the
Directors of the Company:
Term of Office
Name Age as Director Expires
---- --- -------------------
Dennis L. Thompson .......................... 56 2001
Stephen P. Hartnett ......................... 51 2001
Steven M. Johnson ........................... 40 2002
Gary M. Judd ................................ 40 2002
James K. Zielke ............................. 35 2000
Thomas A. Hager ............................. 51 2001
C. Wells Hall, III .......................... 55 2000
E. Gene Street .............................. 59 2000
John D. Harkey, Jr .......................... 39 2002
Dennis L. Thompson has served as Co-Chairman of the Board since January
1999 and has been a Director of the Company since February 1997 and from 1989 to
1997 was an investor with Bailey Sports Grille, Inc., of which he was
co-founder. Mr. Thompson served as senior vice president of real estate of Lone
Star Steakhouse & Saloon, Inc. from 1992 to 1997 and as a director from 1992 to
1998. Mr. Thompson, co-founder of Lone Star Steakhouse & Saloon, was also an
executive officer and a director of various subsidiaries of Lone Star Steakhouse
& Saloon from 1989 to 1997. From 1985 to August 1995, he was an executive
officer, director and stockholder of Creative Culinary Concepts, Inc., a company
that owned and operated Lone Star Steakhouse and Saloon restaurants and certain
other restaurants.
Stephen P. Hartnett has served as Co-Chairman of the Board and as a
Director since January 1999. Mr. Hartnett was the founder of the Fox and Hound
English Pub & Grille in 1994 and served in various executive capacities until
the sale of 75% of its ownership interests to a subsidiary of the Company in
December 1996. Mr. Hartnett has also served as vice chairman of Consolidated
Restaurant Companies, Inc. and as a principal in Cracken, Harkey, Street &
Hartnett, LLC, since September 1998, and as chairman, president and chief
executive officer of Energy Alchemy, Inc. and The Hartnett Group, Ltd., and
majority shareholder of Summers Investments, Inc. since 1982.
Steven M. Johnson has served as Chief Executive Officer since January 1999
and as a Director since October 1998. From March 1992 until December 1998, Mr.
Johnson was chief operating officer for Coulter Enterprises, Inc., a Pizza Hut
franchisee, with primary responsibility for the operations of 100 Pizza Hut
restaurants. From May 1985 until June 1991, Mr. Johnson was controller for
Fugate Enterprises, Inc., a Pizza Hut, Taco Bell and Blockbuster Video
franchisee. Prior to his employement at Fugate Enterprises, Inc., Mr. Johnson
was employed by Ernst & Young LLP. Mr. Johnson is also a C.P.A.
Gary M. Judd has served as President and Director since June 1997 and
served as Chief Executive Officer and Chief Operating Officer from June 1997
until January 1999. Mr. Judd served as vice president of special projects with
Coulter Enterprises, Inc. from October 1993 to May 1997. From March 1989 to
September 1993, Mr. Judd was employed by Western Sizzlin, Inc. in various
capacities, most recently as director of franchise operations. From March 1984
to February 1989, Mr. Judd served as a director of operations with Coulter
Enterprises, Inc.
James K. Zielke has served as Chief Financial Officer and Secretary since
April 1997 and as a Director since January 1999. From January 1997 until April
1997, Mr. Zielke was the senior director-tax for PepsiCo Restaurant Services
Group, Inc. Mr. Zielke was employed by Pizza Hut, Inc. from March 1993 until
January 1997, most recently as director-tax from March 1995 until January 1997.
Prior to his employment by Pizza Hut, Inc., Mr. Zielke was employed by Ernst &
Young LLP from June 1986 until March 1993. Mr. Zielke is also a C.P.A.
Thomas A. Hager has been a Director of the Company since July 1997. Mr.
Hager was a co-founder of Bailey's Sports Grille, Inc. and served as its
president from inception in November 1989 until February 1997. Prior to founding
Bailey's Sports Grille, Inc., Mr. Hager owned and operated a restaurant in
Charlotte, North Carolina. Mr. Hager is also the founder of Thomas Advertising,
Inc., a national billboard advertising agency where he has served as president
since its inception in 1983.
C. Wells Hall, III has been a Director of the Company since January 1999.
Mr. Hall is a corporate tax partner with the law firm of Moore & Van Allen,
PLLC, where he has practiced since 1975.
4
<PAGE>
E. Gene Street has been a Director of the Company since January 1999.
Since 1998, Mr. Street has served as vice chairman, president and chief
executive officer of Consolidated Restaurant Companies, Inc., and as a principal
in Cracken, Harkey, Street & Hartnett, LLC. Mr. Street was the founder of Black
Eyed Pea and served as president and chief executive officer of Prufrock
Restaurants, Inc., the company which owned and operated Black Eyed Pea
restaurants. Mr. Street was also the founder of Good Eats restaurants and served
as chairman and chief executive officer of Good Eats Holding Company, Inc. from
1986 until its sale to Consolidated Restaurant Companies, Inc. in 1998.
John D. Harkey, Jr. has been a Director of the Company since January 1999.
Since 1998, Mr. Harkey has served as chairman of Consolidated Restaurant
Companies, Inc. and has been a principal in Cracken, Harkey, Street & Hartnett
since 1997. Since 1992, Mr. Harkey has also been a partner with the law firm
Cracken & Harkey, LLP. Mr. Harkey was founder and managing director of Capstone
Capital Corporation and Capstone Partners, Inc. from 1989 until 1992.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES.
Directors and Committee Meetings
For the fiscal year ended December 28, 1999, there were eleven meetings of
the Board of Directors. From time to time, the members of the Board of Directors
act by unanimous written consent pursuant to the laws of the State of Delaware.
The Board of Directors does not have a standing nominating committee.
The Board of Directors has created an Audit Committee, a Compensation
Committee and a Stock Option Committee. The Audit Committee is composed soley of
independent Directors and is charged with reviewing the Company's annual audit
and meeting with the Company's independent auditors to review the Company's
internal controls and financial management practices. The Compensation
Committee, which is also composed soley of independent Directors, recommends to
the Board of Directors compensation for the Company's key employees. The Stock
Option Committee also consists soley of independent Directors and administers
the Company's 1997 Incentive and Non-Qualified Stock Option Plan (the "Plan")
and awards stock options thereunder. The members of the Audit Committee are
Messrs. Thompson, Hager and Hall. The members of the Compensation Committee are
Messrs. Thompson, Hartnett and Hall. The members of the Stock Option Committee
are Messrs. Thompson, Hartnett and Hager. During 1999, there were two meetings
of the Audit Committee and Compensation Committee and one meeting of the Stock
Option Committee.
Other Executive Officers
Christopher L. Wettig, 36, has served as Executive Vice President of the
Company since January 1999. From November 1991 until December 1998, Mr. Wettig
was assistant to the chairman for Coulter Enterprises, Inc. Prior to his
employment by Coulter Enterprises, Inc., Mr. Wettig was employed by Ernst &
Young, LLP from March 1988 until October 1991. Mr. Wettig is also a C.P.A.
J. Chris Weinberg, 34, has served as Chief Operating Officer of the
Company since January 1999. Mr. Weinberg also served as Vice
President-Operations from January 1998 until January 1999 and as
Director-Operations from February 1997 until January 1998. Prior to joining the
Company, Mr. Weinberg was Chief Operating Officer for Bailey's Sports Grille,
Inc. from October 1996 to February 1997 and served in various capacities for
both TGI Friday's and Champps Americana.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires directors and executive officers of the Company to file reports with
the Securities and Exchange Commission indicating their holdings of and
transactions in the Company's equity securities. To the Company's knowledge,
based solely upon a review of the copies of such reports furnished to the
Company and written representations that no other reports were required, the
directors and executive officers of the Company complied with all filing
requirements during the fiscal year ended December 28, 1999.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid to all executive officers (the "Named Executive Officers") with respect to
the fiscal year ended December 28, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
-------------------------------- -------------------------------------------
Number of
Securities
Other Annual Underlying All Other
Name and Principal Position Year Salary Bonus($) Compensation Options(#) Compensation (1)
- ------------------------- ------ ---------- --------- ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Steven M. Johnson ..................... 1999 $165,000 -- -- 30,000 --
Chief Executive Officer 1998 -- -- -- 10,000 --
1997 -- -- -- -- --
Gary M. Judd (2) ...................... 1999 $150,000 -- -- 20,000 --
President 1998 $175,000 -- -- -- --
1997 $ 95,538 -- -- 100,000 --
James K. Zielke ....................... 1999 $150,000 -- -- 30,000 --
Chief Financial Officer, 1998 $125,000 -- -- -- --
Secretary and Treasurer 1997 $ 91,127 -- -- 50,000 --
J. Chris Weinberg (3) ................. 1999 $150,000 -- -- 15,000 --
Chief Operating Officer 1998 $ 90,000 $10,000 -- 30,000 --
1997 $ 84,000 -- -- 20,000 --
Christopher L. Wettig ................. 1999 $150,000 -- -- 20,000 --
Executive Vice President 1998 -- -- -- -- --
1997 -- -- -- -- --
</TABLE>
- ----------
(1) Perquisites and other personal benefits, securities or property received
by each executive officer did not exceed the lesser of $50,000 or 10% of
such executive officer's annual salary and bonus.
(2) Mr. Judd also served as the Company's Chief Executive Officer and Chief
Operating Officer from June 1997 until January 1999.
(3) Mr. Weinberg served as Vice President-Operations from January 1998 until
January 1999 and Director-Operations from February 1997 until January
1998.
Option Grant Table
The following table sets forth certain information regarding stock option
grants made to the Named Executive Officers under the Plan for services
performed during the fiscal year ended December 28, 1999.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Rates of Stock Price
Appreciation
for Option Term
Individual Grants (1)(2)
-------------------------------------------------- --------------------
Number % of Total
of Securities Options Exercise
Underlying Granted to or Base
Options(#of Employees in Price Expiration
Name shares) Fiscal Year ($/Sh) Date 5% 10%
- ----- ------------ --------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Steven M. Johnson 30,000 7.3% $3.75 2/10/2009 70,751 179,296
Gary M. Judd 20,000 4.9% $3.75 2/10/2009 47,167 119,531
James K. Zielke 30,000 7.3% $3.75 2/10/2009 70,751 179,296
J. Chris Weinberg 15,000 3.6% $3.75 2/10/2009 35,375 89,648
Christopher L. Wettig 20,000 4.9% $3.75 2/10/2009 47,167 119,531
</TABLE>
- ----------
(1) The options indicated vest ratably over a three-year period that commences
February 10, 1999.
6
<PAGE>
(2) The potential realizable portion of the foregoing table illustrates value
that might be realized upon exercise of options immediately prior to the
expiration of their term, assuming the specified compounded rates of
appreciation on the Company's Common Stock over the term of the options.
These numbers do not take into account provisions of certain options
providing for termination of the option following termination of
employment, nontransferability or differences in vesting periods.
Regardless of the theoretical value of an option, its ultimate value will
depend on the market value of the Common Stock at a future date, and that
value will depend on a variety of factors, including the overall condition
of the stock market and the Company's results of operations and financial
condition. There can be no assurance that the values reflected in this
table will be achieved.
Option Exercise Table
No options were exercised by the Named Executive Officers during the
fiscal year ended December 28, 1999. The following table sets forth certain
information concerning unexercised options held as of December 28, 1999 by the
executive officers under the Plan.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at December 28, 1999 December 28, 1999 ($) (1)
----------------------------- ---------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Steven M. Johnson ...... 13,333 26,667 -- --
Gary M. Judd ........... 46,667 73,333 -- --
James K. Zielke ........ 30,000 50,000 -- --
J. Chris Weinberg ...... 19,000 46,000 -- --
Christopher L. Wettig .. 6,667 13,333 -- --
</TABLE>
- ----------
(1) Such amounts are based on the closing price of a share of Common Stock
($1.6875) as reported by the Nasdaq National Market ("Nasdaq") on December
28, 1999.
Directors Compensation
Directors who are not employees of the Company ("Eligible Directors")
receive an annual fee of $3,000 and a fee of $500 for each Board of Directors
meeting attended and are reimbursed for their expenses. Employees who are
Directors are not entitled to any compensation for their service as a Director.
Eligible Directors are also entitled to receive grants of options under the
Company's 1997 Directors Stock Option Plan (the "Directors Plan"). Each Eligible
Director will receive a grant of an option to purchase 10,000 shares of Common
Stock upon election to the Board of Directors, and will be granted another
option to purchase 3,000 shares of Common Stock annually thereafter so long as
he remains an Eligible Director. The exercise price for such shares is equal to
the closing sale price of the Common Stock as reported on the Nasdaq on the date
of grant. Currently, options to purchase 94,000 shares of Common Stock are
outstanding under the Directors Plan at an exercise prices ranging from $1.625
per share to $9.00 per share.
Employment Agreements
The Company has entered into separate employment agreements, with each of
Messrs. Judd, Zielke and Weinberg, dated as of June 11, 1997, April 7, 1997 and
July 20, 1998, respectively, providing for the employment of such individuals as
President, Chief Financial Officer and Chief Operating Officer, respectively.
The agreements were amended as of January 7, 1999. Each employment agreement
provides that the officer shall devote substantially all of his professional
time to the business of the Company. As amended, the agreements provide for
annual base salaries of $150,000, for Messrs. Judd, Zielke, and Weinberg,
subject to increases as determined by the Board of Directors. Each agreement
terminates in April 2002 with an option by the Company to extend the term for an
additional one-year period and contains non-competition and non-solicitation
provisions. Messrs. Thompson and Hager have also entered into non-competition,
confidentiality and non-solicitation agreements with the Company.
7
<PAGE>
Joint Report by the Compensation Committee and the
Stock Option Committee on Executive Compensation
General
The Compensation Committee determines the cash and other incentive
compensation (with the exception of stock options which are granted by the Stock
Option Committee), if any, to be paid to the Company's executive officers and
key employees. Messrs. Thompson, Hartnett and Hall, independent Directors of the
Company, serve as members of the Compensation Committee and Messrs. Thompson,
Hartnett and Hager, non-employee directors of the Company, serve as members of
the Stock Option Committee and are "non-employee directors" (within the meaning
of Rule 16b-3 under the Act). During fiscal 1999, there were two meetings of the
Compensation Committee and one meeting of the Stock Option Committee.
Compensation Philosophy
The Compensation Committee's executive compensation philosophy is to base
management's pay, in part, on the achievement of the Company's annual and
long-term performance goals, to provide competitive levels of compensation, to
recognize individual initiative, achievement and length of service to the
Company, and to assist the Company in attracting and retaining qualified
management. The Compensation Committee establishes executive's base salaries at
relatively low levels. It is the philosophy of the Compensation Committee in
tandem with the Stock Option Committee to provide officers with the opportunity
to realize potentially significant financial gains through the grants of stock
options. The Compensation Committee also believes that the potential for equity
ownership by management is beneficial in aligning management's and stockholders'
interest in the enhancement of stockholder value. However, the decision to
ultimately grant stock options is based primarily on the criteria set forth
under "Stock Option Plan" below.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), prohibits a publicly held corporation, such as the Company, from
claiming a deduction on its federal income tax return for compensation in excess
of $1 million paid for a given fiscal year to the chief executive officer (or
person acting in that capacity) at the close of the corporation's fiscal year
and the four most highly compensated officers of the corporation, other than the
chief executive officer, at the end of the corporation's fiscal year. The $1
million compensation deduction limitation does not apply to "performance-based
compensation." The Company believes that any compensation received by executive
officers in connection with the exercise of options granted under the Plan
qualifies as "performance-based compensation." Accordingly, the Company has not
established a policy with respect to Section 162(m) of the Code because the
Company has not and does not currently anticipate paying compensation in excess
of $1 million per annum to any employee.
Salaries
Base salaries for the Company's executive officers are determined
initially by evaluating the responsibilities of the position held and the
experience of the individual, food service and management experience, and by
reference to the competitive marketplace for management talent, including a
comparison of base salaries for comparable positions at comparable companies
within the Company's industry, which includes companies which comprise the
Company's Peer Group, as defined herein. Such companies are comparable in that
they are fast-growth companies in the casual dining segment of the restaurant
industry. The Company believes salaries for its officers are below average as
compared to the companies reviewed. Annual salary adjustments are determined in
descending level of importance by (i) evaluating the financial results achieved
by the Company, which includes revenues, earnings, unit growth and profit
margins of the Company, (ii) the performance of the executive particularly with
respect to the ability to manage growth and profitability of the Company, (iii)
the length of the executive's service to the Company and (iv) any increased
responsibilities assumed by the executive. There are no restrictions on salary
adjustments of the Company. The Company has employment agreements with Messrs.
Judd, Zielke and Weinberg which set the base salaries for such individuals.
These base salaries are based on and are reviewed annually in accordance with
the factors described in this paragraph and the terms of the employment
agreements. See "Summary Compensation Table -- Employment Agreements."
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Annual Bonuses
The Company does not currently have a formal bonus plan for its executives
and no bonuses were paid to any executives for the 1999 fiscal year. The Company
may in the future adopt an executive bonus plan. As indicated under "Stock
Option Plan" below, the Company has granted options to the Named Executive
Officers in part to reward their performance.
It is the philosophy of the Stock Option Committee to tie a significant
portion of an executives' total opportunity for financial gain to increases in
stockholder value, thereby aligning the long-term interests of the stockholders
with the executives and to retain such key employees. All salaried employees,
including executives and part-time employees, of the Company and its
subsidiaries, are eligible for grants of stock options pursuant to the Plan. In
addition, because the executives' base salaries are currently set below the
average of similar positions in comparable companies within the Company's
industry, which includes companies which comprise the Company's Peer Group, and
because the Company presently maintains neither a qualified retirement program
nor a bonus plan for executives, the Plan is intended to provide executives with
opportunities to supplement their base compensation.
Chief Executive Officer
In setting fiscal 1999 salary and stock option award levels for Mr.
Johnson, the Compensation Committee and the Stock Option Committee focused upon
the policies described above. Based on a review of comparable companies, Mr.
Johnson's salary was set at $165,000. No bonus was paid to him for fiscal year
1999.
Stock Option Plan
Pursuant to the Plan, both incentive and non-qualified options may be
granted to key employees of the Company, or with respect to incentive options,
to any employees of, any subsidiary in which the Company owns more than 50% of
the total combined voting power of all classes of stock, including part-time
employees. As of the Record Date, options to purchase 1,081,135 shares of the
Company's Common Stock were outstanding under the Plan and 518,865 shares
remained available for the grant of options under the Plan. Approximately 1,750
employees are currently eligible to participate under the Plan since the Plan
allows grants to full-time and part-time employees of the Company and its
subsidiaries.
The Plan is administered by the Stock Option Committee, consisting of not
less than three members of the Board of Directors of the Company who are not
eligible to participate in the Plan. The members of the Stock Option Committee
are appointed by the Board of Directors and serve at the pleasure of the Board
of Directors. The Stock Option Committee selects the key employees who will be
granted options under the Plan and, subject to the provisions of the Plan,
determines the terms and conditions and number of shares of Common Stock subject
to each option. The Stock Option Committee also makes any other determinations
necessary or advisable for the administration of the Plan. Determinations by the
Stock Option Committee are final and conclusive. Grants of options and other
decisions of the Stock Option Committee are not required to be made on a uniform
basis. The Plan will terminate on July 17, 2007, but may be terminated by the
Board of Directors at any time before that date.
Upon the grant of an option to a key employee, the Stock Option Committee
will fix the number of shares of Common Stock that the optionee may purchase
upon exercise of the Option and the price at which the shares may be purchased.
The option price for incentive stock options shall not be less than 100% of the
"fair market value" of the shares of Common Stock at the time the option is
granted; provided, however, that with respect to an incentive stock option in
the case of an optionee, who, at the time such option is granted, owns more than
10% of the voting stock of the Company or its subsidiaries, the purchase price
per share shall be at lease 110% of the fair market value. The option price for
non-qualified options shall not be less than 75% of the fair market value at the
time the option is granted. To date, the Company has not granted an option to
any individual at a purchase price below fair market value. "Fair market value"
is deemed to be the closing sales price of Common Stock on such date as Nasdaq
or, if the Common Stock is not listed on Nasdaq, in the principal market in
which the Common Stock is traded.
Compensation Committee: Dennis L. Thompson
Stephen P. Hartnett
C. Wells Hall, III
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Stock Option Committee: Dennis L. Thompson
Stephen P. Hartnett
Thomas A. Hager
Compensation Committee Interlocks
The Compensation Committee consists of Messrs. Thompson, Hartnett and
Hall. Only one Director, Stephen P. Hartnett, was a party to transactions with
the Company which requires disclosure under Item 402(j) of Regulation S-K. See
Certain Relationships And Related Transactions below.
Common Stock Performance
The following graph compares the total return on the Company's Common
Stock from the commencement of trading of the Company's Common Stock on July 18,
1997 to the total returns of the Standard & Poor's Mid-Cap 400 Index and the
Standard & Poor's Restaurant Industry Index (the "Peer Group").
COMPARISON OF TOTAL RETURN
FROM JULY 18, 1997 TO DECEMBER 28, 1999
AMONG
TOTAL ENTERTAINMENT RESTAURANT CORP.,
THE STANDARD & POOR'S MID-CAP 400 INDEX AND THE PEER GROUP
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
Base
Period
Company/Index Name 7/18/97 12/30/97 12/29/98 12/28/99
------------------ ------- -------- -------- --------
Total Entertainment Restaurant Corp. .... $100.00 50.00 31.25 18.75
S&P Restaurant Index .................... $100.00 94.63 149.26 150.47
S&P Midcap 400 Index .................... $100.00 109.79 123.89 144.89
Assumes $100 invested on July 18, 1997 in the Company's Common Stock, the
Standard & Poor's Mid-Cap 400 Index and the Peer Group. The calculations in the
table were made on a dividends reinvested basis.
There can be no assurance that the Company's Common Stock performance will
continue with the same or similar trends depicted in the above graph.
10
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PROPOSAL II -- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Grant Thornton, LLP as the Company's
independent auditors for the fiscal year ending December 26, 2000. Although the
selection of independent auditors does not require ratification, the Board of
Directors has directed that the appointment of Grant Thornton, LLP be submitted
to stockholders for ratification due to the significance of their appointment to
the Company. If stockholders do not ratify the appointment of Grant Thornton,
LLP as the Company's independent auditors, the Board of Directors will consider
the appointment of other certified public accountants. A representative of Grant
Thornton, LLP will be present at the Meeting and will be available to respond to
appropriate questions. The approval of the proposal to ratify the appointment of
Grant Thornton, LLP requires the affirmative vote of a majority of the votes
cast by all shareholders represented and entitled to vote thereon. Broker
"non-votes" are not included in the tabulation of the voting results and
therefore, do not have the effect of votes in opposition in such tabulations. An
abstention from voting on a matter or a Proxy instructing that a vote be
withheld has the same effect as a vote against a matter since it is one less
vote for approval.
The Company changed certifying accountants from Ernst & Young, LLP to
Grant Thornton, LLP effective September 28, 1999. The following sets forth the
information required by item 304 (a) of Regulation S-K: (i) On September 28,
1999, Ernst & Young, LLP was dismissed as the Company's principal accountant.
(ii) Ernst & Young, LLP reports on the financial statements for the past two
fiscal years did not contain an adverse opinion or a disclaimer of opinion, and
were not qualified or modified as to uncertainty, audit scope or accounting
principles. (iii) The decision to change accountants was provided by the
Directors of the Company. (iv) During the Company's two most recent fiscal years
and subsequent interim periods, there were no disagreements with Ernst & Young,
LLP on any matter of accounting principles or practices, financial statement
disclosures or auditing scope or procedure. (v) During the Company's two most
recent fiscal years and subsequent interim periods, there have occurred none of
the "reportable events" listed in Item 304 (a) (l) (v) (A-D) of Regulation S-K.
(b) The Company has requested and received from Ernst & Young, LLP the letter
required by Item 304 (a) (3) of Regulation S-K (and filed the same as Exhibit
16.1 to the Company's report on Form 8-K filed on October 5, 1999), and states
that Ernst & Young, LLP agrees with the statements made by the Company in this
report in response to Item 304 (a) (l) of Regulation S-K.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF GRANT THORNTON, LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING DECEMBER 26, 2000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Restaurant Leases
The Company leases two of its entertainment restaurant locations from
limited partnerships contolled by Stephen P. Hartnett, a Co-Chairman of the
Board of the Company. The annual rent and maintenance expense paid to the
limited partnerships for the College Station, Texas location for the fiscal year
ended December 28, 1999 was $69,480, which will also be the annual rent and
maintenance expense for the fiscal year ending December 26, 2000. The annual
rent and maintenance expense paid to the limited partnerships for the Dallas
(Midway), Texas location for the fiscal year ended December 28, 1999 was
$226,371, which will also be the annual rent and maintenance expense for the
fisal year ending December 26, 2000.
STOCKHOLDER PROPOSALS
In order to be considered for inclusion in the proxy materials to be
distributed in connection with the next Annual Meeting of Stockholders of the
Company, stockholder proposals for such meeting must be submitted to the Company
no later than December 22, 2000. Management of the Company is allowed to use its
discretionary proxy voting authority in connection with any stockholder proposal
received by the Company after March 7, 2001 intended for presentation from the
floor at the next Annual Meeting of Stockholders.
11
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OTHER MATTERS
So far as now known, there is no business other than that described above
to be presented for action by the stockholders at the Meeting, but it is
intended that the proxies will be voted upon any other matters and proposals
that may legally come before the Meeting or any adjournment thereof, in
accordance with the discretion of the persons named therein.
ANNUAL REPORT
All stockholders of record as of April 14, 2000 have been sent, or are
concurrently herewith being sent, a copy of the Company's Annual Report for the
fiscal year ended December 28, 1999. Such report contains certified consolidated
financial statements of the Company and its subsidiaries for the fiscal year
ended December 28 1999.
By Order of the Company,
James K. Zielke
Secretary
Wichita, Kansas
Dated: April 21, 2000
The Company will furnish, without charge, a copy of its Annual Report on Form
10-K for the fiscal year ended December 28, 1999 (without exhibits) as filed
with the Securities and Exchange Commission to stockholders of record on the
Record Date who make written request therefore to Christopher L. Wettig,
Executive Vice President, Total Entertainment Restaurant Corp., 9300 East
Central Avenue, Suite 100, Wichita, Kansas 67206.
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o FOLD AND DETACH HERE o
- --------------------------------------------------------------------------------
TOTAL ENTERTAINMENT RESTAURANT CORP.
ANNUAL MEETING OF STOCKHOLDERS
MAY 22, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, a stockholder of Total Entertainment Restaurant Corp., a
Delaware corporation (the "Company"), does hereby appoint Dennis L. Thompson and
Stephen P. Hartnett and each of them, the true and lawful attorneys and proxies
with full power of substitution, for and in the name, place and stead of the
undersigned, to vote all of the shares of Common Stock of the Company which the
undersigned would be entitled to vote if personally present at the 2000 Annual
Meeting of Stockholders of the Company to be held at the Spaghetti Warehouse
restaurant located at 101 West Worthington, Charlotte, North Carolina 28203, on
Monday, May 22, 2000 at 2:00 p.m. local time, or at any adjournment or
adjournments thereof.
The undersigned hereby instructs said proxies or their substitutes:
1. ELECTION OF DIRECTORS: The election of the following directors: C. Wells
Hall, III, James K. Zielke and E. Gene Street, to serve until the 2003
annual meeting of stockholders and until their successors have been duly
elected and qualified.
|_| FOR |_| WITHHOLD AUTHORITY to vote for any
nominee(s), print names(s) below
___________________________________
2. RATIFICATION OF APPOINTMENT OF AUDITORS: To ratify the appointment of
Grant Thornton, LLP as the independent auditors of the Company for the
fiscal year ending December 26, 2000.
|_| FOR |_| AGAINST |_| ABSTAIN
3. DISCRETIONARY AUTHORITY: To vote with discretionary authority with respect
to all other matters which may come before the Meeting.
(Continued and to be signed and dated, on the reverse side)
<PAGE>
o FOLD AND DETACH HERE o
- --------------------------------------------------------------------------------
(Continued from other side)
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH ANY DIRECTIONS HEREINBEFORE GIVEN.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED TO ELECT THE NOMINEES AS
DIRECTORS, TO RATIFY THE APPOINTMENT OF GRANT THORNTON, LLP AS THE COMPANY'S
INDEPENDENT AUDITORS AND IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES OR
PROXY WITH RESPECT TO ANY OTHER BUSINESS TRANSACTED AT THE ANNUAL MEETING.
The undersigned hereby revokes any proxy
or proxies heretofore given and ratifies
and confirms that all the proxies
appointed hereby, or any of them, or
their substitutes, may lawfully do or
cause to be done by virtue hereof. The
undersigned hereby acknowledges receipt
of a copy of the Notice of Annual
Meeting and Proxy Statement, both dated
April 21, 2000, and a copy of the
Company's Annual Report for the fiscal
year ended December 28, 1999.
DATED:__________________________, 2000
________________________________, (L.S.)
________________________________, (L.S.)
Signature(s)
NOTE: Your signature should appear the same as your name appears hereon. In
signing as attorney, executor, administrator, trustee or guardian, please
indicate the capacity in which signing. When signing as joint tenants, all
parties in the joint tenancy must sign. When a proxy is given by a corporation,
it should be signed by an authorized officer and the corporate seal affixed. No
postage is required if mailed in the United States.
