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 Section 240.14a-11(c) or Section 240.14a-12
RYAN'S FAMILY STEAK HOUSES, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than 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.
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>
RYAN'S FAMILY STEAK HOUSES, INC.
405 Lancaster Avenue (29650)
Post Office Box 100
Greer, South Carolina 29652
March 27, 1998
TO OUR SHAREHOLDERS:
You are cordially invited to attend the Annual Meeting of Shareholders of
Ryan's Family Steak Houses, Inc. to be held on Thursday, April 30, 1998 at
11:00 a.m. at the Greenville/Spartanburg Airport Marriott in Greenville, South
Carolina.
The official Notice of Annual Meeting, Proxy Statement and Proxy Card are
enclosed with this letter. The Notice of the Annual Meeting and Proxy Statement
describe the formal business to be transacted at the Annual Meeting.
The vote of every shareholder is important. To ensure proper representation
of your shares at the meeting, please sign, date and return the enclosed proxy
card as soon as possible, even if you currently plan to attend the Annual
Meeting. This will not prevent you from voting in person but will ensure that
your vote will be counted if you are unable to attend. Under the laws of some
states, failure to vote your shares either in person or by proxy over a period
of years can cause ownership of your shares to be forfeited (escheated) to the
state.
Sincerely,
/s/ Janet J. Gleitz
Janet J. Gleitz
Secretary
<PAGE>
RYAN'S FAMILY STEAK HOUSES, INC.
405 Lancaster Avenue (29650)
Post Office Box 100
Greer, South Carolina 29652
----------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 30, 1998
----------------------------------------
TO OUR SHAREHOLDERS:
Ryan's Family Steak Houses, Inc. (the "Company") will hold its Annual
Meeting of Shareholders at the Greenville/ Spartanburg Airport Marriott,
Greenville, South Carolina, on Thursday, April 30, 1998 at 11:00 a.m. for the
following purposes:
(1) To elect seven (7) directors to hold office until the next annual
meeting of shareholders or until their successors have been duly elected
and qualified;
(2) To vote on the proposal to approve the Ryan's Family Steak Houses,
Inc. 1998 Stock Option Plan; and
(3) To transact such other business as may properly come before the meeting
or any adjournment of the meeting.
If you were a shareholder of record at the close of business on March 4,
1998, you may vote at the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Janet J. Gleitz
JANET J. GLEITZ
Secretary
March 27, 1998
Greer, South Carolina
A PROXY CARD IS ENCLOSED. TO ENSURE THAT YOUR SHARES WILL BE VOTED AT THE
ANNUAL MEETING, PLEASE COMPLETE AND SIGN THE PROXY CARD AND RETURN IT PROMPTLY
IN THE ENCLOSED, POSTAGE-PAID, ADDRESSED ENVELOPE. NO ADDITIONAL POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES. IF YOU RETURN YOUR SIGNED PROXY CARD,
YOU RETAIN YOUR RIGHT TO VOTE IF YOU ATTEND THE MEETING.
<PAGE>
RYAN'S FAMILY STEAK HOUSES, INC.
405 Lancaster Avenue (29650)
Post Office Box 100
Greer, South Carolina 29652
(864) 879-1000
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
The Board of Directors (the "Board") of Ryan's Family Steak Houses, Inc.
(the "Company") is furnishing this Proxy Statement in connection with the
solicitation of proxies to be voted at the Annual Meeting of Shareholders of
the Company (the "Annual Meeting") to be held at 11:00 a.m. on Thursday, April
30, 1998 at the Greenville/Spartanburg Airport Marriott, Greenville, South
Carolina. The approximate mailing date of this Proxy Statement is March 27,
1998.
Shareholders of record at the close of business on March 4, 1998 are
entitled to notice of and to vote at the Annual Meeting. As of such date, a
total of 45,113,580 shares of common stock, $1 par value, of the Company
("Common Stock") were outstanding. Holders of Common Stock are entitled to one
vote for each share held of record on March 4, 1998 upon all matters presented
at the Annual Meeting.
A shareholder giving a proxy may revoke it at any time before it is
exercised by:
o submitting a written notice of revocation (dated later than the Proxy
Card) to the Secretary at or before the Annual Meeting;
o submitting another proxy that is properly signed and later dated; or
o voting in person at the meeting (although attendance at the Annual
Meeting will not in and of itself revoke a proxy).
Any instrument revoking a proxy should be delivered to the Secretary of
the Company at the Annual Meeting or delivered prior to the Annual Meeting to
Ryan's Family Steak Houses, Inc., 405 Lancaster Avenue, Greer, South Carolina
29650, or P.O. Box 100, Greer, South Carolina 29652, Attention: Janet J.
Gleitz.
Unless you revoke your proxy by following the above instructions, your
proxy will be voted as you specify. Unless you specify otherwise, all shares
represented by a proxy will be voted FOR the proposal to elect as directors of
the Company the nominees named in this Proxy Statement, FOR the proposal to
approve the Company's 1998 Stock Option Plan (the "Plan"), and in the best
judgment of the proxy holders on any other matter that may properly come before
the Annual Meeting or any adjournment. An automated system administered by the
Company's transfer agent tabulates the votes. Abstentions and broker non-votes
are each included in determining the number of shares present and able to vote.
Each is tabulated separately. In connection with the election of directors,
abstentions and broker non-votes are not counted in determining the votes cast
for directors. In connection with the vote on the proposal to approve the Plan,
broker non-votes and abstentions are also not counted in determining votes cast
for the Plan.
The Company's bylaws require the presence, either in person or by proxy,
of the holders of a majority of the outstanding shares of Common Stock at March
4, 1998 to constitute a quorum at the Annual Meeting. Directors will be elected
by a plurality of votes cast at the Annual Meeting. Shareholders do not have a
right to cumulate their votes for directors. For the Plan to be approved, the
number of votes cast in favor of the Plan must exceed the number of votes cast
against the Plan.
ELECTION OF DIRECTORS
(Item #1 on the Proxy)
The following seven persons are nominees for election at the Annual
Meeting as directors to serve until the next annual meeting of the Company or
until their successors are duly elected and qualified: Charles D. Way, James D.
Cockman, Brian S. MacKenzie, G. Edwin McCranie, Barry L. Edwards, Harold K.
Roberts, Jr. and James M. Shoemaker, Jr. Unless you withhold authority to vote
for the Board's nominees in the election of directors, the persons named in the
enclosed proxy intend to nominate and vote for such nominees.
1
<PAGE>
Management believes that all of the nominees will be available and able to
serve as directors, but if any nominee is not available or able to serve, the
Common Stock represented by the proxies will be voted for such substitute as
the Board of Directors may designate.
The following table sets forth the name, age, principal occupation, years
of service as a director, and Common Stock beneficially owned as of March 4,
1998 of or by each nominee for director.
<TABLE>
<CAPTION>
Principal
Name Age Occupation
- ---------------------------- ----- -----------------------------------------
<S> <C> <C>
Charles D. Way 45 Chairman of the Board, President
(1,2) and Chief Executive Officer of
the Company
G. Edwin McCranie 49 Executive Vice President of the
(2) Company
Barry L. Edwards 50 Executive Vice President,
(3,4) Treasurer and Chief Financial
Officer, AMRESCO, Inc.
James M. Shoemaker, Jr. 65 Member, Wyche, Burgess,
(3,4) Freeman & Parham, P.A.
Harold K. Roberts, Jr. 47 President and Chief Executive
(1,2,4) Officer, Statewide Title, Inc.
James D. Cockman 65 Chairman and Chief Executive
(1,2) Officer, Ocean Fresh Express
International Seafood
Brian S. MacKenzie 46 President and Chief Executive
(2,3) Officer, Builder Marts of America, Inc.
<CAPTION>
Percent of
Outstanding
Aggregate Number Represented by
of Shares Aggregate Number
Beneficially of Shares
Owned as of Beneficially
Name Director Since March 4, 1998 (5) Owned (6)
- ---------------------------- ---------------- ------------------- -----------------
<S> <C> <C> <C>
Charles D. Way 1981 352,470(7) .8%
(1,2)
G. Edwin McCranie 1991 130,979 .3%
(2)
Barry L. Edwards 1982 65,731 .1%
(3,4)
James M. Shoemaker, Jr. 1982 70,735(8) .2%
(3,4)
Harold K. Roberts, Jr. 1988 50,941(9) .1%
(1,2,4)
James D. Cockman 1993 27,000 .1%
(1,2)
Brian S. MacKenzie 1993 27,000(10) .1%
(2,3)
</TABLE>
- ---------
(1) Member of the Nominating Committee. The Nominating Committee met once
during fiscal 1997 to recommend members of the Board. The Company's
Nominating Committee will consider nominees to the Board recommended by
shareholders of the Company for the 1998 Annual Meeting of Shareholders.
See "Proposals of Shareholders".
(2) Member of the Long Range Planning Committee. The Committee met once during
fiscal 1997 to provide long-term direction for the Company.
(3) Member of the Compensation and Stock Option Committee. The Committee met
twice during fiscal 1997 to review and submit to the Board recommendations
respecting the salary, bonus and option grants under the Company's 1991
Stock Option Plan to the Company's executive officers and key employees.
(4) Member of the Audit Committee. The Audit Committee met with representatives
of the Company's independent auditors once during fiscal 1997 to review
the scope and results of such firm's audit.
(5) Includes 250,000 shares for Mr. Way, 123,000 shares for Mr. McCranie,
50,000 shares for Mr. Edwards, 50,000 shares for Mr. Shoemaker, 50,000
shares for Mr. Roberts, 25,000 shares for Mr. Cockman and 25,000 shares
for Mr. MacKenzie that may be acquired within 60 days of March 4, 1998
through the exercise of exercisable options.
(6) Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Company has computed percentages of
total outstanding shares assuming that shares that can be acquired within
60 days of March 4, 1998 upon the exercise of options by a given person
are outstanding, but no other such shares similarly subject to acquisition
by other persons are outstanding.
(7) The figure shown includes 10,380 shares owned by Mr. Way's wife. Mr. Way
may be deemed to share voting and investment power with respect to such
shares.
(8) The figure shown includes 2,000 shares owned by Mr. Shoemaker's wife and
2,000 shares in a trust, of which Mr. Shoemaker is a co-trustee, for the
benefit of one of Mr. Shoemaker's adult children. Mr. Shoemaker may be
deemed to share voting and investment power with respect to such shares.
(9) The figure shown includes 615 shares held by Statewide Title, Inc., of
which Mr. Roberts is Chairman, Chief Executive Officer, and owner of 95%
of the outstanding common stock.
(10) The figure shown includes 500 shares held in trust for the benefit of Mr.
MacKenzie's minor child.
The Board met four times during fiscal 1997. All directors attended
personally or by telephone all meetings of the Board and committees on which
they served.
2
<PAGE>
Business Experience of Nominees for Director
Charles D. Way became the Chairman of the Board of the Company on October
29, 1992. Mr. Way assumed the position of President and Chief Executive Officer
of the Company in October 1989. From June 1988 to October 1989, he served as
President. From May 1986 to June 1988, he served as Executive Vice President,
Treasurer and Secretary. From January 1981 through April 1986, he served as
Vice President-Finance, Treasurer and Secretary. Mr. Way joined the Company in
June 1979 as Controller. Mr. Way is also a director of World Acceptance
Corporation and Moovies, Inc.
G. Edwin McCranie was promoted to Executive Vice President of the Company
in January 1995. From November 1991 to December 1994, he served as Executive
Vice President-Purchasing. From January 1989 to October 1991, he served as Vice
President-Purchasing. Mr. McCranie joined the Company in 1986 and served as
Director of Purchasing until 1989.
Barry L. Edwards has served as Executive Vice President, Treasurer and
Chief Financial Officer of AMRESCO, Inc., an asset management company, since
November 1994. He served as Vice President and Treasurer of The Liberty
Corporation, engaged primarily in the life insurance business, from 1979 to
November 1994.
James M. Shoemaker, Jr. has been an attorney with Wyche, Burgess, Freeman
& Parham, P.A., the law firm which is general counsel to the Company, since
1965. Mr. Shoemaker is a director of Palmetto Bancshares, Inc., One Price
Clothing Stores, Inc., and Span-America Medical Systems, Inc.
Harold K. Roberts, Jr. was a partner in the firm of Roberts and Morgan,
certified public accountants, from October 1989 until December 1996. In
addition, Mr. Roberts has served as President and Chief Executive Officer of
Statewide Title, Inc., a real estate title insurance agency, since 1989.
James D. Cockman has served since 1992 as Chairman and Chief Executive
Officer of Ocean Fresh Express International Seafood, which is engaged in the
business of processing seafood, and of American Culinary Equipment, Inc., a
distributor and manufacturer of professional culinary and other equipment to
the food service industry. From 1989 until 1992, he served as Chairman of the
Sara Lee Food Service Division of Sara Lee Corp., which engaged in the business
of processing and distributing food products. Mr. Cockman also serves as a
director of California Culinary Academy, Inc. and Clayton Homes, Inc. and as
Treasurer and a director of Phillips & Goot, Inc.
Brian S. MacKenzie has served as President and Chief Executive Officer of
Builder Marts of America, Inc. ("BMA") since October 1993. From May 1991 to
October 1993, he served as BMA's President and Chief Operating Officer after
serving as President of its Building Materials Retail Division from July 1990
to May 1991. BMA is a wholesale distributor of building materials and supplies.
Compensation of Directors
During 1997, the Company paid to directors who were not officers of the
Company an annual retainer of $10,000, plus $2,000 per meeting of the Board,
and $500 for each committee meeting attended. Pursuant to this arrangement,
directors were paid as following during fiscal 1997: Mr. Cockman, $19,000; Mr.
Edwards, $19,500; Mr. MacKenzie, $19,500; Mr. Roberts, $19,500; and Mr.
Shoemaker, $19,500. Directors who are also officers received no payments for
attending board or committee meetings.
In addition, the Company grants to directors who are not officers of the
Company options for 5,000 shares each of Common Stock in January of each year.
Pursuant to such arrangement, on each of January 31, 1997 and January 30, 1998,
the Company granted options for 5,000 shares of Common Stock to each of Messrs.
Edwards, Shoemaker, Roberts, Cockman and MacKenzie. The options granted on
January 31, 1997 had an exercise price of $7.79 per share (the per share market
value on the date of grant), became exercisable on July 31, 1997 and expire
January 31, 2007. The options granted on January 30, 1998 had an exercise price
of $8.31 per share (the per share market value on the date of grant), were
immediately exercisable and expire on January 30, 2008.
3
<PAGE>
Vote Required to Elect Directors
Directors will be elected by a plurality of votes cast at the Annual
Meeting. Shareholders do not have a right to cumulate their votes for
directors. Abstentions and broker non-votes are not counted in determining the
votes cast for directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR THE ELECTION OF EACH NOMINEE LISTED HEREIN
COMPENSATION COMMITTEE INTERLOCKS, INSIDER PARTICIPATION
AND RELATED PARTY TRANSACTIONS
During fiscal 1997, Messrs. Edwards, MacKenzie and Shoemaker, each a
non-employee director, served on the Compensation and Stock Option Committee of
the Board. Mr. Shoemaker is a member of the law firm of Wyche, Burgess, Freeman
& Parham, P.A., which serves as general counsel to the Company.
The Company uses the firm of Phillips & Goot, Inc. ("PGI"), a South
Carolina corporation with its principal office in Greenville, South Carolina,
for certain creative and production services related to the Company's
advertising and merchandising programs. The Company began to use PGI in 1997,
paying approximately $81,400 during 1997 for their services. The Company
estimates that PGI billings during 1998 will be approximately $200,000. Mr.
Cockman is Treasurer and a director of PGI and owns approximately 33% of the
common stock of PGI.
CERTAIN BENEFICIAL OWNERS OF COMMON STOCK
To the extent known to the Company, the only persons or groups that in any
case beneficially owned 5% or more of the outstanding shares of the Common
Stock of the Company as of March 4, 1998 are shown in the following table:
<TABLE>
<CAPTION>
Name and Address Amount of Percent of
of Beneficial Owner Beneficial Ownership Class
- -------------------------------------------- ---------------------- -----------
<S> <C> <C>
Trimark Financial Corporation (1) 4,737,300 (1) 10.5 %
One First Canadian Place
Suite 5600
Toronto, Ontario
Canada M5X 1E5
Mellon Bank Corporation (2) 2,828,735 (2) 6.3 %
One Mellon Bank Center
Pittsburgh, PA 15258
</TABLE>
- ---------
(1) The information with respect to the beneficial ownership of Trimark
Financial Corporation ("TFC") is based on information provided by it as of
December 31, 1997. Each of Trimark Fund and Trimark Select Growth Fund
(the "Funds") is record owner of a portion of the 4,737,300 shares of
Common Stock shown in the table. Trimark Investment Management Inc.
("TIMI") is the manager of the assets of the Funds and sole trustee of the
Funds and, as such, has sole voting power and sole dispositive power with
respect to such shares of Common Stock. TFC owns 100% of the voting equity
securities of TIMI, and consequently may be deemed to be the beneficial
owner of such shares of Common Stock.
(2) The information with respect to the beneficial ownership of Mellon Bank
Corporation ("Mellon") is based on information provided by it as of
January 23, 1998. All of the shares shown are beneficially owned by Mellon
or direct or indirect subsidiaries of Mellon in their various fiduciary
capacities. Of the total amount of shares shown as beneficially owned by
Mellon, it or its subsidiaries has sole voting power as to 2,268,358
shares, shared voting power as to 7,910 shares, sole dispositive power as
to 2,759,735 shares and shared dispositive power as to 69,000 shares of
Company Common Stock.
4
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth the name, age, position with the Company,
years of service as an officer of the Company and Common Stock beneficially
owned as of March 4, 1998 by each executive officer of the Company and all
executive officers and directors as a group. The Company's executive officers
are appointed by and serve at the pleasure of the Board of Directors.
<TABLE>
<CAPTION>
Aggregate Percent of
Number Outstanding
of Shares Represented by
Company Beneficially Aggregate Number of
Company Offices Officer Owned as of Shares Beneficially
Name Age Currently Held Since March 4, 1998 (1) Owned (2)
- ------------------------ ----- ------------------------------ --------- ------------------- --------------------
<S> <C> <C> <C> <C> <C>
Charles D. Way 45 Chairman of the Board, 1981 352,470(3) .8%
President and Chief Executive
Officer
G. Edwin McCranie 49 Executive Vice President and 1989 130,979 .3%
Director
James R. Hart 50 Vice President-Human 1988 74,101 .2%
Resources
John C. Jamison 39 Vice President-Real Estate 1988 106,000 .2%
Fred T. Grant, Jr. 42 Vice President-Finance, 1990 96,865 .2%
Treasurer and Assistant
Secretary
Alan E. Shaw 39 Vice President-Operations 1990 88,667 .2%
Morgan A. Graham 61 Vice President-Construction 1991 80,585 .2%
Ilene T. Turbow 47 Vice President-Marketing 1995 25,412 .1%
Janet J. Gleitz 55 Secretary 1988 16,100 *
All executive officers 1,212,586 2.6%
and directors as a
group (14 persons)
</TABLE>
- ---------
* Less than .1% of the outstanding shares of Common Stock as of March 4, 1998.
(1) Includes 250,000 shares for Mr. Way, 123,000 shares for Mr. McCranie,
71,774 shares for Mr. Hart, 102,500 shares for Mr. Jamison, 94,000 shares
for Mr. Grant, 86,500 shares for Mr. Shaw, 78,000 shares for Mr. Graham,
23,640 shares for Ms. Turbow, 15,000 shares for Ms. Gleitz, and 1,044,414
shares for all executive officers and directors as a group that may be
acquired within 60 days of March 4, 1998 through the exercise of
exercisable options.
(2) Pursuant to Rule 13d-3 under the Exchange Act, the Company has computed
percentages of total outstanding shares assuming that shares that can be
acquired within 60 days of March 4, 1998 upon the exercise of options by a
given person or group are outstanding, but no other such shares similarly
subject to acquisition by other persons are outstanding.
(3) The figure shown includes 10,380 shares owned by Mr. Way's wife. Mr. Way
may be deemed to share voting and investment power with respect to such
shares.
In 1996, the Company implemented a policy to encourage executive officers
to own more Company Common Stock, which would more closely align the personal
financial interests of executive officers with shareholders' interests. The
policy provides that over 13 years, the value of an executive officer's Common
Stock ownership should increase so that by the end of 2008 the value of such
stock holdings equals 100% of the individual's base salary. If an executive
officer does not meet a year's target ownership value, up to one-half of any
bonus payable to such officer for that year will be paid in Company Common
Stock.
Background of Executive Officers
Below is a summary of the backgrounds of the Company's executive officers
who are not also directors of the Company.
James R. Hart joined the Company in 1979 and served as a store manager
until September 1983. From that time, he served as Director of Human Resources
until April 1988, when he became Vice President-Human Resources.
John C. Jamison joined the Company in 1980 and served as a manager trainee
and store manager until February 1983. Since that time, he served as Assistant
Director of Development and Director of Development until January 1988, when he
became Vice President-Development. In May 1991, he was named Vice
President-Real Estate.
5
<PAGE>
Fred T. Grant, Jr., a certified public accountant, joined the Company in
January 1990 as Director of Finance. He served in that position until April
1990, when he became Vice President-Finance. In January 1994, Mr. Grant was
named Vice President-Finance, Treasurer and Assistant Secretary.
Alan E. Shaw joined the Company in 1979 and served as a store manager
until being promoted to Supervisor in 1982, in which position he served until
1984. From 1984 through 1989, he served as Assistant Director of Operations and
Regional Director of Operations prior to his promotion to Regional Vice
President-Operations in January 1990. In November 1991, Mr. Shaw became Vice
President-Operations.
Morgan A. Graham has been Vice President-Construction since November 1991.
After joining the Company in July 1987 as a Construction Superintendent, he
served in several construction-related positions, including Project Manager,
Architectural Coordinator, Procurement Manager and Director of Construction,
until assuming his present position.
Ilene T. Turbow joined the Company in April 1993 as Director of Marketing.
She served in that position until August 1995, when she became Vice
President-Marketing. Prior to joining the Company, Ms. Turbow was General
Manager with Kaminsky's from 1992 to 1993, where she was responsible for store
operations of a prototype restaurant concept. From 1985 to 1992, she was Vice
President with Dawson Foodservice, Inc., a foodservice marketing firm.
Janet J. Gleitz joined the Company in 1981 and served as Corporate
Relations Administrator until June 1988, when she became Secretary.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary of Cash and Certain Other Compensation
The following table shows for the fiscal years 1997, 1996 and 1995 the
cash compensation paid by the Company and its subsidiaries, as well as certain
other compensation paid or accrued for those years, to the chief executive
officer and the four other executive officers with the highest total salaries
and bonuses in 1997 (collectively the "Named Executive Officers"):
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Annual Compensation -------------
Securities
Fiscal Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($) Options (#) Compensation ($) (1)
- ------------------------------ -------- ------------ ----------- ------------- ---------------------
<S> <C> <C> <C> <C> <C>
Charles D. Way, Chairman 1997 265,071 159,000 0 35,664
of the Board, President 1996 240,414 144,000 30,000 38,453
and Chief Executive Officer 1995 225,561 78,975 30,000 39,252
Alan E. Shaw, 1997 143,770 69,000 6,000 30,894
Vice President-Operations 1996 121,997 52,100 10,000 33,334
1995 112,161 47,700 10,000 33,831
G. Edwin McCranie, 1997 147,019 86,214 6,000 33,572
Executive Vice President 1996 123,935 49,446 12,000 36,978
1995 116,027 26,910 10,000 36,628
John C. Jamison, 1997 122,589 61,373 0 24,927
Vice President-Real Estate 1996 116,092 46,632 10,000 27,177
1995 110,200 29,480 10,000 27,197
Fred T. Grant, Jr., 1997 139,395 81,830 6,000 29,389
Vice President-Finance, 1996 123,114 49,446 10,000 31,947
Treasurer and Assistant 1995 115,194 30,820 10,000 32,148
Secretary
</TABLE>
- ---------
(1) "All Other Compensation" for 1997 includes the following: (i) contributions
of $1,680 to the Company's 401(k) Plan (the "Plan") on behalf of each of
Mr. Way, Mr. Shaw, Mr. McCranie, Mr. Jamison and Mr. Grant to match a
portion of the 1997 pre-tax elective deferral contributions (included
under Salary and Bonus) made by each to such Plan; (ii) premium payments
of $6,100 on behalf of each of Mr. Way, Mr. Shaw, Mr. McCranie, Mr.
Jamison and Mr. Grant for a policy of health insurance providing a level
of coverage not otherwise available under the Company's standard health
plan; (iii) premium payments of $168 on behalf of each of Messrs. Way,
Shaw, McCranie, Jamison, and Grant for an
6
<PAGE>
additional $50,000 in life insurance above the coverage available to
salaried employees generally; (iv) a premium payment of $2,428 for
disability insurance coverage for Mr. Way; and (v) the Company's estimate of
the imputed benefit to Messrs. Way, Shaw, McCranie, Jamison, and Grant of
$25,288, $22,946, $25,624, $16,979 and $21,441, respectively, of
split-dollar life insurance coverage (including the value of the term
insurance portion) purchased by the Company on each officer's life in the
policy amounts of $1,005,000, $910,000, $1,101,000, $675,000 and $840,000,
respectively. Under the Company's insurance plan, the Company pays premiums
on such a policy on the life of a participating executive officer for a
period of ten years. The Company owns the policy for the first five years of
the policy. After the fifth year, the Company transfers ownership of the
policy to the participating executive. The Company is repaid the aggregate
amount of the premiums, without interest, at the earlier of the executive's
dying or reaching age 60, or the termination of the policy.
Summary of Option Grants, Option Exercises and Holdings
The following table illustrates the value of the stock options granted to
the Named Executive Officers during fiscal 1997:
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
- --------------------------------------------------------------------------------------------------------------------
% of Total Market Price
Number of Options Required to
Securities Granted to Realize Grant
Underlying Employees in Exercise Grant Date Date Present
Options 1997 Fiscal Price Expiration Present Value
Name Granted (#) Year ($/Sh) Date (2) Value ($) (1) ($/Sh) (3)
- -------------------- ------------- -------------- ---------- ------------ --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Alan E. Shaw 6,000 33.3% 7.88 01/29/2007 23,100 11.73
G. Edwin McCranie 6,000 33.3% 7.88 01/29/2007 23,100 11.73
Fred T. Grant, Jr. 6,000 33.3% 7.88 01/29/2007 23,100 11.73
</TABLE>
- ---------
(1) In accordance with SEC rules, the Company calculated the dollar amounts
under this column using the Black-Scholes based option valuation model.
The Company's use of this model should not be construed as an endorsement
of its accuracy at valuing options. All stock option models require a
prediction about the future movement of stock price. The valuation assumes
an expected volatility of 0.33, a 0% dividend yield, a 7-year holding term
prior to exercise, and a risk free rate of return of 6.55% for the options
expiring January 29, 2007, reflecting the yield on a zero coupon U.S.
Treasury security for the holding term prior to exercise of the option. The
Company made no adjustments for non-transferability or risk of forfeiture.
The actual value of the options, if any, will depend on the extent to which
the market value of the Common Stock exceeds the exercise price of the
option on the date of exercise.
(2) These options became exercisable in full on July 29, 1997. In addition, the
stock option plan and/or stock option agreements set forth certain earlier
expiration dates.
(3) In order to obtain the Grant Date Present Value shown, the market price of
the Common Stock would need to be $11.73 in present value terms.
7
<PAGE>
The following table shows option exercises, the unexercised options held
as of the end of fiscal 1997 and the value of such options for each Named
Executive Officer.
Aggregated Option Exercises In Last Fiscal Year And Fiscal Year-End Option
Values
<TABLE>
<CAPTION>
Value of
Unexercised
Number of Securities In-The-Money
Underlying Options
Unexercised Options at 1997 Fiscal
at 1997 Fiscal Year-End
Year-End(#) ($)(2)
---------------------- ---------------
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($)(1) Unexercisable Unexercisable
- ----------------------- -------------- ----------------- ---------------------- ---------------
<S> <C> <C> <C> <C>
Charles D. Way 120,000 394,688 210,000/0 265,275/0
Alan E. Shaw 2,000 3,473 64,000/0 64,178/0
G. Edwin McCranie 10,000 25,422 98,000/0 174,455/0
John C. Jamison 36,000 111,523 87,500/0 137,019/0
Fred T. Grant, Jr.(3) 1,000 1,125 75,000/0 90,083/0
</TABLE>
- ---------
(1) The value realized of exercised options is the product of (a) the excess of
the per share fair market value of the Common Stock on the date of
exercise over the per share option exercise price, multiplied by (b) the
number of shares acquired upon exercise.
(2) The Company calculated the value of unexercised in-the-money options for
each officer as follows: (a) market price of the Common Stock as of
December 31, 1997, times (b) the number of shares covered by such
in-the-money options held by such officer minus the product of the
exercise price with respect to such options and the number of shares
covered by such options.
(3) Mr. Grant exercised options covering 1,000 shares in February 1998. In
accordance with SEC rules, this exercise will be reported in tabular
format in the Company's proxy statement for the 1999 Annual Meeting.
Deferred Compensation -- Salary Continuation Agreement
The Company is party to a Deferred Compensation -- Salary Continuation
Agreement with Mr. Charles Way. The agreement provides for cash payments of
$60,000 per year for each of the 20 years following Mr. Way's retirement, death
or total disability, with retirement age set at 55. These benefits began
vesting 10% per annum in 1987. The total deferred compensation liability as of
December 31, 1997 relating to this agreement was $181,960. An aggregate of
$17,290 of deferred compensation was accrued under this agreement for the
benefit of Mr. Way during fiscal 1997. The Company is the owner and beneficiary
of a life insurance policy on the life of Mr. Way. The Company expects that the
cost of benefits under this arrangement will be recovered through a combination
of general corporate funds and the cash surrender value of the insurance
policy.
Compliance With Section 16(a) Reporting
Section 16(a) of the Exchange Act requires our directors, executive
officers, and greater-than-10% stockholders to file reports with the SEC and
the NASDAQ on changes in their beneficial ownership of the Company's Common
Stock and to provide the Company with copies of the reports. Based on our
review of these reports and of certifications furnished to us, we believe that
all of these reporting persons complied with their filing requirements for
1997.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation and Stock Option Committee (the "Committee") of the Board
of Directors periodically submits to the Board recommendations respecting the
salary, bonus and other non-stock compensation to be provided to the Company's
executive officers and grants options for shares of the Company's Common Stock
to the Company's executive officers and employees. The Committee provides the
following report.
Executive Officer Compensation
The Committee attempts to act on the shareholders' behalf in establishing
executive compensation programs, for the Company's shareholders ultimately bear
the cost of these programs. The Company adopts and administers its executive
8
<PAGE>
compensation policies and specific executive compensation programs in
accordance with that objective. The Committee annually reviews the Company's
corporate performance and that of its executive officers to determine
appropriate compensation. The Committee seeks to achieve a balance between the
Company's need to attract and retain qualified and motivated executives, on the
one hand, and maximizing the Company's operating performance, on the other.
The Committee's executive compensation philosophy is to set compensation
levels in its discretion that provide for compensation opportunities that
reflect Company and individual performances. The Company's current executive
compensation structure consists of base salary, incentive cash bonuses and
stock options.
Over the years, the Committee has attempted to set executive officer cash
compensation amounts at levels somewhat lower than levels that the Committee
believes prevail within the restaurant industry, and has complemented these
cash amounts with significant stock option grants.
The Committee adjusted the salaries for all executive officers except Mr.
Way in 1997 based upon the recommendations of Mr. Way. Mr. Way considered
factors that were generally subjective, such as his perception of individual
performance and the level of individual responsibility. Mr. Way recommended
increases in the base salaries of executive officers ranging from 6% to 20%.
The Committee determined that these increases were appropriate to compensate
executive officers for the increased level of responsibility associated with
the increase in the Company's size.
The Committee generally grants stock options on an annual basis at an
exercise price equal to the stock market price at the time of grant. The grants
provide the Company's executive officers and key employees with an equity
ownership opportunity in the Company and with incentives to maximize
shareholder value. During 1997, the Committee made one option grant to each
executive officer shown in the table titled "Option Grants in Last Fiscal
Year." In determining the size of any stock option grant, the Committee
considers the following qualitative factors: the Committee's perception of the
Company's overall performance; the individual's performance; the potential
effect that the individual's future performance may have on the Company; and
the number of options previously granted to the individual. The Committee gave
each of these factors approximately equal weight.
During 1997, Alan Shaw, Vice President-Operations, was paid quarterly
bonuses based on four factors: same-store sales comparisons; pre-tax earnings
compared to the immediately preceding year; customer service as reported
through a "hidden shopper" program; and various other subjective
considerations, including management turnover, team work and creativity. The
first two factors were given a combined weight of approximately 70%. The
Committee considered each of these factors and awarded bonuses to Mr. Shaw as
noted in the Summary Compensation Table.
During 1997, the Committee continued an Executive Bonus Plan to provide
additional incentives to the Company's other executive officers. The bonus plan
covers eight of the Company's nine executive officers. Alan Shaw participates
in the plan described above. Pursuant to the plan, each year the Committee
establishes a percentage of each participating executive's annual base salary,
ranging from 20%-40%, as a target bonus amount. The executive is eligible to
receive this bonus amount, or a portion thereof, if the executive meets
objectives set by the Committee.
In the case of all executive officers other than Charles Way and Alan
Shaw, the receipt of the target bonus was based upon the achievement of Company
objectives in increase in average unit sales, increase in net earnings per
share, and subjective departmental and personal objectives. The Committee
weighted each of these factors approximately equally in setting the target
bonus. The Company's performance during 1997 was substantially above targeted
levels in one of the Company-wide measures and below targeted levels in the
remaining Company-wide measure, which when combined with performance of
departmental and personal objectives, resulted in bonus payouts that were above
targeted levels.
In the case of Mr. Way, the receipt of his entire target bonus was based
upon the achievement of Company objectives in increase in average unit sales
and increase in net earnings per share. The Committee weighted each of these
factors approximately equally in setting the target bonus. The Company's
performance during 1997 was substantially above targeted levels in one measure
and below targeted levels in the remaining measure, resulting in a bonus payout
that was above the targeted level. In early 1998, the Committee considered each
of these objectives and awarded bonuses as noted in the Summary Compensation
Table in accordance with the bonus plan.
The Omnibus Budget Reconciliation Act of 1993 denies publicly traded
companies the ability to deduct for federal income tax purposes certain
compensation paid (including income on exercised stock option grants) to top
executive officers in excess of $1 million per person. The Committee intends to
administer the Company's executive compensation programs in such a way that
anticipated compensation to executive officers will be fully deductible under
the Internal Revenue Code, including submitting plans for shareholder approval
where necessary and determining compensation on an objective basis where
necessary.
9
<PAGE>
Chief Executive Officer Compensation
Mr. Way joined the Company in 1979, has served as its President and Chief
Executive Officer since 1989, and became Chairman of the Board in 1992. In
setting Mr. Way's compensation, the Committee tends to set a relatively low
base salary for an individual with Mr. Way's responsibilities and emphasize
stock option grants as a component of his overall compensation package. The
Committee believes that this approach to Mr. Way's compensation has resulted in
an appropriate alignment of his long-term rewards from the Company with the
interests of shareholders.
During 1997, the Committee adjusted Mr. Way's base salary upward by
approximately 10.4%. In making this adjustment, the Committee considered
subjective factors including the perception of the committee as to Mr. Way's
overall performance and objective factors such as the increase in the Company's
earnings per share, operating margins, and return on equity. Each of these
factors was given approximately equal weight. In addition, Mr. Way received a
bonus of $159,000 pursuant to the bonus plan described above because of the
Company's attainment of its net earnings per share (as adjusted) objectives.
The Committee adjusted the earnings per share calculation for Mr. Way, as well
as for all other executive officers, by adding 13.75 cents to 1996 earnings per
share. This adjustment offset 85% of the impact of adopting Statement of
Financial Accounting Standards No. 121 in 1996 and was equal to the adjustment
made in the calculation of the 1996 executive officer bonuses. Accordingly, on
this adjusted basis, the Company's net earnings per share increased 19%
compared to the 49% increase reported in the Company's 1997 consolidated
financial statements.
In addition, during January 1998, the Stock Option Committee granted Mr.
Way options with respect to an aggregate of 40,000 shares of Common Stock. In
determining the size of this grant, the Committee considered the following
qualitative factors: the Committee's perception of the Company's overall
performance; Mr. Way's performance; the potential effect of his future
performance on the Company; and the number of options previously granted to
him. Each of these factors was given approximately equal weight. At fiscal 1997
year-end, the value of Mr. Way's outstanding exercisable in-the-money stock
options was $265,275 as compared to $200,625 at the end of 1996, an increase of
32.2%. The Stock Option Committee believes that the stock options provide Mr.
Way with appropriate incentives to promote long-term shareholder value.
Compensation and Stock Option Committee
Brian S. MacKenzie, Chairman
Barry L. Edwards
James M. Shoemaker, Jr.
10
<PAGE>
PERFORMANCE GRAPH
A line graph comparing the cumulative, total shareholder return on the
Common Stock of the Company for the last five fiscal years with the cumulative
total returns of the NASDAQ Market Index and a peer group consisting of all
publicly traded companies whose SIC code is 5812, the code for eating places,
over the same period (assuming a $100 initial investment and dividend
reinvestment) is presented below. The Company will promptly furnish without
charge to any shareholder of record on March 4, 1998, the identity of the
companies included in the peer group. Requests should be directed to the
Company, Post Office Box 100, Greer, South Carolina 29652; Attention:
Shareholder Relations.
Note: The stock price performance shown on the graph below is not necessarily
indicative of future price performance.
[GRAPHIC OMITTED]
PROPOSAL TO APPROVE THE COMPANY'S
1998 STOCK OPTION PLAN
(Item #2 on the Proxy)
The Board of Directors and the Compensation Committee recommend that the
shareholders of the Company approve adoption of the Ryan's Family Steak Houses,
Inc. 1998 Stock Option Plan (the "Plan"). Under the Plan, the Board or
Compensation Committee would have the discretion to grant options for up to an
aggregate maximum of 3,000,000 shares of the Company's Common Stock. Holders of
shares of the Common Stock do not have preemptive rights. This maximum number
of shares may be appropriately adjusted to reflect any change in capitalization
of the Company resulting from a stock dividend, recapitalization, merger,
reorganization, consolidation, stock split, stock consolidation or any other
change in the characteristics of the shares of Common Stock of the Company. The
Board and Compensation Committee recommend approval of the Plan because it will
provide the Company's key personnel who participate in the Plan with an
incentive to maximize shareholder value by better aligning their compensation
with the interests of the Company's shareholders. Proceeds received by the
Company from the sale of shares pursuant to options granted under the Plan will
be used for general corporate purposes as determined by the Board.
The purpose of the Plan is to promote the growth and profitability of the
Company and its subsidiaries ("Subsidiaries") by increasing the personal
participation of key personnel in the continued growth and financial success of
the Company and
11
<PAGE>
the Subsidiaries by enabling the Company and the Subsidiaries to attract and
retain key personnel of outstanding competence and by providing such key
personnel with an equity opportunity in the Company.
The Compensation Committee or a committee of the Board of Directors (the
"Committee") that includes those members of the Compensation Committee who are
"outside directors" as defined for purposes of Section 162(m) ("Section
162(m)") of the Internal Revenue Code of 1986, as amended (the "Code"), shall
administer the Plan. The Committee shall have complete authority to: (i)
interpret all terms and provisions of the Plan consistent with law; (ii) select
from the group of those individuals eligible to participate in the Plan the key
personnel to whom options shall be granted; (iii) within the limits established
herein, determine the number of shares to be subject to and the term of each
option granted to each of such personnel; (iv) prescribe the form of
instrument(s) evidencing options granted under the Plan; (v) determine the time
or times at which options shall be granted; (vi) make special grants of options
when determined to be appropriate; (vii) provide, if appropriate, for the
exercise of options in installments and/or subject to specified conditions;
(viii) determine the method of exercise of options granted under the Plan; (ix)
adopt, amend and rescind general and special rules and regulations for the
Plan's administration; and (x) make all other determinations necessary or
advisable for the administration of this Plan.
Participation in the Plan is determined by the Committee and is limited to
those key personnel, who may or may not be officers or members of the Board of
Directors, of the Company or the Subsidiaries who have the greatest impact on
the Company's long-term performance. In determining the key personnel to whom
options shall be granted and the number of shares to be granted, the Committee
shall take into account, in each case, the level and responsibility of the
person's position, performance, compensation, assessed potential and other
factors the Committee shall deem relevant to accomplish the purpose of the
Plan. Directors of the Company or any Subsidiary who are not also employees of
the Company are eligible to participate in the Plan only under the conditions
described in the next paragraph. The Company believes that approximately 1,200
employees of the Company and its Subsidiaries are currently eligible to
participate in the Plan.
The Plan contains certain provisions for directors of the Company who, on
the date of grant, are neither officers nor employees of the Company or any
Subsidiary (each an "Eligible Director"). On January 31 of each calendar year
(or, if January 31 is not a business day, the immediately preceding business
day) (the "Grant Date"), each Eligible Director shall automatically receive
from the Company an option to acquire 5,000 shares of Common Stock at an
exercise price equal to the closing price of the Common Stock on the Grant
Date. Each such Option shall be exercisable immediately and at any time
thereafter until and including the business day immediately preceding the tenth
anniversary of the Grant Date. Notice of each such Option granted on a Grant
Date shall be given to each Eligible Director within a reasonable time after
the Grant Date.
The stock to be offered under the Plan, upon exercise of options, may be
authorized but unissued common shares, shares previously issued and thereafter
acquired by the Company (if permitted by applicable law), or any combination
thereof. An aggregate of 3,000,000 shares are reserved for the grant under the
Plan of options. The maximum number of shares of the Company's Common Stock
that may be covered by options granted under the Plan in any fiscal year of the
Company to any single participant is 100,000. Provided that the adjustment does
not cause compensation payable under the Plan to lose its deductibility under
Section 162(m), the maximum number of shares subject to the Plan shall be
appropriately adjusted to reflect any change in the capitalization of the
Company resulting from a stock dividend, stock split, or other adjustment
contemplated by the Plan and occurring after the adoption of the Plan.
The Committee shall establish the term of each option, but the term shall
not exceed ten years (or five years for owners of more than 10% of the total
combined voting power of all classes of stock of the Company or of a
Subsidiary) from the date of grant. The Committee shall also determine the
schedule for exercising each option. If an option expires or terminates for any
reason without having been fully exercised, the unpurchased shares subject to
the option shall again be available for the purposes of the Plan.
The Committee may, in its sole discretion and subject to the provisions of
the Plan, grant to eligible participants options to purchase shares of the
Company's common stock. Options granted under this Plan may, at the discretion
of the Committee, be: (i) options which are intended to qualify as incentive
stock options ("ISOs") under Section 422 of the Code (or any successor
provision); (ii) Options which are not intended to qualify under Section 422 of
the Code (or any successor provision) ("NQOs"); or (iii) both of the foregoing
if granted separately, not in tandem. Options may be allotted to participants
in such amounts, subject to the limitations specified in the Plan, as the
Committee, in its sole discretion, may from time to time determine. In the case
of options intended to be ISOs, the aggregate fair market value (determined at
the time of the options' respective grants) of the shares with respect to which
such options are exercisable for the first time by a participant
12
<PAGE>
during any calendar year (under all plans taken into account pursuant to
Section 422(d) of the Code (or any successor provision)) shall not exceed
$100,000.
Generally, a participant is not taxed upon either the grant or exercise of
an ISO. However, for purposes of determining an individual's alternative
minimum tax, the difference between the exercise price of an ISO and the market
price at the date of exercise gives rise to an adjustment of alternative
minimum tax income in the year of exercise. To qualify as an ISO, the stock
acquired by a participant must be held for at least two years after the option
is granted and one year after it is exercised. The Company does not receive a
tax deduction for the value of the option at date of grant or date of exercise
of the option or at any other time unless the participant disposes of the stock
before the holding periods expire.
In the event of an early disposition of an ISO, the participant recognizes
ordinary income in the taxable year of the disposition equal to the difference
between the option price and the market value at date of exercise, and the
Company receives a tax deduction in an equal amount. If the participant holds
the stock for the period of time required for ISO qualification, then he will
be taxed only on the gain realized upon the disposition of the stock. His gain
will be equal to the difference between the sales price of the stock and its
option price. There is no requirement that ISOs must be exercised in the order
granted. For all options intended to be ISOs to receive ISO treatment, the fair
market value of stock subject to ISOs that are exercisable by an individual for
the first time in any future year cannot exceed $100,000, determined in
accordance with fair market value at the date of grant. If an ISO is exercised
after the death of the employee by the estate of the decedent, or by a person
who acquired the right to exercise such option by bequest or inheritance or by
reason of the death of the decedent, none of the time limits described above in
this paragraph shall apply.
If options granted under the Plan do not qualify as ISOs, they will be
treated as "non-qualified stock options" or "NQOs." Ordinarily NQOs do not
result in tax liability for Federal income tax purposes to the participant upon
grant. Generally, upon exercise of an NQO, the participant recognizes ordinary
income for Federal income tax purposes equal to the difference between the fair
market value of the stock on the day of exercise and the exercise price. The
Company receives a tax deduction for the amount the participant reports as
ordinary income by reason of the exercise if the amount of ordinary income the
participant should recognize is included in the participant's income reported
on a timely Form W-2 or 1099. Upon a subsequent sale or disposition of the
stock received from exercise of an option, the holder is generally taxable on
any excess of the selling price over its fair market value at the date of
exercise.
Subject to the provisions of the Plan, an option granted under the Plan
may be exercisable at such time or times after the date of grant, on such
schedule, and upon such conditions as may be determined by the Committee at the
time of grant (except for grants of options to Eligible Directors, which are
exercisable at the times described above).
Any option granted under the Plan {other than an option granted to a
person who was an executive officer of the Company (as designated by the Board
of Directors) at the time of the grant of the option (a "Grant-Date Officer")}
shall terminate in full (whether or not previously exercisable) prior to the
expiration of its term on the date the optionee ceases to be a director of the
Company or an employee of the Company or any Subsidiary of the Company, unless
the optionee shall:
(a) die while a director of the Company or an employee of the Company or
such Subsidiary;
(b) become permanently or totally disabled within the meaning of Section
22(e)(3) of the Code (or any successor provision) while a director of the
Company or an employee of the Company or a Subsidiary;
(c) resign with the consent of the Company or have his or her directorship
with the Company or employment with the Company or any Subsidiary
terminated by the Company or any Subsidiary for any reason other than
because of an "Immediate Termination Event" (as defined below);
(d) retire with the consent of the Company after the optionee has reached
his or her 55th birthday and has at least 10 years of service with the
Company or any Subsidiary; or
(e) retire with the consent of the Company in any circumstance not covered
by the preceding clause (d).
If the participant ceases to be an employee or director of the Company
under the circumstances enumerated above, then ISOs held by such employee or
director (or his representative) shall expire one year, one year, three months
or two years (but, in each case, no later than the fixed term of the option)
following termination in cases (a), (b), (c) and (e) above, respectively. In
the case of NQOs, the corresponding periods are two years, two years, three
months and two years for cases (a), (b), (c) and (e) above, respectively. If
the participant ceases to be an employee or director of the Company in
circumstance (d) above, then for both ISOs and NQOs, the expiration date shall
be the expiration of the fixed term of the option.
13
<PAGE>
In the case of an option granted to a Grant-Date Officer, the termination
of such participant's employment for a reason other than an Immediate
Termination Event (as defined below) shall not affect the term of the option,
and the option shall be exercisable by the option holder or his or her personal
representative for its remaining term notwithstanding such termination of
employment.
An "Immediate Termination Event" means termination of employment or
directorship by reason of: (i) failure to pass a drug test administered by the
Company or any Subsidiary; (ii) obvious intoxication on the job or possession
of any alcoholic substance on the premises of the Company or any Subsidiary;
(iii) misuse of Company or Subsidiary assets (which shall include but not be
limited to cash, inventory and/or equipment); (iv) gross misconduct in
connection with the performance of job duties for the Company or any
Subsidiary; or (v) conviction of a felony or entry of a guilty or nolo
contendere plea to a felony offense by the individual. Notwithstanding anything
to the contrary herein, if a participant to whom an Option shall have been
granted shall have his or her directorship with the Company or employment with
the Company or a Subsidiary terminated because of an Immediate Termination
Event, all options held by such participant shall terminate in full (whether or
not previously exercisable) prior to their term on the date that the
participant ceased to be an employee of the Company or a Subsidiary or a
director of the Company.
Under Section 422 of the Code, an ISO will lose its qualification if not
exercised within three months of termination of the participant's employment
with the Company (the three-month period is extended to one year in cases of
disability). The expiration dates determined in many of the circumstances of
termination enumerated above for options granted under the Plan extend beyond
the statutory deadline for exercise of an ISO. Thus options originally
classified as ISOs exercised by optionees, or their representatives, who seek
to take full advantage of the expiration dates described above could lose their
ISO status and be taxed as NQOs.
In no event may an Option be exercised after the expiration of its fixed
term.
Options granted pursuant to the Plan are not transferrable except by will,
by the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Code or in Title I of the Employee Retirement
Income Security Act, or the rules thereunder. Options granted pursuant to the
Plan which are intended to qualify as ISOs are not transferrable except by will
or the laws of descent and distribution and during a participant's lifetime are
exercisable only by him or her.
The price per share at which each option granted under the Plan may be
exercised shall be the price as determined by the Committee at the time of
grant based on criteria adopted by the Committee at the time of grant in good
faith; provided, however, that in no event shall the exercise price per share
of an option be less than 100% of the fair market value of the Common Stock on
the date such option is granted (or 110% for owners of more than 10% of the
total combines voting power of all classes of stock of the Company or any
Subsidiary). The closing price of the Common Stock, as quoted on the NASDAQ
National Market, on March 4, 1998 was $8.25 per share.
If the Company's Common Stock is:
(1) actively traded on any national securities exchange or NASDAQ system
that reports their sales prices, fair market value shall be the closing
price per share on the date the Committee grants the Option;
(2) otherwise traded over the counter, fair market value shall be the
average of the final bid and asked prices for the shares of the Company's
common stock as reported for the date the Committee grants the Option; or
(3) not traded, the Committee shall consider any factor or factors which
it believes affects fair market value, and shall determine fair market
value without regard to any restriction other than a restriction which by
its terms will never lapse.
A participant may exercise an option by completing each of the following
steps:
(a) indicating in writing the decision to exercise the option and
delivering such notice to the Company;
(b) tendering to the Company payment in full in cash, or in shares of the
Company's Common Stock, of the exercise price for the shares for which the
option is exercised;
(c) tendering to the Company payment in full in cash, or in shares of the
Company's Common Stock, of the amount of all federal and state withholding
or other employment taxes applicable to taxable income, if any, of the
holder resulting from such exercise; and
(d) complying with such other reasonable requirements as the Committee
may establish.
14
<PAGE>
An option granted under the Plan may be exercised for any lesser number of
shares than the full amount for which it could be exercised. Such a partial
exercise of an option will not affect the right to exercise the option from
time to time in accordance with the Plan provisions for the remaining shares
subject to the option.
The Plan provides that it may be suspended, terminated or amended by the
Committee, except that shareholder approval would be required in the event an
amendment were to:
(a) materially increase the benefits accruing to participants;
(b) increase the number of securities issuable under the Plan (other than
an increase pursuant to the antidilution provisions of the Plan);
(c) change the class of individuals eligible to receive options; or
(d) otherwise materially modify the requirements for eligibility.
The Plan provides that no person, estate or entity shall have any of the
rights of a shareholder with respect to shares subject to an option until a
certificate for such shares has been delivered.
No certificate(s) for shares shall be executed and delivered upon exercise
of an option until the Company shall have taken such action, if any, as is then
required to comply with the provisions of the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, the South Carolina
Uniform Securities Act, as amended, any other applicable state securities
law(s) and the requirements of any exchange on which the Common Stock may, at
the time, be listed.
The Plan provides that it shall terminate on the close of business on
December 31, 2007, and no option shall be granted under the Plan after that
date, but the termination shall not affect any option previously granted under
the Plan.
All of the Company's executive officers are currently eligible to
participate in the Plan.
Each of the directors of the Company and the executive officers named in
this Proxy Statement, as a potential participant in the Plan, could be deemed
to have an interest in approval of the Plan.
Because shares of the Company's Common Stock will be issued upon exercise
of options granted pursuant to the Plan, the proportional ownership of the
Company by existing shareholders will be reduced.
The following table provides certain information with respect to options
granted under the Plan, subject to shareholder approval at the Annual Meeting:
1998 Grants Under the Ryan's Family Steak Houses, Inc.
1998 Stock Option Plan
<TABLE>
<CAPTION>
Number of Securities
Underlying Options Grant Date
Name and Position Granted (#) Present Value ($)
- ------------------------------------------ --------------------- ------------------
<S> <C> <C>
Charles D. Way, Chairman of the Board,
President and Chief Executive Officer 40,000 134,000 (1)
Alan E. Shaw,
Vice President-Operations 22,500 75,375 (1)
G. Edwin McCranie,
Executive Vice President 25,000 83,750 (1)
John C. Jamison,
Vice President-Real Estate 15,000 50,250 (1)
Fred T. Grant, Jr.,
Vice President-Finance, Treasurer and
Assistant Secretary 20,000 67,000 (1)
Executive Group 167,000 559,450 (1)
Non-Executive Director Group 25,000 93,500 (2)
Non-Executive Officer Employee Group 64,050 164,609 (3)
</TABLE>
15
<PAGE>
- ---------
(1) In accordance with SEC rules, the Company calculated the dollar amounts
under this column using the Black-Scholes based option valuation model.
The Company's use of this model should not be construed as an endorsement
of its accuracy at valuing options. All stock option models require a
prediction about the future movement of stock price. The valuation assumes
an expected volatility of 0.307, a 0% dividend yield, a 7-year holding
term prior to exercise, and a risk free rate of return of 5.58% for the
options expiring January 22, 2008, reflecting the yield on a zero coupon
U.S. Treasury security for the holding term prior to exercise of the
option. The Company made no adjustments for non-transferability or risk of
forfeiture. The actual value of the options, if any, will depend on the
extent to which the market value of the Common Stock exceeds the exercise
price of the option on the date of exercise.
(2) The valuation is the same as in note (1) above except that the valuation
assumes a risk free rate of return of 5.55% and an option expiration date
of January 30, 2008.
(3) The valuation is the same as in note (1) above except that the valuation
assumes an expected volatility of 0.302, a 4.5-year holding term prior to
exercise and a risk free rate of return of 5.43%.
The Plan is being submitted to the shareholders of the Company for
approval in order to qualify the Plan under the incentive stock option rules of
the Code, in order for the plan to comply with Section 162(m) of the Code,
which imposes limits on the ability of a public company to claim income tax
deductions for compensation paid to certain highly compensated executives, and
because of the requirements of NASDAQ. Section 162(m) generally denies a
corporate income tax deduction for annual compensation in excess of $1,000,000
paid to the chief executive officer and the four most highly compensated
officers of a public company (who, in each proxy statement, will be the Named
Executive Officers for such year). Certain types of compensation, including
performance-based compensation, are generally excluded from this deduction
limit. The Company believes that compensation payable in the form of NQOs
issued under the Plan may be deductible for Federal income tax purposes under
some circumstances as performance-based compensation.
For the Plan to be approved, the number of votes cast in favor of the Plan
must exceed the number of votes cast against the Plan. Broker non-votes and
abstentions have no effect on the vote pertaining to the Plan. If the Plan is
not approved by the requisite shareholder vote described above, it shall not
become effective. By approving the Plan, shareholders will be approving, among
other things, the performance measure or measures, the class of employees and
the class of directors eligible to participate in the Plan and the limits on
various compensation awards contained therein. Shareholders have no dissenters'
rights or rights of appraisal with respect to the vote to approve the Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
THE APPROVAL OF THE RYAN'S FAMILY STEAK HOUSES, INC.
1998 STOCK OPTION PLAN.
AUDITORS
The Board has appointed KPMG Peat Marwick LLP, independent certified
public accountants, as auditors for the Company for the current fiscal year and
to examine and report to shareholders upon the financial statements as of and
for the year ending December 30, 1998. Representatives of KPMG Peat Marwick LLP
will be present at the Annual Meeting. They will have the opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions which the shareholders may have. KPMG Peat Marwick LLP
has acted for the Company in this capacity since 1981, and neither the firm nor
any of its members has any relation with the Company except in the firm's
capacity as auditors and tax advisors.
SOLICITATION OF PROXIES
The Company will pay for soliciting proxies. Officers and other regular
employees of the Company may solicit proxies by telephone, telegram or personal
interview for no additional compensation. The Company has engaged W. F. Doring
& Company to solicit proxies and distribute materials to brokerage houses,
banks, custodians, nominees and fiduciaries for a fee of approximately $10,000.
The Company will make arrangements with brokerage houses and other custodians,
nominees and fiduciaries to forward solicitation material to beneficial owners
of the stock held of record by such persons, and the Company will reimburse
such persons for reasonable out-of-pocket expenses incurred by them in so
doing.
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<PAGE>
PROPOSALS OF SHAREHOLDERS
Any shareholder who wishes to present a proposal at the 1999 Annual
Meeting of Shareholders of the Company and have such proposal included in the
proxy statement and proxy card relating to that meeting must deliver such
proposal to the Company no later than November 30, 1998. Shareholders desiring
to make a recommendation to the Nominating Committee of the Board of Directors
should submit the name(s) and business background(s) of the proposed nominee(s)
for the Board by no later than November 30, 1998. Shareholders may send their
proposals to the Company, Attention: Janet J. Gleitz, Post Office Box 100,
Greer, South Carolina 29652. The proposal must comply with the rules of the SEC
relating to shareholder proposals.
FINANCIAL INFORMATION
The Company's 1997 Annual Report is enclosed. The Company will provide
without charge to any shareholder of record as of March 4, 1998, who requests
in writing, a copy of the Company's 1997 Annual Report or the 1997 Annual
Report on Form 10-K (without exhibits), including financial statements and
financial statement schedules, filed with the Securities and Exchange
Commission. Any such request should be directed to Ryan's Family Steak Houses,
Inc., 405 Lancaster Avenue, Greer, South Carolina 29650, or Post Office Box
100, Greer, South Carolina 29652, Attention: Janet J. Gleitz, Secretary.
OTHER BUSINESS
As of the date of this Proxy Statement, management was not aware that any
business not described above would be presented for consideration at the Annual
Meeting. If any other business properly comes before the meeting, the shares
represented by proxies will be voted according to the best judgment of the
person voting them.
By Order of the Board of Directors,
Janet J. Gleitz
Secretary
Greer, South Carolina
March 27, 1998
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APPENDIX A
The issuer hereby supplementally informs the U.S. Securities and Exchange
Commission that the securities to be issued pursuant to Ryan's Family Steak
Houses, Inc. 1998 Stock Option Plan will be registered under the Securities Act
following receipt of approval of the Plan by the shareholders of the issuer.
RYAN'S FAMILY STEAK HOUSES, INC.
1998 STOCK OPTION PLAN
Effective as of January 1, 1998
<PAGE>
RYAN'S FAMILY STEAK HOUSES, INC.
1998 STOCK OPTION PLAN
1. PURPOSE
The purpose of this Stock Option Plan (the "Plan") is to promote the
growth and profitability of Ryan's Family Steak Houses, Inc. (the "Company") and
its subsidiaries from time to time (the "Subsidiaries") by increasing the
personal participation of key personnel in the continued growth and financial
success of the Company and the Subsidiaries by enabling the Company and the
Subsidiaries to attract and retain key personnel of outstanding competence and
by providing such key personnel with an equity opportunity in the Company. This
purpose will be achieved through the grant of stock options ("Options") to
purchase shares of the common stock of the Company.
2. ADMINISTRATION
The Plan shall be administered by the Compensation Committee of the
Company's Board of Directors (the "Compensation Committee"); provided, however,
that, if the Compensation Committee includes members who are not "outside
directors" (as that term is defined for purposes of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), or any successor
provision ("Section 162(m)")), the Plan shall be administered by a special
committee of the Board of Directors that includes those members of the Company's
Compensation Committee who are "outside directors" (as defined above). The
administering committee shall be referred to herein as the "Committee." The
Committee shall have complete authority to: (i) interpret all terms and
provisions of the Plan consistent with law; (ii) select from the group of those
individuals eligible to participate in the Plan the key personnel to whom
Options shall be granted; (iii) within the limits established herein, determine
the number of shares to be subject to and the term of each Option granted to
each of such personnel; (iv) prescribe the form of instrument(s) evidencing
Options granted under this Plan; (v) determine the time or times at which
Options shall be granted; (vi) make special grants of Options when determined to
be appropriate; (vii) provide, if appropriate, for the
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<PAGE>
exercise of Options in installments and/or subject to specified conditions;
(viii) determine the method of exercise of Options granted under the Plan; (ix)
adopt, amend and rescind general and special rules and regulations for the
Plan's administration; and (x) make all other determinations necessary or
advisable for the administration of this Plan.
Any action which the Committee is authorized to take may be taken
without a meeting if all the members of the Committee sign a written document
authorizing such action to be taken, unless different provision is made by the
Bylaws of the Company or by resolution of the Committee.
The Committee may designate selected Board members or certain employees
of the Company to assist the Committee in the administration of the Plan and may
grant authority to such persons to execute documents including Options on behalf
of the Committee; subject in each such case to the requirements of Rule 16b-3
(as defined below) and Section 162(m).
No member of the Board or Committee or employee of the Company
assisting the Board or Committee pursuant to the preceding paragraph shall be
liable for any action taken or determination made in good faith.
3. ELIGIBILITY AND FACTORS TO BE CONSIDERED IN GRANTING OPTIONS
Participation in this Plan shall be determined by the Committee and
(other than grants pursuant to Section 5 hereof) shall be limited to those key
personnel, who may or may not be officers or members of the Board of Directors,
of the Company or the Subsidiaries who have the greatest impact on the Company's
long-term performance. In making any determination as to the key personnel to
whom Options shall be granted and as to the number of shares to be subject
thereto, the Committee shall take into account, in each case, the level and
responsibility of the position, performance, compensation, assessed potential
and such other factors as the Committee shall deem relevant to the
accomplishment of the purposes of the Plan.
Directors of the Company or any Subsidiary who are not also employees
of the Company or any Subsidiary are not eligible to participate in this Plan,
except pursuant to Section 5 of the Plan. Options may be granted under this Plan
only for a reason connected with employment or directorship.
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<PAGE>
4. STOCK SUBJECT TO PLAN
The stock to be offered under this Plan, upon exercise of Options, may
be authorized but unissued common shares, shares previously issued and
thereafter acquired by the Company (if permitted by applicable law), or any
combination thereof. An aggregate of 3,000,000 shares are reserved for the grant
of Options, under this Plan, any or all of which, at the Committee's discretion,
may be intended to qualify as incentive stock options under Section 422 of the
Code. The maximum number of shares of the Company's common stock that may be
covered by Options granted under the Plan in any fiscal year of the Company to
any single participant is 100,000. Provided that the adjustment does not cause
compensation payable under this Plan to lose its deductibility under Section
162(m), the maximum number of shares subject to the Plan shall be appropriately
adjusted to reflect any change in the capitalization of the Company resulting
from a stock dividend, stock split, or other adjustment contemplated by Section
15 of this Plan and occurring after the adoption of this Plan.
If an Option granted hereunder shall expire or terminate for any reason
without having been fully exercised, the unpurchased shares subject thereto
shall again be available for the purposes of this Plan.
The Committee will maintain records showing the cumulative total of all
shares subject to Options outstanding under this Plan.
5. OPTIONS FOR DIRECTORS WHO ARE NEITHER OFFICERS NOR EMPLOYEES
The grant of Options under this Section 5 shall be limited to those
directors of the Company who, on the date of grant, are neither officers nor
employees of the Company or any Subsidiary (each an "Eligible Director").
On January 31 of each calendar year (or, if January 31 is not a
business day, the immediately preceding business day) (the "Grant Date"), each
Eligible Director shall automatically receive from the Company an option to
acquire 5,000 shares of Common stock at an exercise price equal to the closing
price of the common stock on the Grant Date. Each such Option shall be
exercisable immediately and at any time and from time to time thereafter
(subject to Section 11 hereof) until and including the date which is the
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<PAGE>
business day immediately preceding the tenth anniversary of the Grant Date.
Notice of each such Option granted on a Grant Date shall be given to each
Eligible Director within a reasonable time after the Grant Date.
This Section 5 may not be amended more frequently than once every six
months, other than to comport with changes in the Internal Revenue Code, the
Employee Retirement Income Security Act, or the rules thereunder.
6. ALLOTMENT OF SHARES
The Committee may, in its sole discretion and subject to the provisions
of the Plan, grant to eligible participants, on or after the effective date
hereof, Options to purchase shares of the Company's common stock. Options
granted under this Plan may, at the discretion of the Committee, be: (i) Options
which are intended to qualify as incentive stock options under Section 422 of
the Code (or any successor provision); (ii) Options which are not intended to so
qualify under Section 422 of the Code (or any successor provision); or (iii)
both of the foregoing if granted separately, not in tandem. Each Option granted
under this Plan must be clearly identified as to its status as an incentive
stock option or not.
Options may be allotted to participants in such amounts, subject to the
limitations specified in this Plan, as the Committee, in its sole discretion,
may from time to time determine.
In the case of Options intended to be incentive stock options, the
aggregate fair market value (determined at the time of the Options' respective
grants) of the shares with respect to which such Options are exercisable for the
first time by a participant hereunder during any calendar year (under all plans
taken into account pursuant to Section 422(d) of the Code (or any successor
provision)) shall not exceed $100,000.
Options not intended to qualify as incentive stock options under
Section 422 of the Code (or any successor provision) may be granted to any Plan
participant without regard to the Section 422 limitations.
5
<PAGE>
7. OPTION PRICE
The price per share at which each Option granted under the Plan may be
exercised shall be such price as shall be determined by the Committee at the
time of grant based on such criteria as may be adopted by the Committee in good
faith; provided, however, in no case shall the exercise price per share be
less than one hundred percent (100%) of the fair market value of the common
stock at the time such Option is granted (or 110% for owners of more than 10% of
the total combined voting power of all classes of stock of the Company or any
Subsidiary). Other than adjustments pursuant to Section 15 of this Plan, the
price per share at which an Option granted under this Plan may be exercised
shall not be changed after the date of grant.
If the Company's shares of common stock are:
(1) actively traded on any national securities exchange or
NASDAQ system that reports their sales prices, fair market value shall
be the closing price per share on the date the Committee grants the
Option;
(2) otherwise traded over the counter, fair market value
shall be the average of the final bid and asked prices for the shares
of the Company's common stock as reported for the date the Committee
grants the Option; or
(3) not traded, the Committee shall consider any factor or
factors which it believes affects fair market value, and shall
determine fair market value without regard to any restriction other
than a restriction which by its terms will never lapse.
8. TERM OF OPTION The term of each Option granted under the
Plan shall be established by the Committee, but shall not exceed ten
(10) years (or five (5) years for owners of more than 10% of the total
combined voting power of all classes of stock of the Company or of a
Subsidiary) from the date of the grant.
6
<PAGE>
9. TIME OF GRANTING OPTIONS
The date of grant of an Option under the Plan shall, for all purposes,
be the date on which the Committee makes the determination of granting such
Option. Notice of the determination shall be given to each individual to whom an
Option is so granted, within a reasonable time after the date of such grant.
10. NON-TRANSFERABILITY
An Option granted to a participant under this Plan shall not be
transferable by him or her except by will or the laws of descent and
distribution or, to the extent not inconsistent with the applicable provisions
of the Code, pursuant to a qualified domestic relations order (as that term is
defined in the Code or Title I of the Employee Retirement Income Security Act,
or the rules thereunder). In the case of an Option intended to be an incentive
stock option, such Option shall not be transferable by a participant other than
by will or the laws of descent and distribution and during the optionee's
lifetime shall be exercisable only by him or her.
11. EXERCISE OF OPTIONS
Subject to the provisions of this Plan, an Option may be exercisable at
such time or times after the date of grant thereof, on such schedule, and upon
such conditions as may be determined by the Committee at the time of grant, and
an Option granted under Section 5 hereof shall be exercisable in accordance with
the provisions of Section 5 hereof.
Exercisability of Incentive Stock Options. Any Option granted under
this Plan which is intended to qualify as an incentive stock option under
Section 422 of the Code (or any successor provision) (other than an Option
granted to a person who was an executive officer of the Company (as designated
by the Board of Directors) at the time of the grant of the Option (a "Grant-Date
Officer")) shall terminate in full (whether or not previously exercisable) prior
to the expiration of its term on the date the optionee ceases to be a director
of the Company or an employee of the Company or any Subsidiary of the Company,
unless the optionee shall (a) die while a director of the Company or an employee
of the Company or such Subsidiary, in which case the participant's personal
representative or representatives may exercise all or part of the previously
unexercised portion of the Option at any time within one year after the
participant's death (but no later than the fixed term
7
<PAGE>
of the Option) for the number of shares for which the Option could have been
exercised at the time the participant died, (b) become permanently or totally
disabled within the meaning of Section 22(e)(3) of the Code (or any successor
provision) while a director of the Company or an employee of the Company or a
Subsidiary, in which case the participant or his or her personal representative
may exercise the previously unexercised portion of the Option at any time within
one year after termination of his or her employment or directorship (but no
later than the fixed term of the Option) for the number of shares for which the
Option could have been exercised at the time the participant terminated his or
her employment because of becoming permanently or totally disabled, (c) resign
with the consent of the Company or have his or her directorship with the Company
or employment with the Company or any Subsidiary terminated by the Company or
any Subsidiary for any reason other than because of an "Immediate Termination
Event" (as defined below), in which case the participant may exercise the
previously unexercised portion of the Option at any time within three months
after the participant's resignation or termination (but no later than the fixed
term of the Option) for the number of shares for which the Option could have
been exercised immediately prior to such resignation or termination, (d) retire
with the consent of the Company after the optionee has reached his or her 55th
birthday and has at least 10 years of service with the Company or any
Subsidiary, in which case the participant may exercise the previously
unexercised portion of such Option at any time prior to the expiration of its
fixed term for the number of shares for which the Option could have been
exercised immediately prior to such retirement, or (e) retire with the consent
of the Company in any circumstance not covered by the preceding clause (d), in
which case the participant may exercise the previously unexercised portion of
such Option at any time within two years after the participant's retirement (but
no later than the fixed term of the Option) for the number of shares for which
the Option could have been exercised immediately prior to such retirement.
Exercisability of Stock Options other than Incentive Stock Options. Any
Option granted under this Plan which is not intended to qualify as an incentive
stock option under Section 422 of the Code (or any successor provision) (other
than an Option granted to a Grant-Date Officer) shall terminate in full (whether
or not previously exercisable) prior to the expiration of its term on the date
the optionee ceases to be a director
8
<PAGE>
of the Company or an employee of the Company or any Subsidiary of the Company,
unless the optionee shall (a) die while a director of the Company or an employee
of the Company or such Subsidiary, in which case the participant's personal
representative or representatives may exercise all or part of the previously
unexercised portion of the Option at any time within two years after the
participant's death (but no later than the fixed term of the Option) for the
number of shares for which the Option could have been exercised at the time the
participant died, (b) become permanently or totally disabled within the meaning
of Section 22(e)(3) of the Code (or any successor provision) while a director of
the Company or an employee of the Company or a Subsidiary, in which case the
participant or his or her personal representative may exercise the previously
unexercised portion of the Option at any time within two years after termination
of his or her employment or directorship (but no later than the fixed term of
the Option) for the number of shares for which the Option could have been
exercised at the time the participant terminated his or her employment because
of becoming permanently or totally disabled, (c) resign with the consent of the
Company or have his or her directorship with the Company or employment with the
Company or any Subsidiary terminated by the Company or any Subsidiary for any
reason other than because of an "Immediate Termination Event" (as defined
below), in which case the participant may exercise the previously unexercised
portion of the Option at any time within three months after the participant's
resignation or termination (but no later than the fixed term of the Option) for
the number of shares for which the Option could have been exercised immediately
prior to such resignation or termination, (d) retire with the consent of the
Company after the optionee has reached his or her 55th birthday and has at least
10 years of service with the Company or any Subsidiary, in which case the
participant may exercise the previously unexercised portion of such Option at
any time prior to the expiration of its fixed term for the number of shares for
which the Option could have been exercised immediately prior to such retirement,
or (e) retire with the consent of the Company in any circumstance not covered by
the preceding clause (d), in which case the participant may exercise the
previously unexercised portion of such Option at any time within two years after
the participant's retirement (but no later than the fixed term of the Option)
for the number of shares for which the Option could have been exercised
immediately prior to such retirement.
9
<PAGE>
Options to Grant-Date Officers. In the case of an Option granted to a
Grant-Date Officer, the termination of such participant's employment for a
reason other than an Immediate Termination Event (as defined below) shall not
affect the term of the Option and the Option shall be exercisable by the option
holder or his or her personal representative for its remaining term
notwithstanding such termination of employment.
Immediate Termination Event. An "Immediate Termination Event" means
termination of employment or directorship by reason of: (i) failure to pass a
drug test administered by the Company or any Subsidiary; (ii) obvious
intoxication on the job or possession of any alcoholic substance on the premises
of the Company or any Subsidiary; (iii) misuse of Company or Subsidiary assets
(which shall include but not be limited to cash, inventory and/or equipment);
(iv) gross misconduct in connection with the performance of job duties for the
Company or any Subsidiary; or (v) conviction of a felony or entry of a guilty or
nolo contendere plea to a felony offense by the individual. Notwithstanding
anything to the contrary herein, if a participant to whom an Option shall have
been granted shall have his or her directorship with the Company or employment
with the Company or a Subsidiary terminated because of an Immediate Termination
Event, all options held by such participant shall terminate in full (whether or
not previously exercisable) prior to their term on the date that the participant
ceased to be an employee of the Company or a Subsidiary or a director of the
Company.
No Exercise After Fixed Term of Option. In no event may an Option be
exercised after the expiration of its fixed term.
12. METHOD OF EXERCISE
Each Option granted under this Plan shall be deemed exercised when the
holder: (a) shall indicate the decision to do so in writing delivered to the
Company; (b) shall tender to the Company payment in full in cash, or in shares
of the Company's common stock, of the exercise price for the shares for which
the Option is exercised; (c) shall tender to the Company payment in full in
cash, or in shares of the Company's common stock, of the amount of all federal
and state withholding or other employment taxes applicable to the taxable
income, if any, of the holder resulting from such exercise; and (d) shall comply
with such other reasonable requirements as the Committee may establish.
10
<PAGE>
No person, estate or other entity shall have any of the rights of a
shareholder with reference to shares subject to an Option until a certificate or
certificates for the shares has been delivered.
An Option granted under this Plan may be exercised for any lesser
number of shares than the full amount for which it could be exercised. Such a
partial exercise of an Option shall not affect the right to exercise the Option
from time to time in accordance with this Plan for the remaining shares subject
to the Option.
13. CANCELLATION AND REPLACEMENT OF OPTIONS
The Committee may, at any time or from time to time, permit the
voluntary surrender by the holder of any outstanding Option under this Plan
where such surrender is conditioned upon the granting to such holder of new
Option(s) for such number of shares as the Committee shall determine, or may
require such a voluntary surrender as a condition precedent to the grant of new
Option(s) to such holder.
The Committee shall determine the terms and conditions of new Options,
including the prices at and periods during which they may be exercised, in
accordance with the provisions of this Plan, all or any of which may differ from
the terms and conditions of the Options surrendered. Any such new Option(s)
shall be subject to all the relevant provisions of this Plan. In no event,
however, shall a cancellation and regrant be used to effect a "repricing" that
would result in a decrease in the per-share exercise price of an Option granted
under this Plan.
The shares subject to any Option(s) so surrendered shall no longer be
charged against the limitation provided in Section 4 of this Plan and may again
become shares subject to the Plan.
Except as may be otherwise required in Section 162(m) with respect to
"covered employees" (as defined in Section 162(m)), the granting of new
Option(s) in connection with the surrender of outstanding Option(s) under this
Plan shall be considered for the purposes of the Plan as the grant of new
Option(s) and not an alteration, amendment or modification of the Plan or of the
Option(s) being surrendered.
14. TERMINATION OF OPTIONS
An Option granted under this Plan shall be considered terminated in
whole or in part to the extent that,
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<PAGE>
in accordance with the provisions of this Plan, it can no longer be exercised
for any shares originally subject to the Option. The shares subject to any
Option, or portion thereof, which terminates shall no longer be charged against
the limitation provided in Section 4 of this Plan and may again become shares
subject to the Plan.
15. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
Provided that the adjustment does not cause compensation payable under
this Plan to lose its deductibility under Section 162(m), in the event of a
stock dividend, recapitalization, merger, reorganization, consolidation, stock
split, stock consolidation or any other change in the characteristics of the
shares of common stock, the shares available for purposes of this Plan or
subject to Options outstanding hereunder shall be correspondingly increased,
diminished or changed, so that by exercise of any outstanding Option the
participant shall receive, without change in aggregate purchase price,
securities, as so increased, diminished or changed, comparable to the securities
he or she would have received if he or she had exercised his or her Option prior
to such event and had continued to hold the common stock so purchased until
affected by such event; provided with respect to incentive stock options that,
in the case of a corporate merger, consolidation, acquisition of property or
stock, separation, reorganization or liquidation, the excess of the aggregate
fair market value of the shares subject to any Option immediately after such
event over the aggregate exercise price of such shares is not more than the
excess of the aggregate fair market value of all shares subject to the Option
immediately before such event over the aggregate exercise price of such shares.
Adjustments under this Section shall be made by the Committee, whose
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive.
16. COMPLIANCE WITH SECURITIES AND EXCHANGE COMMISSION AND OTHER
REQUIREMENTS
No certificate(s) for shares shall be executed and delivered upon
exercise of an Option until the
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<PAGE>
Company shall have taken such action, if any, as is then required to comply with
the provisions of the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, the South Carolina Uniform Securities Act, as
amended, any other applicable state blue sky law(s) and the requirements of any
exchange on which the common stock of the Company may, at the time, be listed.
In the case of the exercise of an option by a person or estate
acquiring the right to exercise the Option by bequest or inheritance, the
Committee may require reasonable evidence as to the ownership of the Option and
may require such consent and releases of taxing authorities as it may deem
advisable.
17. NO RIGHT TO EMPLOYMENT
Neither the adoption of the Plan nor its operation, nor any document
describing or referring to the Plan, or any part thereof, shall confer upon any
participant under this Plan any right to continue in the employ or as a director
of the Company or any Subsidiary, or shall in any way affect the right and power
of the Company or any Subsidiary to terminate the employment or directorship of
any participant under this Plan at any time with or without assigning a reason
therefore, to the same extent as the Company or Subsidiary might have done if
this Plan had not been adopted.
18. AMENDMENT AND TERMINATION
The Committee may at any time suspend, amend or terminate this Plan.
The Committee may make such modifications of the terms and conditions of a
holder's Option as it shall deem advisable. No Option may be granted during any
suspension of the Plan or after such termination. Notwithstanding the foregoing
provisions of this Section, no amendment, suspension or termination shall,
without the consent of the holder of an Option, alter or impair any rights or
obligations under any Option theretofore granted under the Plan.
In addition to Committee approval of an amendment, if the amendment
would: (i) materially increase the benefits accruing to participants; (ii)
increase the number of securities issuable under this Plan (other than an
increase merely reflecting a change in capitalization such as a stock dividend
or stock split); (iii) change the class of employees eligible to receive
Options; or (iv) otherwise materially modify the
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<PAGE>
requirements for eligibility, then such amendment shall be approved by a
majority of the shares of the Company's capital stock present and voting either
in person or by proxy, and entitled to vote, at a meeting duly held of the
stockholders of the Company.
19. USE OF PROCEEDS
The proceeds received by the Company from the sale of shares pursuant
to Options granted under the Plan shall be used for general corporate purposes
as determined by the Board.
20. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have as
members of the Board, the members of the Committee shall, to the fullest extent
permitted by law, be indemnified by the Company against the reasonable expenses,
including attorney's fees, actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any Option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such Board member (or Committee
member, as applicable) is liable for gross negligence or misconduct in the
performance of his or her duties; provided that within 60 days after institution
of any such action, suit or proceeding the Board member (or Committee member, as
applicable) shall in writing offer the Company the opportunity, at its own
expense, to handle and defend the same.
21. EFFECTIVE DATE OF THE PLAN
This Plan shall be effective as of January 1, 1998, subject, however,
to the condition subsequent of approval by the requisite shareholder vote at the
next ensuing annual meeting of shareholders of the Company.
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<PAGE>
22. SECTION 162(m)
This Plan and its operation are intended to satisfy the requirements of
Section 162(m) with respect to permitting the deductibility of compensation for
those participants who are "covered employees" for purposes of Section 162(m).
In the event that any provision of this Plan or an Option granted under this
Plan does not so satisfy Section 162(m), that provision shall be deemed amended
to the extent necessary to satisfy Section 162(m).
23. DURATION OF THE PLAN
Unless previously terminated by the Committee, this Plan shall
terminate at the close of business on December 31, 2007, and no Option shall be
granted under it thereafter, but such termination shall not affect any option
theretofore granted under the Plan.
15
<PAGE>
|X| PLEASE MARK VOTES AS IN THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" BOTH OF THE BELOW-LISTED PROPOSALS.
APPROVAL OF NEITHER MATTER IS CONDITIONED ON
APPROVAL OF THE OTHER MATTER.
1) Elect as directors the seven For All With For All
nominees listed below to serve until Nominees hold Except
the Annual Meeting of Shareholders |_| |_| |_|
in the year 1999 and until their
successors are elected and qualified:
CHARLES D. WAY, G. EDWIN MCCRANIE, BARRY L. EDWARDS, JAMES M.
SHOEMAKER, JR., HAROLD K. ROBERTS, JR., JAMES D. COCKMAN, BRIAN S.
MACKENZIE
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, MARK THE "FOR ALL EXCEPT" BOX AND STRIKE A LINE
THROUGH THAT NOMINEE'S NAME IN THE LIST ABOVE.
2) To approve the Ryan's Family For Against Abstain
Steak Houses, Inc. 1998 Stock |_| |_| |_|
Option Plan.
PLEASE SIGN AND DATE THIS PROXY CARD. Date
Shareholder sign here Co-owner sign here
THIS PROXY CARD, WHEN PROPERLY EXECUTED, WILL
BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
PROPOSALS 1 AND 2.
In its discretion, the proxy is authorized to vote upon such other business as
properly may come before the Annual Meeting and any and all adjournments thereof
and on matters incident to the conduct of the meeting.
If any other business is presented at the Annual Meeting, this proxy card will
be voted by the proxy in its best judgment. At the present time, the Board of
Directors knows of no other business to be presented at the Annual Meeting.
Mark box at right if you plan to attend the Annual Meeting. |_|
Mark box at right if comments or address change has been noted on the reverse
side of this card. |_|
RECORD DATE SHARES: [print number here]
[shareholder name here]
[shareholder address here]
DETACH CARD
RYAN'S FAMILY STEAK HOUSES, INC.
405 LANCASTER AVENUE (29650)
POST OFFICE BOX 100
GREER, SOUTH CAROLINA 29652
Dear Shareholder:
YOUR VOTE IS IMPORTANT, AND YOU ARE STRONGLY ENCOURAGED TO EXERCISE YOUR RIGHT
TO VOTE YOUR SHARES. ON BEHALF OF THE BOARD OF DIRECTORS, WE URGE YOU TO SIGN,
DATE AND RETURN THE PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE AS SOON AS
POSSIBLE.
Under the laws of some states, failure to vote your shares (either in person or
by proxy) over a period of years can cause ownership of your shares to be
forfeited (escheated) to the state.
Thank you in advance for your prompt consideration.
Sincerely,
Ryan's Family Steak Houses, Inc.
<PAGE>
Revocable Proxy RYAN'S FAMILY STEAK HOUSES, INC.
405 LANCASTER AVENUE (29650)
POST OFFICE BOX 100
GREER, SOUTH CAROLINA 29652
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE 1998 ANNUAL MEETING OF
SHAREHOLDERS
The undersigned shareholder of Ryan's Family Steak Houses, Inc. (the "Company"),
hereby revoking all previous proxies, hereby appoints Charles D. Way and G.
Edwin McCranie and either of them, the attorney or attorneys or proxy or
proxies, with full power of substitution, to act for and in the name of the
undersigned to vote all shares of Common Stock of the Company that the
undersigned shall be entitled to vote, at the 1998 Annual Meeting of
Shareholders of the Company, to be held at the Greenville/Spartanburg Airport
Marriott, Greenville, South Carolina, on Thursday, April 30, 1998, at 11:00 a.m.
local time, and at any and all adjournments thereof, as set forth on the reverse
side.
The undersigned may elect to withdraw this proxy card at any time prior to its
use by (i) submitting a written notice of revocation (dated later than this
proxy card) to the Secretary of the Company at or before the Annual Meeting,
(ii) submitting another proxy that is properly signed and dated later than this
proxy card, or (iii) voting in person at the meeting (although attendance at the
Annual Meeting will not in and of itself revoke a proxy).
Receipt of the Notice of Meeting, the accompanying Proxy Statement and the
Annual Report to Shareholders is hereby acknowledged.
Under the laws of some states, failure to vote your shares (either in person or
by proxy) over a period of years can cause ownership of your shares to be
forfeited (escheated) to the state.
PLEASE COMPLETE, DATE, SIGN ON THE REVERSE
SIDE, AND MAIL THIS PROXY CARD IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
Please mark, date and sign exactly as your name appears on this proxy card. When
shares are held jointly, both holders should sign. When signing as attorney,
executor, administrator, trustee, guardian or custodian, please give your full
title. If the holder is a corporation or a partnership, the full corporate or
partnership name should be signed by a duly authorized officer.
HAS YOUR ADDRESS CHANGED? If so, print new address below:
DO YOU HAVE ANY COMMENTS?
2
