<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
WENDY'S INTERNATIONAL, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
- --------------------------------------------------------------------------------
PROXY STATEMENT
WENDY'S
INTERNATIONAL,
INC.
LOGO
1998 ANNUAL MEETING OF SHAREHOLDERS
<PAGE> 3
<TABLE>
<C> <S>
CONTENTS
Notice of Annual Meeting of Shareholders
1 Proxy Statement
1 Voting Securities and Principal Holders Thereof
4 Election of Directors
6 Committees of Directors
8 Compensation of Management
8 Summary Compensation Table
9 Options Granted in Last Fiscal Year
10 Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values
11 Report of the Compensation Committee on Executive
Compensation
14 Comparison of Five-Year Total Return For Wendy's
International, Inc.,
the Peer Group Index and the S&P 500 Index
15 Executive Agreements
17 Certain Transactions Involving Management
18 Selection of Independent Public Accountants
19 Other Matters
Map to Wendy's Annual Meeting
</TABLE>
<PAGE> 4
WENDY'S INTERNATIONAL, INC.
P.O. Box 256
Dublin, Ohio 43017-0256
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Wendy's International, Inc.:
Notice is hereby given that the Annual Meeting of Shareholders of Wendy's
International, Inc. (the "Company") will be held at the Aladdin Shrine Temple,
3850 Stelzer Road, Columbus, Ohio 43219, on Wednesday, April 29, 1998, at 10:00
a.m., local time, for the following purposes, all of which are more completely
set forth in the accompanying Proxy Statement:
1. To elect five Directors, each for a term of three years.
2. To ratify the selection of Coopers & Lybrand L.L.P. as the independent
public accountants of the Company for the current year.
3. To transact such other business as may properly come before the meeting.
Only shareholders of record at the close of business on March 2, 1998 are
entitled to notice of and to vote at the Annual Meeting of Shareholders.
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
You are urged to date, sign and promptly return the enclosed Proxy so that your
shares may be voted in accordance with your wishes and so that the presence of a
quorum may be assured. The prompt return of your signed Proxy, regardless of the
number of shares you hold, will aid the Company in reducing the expense of
additional Proxy solicitation. The giving of such Proxy does not affect your
right to vote in person in the event you attend the meeting. You are cordially
invited to attend the meeting, and we request that you indicate your plans in
this respect in the space provided on the enclosed form of Proxy.
/s/ Frederick R. Reed
FREDERICK R. REED
Secretary
Dublin, Ohio
March 6, 1998
<PAGE> 5
WENDY'S INTERNATIONAL, INC.
P.O. Box 256
Dublin, Ohio 43017-0256
(614) 764-3100
- --------------------------------------------------------------------------------
PROXY STATEMENT
The enclosed Proxy, for use at the Annual Meeting of Shareholders to be held on
Wednesday, April 29, 1998, and any adjournments thereof, is being solicited on
behalf of the Board of Directors of the Company. Without affecting any vote
previously taken, the Proxy may be revoked by the shareholder by giving notice
of revocation to the Company in writing or in open meeting. Unless otherwise
specified, all properly executed Proxies received by the Board of Directors will
be voted "FOR" the election as Directors of the nominees listed below under
"ELECTION OF DIRECTORS" and "FOR" the ratification of the selection of
independent public accountants.
Solicitation of Proxies may be made by mail, personal interview, telephone and
telegraph by Officers, Directors and regular employees of the Company. In
addition, the Company has retained, at an estimated cost of $10,000 plus
reasonable expenses, Georgeson & Co., a firm specializing in proxy solicitation.
All costs of solicitation will be borne by the Company. This Proxy Statement,
including the Notice of Meeting, was first mailed to shareholders on March 11,
1998.
- --------------------------------------------------------------------------------
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
VOTING RIGHTS
The total number of outstanding shares entitled to vote at the meeting is
132,259,807 and only shareholders of record at the close of business on March 2,
1998, are entitled to notice of and to vote at said meeting or any adjournments
thereof. Each shareholder is entitled to one vote for each share held and has
cumulative voting rights in the election of Directors. A shareholder wishing to
exercise cumulative voting must so notify the President, a Vice President or the
Secretary of the Company in writing not less than 48 hours before the meeting.
If cumulative voting is requested and if an announcement of such request is made
upon the convening of the meeting by the Chairman or Secretary or by or on
behalf of the shareholder requesting cumulative voting, each shareholder will
have a number of votes equal to the number of Directors to be elected multiplied
by the number of shares owned by such shareholder and will be entitled to
distribute his votes among the nominees as the shareholder sees fit. If
cumulative voting is requested, as described above, the enclosed Proxy would
grant discretionary authority to the Proxies named therein to cumulate votes and
to distribute the votes among the candidates.
1
<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information (based upon filings with the
Securities and Exchange Commission) with respect to the persons known to the
Company to own beneficially more than five percent of the outstanding common
shares of the Company as of March 2, 1998:
<TABLE>
<CAPTION>
(2) NAME AND (3) AMOUNT AND
(1) TITLE OF ADDRESS OF NATURE OF BENEFICIAL
CLASS BENEFICIAL OWNER OWNERSHIP(A) (4) PERCENT OF CLASS
- ------------ ---------------- -------------------- --------------------
<S> <C> <C> <C>
Common shares Ronald V. Joyce 16,475,418 12.5%
10 Blue Ridge Mountain Estates
Calgary, Alberta T2M 4N4
Canada
Common shares FMR Corp. 10,000,494(b) 7.6%
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
- ---------
(a) Includes options exercisable within 60 days following March 2, 1998.
(b) Fidelity Management and Research Company ("Fidelity"), a subsidiary of FMR
Corp., is the beneficial owner of 9,741,924 common shares as the result of
acting as investment advisor to various investment companies (the "Fidelity
Funds") registered under Section 8 of the Investment Company Act of 1940.
Included in that amount are 132,524 common shares resulting from the assumed
conversion of $2.50 Term Convertible Securities, Series A, of Wendy's
Financing I beneficially owned by the Fidelity Funds. Edward C. Johnson 3d
(Chairman of FMR Corp.), FMR Corp., through its control of Fidelity, and the
Fidelity Funds each have sole power to dispose of the 9,741,924 common
shares. Neither FMR Corp. nor Edward C. Johnson 3d, has the sole power to
vote or direct the voting of the common shares owned directly by the
Fidelity Funds. The sole power to vote or direct the voting of the common
shares owned directly by the Fidelity Funds resides with the Board of
Trustees of such funds.
Fidelity Management Trust Company, a subsidiary of FMR Corp., is the
beneficial owner of 258,570 common shares as the result of its serving as
investment manager of institutional accounts. Edward C. Johnson 3d and FMR
Corp., through its control of Fidelity Management Trust Company, each has
sole dispositive power over 258,570 common shares, sole power to vote or to
direct the voting of 95,670 common shares, and no power to vote or direct
the voting of 162,900 common shares owned by the institutional accounts.
Members of the Edward C. Johnson 3d family and trusts for their benefit are
the predominant owners of Class B shares of the common stock of FMR Corp.,
representing approximately 49% of the voting power of FMR Corp. Mr. Johnson
3d owns 12.0% and Abigail P. Johnson owns 24.5% of the aggregate outstanding
voting stock of FMR Corp. Mr. Johnson 3d is Chairman of FMR Corp. and
Abigail P. Johnson is a director of FMR Corp. The Johnson family group and
all other Class B shareholders have entered into a shareholders' voting
agreement under which all Class B shares will be voted in accordance with
the majority vote of Class B shares. Accordingly, through their ownership of
voting common stock and the execution of the shareholders' voting agreement,
members of the Johnson family may be deemed, under the Investment Company
Act of 1940, to form a controlling group with respect to FMR Corp.
2
<PAGE> 7
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 2, 1998, certain information with
respect to the Company's common shares owned beneficially by each Director, by
each nominee for election as a Director of the Company, by the Executive
Officers named in the Summary Compensation Table set forth on page 8 of this
Proxy Statement and by all Directors and Executive Officers as a group:
<TABLE>
<CAPTION>
(3) AMOUNT AND
NATURE OF BENEFICIAL
(1) TITLE OF CLASS (2) NAME OF BENEFICIAL OWNER OWNERSHIP (a)(b) (4) PERCENT OF CLASS
------------------ ---------------------------- -------------------- --------------------
<S> <C> <C> <C>
(All of these are R. David Thomas 5,735,615 4.3%
common shares.) Ronald V. Joyce 16,475,418 12.5%
Gordon F. Teter 355,529 .3%
Frederick R. Reed 28,825 --
Ronald E. Musick 255,362 .2%
Paul D. House 59,767 --
W. Clay Hamner 1,786 --
Ernest S. Hayeck 2,150 --
Janet Hill 2,850 --
Thomas F. Keller 2,619 --
True H. Knowles 1,000 --
Andrew G. McCaughey 3,000 --
Fielden B. Nutter, Sr. 40,097 --
James V. Pickett 51,356 --
Thekla R. Shackelford 15,784 --
Charles W. Rath 76,943 --
John W. Wright 68,766 --
All Directors and 23,798,709 18.0%
Executive Officers as a group
(27 persons)
</TABLE>
- ---------
(a) The amounts reflected in this table include common shares in which there is
shared voting and investment power.
(b) Includes options exercisable within 60 days following March 2, 1998.
The information with respect to beneficial ownership is based upon information
furnished by each Director, nominee or Executive Officer, or information
contained in filings made with the Securities and Exchange Commission.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and Executive Officers to file reports of ownership and changes of
ownership with the Securities and Exchange Commission and the New York Stock
Exchange. The Company assists its Directors and Executive Officers in completing
and filing those reports. The Company believes that during the last completed
fiscal year all filing requirements applicable to its Directors and Executive
Officers were complied with except that one report, disclosing one gift
transaction, was filed late by the Company on behalf of Mr. Musick. The late
filing was due to an inadvertent delay by the Company in furnishing the
necessary report and other assistance to Mr. Musick.
3
<PAGE> 8
- --------------------------------------------------------------------------------
ELECTION OF DIRECTORS
The Board of Directors has designated the following nominees for election as
Directors of the Company with their terms to expire in 2001:
<TABLE>
<CAPTION>
DIRECTOR
DIRECTORS AND THEIR PRINCIPAL OCCUPATIONS AGE SINCE
- ----------------------------------------- --- --------
<S> <C> <C>
R. David Thomas.......................................... 65 1969
Senior Chairman of the Board and Founder
Ernest S. Hayeck (1)..................................... 73 1993
Retired Judge, Trial Court of Massachusetts
Janet Hill (1)(2)........................................ 50 1994
Vice President, Alexander & Associates, Inc.
Washington, D.C.
True H. Knowles (1)(2)................................... 60 1997
Retired President and Chief Operating Officer, Dr
Pepper Company, and Retired Executive Vice President Dr
Pepper/Seven-Up Companies, Inc. Dallas, Texas
Paul D. House (1)........................................ 54 1998
President and Chief Operating Officer, The TDL Group
Ltd. Oakville, Ontario, Canada
</TABLE>
The following Directors will continue to serve after the 1998 Annual Meeting:
<TABLE>
TERMS EXPIRING IN 1999
- ----------------------
<S> <C> <C>
Thekla R. Shackelford (2)................................ 63 1984
Owner/President, School Selection Consulting Columbus,
Ohio
Ronald E. Musick......................................... 57 1987(3)
Executive Vice President
W. Clay Hamner (1)....................................... 52 1987
Chairman and Chief Executive Officer, Montrose Capital
Corporation Durham, North Carolina
Gordon F. Teter (1)...................................... 54 1990
Chairman of the Board, Chief Executive Officer and
President
Frederick R. Reed (1).................................... 49 1995
Chief Financial Officer, General Counsel and Secretary
</TABLE>
4
<PAGE> 9
<TABLE>
TERMS EXPIRING IN 2000
- ----------------------
<S> <C> <C>
Fielden B. Nutter, Sr. (1)............................... 73 1980
President, F.B. Nutter Leasing Co. Pompano Beach,
Florida
James V. Pickett (1)(2).................................. 56 1982
Chairman, The Pickett Companies; Vice Chairman, Banc
One Capital Corporation Dublin, Ohio
Thomas F. Keller (1)(2).................................. 66 1991
R.J. Reynolds Professor of Business Administration,
Fuqua School of Business, Duke University Durham, North
Carolina
Ronald V. Joyce (1)...................................... 67 1996
Senior Chairman and Co-Founder, The TDL Group Ltd.
Oakville, Ontario, Canada
Andrew G. McCaughey (1)(2)............................... 75 1997
Former Chairman and Chief Executive Officer, Scott's
Hospitality Inc. Toronto, Ontario, Canada
</TABLE>
- ---------
(1) Judge Hayeck was a Trial Court Justice for the State of Massachusetts, from
January 27, 1970 until he retired on January 26, 1993. Judge Hayeck was
awarded the American Bar Association Franklin N. Flaschner Judicial Award in
1992. He is also a faculty member of the National Judicial College. He
became a Director of the Company on February 8, 1993.
Mrs. Hill provides corporate planning, advice and analysis to directors,
executives and managers in the areas of human resource planning, corporate
responsibility, corporate communications and government consultation.
Alexander & Associates, Inc. is a corporate consulting firm.
Mr. Knowles was President and Chief Operating Officer of the Dr Pepper
Company and Executive Vice President of Dr Pepper/Seven-Up Companies, Inc.,
from January, 1992 until he retired in June, 1995.
Mr. House has been the Chief Operating Officer of The TDL Group Ltd. since
January, 1992. He assumed his current position on December 29, 1995. The TDL
Group Ltd. franchises and operates Tim Hortons restaurants.
Montrose Capital Corporation is a private investment company. Mr. Hamner was
also Chairman of The Pantry, Inc. from July 11, 1994 until August 19, 1996.
The Pantry, Inc. is a convenience store chain.
Mr. Teter became President and Chief Operating Officer of the Company on
February 18, 1991. He added the title of Chief Executive Officer on January
1, 1995. He assumed his current position with the Company on February 19,
1997.
Mr. Reed was a partner of Vorys, Sater, Seymour and Pease LLP from January
1, 1980 to August 31, 1996. He was Executive Vice President, General Counsel
and Secretary of the Company from September 3, 1996 to April 1, 1997, at
which time he assumed his current position.
Mr. Nutter was also Chairman and Chief Executive Officer of Kare
Electronics, Inc. from December, 1988 until June 1, 1993, when that company
was dissolved. He was Chairman and Chief Executive Officer of John Henry
Rock Drills, Inc. from September 1, 1993 to March 31, 1997. F.B. Nutter
Leasing Co. is a real estate leasing and management company. Kare
Electronics, Inc. distributed electronic monitoring devices. John Henry Rock
Drills, Inc. manufactured hydraulic rock drills.
5
<PAGE> 10
Mr. Pickett has served as President and Chief Executive Officer of various
companies generally known as The Pickett Companies since 1969. The Pickett
Companies are involved in real estate development, ownership and management.
Mr. Pickett became the Managing Director of the real estate investment group
of Banc One Capital Corporation on February 1, 1993. He became Vice Chairman
of Banc One Capital Corporation on January 1, 1997.
Mr. Keller was also Dean of the Fuqua School of Business at Duke University
until he retired from that position on May 31, 1996.
Mr. Joyce was Chairman and Chief Executive Officer of The TDL Group Ltd.
until December 29, 1995, when that company became an indirect subsidiary of
the Company.
Mr. McCaughey was Chairman and Chief Executive Officer of Scott's
Hospitality Inc. from April 30, 1989 to September 3, 1992. Scott's
Hospitality Inc. operated restaurants and hotels, and was also involved with
the school bus and retail photography industries. Scott's Hospitality Inc.
had been a Canadian franchisee operating both Wendy's and Tim Hortons
restaurants since 1987. The successor company to Scott's Hospitality Inc.
presently operates 11 franchised Wendy's and 17 franchised Tim Hortons
restaurants.
Each of the other Directors has had the same principal occupation and
employer during the past five years as set forth in this table.
(2) Mrs. Hill serves as a director of The Progressive Corporation, First Union
Bank of Virginia, Maryland and D.C. and Dean Foods Company; Mr. Knowles
serves as a director of Cott Corporation; Mrs. Shackelford serves as a
director of Banc One Corporation and Fiserv Inc.; Mr. Pickett serves as a
director of Metatec Corporation and Karrington Health, Inc.; Mr. Keller
serves as a director of Ladd Furniture Company, Hatteras Income Securities,
Inc., Nations Funds, Inc., Nations Fund Trust, Nations Government Income
Term Trust 2003, Inc., Nations Government Income Term Trust 2004, Inc.,
Nations Balanced Target Maturity Fund Inc., Mentor Funds Trust, DIMON
International, American Business Products and Biogen Inc.; and Mr. McCaughey
serves as a director of Toromont Industries Ltd.
(3) Mr. Musick was a Director of the Company from 1970 to 1981.
Unless otherwise directed, the persons named in the Proxy will vote the Proxies
for the election of Mr. Thomas, Judge Hayeck, Mrs. Hill, Mr. Knowles and Mr.
House as Directors of the Company, each to serve for a term of three years and
until their successors are elected and qualified. While it is contemplated that
all nominees will stand for election, in the event any person nominated fails to
stand for election, the Proxies will be voted for such other person or persons
as may be designated by the Directors. Management has no reason to believe that
any of the above-mentioned persons will not stand for election or serve as a
Director.
Under Ohio law and the Company's Regulations, the five nominees receiving the
greatest number of votes will be elected as Directors. Shares as to which the
authority to vote is withheld and broker non-votes are not counted toward the
election of Directors or toward the election of the individual nominees
specified on the Proxy.
- --------------------------------------------------------------------------------
COMMITTEES OF DIRECTORS
A total of six meetings of the Board of Directors of the Company were held
during 1997. No Director attended less than 75 percent of the aggregate of (1)
the total number of meetings of the Board of Directors, and (2) the total number
of meetings held by all committees of the Board of Directors on which that
Director served during the period each served as a Director.
The Board of Directors has an Audit Committee, a Board Membership Committee and
a Compensation Committee.
The members of the Audit Committee are Messrs. Keller (Chairman), Hayeck,
Hamner, McCaughey and Pickett. The Committee met four times during 1997. Its
function is to review the accounting and financial reporting practices of the
Company and the adequacy of the Company's system of internal
6
<PAGE> 11
control, to review the scope and adequacy of internal audit activities and the
work of the Company's independent public accountants, and to recommend to the
Directors a firm of accountants to serve as the Company's independent public
accountants.
The members of the Board Membership Committee are Messrs. Pickett (Chairman),
Hamner, Reed, Thomas and Mrs. Shackelford. The Committee met twice during 1997.
Its function is to recommend candidates for membership to the Board of
Directors. The Board Membership Committee will consider nominees recommended by
shareholders for the 1999 Annual Meeting of Shareholders, provided that the
names of such nominees are submitted in writing, not later than November 11,
1998, to James V. Pickett, P. O. Box 256, Dublin, Ohio 43017-0256. Each such
submission must include a statement of the qualifications of the nominee, a
consent signed by the nominee evidencing a willingness to serve as a Director,
if elected, and a commitment by the nominee to meet personally with the
Committee members.
The members of the Compensation Committee are Messrs. Nutter (Chairman),
Knowles, Mrs. Shackelford and Mrs. Hill. The Compensation Committee met four
times during 1997. The Compensation Committee's function is to examine the
levels and methods of compensation employed by the Company with respect to the
individuals named or to be named in the Company's proxy statement, to review and
evaluate alternative and additional compensation programs for these individuals,
and to make recommendations to the Board of Directors on such matters. The
Compensation Committee has the authority to make all decisions regarding the
individuals to whom options are to be granted under the Company's stock option
plans, and the timing, pricing, number of options to be granted and the other
terms of such grants (the Compensation Committee does not have the authority to
amend the terms of the stock option plans or to adopt new stock option plans).
In addition, the Compensation Committee has the authority to adopt one or more
cash bonus plans which will qualify compensation paid thereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Internal Revenue Code of 1986, as amended, and to implement and administer such
plans. In addition to the three committees set forth above, the Board of
Directors has an Executive Committee and a Finance Committee.
Directors who are not employees of the Company or its subsidiaries are paid
$7,000 quarterly, plus $1,500 for each Board meeting and $1,000 for each
qualified committee meeting attended, including telephonic meetings, for all
services, plus expenses. If more than one qualified meeting is held on the same
day, a separate fee is paid for each such meeting. Meetings of the Audit and
Compensation Committees are qualified meetings, together with meetings of any
special committees established from time to time.
Directors who are not employees of the Company or its subsidiaries also receive
grants of stock options under Part II of the Company's 1990 Stock Option Plan.
Each Director who is not an employee of the Company receives an annual grant of
options to purchase 2,500 common shares. The option exercise price is 100% of
the fair market value of the Company's common shares on the date of grant.
Options are granted on the date on which the regularly scheduled Board meeting
is held during the Company's third fiscal quarter. Each option is granted for a
period of 10 years. 25% of the options granted each year become exercisable on
each of the first four anniversaries of the grant date for such options.
7
<PAGE> 12
- --------------------------------------------------------------------------------
COMPENSATION OF MANAGEMENT
The following table summarizes compensation awarded or paid to, or earned by,
each of the named Executive Officers during each of the Company's last three
fiscal years.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------- ------------
NAME AND SECURITIES ALL OTHER
PRINCIPAL SALARY UNDERLYING COMPENSATION
POSITION YEAR ($)(1) BONUS ($) OPTIONS (#) ($)(2)
--------- ---- ---------- --------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
Gordon F. Teter, 1997 786,692 1,141,866 181,061 682,384
Chairman of the Board, 1996 680,854 1,364,545 181,506 504,817
Chief Executive Officer 1995 571,385 963,113 208,555 257,362
and President (3)
R. David Thomas, 1997 868,813(4) 570,933 103,840 78,363
Senior Chairman of the 1996 790,341(4) 682,273 105,638 105,258
Board and Founder 1995 805,671(4) 481,556 109,535 72,328
Frederick R. Reed, 1997 313,673 376,849 50,315 41,933
Chief Financial 1996 121,385 104,333 101,100 860
Officer, General 1995 27,000 0 1,100 0
Counsel and Secretary (5)
Charles W. Rath, 1997 319,154 329,244 32,252 154,606
Executive Vice President 1996 292,092 312,615 33,358 151,842
1995 277,231 318,761 36,434 130,870
John W. Wright, 1997 283,048 292,649 32,104 69,042
Former President and 1996 257,709 309,456 33,135 64,536
Chief Operating 1995 245,432 312,920 35,978 28,382
Officer, International Division
(6)
</TABLE>
- ---------
(1) 1997 salary included 27 biweekly pay periods. 1996 and 1995 each contained
26 biweekly pay periods.
(2) The amounts shown in this column for each named Executive Officer consist of
(i) aggregate contributions or other allocations to the Company's Profit
Sharing and Savings Plan of $2,224, $2,277 and $2,288 made in 1997, 1996 and
1995, respectively (except that Mr. Wright did not receive contributions or
allocations under this Plan in 1995, and Mr. Reed did not receive
contributions or allocations in any year); and (ii) executive health
insurance premiums paid by the Company for coverage for the named Executive
Officers, and the amount allocated to the account of each of the named
Executive Officers under the Company's Supplemental Executive Retirement
Plan ("SERP"), as follows:
<TABLE>
<CAPTION>
HEALTH INSURANCE PREMIUMS SERP ALLOCATIONS
------------------------------ ------------------------------
NAME 1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Mr. Teter.......... $3,173 $2,579 $2,396 $384,227 $280,143 $124,003
Mr. Thomas......... $5,229 $4,251 $3,948 $ 70,910 $ 78,730 $ 66,092
Mr. Reed........... $3,173 $ 860 $ 0 $ 38,760 $ 0 $ 0
Mr. Rath........... $3,173 $2,579 $2,396 $149,209 $146,986 $126,186
Mr. Wright......... $3,173 $2,579 $2,396 $ 63,645 $ 59,680 $ 25,986
</TABLE>
In addition, the amount shown in this column for Mr. Thomas in 1996 includes
a $20,000 allocation under a Deferred Compensation Agreement between the
Company and Mr. Thomas; and the amounts shown in this column for Mr. Teter
includes allocations of $292,760, $219,818 and $128,675 for 1997, 1996 and
1995, respectively, under an Agreement between the Company and Mr. Teter
(which is described beginning on page 16).
8
<PAGE> 13
(3) Mr. Teter was President, Chief Executive Officer and Chief Operating Officer
until February 19, 1997.
(4) The amounts shown in this column for Mr. Thomas include payments made to Mr.
Thomas for services rendered as the principal spokesman in the Company's
television and radio commercials (the "Advertising Payments") in the amounts
of $261,659, $230,341 and $251,209 in 1997, 1996 and 1995, respectively. Mr.
Thomas was paid for these services at the minimum rate permitted by
applicable union contract provisions. The Advertising Payments were not
acted on by the Compensation Committee since they were not made for services
rendered by Mr. Thomas in his capacity as an Executive Officer. The
Advertising Payments are therefore not included in the compensation data set
forth in the section of this Proxy Statement entitled "REPORT OF THE
COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION" (which begins on page 11).
(5) Mr. Reed has been a director of the Company since February 23, 1995. He
became Executive Vice President, General Counsel and Secretary of the
Company on September 3, 1996. He assumed his current position on April 1,
1997. Amounts shown for Mr. Reed include compensation paid to Mr. Reed as an
outside director prior to becoming an officer.
(6) Mr. Wright was President--International Division until February 19, 1997. He
resigned from the Company on January 26, 1998.
The following table sets forth information concerning individual grants of stock
options made during the last fiscal year to each of the named Executive
Officers.
<TABLE>
<CAPTION>
OPTIONS GRANTED IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
- ---------------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO GRANT DATE
OPTIONS GRANTED EMPLOYEES IN EXERCISE PRICE EXPIRATION PRESENT VALUE
NAME (#)(1) FISCAL YEAR ($/SHARE)(2) DATE $(3)
---- --------------- ------------ -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Gordon F. Teter...................... 181,061 8.1% $27.125 7/29/07 $1,405,414
R. David Thomas...................... 103,840 4.6% $27.125 7/29/07 $ 806,016
Frederick R. Reed.................... 50,315 2.2% $27.125 7/29/07 $ 390,550
Charles W. Rath...................... 32,252 1.4% $27.125 7/29/07 $ 250,343
John W. Wright....................... 32,104 1.4% $27.125 7/29/07 $ 249,194
</TABLE>
- ---------
(1) 25% of the options listed in this column become exercisable on July 30,
1998. An additional 25% becomes exercisable on each successive July 30.
These exercise dates may be accelerated if the Company is involved in
certain change-in-control transactions as specified in the Company's various
stock option plans. If the Executive Officer's employment is terminated for
any reason other than death, disability or retirement, the options will be
canceled as of the date of such termination. If the Executive Officer's
employment is terminated by reason of his death or disability, the options
will become immediately exercisable and may be exercised at any time during
the 12-month period after his death or date of becoming disabled, subject to
the stated term of the options. If the Executive Officer's employment is
terminated by reason of his retirement, the options may be exercised during
the 48-month period after the retirement date, subject to the stated term of
the options.
(2) The exercise price is the mean of the high and low prices at which common
shares of the Company are traded on the New York Stock Exchange on the date
of grant.
(3) All values shown are pre-tax. Values shown were calculated using the
Black-Scholes option pricing model and the following assumptions: expected
volatility .281; risk-free rate of return 5.83%; dividend yield 1.11%; and
an expected time of exercise of four years. No adjustments were made for the
non-transferability of the options or for the risk of forfeiture. The
Company is not aware of any model which will determine with reasonable
accuracy a present value based on future unknown
9
<PAGE> 14
or volatile factors. No gain to the optionees is possible without an
increase in the market price of the Company's common shares above the market
price on the date of grant. If such increase occurs, all shareholders will
benefit commensurately. If no increase in the market price occurs, optionees
will realize no value from stock options.
The following table sets forth information regarding each individual exercise of
stock options made during the last fiscal year by each of the named Executive
Officers.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES
IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
VALUE OF
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY OPTIONS
UNEXERCISED OPTIONS AT FISCAL YEAR-END
AT FISCAL YEAR-END (#) ($)(1)(2)
SHARES --------------------------- ---------------------------
ACQUIRED ON VALUE REALIZED
NAME EXERCISE (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gordon F. Teter...... 79,720 812,179 293,852 442,069 $1,931,413 $1,421,171
R. David Thomas...... 0 N/A 365,406 332,581 $1,982,630 $1,214,812
Frederick R. Reed.... 0 N/A 25,825 126,690 $ 46,209 $ 133,609
Charles W. Rath...... 0 N/A 74,943 85,008 $ 548,394 $ 292,120
John W. Wright....... 0 N/A 61,505 83,777 $ 375,941 $ 285,001
</TABLE>
- ---------
(1) All values as shown are pre-tax.
(2) Based on the fiscal year-end closing price of $22.875 per share.
The Company has three retirement plans which apply to Executive Officers in
addition to other Officers and/or employees. The amounts of contributions or
other allocations under the Profit Sharing and Savings Plan and the Supplemental
Executive Retirement Plan for each of the named Executive Officers are set forth
in footnote 2 to the Summary Compensation Table (see page 8). The third
retirement plan is the Company's Pension Plan. Under the Pension Plan, each
participant is credited with a basic benefit of 1% of current compensation. The
participant may elect to contribute 2% of current compensation on an after-tax
basis. If the participant elects to contribute, then the Company contributes an
additional 2.5% of compensation for participants with less than five years of
service under the Pension Plan, and 3% of compensation for participants with at
least five years of service. Notwithstanding the contribution rates set forth
above, the maximum annual compensation amount for which contributions can be
made to the Pension Plan under the Internal Revenue Code is currently $160,000.
All accounts are credited with interest at an annual rate equal to the greater
of 5% or the interest rate for one-year treasury bills determined at the end of
the prior year, plus 1%. The estimated annual benefits payable upon retirement
at normal retirement age under the Pension Plan for each of the named Executive
Officers are as follows: Gordon F. Teter, $29,978; R. David Thomas, $118,246;
Frederick R. Reed, $23,805; Charles W. Rath, $19,789; and John W. Wright,
$25,005. The estimated annual retirement benefits assume a 7.5% interest factor
and retirement at age 65.
Mr. Thomas is the sole remaining participant in a separate retirement plan, and
he does not continue to accrue benefits under that plan. The estimated annual
benefit payable to Mr. Thomas upon retirement under that plan is $1,600,
assuming a 4% annual salary increase, a 7.25% interest factor, and retirement at
age 65.
Notwithstanding anything to the contrary as set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the following Report and
the performance graph on page 14 shall not be incorporated by reference into any
such filings.
10
<PAGE> 15
- --------------------------------------------------------------------------------
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Company's executive compensation policy has been "pay for performance" since
well before the current popularity of that concept. In an effort to provide
shareholders with a better understanding of the Company's executive compensation
practices, this report provides information beyond the information required by
the proxy rules of the Securities and Exchange Commission.
The Executive Officers named in the Summary Compensation Table (see page 8) have
significant years of experience in the food-service industry, including over 53
years of experience in the Wendy's system. Each of those individuals possess
talents and abilities which together make up a management team unique in the
industry. The Company and its shareholders have benefited and continue to
benefit from the skill, dedication and judgment of this team. The Committee
believes that the overall compensation levels paid to the named Executive
Officers reflect the performance of those individuals.
COMPENSATION PHILOSOPHY
The Company's executive compensation program is based on two objectives:
Providing market-competitive compensation opportunities, and
Creating a strong link between the interests of the shareholders, the
Company's financial performance, and the total compensation of the
Company's Executive Officers.
There are three components to the Company's executive compensation program:
annual cash compensation, longer-term incentive compensation and benefits. The
annual cash compensation program is comprised of base salary and annual
incentive compensation. Base salary and annual incentive compensation
opportunities are set by periodic comparison to external rates of pay for
comparable positions within the food-service industry. The companies used for
this comparison were comprised of the participants in the National Chain
Restaurant Compensation Association annual survey and the same companies which
comprise the "Peer Group Index" shown on the graph on page 14.
Base salary ranges are targeted at the 50th percentile of competitive data.
Individual variability is based on performance and experience. Adjustments are
normally considered annually, based upon general movement in external salary
levels, individual performance and potential, and/or changes in the position's
duties and responsibilities.
Annual incentive compensation opportunities are targeted at the 50th percentile
of competitive data. The Company had three cash bonus plans which applied to
Executive Officers for the 1997 fiscal year. Under the Senior Executive Earnings
Maximization Plan (the "SEEMP") (which Messrs. Teter and Thomas participated in
during fiscal 1997), and the Earnings Maximization Plan (the "EMP") (which other
Executive Officers participated in), participants received annual incentive
awards which were based on the extent to which the Company exceeded specified
net income goals for the year. The net income goals for the SEEMP were
established in 1994 and increase annually. The net income goals for the EMP were
established in 1991 and increase annually. The goals for both plans have been
specified through the Company's 1998 fiscal year. Under the Management Incentive
Plan, 1997 incentive awards were based on the extent to which the Company
achieved or exceeded specified earnings per share and return on assets goals for
the year (excluding the effect of the non-recurring charges taken in the fourth
quarter of 1997). The awards to participants under this plan were based on the
payout percentages specified in the following table multiplied by the
participant's base salary and the targeted bonus percentage applicable to such
employee's grade (which ranged from 13% to 32% of base salary). For 1997 the
Company attained between 85% and 99.9% of its earnings per share goal and
between 90% and 94.9% of its return on assets goal.
11
<PAGE> 16
MANAGEMENT INCENTIVE PLAN PAYOUT PERCENTAGES
E
A
R
N
I
N
G
S
P
E
R
S
H
A
R
E
<TABLE>
<CAPTION>
% ATTAINMENT
- ------------
<S> <C> <C> <C> <C> <C> <C>
120.0%+ 75.00% 112.50% 135.00% 142.50% 150.00% 157.50%
110.0%-119.9% 62.50% 93.75% 112.50% 118.75% 125.00% 131.25%
100.0%-109.9% 50.00% 75.00% 90.00% 95.00% 100.00% 105.00%
85.0%- 99.9%(1) 37.50% 56.25% 67.50% 71.25% 75.00% 78.75%
80.0%- 84.9% 25.00%(2) 37.50% 45.00% 47.50% 50.00% 52.50%
-------------------------------------------------------------------------------------
% ATTAINMENT 80.0%-84.9% 85.0%-89.9% 90.0%-94.9%(1) 95.0%-99.9% 100.0%-104.9% 105.0%-109.9%
------------
<CAPTION>
% ATTAINMENT
------------
<S> <C> <C> <C>
120.0%+ 165.00% 187.50% 225.00%
110.0%-119.9% 137.50% 156.25% 187.50%
100.0%-109.9% 110.00% 125.00% 150.00%
85.0%- 99.9%(1) 82.50% 93.75% 112.50%
80.0%- 84.9% 55.00% 62.50% 75.00%
-----------------------------------------
% ATTAINMENT 110.0%-114.9% 115.0%-119.9% 120.0%+
------------
</TABLE>
RETURN ON ASSETS
- ---------
(1) Indicates percentage of attainment applicable for fiscal year 1997.
(2) Less than 80% budget attainment in either payout criteria results in a 0%
bonus factor.
Total annual cash compensation may be well below the 50th percentile when target
performance is not achieved. When targets are significantly exceeded, total
annual cash compensation may equal or exceed the 75th percentile.
The longer-term incentive compensation program primarily consists of stock
options (although one of the cash incentive award programs has a longer-term
orientation, since the annual financial performance goals were established in
1991 and specified through fiscal 1998). Award opportunities under the stock
option program for 1997 were set by comparison to stock option grants made to
comparable positions at companies with revenues of at least $500 million within
the food-service industry and other industrial companies with revenues between
$1 billion and $3 billion, and were set at approximately the 75th percentile.
The companies used for the food-service industry comparison were the same
companies which comprise the "Peer Group Index" shown on the graph on page 14.
Options are exercisable at not less than 100% of the fair market value of the
Company's common shares on the date of grant. Award opportunities under the
stock option program are based on a fixed number of options for each eligible
employee grade. As a result, the Black-Scholes value of options awarded will
increase or decrease based on how the Company's stock price has changed since
the previous year's option awards (assuming that the other inputs used in the
Black-Scholes calculation remain constant). The fixed number of options to be
awarded will be adjusted periodically by comparison to comparable positions
within the food-service industry and to other industrial companies with revenues
between $1 billion and $3 billion. Grantees do not receive a benefit from stock
options unless and until the market price of the Company's common shares
increases. This program accomplishes the objective of linking each Executive
Officer's opportunity for financial gain to increases in shareholder wealth, as
reflected by the market price of the Company's common shares.
The benefits program is comprised of retirement income and group insurance
plans. The objective of the program is to provide Executive Officers with
reasonable and competitive levels of protection against the four contingencies
(retirement, death, disability and ill health) which will interrupt the
Executive Officer's employment and/or income received as an active employee. The
retirement program consists of two tax-qualified plans that cover all full-time
management and administrative employees, and a supplemental retirement plan
which covers the Executive Officers and other Officers of the Company. Mr.
Thomas is the sole remaining participant in a fourth retirement plan, and he
does not continue to accrue benefits under that plan. The group insurance
program consists of life, disability and health insurance benefit plans that
cover all full-time management and administrative employees and the executive
health care reimbursement plan, which covers Executive Officers and other
Officers.
Section 162(m) of the Internal Revenue Code of 1986, as amended, prohibits a
publicly-held corporation, such as the Company, from claiming a deduction on its
federal income tax return for
12
<PAGE> 17
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
compensation paid under the SEEMP and its stock option plans qualifies as
"performance-based compensation" for purposes of Section 162(m).
COMPENSATION FOR CHIEF EXECUTIVE OFFICER
The Committee believes that the Company's executive compensation program has
resulted in a meaningful relationship between the compensation paid to Mr. Teter
and the Company's performance. Total cash compensation (salary and bonus) for
Mr. Teter decreased by $116,841, or 5.7% from the prior year. The Company's net
income for 1997 increased 15.7% to $180,506,000 (or $1.33 per share, diluted)
from $155,948,000 (or $1.19 per share, diluted), in 1996, excluding the effect
of the non-recurring charges taken in the fourth quarter of 1997. Giving effect
to those charges, the Company's net income decreased 16.3% to $130,499,000 (or
$0.97 per share, diluted). In order to facilitate a more long-term perspective
between the Company's performance and total cash compensation paid to the Chief
Executive Officer, the following table shows the correlation between changes in
earnings per share (diluted) and the total cash compensation paid to the Chief
Executive Officer since 1992.
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Percentage change from prior year in earnings
per share (diluted)........................ 19.6% 17.9% 11.4% 35.2% 11.8%(1)
Percentage change from prior year in cash
compensation for CEO....................... 8.0% 13.6% 1.8%(2) 33.3% (5.7%)
</TABLE>
- ---------
(1) Excludes the effect of the non-recurring charges taken in the fourth quarter
of 1997. If the charges were included, this number would be (18.5%).
(2) Mr. Teter became Chief Executive Officer on January 1, 1995.
Mr. Teter's base salary rate for 1997 was targeted at the 50th percentile of
competitive data. In setting Mr. Teter's base salary level, the Compensation
Committee also considered Mr. Teter's vast experience in the restaurant
industry, the Company's performance under his leadership since he was named
Chief Executive Officer effective January 1, 1995, and the additional
responsibilities he assumed when he was also named Chairman of the Board
effective February 19, 1997.
An annual cash incentive award is payable under the SEEMP to Mr. Teter only if
the Company achieves or exceeds specified annual net income goals. The amount of
the award can increase if the Company exceeds the specified goals. Conversely,
no award is payable if the Company does not achieve the specified goals. The
payment to Mr. Teter for 1997 was based on the extent to which the 1997 goals
were achieved after giving effect to the non-recurring charges taken in the
fourth quarter. 59% of Mr. Teter's cash compensation for 1997 was incentive pay.
Since the incentive award increases as the Company's performance increases, and
decreases (or becomes zero) if the specified goals are not met, Mr. Teter's cash
compensation is significantly affected by the Company's performance. Mr. Teter
does not participate in the Management Incentive Plan.
Long-term incentives in the form of stock options were granted to Mr. Teter in
1997. Stock options were granted at 100% of the fair market value of the
Company's common shares on July 30, 1997, the date of grant. Options serve to
directly align Mr. Teter's interests with the interests of other shareholders,
since Mr. Teter will not realize a benefit unless and until the market price of
the Company's common shares increases.
The Committee considered the number of unexercised options already held by Mr.
Teter and competitive practices in determining the number of options to grant in
1997. The number of options granted in 1997 to Mr. Teter was designed to
approximate the 75th percentile of competitive practice for comparable positions
within the food-service industry and at other industrial companies with revenues
between $1 billion and $3 billion, consistent with the policy previously
described.
13
<PAGE> 18
The Committee believes that the information set forth in this report strongly
supports the conclusion that Mr. Teter has been reasonably compensated for the
job he has done since he became the Chief Executive Officer as well as for his
assumption of additional responsibilities as Chairman of the Board. His
opportunities to increase his future compensation depend on the Company's future
performance and the competitive pay practices of comparable positions within the
food-service industry. The compensation programs applicable to Mr. Teter have
accomplished the objective of linking shareholder and financial performance to
Mr. Teter's total compensation.
Respectfully submitted,
COMPENSATION COMMITTEE
Fielden B. Nutter, Sr., Chairman
Thekla R. Shackelford
Janet Hill
True H. Knowles
- --------------------------------------------------------------------------------
COMPARISON OF FIVE-YEAR TOTAL RETURN FOR WENDY'S INTERNATIONAL, INC.,
THE PEER GROUP INDEX AND THE S&P 500 INDEX
The following graph compares the yearly percentage change in the Company's
cumulative total shareholder return (as measured by dividing (i) the sum of (A)
the cumulative amount of dividends for the measurement period, assuming dividend
reinvestment, and (B) the difference between the Company's share price at the
end and the beginning of the measurement period; by (ii) the share price at the
beginning of the measurement period) against the cumulative total return of the
S&P 500 Stock Index and a peer group of other companies with restaurant
operations (excluding the Company) (the "Peer Group Index").
COMPARISON OF FIVE-YEAR TOTAL RETURN(1)
FOR WENDY'S INTERNATIONAL, INC., THE PEER
GROUP INDEX(2) AND THE S&P 500 INDEX
<TABLE>
<CAPTION>
Measurement Period PEER GROUP
(Fiscal Year Covered) WEN S&P INDEX INDEX
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 139.92 110.09 115.44
1994 117.51 111.85 108.80
1995 176.03 153.80 153.59
1996 171.99 189.56 156.75
1997 204.13 252.82 170.66
</TABLE>
- ---------
(1) Assumes $100 invested on December 31, 1992, in Wendy's International, Inc.
common shares, the Peer Group Index and the S&P 500 Index. Total return
assumes dividend reinvestment.
14
<PAGE> 19
(2) The Peer Group Index has been computed by the Company, and is comprised of
the following 10 companies: Bob Evans Farms, Inc.; Brinker International,
Inc.; Cracker Barrel Old Country Store; Flagstar Companies, Inc.; Foodmaker,
Inc.; Host Marriott Services Corp.; McDonald's Corporation; Ruby Tuesday,
Inc.; Ryan's Family Steakhouses, Inc.; and Shoney's, Inc. This Index has
been weighted by market capitalization of each component company.
- --------------------------------------------------------------------------------
EXECUTIVE AGREEMENTS
The Company has entered into an employment agreement ("Key Executive Agreement")
with Mr. R. David Thomas. The Company has also entered into employment
agreements ("New Key Executive Agreements") with Messrs. John F. Brownley, John
K. Casey, George Condos, Lawrence A. Laudick, Ronald E. Musick, Charles W. Rath,
Frederick R. Reed, John T. Schuessler, Gordon F. Teter, Mrs. Kathie T. Chesnut
and Mrs. Kathleen A. McGinnis. The Key Executive Agreement and the New Key
Executive Agreements (collectively the "Agreements") are intended to assure the
Company that it will have the continued dedication, undivided loyalty, and
objective advice and counsel from these key executives in the event of a
proposed transaction, or the threat of a transaction, which could result in a
change of control of the Company. Mr. Casey has indicated that he expects to
retire as an officer of the Company effective April 1, 1998. His New Key
Executive Agreement will terminate as of the effective date of his retirement.
Messrs. Brownley, Casey, Laudick, Musick, Rath and Teter had previously entered
into Key Executive Agreements with the Company. The New Key Executive Agreements
were executed in 1989 with those key executives to replace and clarify certain
provisions, to provide protections to both the Company and the covered
executives consistent with current executive compensation practices, and to
reduce the costs to the Company. Except as otherwise noted, the provisions of
the New Key Executive Agreements are substantially the same as the provisions of
the Key Executive Agreements.
The Agreements provide that in the event of a change of control (as defined in
the respective Agreements), the key executives will be employed by the Company
in their present positions for a period of approximately five years (ten years
in the case of Mr. Thomas), or until the executive dies, is terminated for good
cause by the Company or terminates employment himself without good reason or
good cause, or, in the case of the Key Executive Agreements, reaches the normal
retirement age, whichever occurs first (the "Employment Term").
In the event of a change of control, the key executives will be entitled to
continue to receive during their Employment Term the annual salary, bonus and
other benefits made available to them by the Company immediately prior to the
change of control. The Board of Directors will review annually the performance
of each key executive during such Employment Term to determine whether or not
such salary and bonus should be increased.
The Agreements may be terminated for good cause by the Company as defined in the
respective Agreements. If a key executive is terminated for good cause by the
Company under either Agreement, the Company has no further obligation to pay any
compensation or to provide benefits to the key executive.
The Key Executive Agreement may be terminated by the key executive for good
cause if the Company assigns him to a position of lesser importance, the Company
attempts to terminate his employment other than for good cause or the Company
breaches any of its obligations under the Key Executive Agreement. The New Key
Executive Agreement may be terminated by the key executive for good reason if
the Company (i) changes the key executive's status, title, position or
responsibilities in a way that does not represent a promotion, (ii) either
reduces the key executive's base salary or provides an annual salary increase
less than the increase in a defined consumer price index, (iii) requires the key
executive to relocate beyond a 30 mile radius from Dublin, Ohio, (iv) takes
action which results in a material reduction in compensation and benefits
otherwise payable to the key executive, (v) materially breaches the Agreement,
or (vi) fails to notify the key executive that a successor to the Company has
agreed to perform under the Agreement.
15
<PAGE> 20
If the Key Executive Agreement is terminated by the key executive for good
cause, the Company is obligated to continue to pay the compensation and to
provide the benefits to the key executive for the remainder of the Employment
Term, subject to offset for any compensation earned by the key executive from
subsequent employment. If the New Key Executive Agreement is terminated by the
key executive for good reason, the Company will be obligated to make a lump-sum
payment to the key executive of three times the sum of such executive's current
salary plus average annual bonuses over the prior three years (or the term of
employment, if less than three years). The lump-sum payment will not be subject
to offset. If a key executive terminates a New Key Executive Agreement for good
reason, such key executive will also be entitled to (i) continuation of group
insurance benefits for three years, subject to offset for any benefits from
subsequent employment, if any, (ii) purchase his or her Company automobile at
the then-current book value, and (iii) a lump-sum payment equal to the present
value of accrued retirement benefits after adding three additional years of
benefit accrual, reduced by any vested benefits. In addition, any awards granted
under all long-term incentive plans of the Company (including, without
limitation, options granted under the Company's stock option plans) will become
immediately vested.
The New Key Executive Agreements with Messrs. Casey and Musick will also require
the Company to gross-up the payments made under such Agreements to permit these
key executives to receive a net amount (after taxes) equal to what would have
been received had no excise tax been imposed. The amounts paid to the other key
executives who are parties to the New Key Executive Agreements will be subject
to a maximum benefit where such payment results in an excise tax liability to
the individual. In such case, the amount otherwise payable to such individual
will be reduced if, and to the extent that, such reduction will entitle the
executive to a larger net benefit, taking into account the payment of any excise
tax.
The Company has established a benefits protection trust to provide for the
payment of benefits to the key executives and to provide for the payment of any
legal fees or expenses incurred by such key executives in enforcing their rights
under the Agreements.
The Company entered into an Agreement with Gordon F. Teter in March, 1995. Mr.
Teter became Chief Executive Officer (in addition to retaining his titles of
President and Chief Operating Officer) on January 1, 1995. The Agreement
recognizes the significant professional and personal contributions Mr. Teter has
made to the successful operation and recognized good will and reputation of the
Company. If Mr. Teter ceases to be actively employed by the Company after
attaining age 62 and before attaining age 65 (the "Transition Date"), the
Agreement provides for the continuation of Mr. Teter's salary at the rate of his
highest annual base salary in effect at any time during the five-year period
preceding the date of his termination of employment. The salary continuation
benefits will end on the earliest of (i) 24 months after termination of active
employment, (ii) death, or (iii) attainment of age 65. Until the salary
continuation period expires, Mr. Teter will continue to participate in the other
employee benefit plans and programs of the Company, except that Mr. Teter will
not receive any further stock options or other stock-based awards, Mr. Teter
will only be entitled to receive a pro-rated bonus under the annual cash bonus
plan in effect for the year in which his active employment terminates, and any
benefits Mr. Teter receives from the Company's short-term or long-term
disability plans will offset amounts otherwise payable under the Agreement.
If Mr. Teter's active employment is terminated prior to his attainment of age 62
for any reason other than by reason of his voluntary termination of employment,
death or termination for "cause" as defined in the Agreement, the Agreement
provides for the continuation of Mr. Teter's salary for 24 months at the rate in
effect at the time his active employment is terminated. During such period, Mr.
Teter will continue to participate in certain of the Company's employee benefit
plans in which he was a participant immediately preceding the date his active
employment terminated, receive a pro-rated bonus under the Company's annual cash
bonus plan then in effect for the fiscal year in which his active employment is
terminated, and receive payment for any accrued, unused vacation for the year in
which his termination of active employment occurs. Any benefits Mr. Teter
receives under the Company's short-term or long-term disability plans will be
offset against amounts otherwise payable under this provision. In the event Mr.
Teter accepts other employment while he is receiving benefits under this
provision of the Agreement, he will be required to accept a lump-sum payment
representing the balance
16
<PAGE> 21
of the salary continuation payments otherwise due, and the other benefits
described in this paragraph will immediately terminate. Mr. Teter's right to
receive the benefits described in this paragraph is conditioned upon his
execution of a general release in favor of the Company at the time his active
employment is terminated.
The Agreement with Mr. Teter also provides for a non-qualified supplemental
retirement benefit. Under the Company's existing retirement plans, Mr. Teter
would be entitled to retirement benefits as set forth in footnote 2 to the
Summary Compensation Table on page 8 and the Pension Plan benefit estimated on
page 10. Those plans are designed to provide a full benefit based on payments
beginning at age 65 and the employee's continuing employment with the Company or
its subsidiaries until age 65. The Agreement establishes a supplemental account
intended to provide full retirement benefits at age 62 rather than age 65 and
which recognizes compensation earned until the actual date of termination of
employment. Each year until the year in which the Transition Date occurs (or, if
Mr. Teter's employment terminates before he attains age 62, the year preceding
the year in which his employment terminates), the supplemental account will be
credited in an amount determined by actuarial calculation to result in the
intended retirement benefits. The supplemental account will be credited with an
additional amount equal to .8% of Mr. Teter's compensation for each such year
until termination of employment. This additional credit is intended to provide
funds which Mr. Teter could use to purchase retiree health insurance upon his
termination of employment and the expiration of the salary continuation period.
The supplemental account will also be credited with interest at the rate at
which interest is credited under the Company's qualified pension plan which
applies to Mr. Teter and all of the Company's other eligible employees.
Mr. Teter can elect whether to take the retirement benefit from the supplemental
account as a lump-sum distribution or over a period not exceeding the joint and
last survivor life expectancies of Mr. Teter and his wife (if Mr. Teter is
married at the time of his election).
If Mr. Teter ceases to be actively employed by the Company after attaining age
62 and before attaining age 65, the Agreement provides that (i) Mr. Teter will
make himself available to provide advice and counsel to the Company upon request
during the salary continuation period; (ii) the Company may require Mr. Teter to
return to active employment for up to 12 months under certain conditions; and
(iii) Mr. Teter is prohibited from competing against the Company during the
salary continuation period. If Mr. Teter's employment with the Company is
terminated before he attains age 62, he is prohibited from competing against the
Company for two years following the date of his termination of employment. The
Agreement further provides that Mr. Teter will not be entitled to receive any
payments or benefits specified in the Agreement in the event he violates his
obligations under the Agreement or if his employment is terminated for "cause"
as defined in the Agreement.
If Mr. Teter's employment is terminated after he attains age 62 under
circumstances which entitle him to receive benefits under his Key Executive
Agreement, no salary continuation payments (or further salary continuation
payments in the event such payments have already commenced) will be paid under
the Agreement unless Mr. Teter waives all rights to any payments or benefits
under the Key Executive Agreement.
- --------------------------------------------------------------------------------
CERTAIN TRANSACTIONS INVOLVING MANAGEMENT
Melinda Morse, the daughter of R. David Thomas, is a 49% shareholder in a
corporation which owns the right to operate five Wendy's Old Fashioned
Hamburgers restaurants in Texas. Mrs. Morse serves as a co-Franchise Owner with
the corporation and her husband under the applicable Restaurant Franchise and
Unit Franchise Agreements with the Company. In the opinion of the Company, the
terms of these franchises are no less favorable than the Company could have
obtained from unrelated third parties.
The Company has proposed to purchase all five of the Wendy's Old Fashioned
Hamburgers restaurants from Mr. and Mrs. Morse and their corporation. If this
transaction is consummated as proposed, the Company would acquire the right to
operate the restaurants and ownership of the equipment for $3 million. The
Company would lease the real estate for 7% of sales. The Company would also have
the option to purchase the real estate after the eleventh lease year for $3
million, and the sellers would have
17
<PAGE> 22
an option to require the Company to purchase the real estate through and
including the fifth lease year for $3 million. The purchase price for this
proposed transaction was determined by George Condos, Executive Vice
President -- Development, in conjunction with financial management of the
Company, based on the valuation method the Company generally uses for
acquisitions of restaurants from franchisees. In the opinion of the Company, the
terms of this proposed transaction would be no less favorable than the Company
could obtain from unrelated third parties. The transaction would be subject to
the execution of definitive agreements and the satisfaction of customary
conditions.
John J. Casey and Kevin B. Casey, the sons of John K. Casey, are each a 26%
shareholder of J.K.C. Wen, L.C., which owns the right to operate ten Wendy's Old
Fashioned Hamburgers restaurants in Florida. A third shareholder, who is
unrelated to the Caseys, owns the remaining 48% of the corporation. John J.
Casey and Kevin B. Casey serve as co-Franchise Owners with the corporation under
the applicable Unit Franchise Agreements with the Company. In the opinion of the
Company, the terms of these franchises are no less favorable than the Company
could have obtained from unrelated third parties. John K. Casey retired as a
Director of the Company effective February 21, 1998. He was Vice Chairman and
Chief Financial Officer of the Company until April 1, 1997. He is currently Vice
President and Senior Advisor. Mr. Casey has indicated that he expects to retire
from this position effective April 1, 1998.
- --------------------------------------------------------------------------------
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Directors have selected Coopers & Lybrand L.L.P. as the independent public
accountants of the Company for the current fiscal year. Management recommends
that the shareholders ratify the selection. This firm has audited the Company's
financial statements for each of the last 28 years. Management expects that
representatives of Coopers & Lybrand L.L.P. will be present at the Annual
Meeting with the opportunity to make a statement if they desire to do so and
will be available to respond to appropriate questions. The affirmative vote of
the holders of a majority of the common shares represented in person or by proxy
is necessary to ratify the selection of the Company's independent public
accountants. Under Ohio law and the Company's Regulations, abstentions and
broker non-votes are counted as present; the effect of an abstention or broker
non-vote on this proposal is the same as a "no" vote. Unless otherwise
indicated, the persons named in the Proxy will vote all Proxies in favor of
ratifying the selection of independent public accountants.
18
<PAGE> 23
- --------------------------------------------------------------------------------
OTHER MATTERS
SHAREHOLDER PROPOSALS
In order to be considered for inclusion in the proxy statement distributed to
shareholders prior to the Annual Meeting in 1999 a shareholder proposal must be
received by the Company no later than November 11, 1998. Written requests for
inclusion should be addressed to: Corporate Secretary, P. O. Box 256, Dublin,
Ohio 43017-0256. It is suggested that you mail your proposal by certified mail,
return receipt requested.
A COPY OF FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WILL BE
SENT TO ANY SHAREHOLDER WITHOUT CHARGE UPON WRITTEN REQUEST ADDRESSED TO
INVESTOR RELATIONS DEPARTMENT, P. O. BOX 256, 4288 WEST DUBLIN-GRANVILLE ROAD,
DUBLIN, OHIO 43017-0256.
Management knows of no other business which may be properly brought before the
Annual Meeting of Shareholders. However, if any other matters shall properly
come before such meeting, it is the intention of the persons named in the
enclosed form of Proxy to vote such Proxy in accordance with their best judgment
on such matters.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR NOT YOU
EXPECT TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO FILL IN, SIGN AND
RETURN THE PROXY IN THE ENCLOSED STAMPED, SELF-ADDRESSED ENVELOPE.
By order of the Board of Directors.
/s/ Frederick R. Reed
FREDERICK R. REED
Secretary
19
<PAGE> 24
MAP TO WENDY'S INTERNATIONAL, INC.
ANNUAL MEETING OF SHAREHOLDERS
COLUMBUS, OHIO
MAP TO WENDY'S MEETING
WEDNESDAY, APRIL 29, 1998
MEETING BEGINS AT 10:00 A.M.
DOORS OPEN AT 9:30 A.M.
ALADDIN SHRINE TEMPLE
3850 STELZER ROAD
COLUMBUS, OH 43219
(614) 475-2609
FOR FURTHER INFORMATION, CALL 1-800-443-7266
AND ASK FOR EXTENSION 3251.
<PAGE> 25
[WENDY'S LOGO]
Dear Wendy's Shareholder:
You are invited to join our directors and management at the Annual Meeting of
Shareholders of Wendy's International, Inc. The meeting will be held at the
Aladdin Shrine Temple, 3850 Stelzer Road, Columbus, Ohio 43219, on Wednesday,
April 29, 1998, beginning at 10 a.m.
We will elect directors, ratify the selection of independent public accountants
and transact such other business as may properly come before the meeting. We
will also give you an overview on our growth strategy with Wendy's and Tim
Hortons restaurants. And, Wendy's Senior Chairman of the Board and Founder Dave
Thomas plans to attend the meeting. We hope you will be able to join us.
It is important that your shares be voted whether or not you plan to be present
at the meeting. You should specify your choices by marking the appropriate boxes
on the proxy form, and date, sign and return your proxy form in the enclosed
envelope as promptly as possible. If you date, sign and return your proxy form
without specifying your choices, your shares will be voted in accordance with
the recommendations of Wendy's directors.
Sincerely,
/s/ GORDON F. TETER
Chairman, Chief Executive Officer and President
PLEASE DETACH AND MAIL IN THE ENVELOPE PROVIDED
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
PLEASE MARK YOUR
/X/ VOTE AS THIS
EXAMPLE
FOR WITHHELD FOR AGAINST ABSTAIN
1. ELECTION OF / / / / Nominees: R. David Thomas, Ernest S. 2. APPROVAL OF INDEPENDENT PUBLIC / / / / / /
DIRECTORS Hayeck, Janet Hill, True H. ACCOUNTANTS
Knowles and Paul D. House
FOR, except vote withheld from the following nominee(s): 3. IN THEIR DISCRETION, THE PROXIES
ARE AUTHORIZED TO VOTE ON SUCH
- ---------------------------------------------------------------- OTHER BUSINESS AS MAY PROPERLY
The Board of Directors recommend a vote FOR the nominees and FOR COME BEFORE THE MEETING
proposal 2.
Change of
Address/comments / /
on reverse side
I plan to I do not plan
attend the / / to attend the / /
meeting meeting
SIGNATURE(S) DATE
-------------------------------------------------------------- --------------------
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH SIGN. WHEN SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. I
HEREBY REVOKE ALL PROXIES HERETOFORE GIVEN BY ME TO VOTE AT SAID MEETING OR ANY ADJOURNMENTS
THEREOF.
</TABLE>
<PAGE> 26
WENDY'S INTERNATIONAL, INC.
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS OF THE COMPANY
FOR ANNUAL MEETING APRIL 29, 1998
The undersigned hereby constitutes and appoints R. David Thomas, Gordon F. Teter
and Frederick R. Reed, and each of them, his true and lawful agents and proxies
with full power of substitution in each, to represent the undersigned at the
Annual Meeting of Shareholders of Wendy's International, Inc. to be held at the
Aladdin Shrine Temple, 3850 Stelzer Road, Columbus, Ohio 43219, on Wednesday,
April 29, 1998, and at any adjournments thereof, on all matters coming before
said meeting.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, SEE
REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE
WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT VOTE YOUR
SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS
AND FOR THE APPROVAL OF INDEPENDENT PUBLIC ACCOUNTANTS.
COMMENTS: (Change of address)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(IF YOU HAVE WRITTEN IN THE ABOVE SPACE, PLEASE MARK
THE CORRESPONDING BOX ON THE REVERSE SIDE OF THE CARD)
---------
SEE
REVERSE
SIDE
---------
