<PAGE> 1
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
FRISCH'S RESTAURANTS, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
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<PAGE> 2
September 9, 1998
Dear Shareholders:
We are proud that the last fiscal year was very successful for your
Company. The Company achieved better operating results and now has an additional
growth vehicle through the Golden Corral restaurant development. Big Boy same
store sales continued to increase, especially in the second half of the fiscal
year. In June, we began a new compensation program for restaurant management to
help us attract and retain qualified and experienced managers, which in turn
should lead to improved restaurant operating results. In addition, In August we
were very pleased to announce that we had signed a Letter of Intent to sell our
limited partnership interest in The Cincinnati Reds for $7,000,000 in cash. We
look forward to continuing our progress through the next fiscal year.
On behalf of the Board of Directors, I cordially invite you to attend
your Company's 1998 Annual Meeting of Shareholders. The meeting will be held at
10:00 a.m., Eastern Daylight Savings Time, at our newly remodeled, award-winning
Quality Hotel Riverview, 668 W. Fifth Street, Covington, Kentucky.
At the meeting, as set forth in the accompanying Notice of Annual
Meeting and Proxy Statement, you are being asked to elect four Directors to
serve for two year terms, to approve an Amended and Restated 1993 Stock Option
Plan and a Frisch's Restaurants, Inc. Employee Stock Option Plan, and to ratify
the selection of Grant Thornton LLP as the Company's independent auditors.
This year we are pleased to propose the reelection of two of your
current directors, Jack C. Maier, the Company's Chairman of the Board and a
director since 1961, and William A. Mauch, a director since 1992. In addition,
your Board of Directors and its Nominating Committee is enormously proud to
recommend the election of two new candidates: William J. Reik, Jr., Managing
Director of William D. Witter, a New York investment counseling firm, and
Lorrence T. Kellar, Vice President Real Estate of Kmart Corporation.
We have sought new candidates who could provide expertise, experience
and independent points of view in the development of the company's strategies
and long term planning. When you read of these candidates' experience and
qualifications, we know you will agree that these candidates will be important,
valuable additions to your Board. The Board will welcome Bill Reik's Wall Street
vantage point and his understanding of institutional investors and investment
analysts. We have a great company with fine results. Bill will help us get our
story out. The time is also right to add Larry Kellar to the Board. The real
estate assets and financial characteristics of our company are important
components of our long term strategy. Larry will lend his considerable knowledge
and his judgment to these matters.
We are gratified by our shareholders' continued interest in the
business of the Company and we hope that you can attend the meeting in person.
It is important that your views be expressed whether or not you are able to be
present at the meeting in person. Accordingly, please sign, date and return your
proxy card promptly in the enclosed envelope.
Sincerely,
JACK C. MAIER,
Chairman of the Board
<PAGE> 3
FRISCH'S RESTAURANTS, INC.
2800 GILBERT AVENUE
CINCINNATI, OHIO 45206
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 5, 1998
Dear Shareholders:
The annual meeting of the shareholders of Frisch's Restaurants, Inc.,
an Ohio corporation, will be held at the Quality Hotel Riverview, 668 W. Fifth
Street, Covington, Kentucky 41011 on Monday, October 5, 1998 at 10:00 a.m.,
Eastern Daylight Savings Time, for the following purposes:
1. Election of four Directors.
2. Approval of the Amended and Restated 1993 Stock Option Plan.
3. Approval of the Frisch's Restaurants, Inc. Employee Stock Option
Plan.
4. Ratification of the appointment of Grant Thornton LLP as
independent auditors.
5. Transaction of such other business as may properly come before
the meeting or any adjournments thereof.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE OF "AUTHORITY GIVEN" ON
PROPOSAL 1 AND A VOTE "FOR" ON PROPOSALS 2, 3 AND 4.
Shareholders of record at the close of business on September 3, 1998
are entitled to notice of, and to vote at, the annual meeting and any
adjournment(s) or postponement(s) thereof.
By Order of the Board of Directors
W. GARY KING
Secretary
Cincinnati, Ohio
September 9, 1998
YOUR VOTE IS IMPORTANT
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE VOTE BY SIGNING AND DATING
THE ENCLOSED PROXY AND RETURNING IT PROMPTLY IN THE ACCOMPANYING ENVELOPE,
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING. IF YOU ATTEND THE
MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
<PAGE> 4
FRISCH'S RESTAURANTS, INC.
2800 GILBERT AVENUE
CINCINNATI, OHIO 45206
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PROXY STATEMENT
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ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 5, 1998
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INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Frisch's Restaurants, Inc. (the
"Company") for use at the Annual Meeting of Shareholders (the "Meeting") to be
held at the Quality Hotel Riverview, 668 W. Fifth Street, Covington, Kentucky
41011 on Monday, October 5, 1998 at 10:00 a.m., Eastern Daylight Savings Time,
and at any and all adjournments thereof. This Proxy Statement and the enclosed
form of proxy are first being sent to shareholders on or about September 9,
1998.
THE PROXY
PROXY
The Board of Directors solicits proxies so that each shareholder has
the opportunity to vote on the proposals to be considered at the Meeting. A form
of proxy for voting your shares at the Meeting is enclosed. When you properly
execute and return your proxy, the shares it represents will be voted at the
meeting as specified on your proxy. If no specification is made, the shares
represented by your duly executed proxy will be voted (i) for the election as
Directors of each of the four nominees listed thereon; (ii) for the approval of
the Amended and Restated 1993 Stock Option Plan; (iii) for the approval of the
Frisch's Restaurants, Inc. Employee Stock Option Plan; (iv) for the ratification
of Grant Thornton LLP as the independent auditors; and (v) at the discretion of
the holders of the proxy, in accordance with the recommendations of the Board,
on any other matter that may come before the meeting.
REVOCABILITY OF PROXIES
You may revoke your proxy at any time before it is exercised by (i)
submitting a duly executed proxy bearing a later date; (ii) filing a written
notice of revocation with the President of the Company; or (iii) by attending
and voting in person at the Meeting.
VOTING SECURITIES AND VOTING
RECORD DATE
The Board of Directors has fixed the close of business on September 3,
1998 as the record date for the purpose of determining the shareholders entitled
to notice of and to vote at the Meeting and any adjournment(s) thereof (the
"Record Date"). There were 6,006,139 shares of the Company's common stock
("Common Stock") issued and outstanding at the close of business on the Record
Date. Only shareholders of record on the Record Date are entitled to vote at the
Meeting.
VOTING
You are entitled to one vote for each share of Common Stock you owned
of record on the Record Date on any matter submitted to a vote at the Meeting.
However, in connection with the election of directors, shares may be voted
cumulatively if written notice that cumulative voting for the election of
Directors is desired is given by any shareholder to the President, a Vice
President or the Secretary of the Company not less than forty-eight (48) hours
before the time fixed for holding the Meeting. If any shareholder gives such
notice, the Chairman will make an announcement of the giving of such notice upon
the convening of the Meeting and all shareholders may then cumulate their votes
for director nominees. Cumulative voting means that you have the right to vote
the number of shares you owned as of the Record Date, multiplied
<PAGE> 5
by the number of Directors to be elected (four). You may cast this total number
of votes for one nominee or distribute the votes among some or all of the
nominees in any manner you desire. If cumulative voting is declared at the
Meeting, votes represented by proxies may be cumulated in the discretion of the
proxy holders, in accordance with the recommendations of the Board, and
discretionary authority to do so is included in the proxy.
QUORUM REQUIREMENT
The presence, in person or by proxy, of the holders of at least a
majority of the total number of outstanding shares of Common Stock is necessary
to constitute a quorum at the Meeting.
VOTE REQUIRED
At the Meeting, directors will be elected by a plurality of the votes
cast. Therefore, the four nominees receiving the greatest number of votes will
be elected as Directors. Each other matter presented at the Meeting will be
decided by a majority of the votes cast on that matter.
METHOD OF COUNTING VOTES
Shares represented by proxies which are marked "Withhold Authority" or
on which a broker has indicated the absence of discretionary authority to vote
the shares will be counted as present for the purpose of determining a quorum,
but will not be voted in the election of Directors. Shares voted on one proposal
but not all proposals on the proxies returned by brokers will be counted for the
purpose of determining the number of shares represented at the meeting, but will
not be considered as a vote for or against any matter not voted on. Abstentions
will also be counted for the purpose of determining the number of shares
represented at the meeting, but will not be considered as a vote for or against
any matter as to which the abstention is effective.
PROPOSALS
PROPOSAL 1 - ELECTION OF DIRECTORS
Article II, Section 1 of the Company's Code of Regulations provides
that the business of the Company shall be managed and conducted by a Board of
Directors consisting of not less than five nor more than nine members. The
shareholders previously set the number of Directors at nine. The Code of
Regulations also requires that a majority of the Directors be independent.
At the Meeting, four Directors are to be elected for a two-year term,
until the 2000 annual meeting of shareholders and until their successors have
been elected and qualified. Your Board of Directors has nominated the following
persons for election as Directors at the Meeting:
<TABLE>
<CAPTION>
Positions with the Company,
Business Experience Director
Name and Other Directorships Since
- ---- ----------------------- -----
Directors
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<S> <C> <C>
Jack C. Maier Chairman of the Board of the Company 1961
(Age 73)
William A. Mauch Director of the Company; Administrator of the Cincinnati 1992
(Age 77) office of the law firm of Thompson, Hine & Flory, L.L.P.
William J. Reik, Jr. Managing Director, William D. Witter, Inc. (investment N/A
(Age 60) counseling firm); Managing Director, Mitchell Hutchins Asset
Management, Inc. (until February, 1991)
</TABLE>
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<PAGE> 6
<TABLE>
<S> <C> <C>
Lorrence T. Kellar Vice President - Real Estate, Kmart Corporation (from April, N/A
(Age 61) 1996); Group Vice President - Finance and Real Estate, The
Kroger Co. (until April, 1996); Director of Loehmann's,
Inc., BT Office Products International, Inc. and Multi-Color
Corporation; Trustee of Bartlett Capital Trust (mutual fund
group); Chairman and Trustee, City of Cincinnati Retirement
System; Trustee, Cincinnati Symphony Orchestra
</TABLE>
Votes represented by proxies will be cast by the proxy holders in such
a way as to effect the election of all four nominees, or as many thereof as
possible under the rules of cumulative voting in accordance with the
recommendation of the Board. All nominees have consented to serve as directors
if elected. However, in the event that any nominee shall become unable to serve
prior to the Meeting, it is intended that the proxies will be voted for the
balance of those nominees named and for such substitute nominee, if any, as
shall be designated by the Board.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE OF "AUTHORITY GIVEN" FOR ALL
DIRECTOR NOMINEES.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names and certain information
concerning the current Directors whose terms expire at the 1999 Annual
Shareholders Meeting and the executive officers of the Company:
<TABLE>
<CAPTION>
Positions with the Company,
Business Experience Director
Name: and Other Directorships Since
- ----- ----------------------- -----
Directors
- ---------
<S> <C> <C>
Craig F. Maier President and Chief Executive Officer and a Director 1984
(Age 48) of the Company
Daniel W. Geeding Director of the Company; Professor of management and 1992
(Age 56) entrepreneurship (since June, 1997) and Director of the
Center for International Business (since May, 1996), and
formerly Dean, College of Business Administration (from
April, 1988 to June, 1997), Xavier University; Director of
Zaring National, Inc. and Glenway Financial Corporation
Malcolm M. Knapp Director of the Company; President of Malcolm M. Knapp, 1997
(Age 59) Inc. (restaurant business consulting)
Blanche F. Maier Director of the Company; Chairman of the Board of Trustees, 1961
Cincinnati Ballet
(Age 71)
Christopher B. Hewett Director of the Company; Director, President and 1997
(Age 39) Chief Executive Officer, Meritage Hospitality Group Inc.
(since January, 1996); President of Meritage Capital Corp.
(private holding Company) (since November, 1993); former
President and Chief Executive Officer, Key Largo Group Inc.
f/k/a Ocean Reef Club, Inc. (from September, 1991 to
January, 1997)
</TABLE>
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<PAGE> 7
<TABLE>
<CAPTION>
Executive Officers
- ------------------
<S> <C> <C>
Donald H. Walker Vice President-Finance, Chief Financial Officer (since N/A
(Age 52) October, 1996) and Treasurer (since June, 1982) of the
Company
Marvin G. Fields Senior Vice President-Operations and Chief Operations N/A
(Age 63) Officer of the Company since June, 1973; Director of the
Company from April, 1975 to October, 1996
W. Gary King Counsel (since June, 1986) and Secretary (since October, N/A
(Age 61) 1996); Assistant Secretary from September, 1972 to October,
1996
</TABLE>
PROPOSAL 2 - AMENDED AND RESTATED 1993 STOCK OPTION PLAN
INTRODUCTION. The Company's Amended and Restated 1993 Stock Option Plan
(the "Amended Plan") was adopted by the Board of Directors on June 9, 1998. The
original 1993 Stock Option Plan (the "Original Plan"), which will be superseded
by the provisions of the Amended Plan, was adopted by Board of Directors on
August 3, 1993 and approved by the Company's shareholders on October 4, 1993.
There are a number of substantive differences between the Amended Plan
and the Original Plan, the most significant of which are as follows: The Amended
Plan provides for automatic, annual stock option grants to the Company's
nonemployee directors, whereas the Original Plan only permitted grants to
employees. The Amended Plan adds a Company right to repurchase shares acquired
on exercise of a stock option and modifies the holding period requirements for
shares acquired on option exercise. Additionally, the Amended Plan contains
reduced standard time periods for exercise of an option after death, disability
or retirement and provides for accelerated option vesting in the event of a
change in control of the Company. Stock appreciation rights, which could be
granted under the Original Plan, are not provided for in the Amended Plan.
Various administrative provisions have been revised in the Amended Plan,
including the requirements for shareholder approval of future amendments.
A summary of the Amended Plan is given below. The full text of the
Amended Plan, which is set forth as Exhibit A to this Proxy Statement, should be
consulted for additional information.
The Board of Directors believes that the Amended Plan will advance the
interests of the Company by providing its directors, officers and key management
personnel with additional incentive and a proprietary interest in the success of
the Company.
THE AMENDED PLAN. Officers and other key employees of the Company may
be selected to participate in the Amended Plan. Additionally, at the close of
business on the date of each annual meeting of shareholders of the Company,
commencing with the Meeting, each then serving nonemployee director of the
Company automatically will be granted an option to purchase 1,000 shares of
Common Stock. Up to 562,432 shares of Common Stock (being the 500,000 shares
provided for in the Original Plan, as adjusted due to changes in the Company's
capitalization) may be issued pursuant to the Amended Plan. Appropriate
adjustments in the number of shares issuable and in the number and prices of
shares covered by outstanding options also will be made under the Amended Plan
to give effect to changes in the Company's capitalization (stock splits, stock
dividends, etc.).
The Amended Plan will be administered by the Compensation Committee
(the "Committee") of the Board of Directors (the "Board") of the Company, except
that only the Board has authority on matters relating to options granted to
nonemployee directors. In addition to administering and interpreting the Amended
Plan, the Committee has authority to select optionees, determine the number of
shares of Common Stock for which an option is granted, set the option's exercise
price and term and establish all other terms and conditions of the option. The
Committee may waive or amend the terms and conditions of, or accelerate the
vesting of, an option. Any function of the Committee may be performed by the
Board.
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<PAGE> 8
Only nonqualified options, (i.e., options which do not qualify for
special tax treatment under Section 422 of the Internal Revenue Code (the
"Code")) may be granted under the Amended Plan. The per share exercise price of
an option granted to an employee of the Company must be at least 75% of the fair
market value of a share of Common Stock on the date the option is granted. The
per share exercise price of an option granted to a nonemployee director of the
Company must be 100% of the Common Stock's fair market value on the date of
grant.
An option's exercise price may be paid in cash, by the tender of shares
of Common Stock which have been held for at least six months or by a combination
of these methods. Shares which are tendered are to be valued at their fair
market value on the date of tender. For purposes of the Amended Plan, fair
market value is the mean between the high and the low sale price for a share of
Common Stock on the American Stock Exchange on a given date. On September 3,
1998, the fair market value of the Company's Common Stock was $9.13 per share.
Generally, an unexercisable option terminates when the optionee
terminates employment with or service as a director of the Company. An
exercisable option terminates on the earlier of (i) its full exercise, (ii) its
expiration date or (iii) the end of the three-month period following the date of
termination of employment or service as a director, unless the optionee's
employment or service has been terminated for "cause" (as defined in the Amended
Plan), in which case the option terminates immediately. If an optionee becomes
disabled or dies while employed by or serving as a director of the Company, or
within three months thereafter, a then-exercisable option may be exercised for
one year after the date of death or commencement of disability. The Amended Plan
allows the Committee to extend the periods for option exercise. Unless otherwise
specified, each option granted under the Amended Plan will expire ten years from
its date of grant.
An option may be transferred pursuant to a domestic relations order.
Otherwise, an option is not transferrable except by the optionee's will or the
laws of descent and distribution and, during an optionee's lifetime, may only be
exercised by the optionee or the optionee's legal representative or guardian.
Shares acquired upon exercise of an option may not be sold, transferred
or otherwise disposed of, except to the Company and except to the extent
necessary to pay the option's exercise price and any withholding taxes, for a
period of three years after the date the option is exercised. Additionally,
regardless of the length of time they have been held, all shares acquired on
exercise of an option are subject to a right of repurchase by the Company. The
holding period requirement of the Amended Plan terminates upon the death or
disability of the optionee or in the event of a change in control of the
Company, and the Company's right of repurchase terminates in the event of a
change in control. Moreover, the Committee may lessen or waive the holding
period requirement and may waive the Company's right of repurchase either at the
time an option is granted or at a later date.
All options outstanding under the Amended Plan become immediately
exercisable in the event of a change in control of the Company. For purposes of
the Amended Plan, a change in control includes, inter alia, (i) the execution of
an agreement of reorganization, merger or consolidation in which the Company is
not to be the surviving corporation or of an agreement for the sale or transfer
of all or substantially all of the Company's assets, (ii) the acquisition,
without specified prior approval, of 30% or more of the voting power of the
Company's outstanding securities and (iii) a 25% or greater change in the
composition of the Board over a two year period without specified prior approval
by the directors then in office.
The Board may amend or terminate the Amended Plan at any time; however,
shareholder approval is required for an amendment if such approval is required
pursuant to the Code or the Securities Exchange Act of 1934. No amendment may
alter or impair an outstanding option without the optionee's consent. No option
may be granted under the Amended Plan subsequent to October 4, 2008.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS. In general, an optionee who
exercises a nonqualified option recognizes taxable ordinary income, and the
Company is entitled to a deduction, at the time of exercise of the option in an
amount equal to the excess of the fair market value of the shares purchased over
the option's exercise price.
ACCOUNTING CONSIDERATIONS. The proceeds from the sale of stock under
the Amended Plan will constitute general funds of the Company and may be used by
it for any purpose. Under current accounting practices, neither the grant nor
the exercise of an option under the Amended Plan results in any charge against
the Company's earnings. The Company is aware that the Financial Accounting
Standards Board is considering an interpretation of the accounting rules which
could
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<PAGE> 9
result in a charge to earnings for options granted to nonemployee directors. At
this time it is uncertain whether such an interpretation will be adopted and, if
adopted, when that might occur. Such interpretations normally are adopted
prospectively. The Company intends to monitor the issue. If this interpretation
is adopted, the Board of Directors will evaluate its impact on the Company and
make a determination as to whether option grants to nonemployee directors should
be continued.
GRANTS. The Amended Plan contains no limitation on the maximum number
of participants or on the maximum number of shares which can be granted to any
individual. Approximately 45 persons currently are eligible for option grants
under the Amended Plan. As of September 3, 1998, options for a total of 56,000
shares of Common Stock had been granted under the Original Plan to the following
persons and groups: Mr. Craig F. Maier, none; Mr. Jack C. Maier, none; Mr.
Fields, 5,250 shares; Mr. Walker, 5,250 shares; Mr. Fleckinger, 1,000 shares;
all current executive officers as a group, 16,750 shares; all current directors
who are not executive officers, none; each nominee for director, none; and all
employees (other than current executive officers) as a group, 39,250 shares.
Other than the automatic annual grants to the Company's nonemployee directors,
the recipients of, and the numbers of shares subject to, future grants under the
Amended Plan are not determinable at this time.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDED
AND RESTATED 1993 STOCK OPTION PLAN.
PROPOSAL 3 - FRISCH'S RESTAURANTS, INC. EMPLOYEE STOCK OPTION PLAN
INTRODUCTION. The Frisch's Restaurants, Inc. Employee Stock Option Plan
(the "Section 423 Plan" or the "Plan") was established by the Company on March
17, 1998 to provide employees of the Company and certain of its subsidiaries
with an opportunity to acquire an ownership interest in the Company's Common
Stock and to provide an incentive for such stock ownership. The following is a
summary of the Section 423 Plan, the full text of which is set forth as Exhibit
B to this Proxy Statement.
The Board of Directors believes that the Section 423 Plan will advance
the interests of the Company by providing its employees with additional
incentive to remain with the Company and a proprietary interest in the success
of the Company.
THE SECTION 423 PLAN. A maximum of 1,000,000 shares (as adjusted from
time to time in the event of stock splits, stock dividends or other changes in
the Company's capitalization) of Common Stock may be purchased under the
Section 423 Plan by eligible employees of the Company and its designated
subsidiaries (specified in the Plan document). To be eligible, an employee must
have been employed by the Company or a designated subsidiary for at least 90
continuous days and may not own stock possessing 5% or more of the voting power
or value of all classes of stock of the Company or a subsidiary. The Company
estimates that approximately 2,500 employees currently are eligible to
participate in the Plan.
An employee who elects to participate in the Plan must authorize
regular after-tax payroll deductions in the minimum amount of $5 per week.
Deductions are credited to the participant's stock purchase account maintained
by Star Bank, N.A., Cincinnati, the Plan's custodian. In addition to payroll
deduction amounts, a participant's account is credited with all dividends on
shares held in the account. No interest accrues on funds in a participant's
stock purchase account.
Immediately following the end of each Offering Period (defined below)
Star Bank will purchase whole shares of the Company's Common Stock with the
funds available in a participant's account. Purchases may be made on the open
market or from the Company. The purchase price to the participant will be 85% of
the Fair Market Value of the stock at the beginning of the Offering Period, or
at the end of the Offering Period, whichever is less. "Offering Periods"
initially will run from November through April and May through October; but the
Plan Committee (appointed by the Company's Board of Directors) has the authority
to change the timing and/or length of the Offering Periods. For purposes of the
Plan "Fair Market Value" generally means the closing sale price of the Company's
Common Stock reported in The Wall Street Journal on an applicable date. Of any
purchase price, the Company will bear the remainder (15%) of the cost and the
brokerage fees on all open market purchases. In any calendar year, a participant
may not purchase Common Stock under the Plan having a market value of more than
$25,000, calculated from the full Fair Market Value of the Common Stock at the
beginning of the Offering Periods that year. Participants have the right to
direct the voting of all shares held in their
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<PAGE> 10
accounts and to receive statements twice a year on the status of their accounts.
A participant may also designate one or more beneficiaries to receive his or her
interest in the Plan in the event of the participant's death.
Distributions from a participant's account may or will be made either
on the request of the participant or in accordance with the requirements of the
Plan. A participant at any time may request a withdrawal from his or her
account; however, in doing so a participant must cease payroll deductions under
the Plan, must withdraw everything in the account and may not resume payroll
deductions under the Plan until the start of an Offering Period beginning at
least six months after the withdrawal.
The Plan requires that all shares of Common Stock and cash in a
participant's account be distributed (i) if the participant ceases to be
eligible to participate in the Plan (for example, as the result of termination
of employment) or (ii) if the Plan is terminated.
The Plan will be administered by a Committee of at least two members
chosen and subject to removal by the Company's Board of Directors. Subject to
the general control of the Board and the terms of the Plan, the Committee has
full power to adopt rules relating to the Plan and to administer and interpret
the Plan. The Plan may be amended at any time by the Board. The Board also has
the power to terminate or suspend the Plan at any time.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS. Contributions to the Section
423 Plan are made only from payroll deductions after federal, state and local
taxes have been withheld. In addition, a participant in the Plan is responsible
for taxes on all dividends paid on the shares of Common Stock held in his or her
account and for all tax consequences resulting from the sale of shares bought
under the Plan. The tax consequences from the sale of Section 423 Plan shares
depend in part on the length of time the shares have been held and whether a
gain or loss is realized at the time of sale. Under all circumstances, if a gain
is realized, a participant (or the participant's estate) will be required to
report as ordinary income the 15% discount in purchase price (or, if less, the
actual amount of the gain); and if the shares from an Offering Period are sold
less than two years from the beginning of that Period, any additional gain on
the sale of the stock will be taxed as ordinary income and the Company will be
entitled to take an income tax deduction equal to that additional amount.
The Plan is designed to qualify as an employee stock purchase plan
under Section 423 of the Code. If the Plan at any time does not comply with Code
Section 423, it will remain in effect and administered as a non-qualified stock
purchase plan.
ACCOUNTING CONSIDERATIONS. Under current accounting practices, a
Section 423 plan, which the Plan is designed to be, is considered to be a
noncompensatory plan and the sale of stock under such a plan does not result in
any charge against the Company's earnings. The Financial Accounting Standards
Board has considered changes in its interpretative guidance for employee stock
purchase plans, such as the Plan, which are qualified under Section 423 of the
Internal Revenue Code, and the Company is monitoring this matter. If adverse
changes are adopted, the Board of Directors currently anticipates that it will
amend the Plan to the extent necessary to preserve its noncompensatory status.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE FRISCH'S
RESTAURANTS, INC. EMPLOYEE STOCK OPTION PLAN.
PROPOSAL 4 - RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has unanimously selected the firm of Grant
Thornton LLP as auditors to make an examination of the accounts of the Company
and serve as the Company's independent public accountants for the fiscal year
commencing June 1, 1998. This firm of independent certified public accountants
has made the audits of the Company's accounts since 1952.
Shareholder ratification of the selection of auditors is not required
by law, however, the Board nevertheless decided to ascertain the views of the
shareholders in this regard. If the selection of Grant Thornton LLP is not
ratified at the Meeting, the Board of Directors will consider the selection of
other auditors.
- 7 -
<PAGE> 11
Representatives of Grant Thornton LLP are expected to be present at the
annual meeting of shareholders. They will be afforded an opportunity to make a
statement, if they so desire, and will be available to respond to appropriate
questions from the shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
SELECTION OF GRANT THORNTON LLP AS AUDITORS.
EXECUTIVE COMPENSATION
The following information is furnished with respect to each of the five
most highly compensated executive officers of the Company, including the Chief
Executive Officer, for the fiscal year ended May 31, 1998.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
----------------------------------
LONG-TERM
OTHER COMPEN- ALL
ANNUAL SATION OTHER
COMPEN- AWARDS COMPEN-
NAME AND TITLE YEAR SALARY BONUS SATION OPTIONS SATION
-------------- ---- ------ ----- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Craig F. Maier 1998 $139,482 $ 0 $18,543(b) 0 $1,218(c)
President and Chief 1997 137,891 0 18,515(b) 0 1,218(c)
Executive Officer 1996 138,534 0 17,973(b) 0 1,986(c)
Jack C. Maier 1998 300,000 0 (a) 0 0
Chairman of the Board 1997 300,000 0 (a) 0 0
1996 305,770 0 (a) 0 0
Marvin G. Fields 1998 173,719 6,524 (a) 5,250(d) 4,414(e)
Senior Vice President and 1997 170,570 0 (a) 0 4,348(e)
Chief Operations Officer 1996 173,851 0 (a) 0 4,372(e)
Donald H. Walker 1998 112,357 6,767 (a) 5,250(d) 1,276(f)
Vice President and Chief 1997 102,600 0 (a) 0 2,310(f)
Financial Officer
Gerald N. Fleckinger 1998 98,069 3,683 11,634(g) 1,000(d) 1,103(h)
Vice President-Big Boy
Division
</TABLE>
(a) In 1996, 1997 and 1998, the value of perquisites and other personal
benefits received by each of Messrs. Maier and Fields, and in 1997 and
1998 by Mr. Walker, did not exceed an amount equal to the lesser of
$50,000 or ten percent of the sum of the applicable officer's salary
and bonus for such year.
(b) Perquisites and other personal benefits received by Mr. Maier consisted
of $4,849 in 1998, $4,849 in 1997 and $5,315 in 1996 as an auto
allowance; $5,544 in 1998, $5,876 in 1997 and $5,208 in 1996 in
premiums for medical reimbursement insurance paid by the Company; and
$8,150 in 1998, $7,790 in 1997 and $7,450 in 1996 in premiums for
supplemental long term disability insurance paid by the Company.
(c) Represents the premium paid by the Company on split dollar life
insurance policies.
(d) These represent stock options, 3,500 of which were granted to each of
Mr. Fields and Mr. Walker and 1,000 of which were granted to Mr.
Fleckinger during the fiscal year ended May 31, 1998, and 1,750 of
which were earned by each of Mr. Fields and Mr. Walker in the fiscal
year ended May 31, 1998 but granted in July, 1998.
- 8 -
<PAGE> 12
(e) Represents premiums paid by the Company on split dollar life insurance
policies of $2,242 in 1998, $2,216 in 1997 and $2,199 in 1996 and
Company matching contributions to the Frisch's Executive Savings Plan
of $2,172 in 1998, $2,132 in 1997 and $2,173 in 1996.
(f) Represents premiums paid by the Company on split dollar life insurance
policies of $1,276 in 1998, $1,276 in 1997 and Company matching
contributions to the Frisch's Executive Savings Plan of $1,034 in 1997.
(g) Perquisites and other personal benefits received by Mr. Fleckinger
consisted of $4,849 in 1998 as an auto allowance; $5,544 in 1998 in
premiums for medical reimbursement insurance paid by the Company; and
$1,241 in 1998 in premiums for supplemental long term disability
insurance paid by the Company.
(h) Represents Company matching contributions to the Frisch's Executive
Savings Plan.
<TABLE>
<CAPTION>
OPTIONS GRANTED IN LAST FISCAL YEAR
Potential realizable
value at assumed annual
rates of stock price
appreciation for
Individualized Grants option term
---------------------------------------------------------------- ------------------------
Exercise or
Percent of Base Price Per Expiration
Number of Total Options Share for Date of
Options Granted to Options Options
Granted in Employees in Granted in Granted in
Name Fiscal Year Fiscal Year Fiscal Year Fiscal Year 5% 10%
---- ----------- ----------- ----------- ----------- --
<S> <C> <C> <C> <C> <C> <C>
Craig F. Maier 0 - - - - -
Jack C. Maier 0 - - - - -
Marvin G. Fields 3,500 9% $12.38 5/10/08 $27,248 $69,038
Donald H. Walker 3,500 9% 12.38 5/10/08 27,248 69,038
Gerald N. Fleckinger 1,000 3% 12.38 5/10/08 7,788 19,725
</TABLE>
The 1993 Stock Option Plan was adopted by the Board of Directors and
approved by the shareholders. Pursuant to the Plan, options for shares of the
Common Stock of the Company are granted to officers and key management
personnel, as determined by the Compensation Committee. Under the 1993 Plan,
options with terms not in excess of ten years from the date of grant and stock
appreciation rights may be granted until May 8, 2004. See "Employment Contracts
and Changes-in-Control Arrangements." In addition to the options listed in the
table above, on May 11, 1998 certain other key employees were granted options to
purchase 29,500 shares at $12.38 per share. All options granted in 1998 vest in
three equal annual installments.
The following table sets forth information regarding the exercise of
stock options by each of the named executive officers during the fiscal year
ended May 31, 1998 and the value of all outstanding options (of which only the
1984 options are currently exercisable) at May 31, 1998.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
1993 PLAN 1984 PLAN
NUMBER OF NUMBER OF VALUE OF
UNEXERCISABLE EXERCISABLE UNEXERCISED
UNEXERCISED UNEXERCISED IN-THE-MONEY
SHARES ACQUIRED NET VALUE OPTIONS AT OPTIONS AT OPTIONS AT
NAME ON EXERCISE REALIZED 5/31/98 5/31/98 5/31/98(1)
- ---- ----------- -------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Craig F. Maier 0 --- 0 96,913 0
Jack C. Maier 0 --- 0 0 0
Marvin G. Fields 0 --- 3,500 0 0
Donald H. Walker 0 --- 3,500 0 0
Gerald N. Fleckinger 0 --- 1,000 0 0
</TABLE>
(1) As of May 31, 1998 the exercise price of all listed options exceeded the
market price of the Common Stock.
- 9 -
<PAGE> 13
DEFINED BENEFIT PENSION PLAN AND EXECUTIVE RETIREMENT PLAN
The Pension Plan adopted by the Board of Directors, in which each of the
executive officers of the Company participates, provides payments of annual
benefits upon the retirement of employees covered by the Plan.
Under the qualified Pension Plan, an individual's monthly Pension Plan
benefit equals 51% of his or her average monthly compensation minus 50% of
monthly Social Security benefits. The benefit of an individual who has less than
28 years of service with the Company is reduced by 1/28 for each year less than
28.
Average monthly compensation is based upon the participant's five highest
consecutive compensation periods. For years prior to 1982, the compensation
period is the month of September. For years 1982 through 1991, the compensation
period is the month of July. For years after 1991, the compensation period is
the entire calendar year, therefore, the monthly compensation for the period is
1/12 of the annual compensation.
Compensation that is taken into consideration for periods through 1991
consists of regular wages, excluding overtime, bonuses, commissions, special
pay, severance pay and expense reimbursements, but including elective
contributions to employee benefit plans. Compensation that is taken into
consideration for periods after 1991 includes all compensation reported on the
participant's W-2 and all elective contributions to a Section 125 or 401(k)
plan.
Amounts set aside under the Plan are computed on an actuarial basis using
an aggregate funding method. No contribution was made to the Plan during the
fiscal year ended May 31, 1998.
Estimated annual retirement benefits under the Pension Plan, assuming
retirement at age 65 for Messrs. Craig F. Maier, Marvin G. Fields, Donald H.
Walker and Gerald N. Fleckinger, would be, respectively, $70,000, $77,000,
$46,000 and $39,000.
Under the Internal Revenue Code, there is an annual limitation on the
amount of compensation of each employee that may be taken into account, which is
currently set at $160,000. The annual limitation for some of the years prior to
1997 was substantially higher. The Company has adopted an unfunded Executive
Retirement Plan which provides a supplemental retirement benefit to qualified
employees equal to the reduction in their benefits under the qualified Pension
Plan that results when compensation exceeds the Internal Revenue Code
limitation, or when elective salary deferrals are made to the non-qualified
Frisch's Executive Savings Plan. Currently, Messrs. Craig F. Maier, Marvin G.
Fields, Donald H. Walker and Gerald N. Fleckinger are eligible, at their normal
retirement ages, to receive supplemental annual benefits under the Executive
Retirement Plan of $42,572, $4,134, $2,106 and $3,508, respectively.
BOARD COMPENSATION AND COMMITTEES
The Board of Directors of the Company held ten meetings during the fiscal
year ended May 31, 1998. Each Director, other than Mr. Ruyan and Mr. Nussbaum,
attended at least 75% of the aggregate of the meetings of the Board held during
the year or portion of the year during which he or she was a Director. Messrs.
Ruyan and Nussbaum attended seven of the ten Board meetings. Messrs. Ruyan and
Nussbaum did not attend three Board meetings at which the Company's strategic
plan was considered and adopted, because each had indicated to the Company that
they might elect to participate as a shareholder in one or more liquidating
opportunities that could be an outcome of the Board's consideration of the
strategic plan. Each Director attended at least 75% of the aggregate of the
meetings of the Committees of which he or she is a member that were held during
the year or portion of the year during which he or she served as a Committee
member. The Company pays non-employee Directors an annual fee of $20,000 plus
$800 for each Board meeting and Committee meeting
- 10 -
<PAGE> 14
attended. Non-employee Directors consist of Mrs. Maier and Messrs. Geeding,
Knapp, Mauch, Nussbaum, Ruyan and Hewett.
The Board of Directors of the Company has an Audit Committee which is
composed of three outside directors, Daniel W. Geeding, William A. Mauch and
Jerry L. Ruyan. During the fiscal year ended May 31, 1998, the committee held
four meetings. The Audit Committee performs the following functions: review and
assessment of internal audit, financial planning, internal control, reporting
processes, public reporting of financial statements, recommendations to the
Board of Directors for independent certified public accountants to audit the
books of the Company for the fiscal year, evaluation of the performance and
independence of the auditors, and review and approval of the scope of the audit
and the audited financial statements. The committee also met separately without
management present with the independent auditors to discuss the audit.
The Board of Directors established a Nominating Committee in June, 1998,
consisting of Craig F. Maier, Daniel W. Geeding and Malcolm M. Knapp. The
Nominating Committee's function is to search for and recommend qualified,
experienced candidates to the Board to be nominated for election as Directors at
annual shareholder meetings and to fill any vacancies on the Board. The
Nominating Committee will consider nominees recommended by shareholders. Any
recommendations should be mailed to Craig F. Maier as Chairman of the Nominating
Committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors has a Compensation Committee which is composed of
three outside directors, Daniel W. Geeding, William A. Mauch and Barry S.
Nussbaum. During the fiscal year ended May 31, 1998, the committee held three
meetings. The Compensation Committee establishes policies of the Company with
respect to the compensation of executive officers and determines such
compensation.
COMPENSATION COMMITTEE REPORT
The compensation of Jack C. Maier and Craig F. Maier for the fiscal year
ended May 31, 1998 was determined in accordance with the terms of employment
agreements approved by the Board of Directors in 1997 and 1995, respectively.
The Compensation Committee believes that these agreements are consistent with
the Company's executive compensation policies.
The compensation of all other executive officers for the fiscal year
ended May 31, 1998 was determined in accordance with salary merit increase
guidelines and incentive compensation formulas established prior to the
commencement of the fiscal year.
The policies with respect to the Company's other executive officers are:
(1) to pay salaries generally in the middle of the range of salaries paid to
executives of comparable levels of responsibility by comparable restaurant
companies; (2) to grant merit increases in salary, within the salary range,
based primarily on job performance as measured by specific, pre-determined
individual goals; and (3) to award bonuses based on how well individual goals
are achieved and how well the Company performs.
To determine the salaries of the Company's other executive officers, the
Company establishes a series of salary ranges which correspond to levels of
executive responsibility. The basis for the establishment of the ranges is data
provided by an independent consultant that is derived from an annual survey of
approximately 68 comparable restaurant companies, including all members of the
peer group used for the Corporate Performance Graph. The Committee sets the
Company's salary ranges to fall generally in the middle of the competitive
ranges. Individual salaries are set within the applicable salary range and are
reevaluated annually. Merit increases are granted within the salary range based
on job performance as measured against one or more individual performance goals
established annually for each executive.
Under the Company's incentive compensation program, other executive
officers are entitled to earn annual bonuses of up to 22.5% of each officer's
salary. Each individual executive officer's bonus is determined by a formula
that takes into account (1) the extent to which individual performance goals
established prior to the beginning of the fiscal year are met and (2) the
Company's pre-tax consolidated earnings for the fiscal year, as a percentage of
total revenue (adjusted to exclude certain revenue not related to the Company's
food service and lodging operations). No incentive bonus is paid unless pre-tax
- 11 -
<PAGE> 15
consolidated earnings of the Company are at least 4% of revenues. In order to
receive the maximum bonus, an executive must fully meet the individual
performance goals and pre-tax consolidated earnings of the Company must equal or
exceed 6% of revenues. Of the total bonus earned, 20% is paid in shares of the
Company's Common Stock and the remainder is paid in cash. All shares received by
the executive must be held for a period of two years.
Bonuses were awarded under the incentive compensation program equal to a
percentage of salary, adjusted in accordance with a formula which took into
account the extent to which individual goals were met, the Company's pre-tax
earnings for the fiscal year as a percent of total revenue, and the salary range
maximum.
Daniel W. Geeding
William A. Mauch
Barry S. Nussbaum
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, as amended
(the "Act"), the Directors, certain of the Company's officers and persons owning
more than 10% of the outstanding shares of the Company's Common Stock are
required to file reports of beneficial ownership and changes in beneficial
ownership with the Securities and Exchange Commission and the American Stock
Exchange and to furnish copies of such reports to the Company. The Company is
required to set forth in this Proxy Statement the number of late reports,
transactions not reported and any known failure to file a report. Based solely
on a review of the reports which were furnished to it and certain written
representations of each reporting person, to the Company's knowledge, the
aforesaid filing requirements were satisfied by the persons subject thereto,
except that one Form 3 reporting his election as a director and his ownership of
1,000 shares of the Company was filed late by Mr. Hewett.
EMPLOYMENT CONTRACTS AND CHANGES-IN-CONTROL ARRANGEMENTS
Pursuant to an employment agreement between the Company and Jack C.
Maier, effective June 2, 1997, which was recommended for approval by a majority
of the Compensation Committee and approved by the Board of Directors, Mr. Maier
is to be paid for the ensuing two fiscal years a base salary of $300,000 per
year. In addition, the agreement provides that upon its expiration or upon Mr.
Maier's retirement, disability or death, there shall be paid to Mr. Maier or to
his survivors for each of the next ten years the sum of $214,050, adjusted
annually to reflect 50% of the annual percentage change in the Consumer Price
Index. Alternatively, the recipient may elect at any time to receive in a lump
sum the present value of all remaining payments. The agreement also provides
that upon cessation of employment, Mr. Maier will, if not prevented by
disability, provide consulting services to the Company, for which he shall be
paid a fee of $100,000 per year for a maximum of seven years.
Pursuant to an employment agreement between the Company and Craig F.
Maier, effective May 29, 1995, which was approved by the Board of Directors, Mr.
Maier is to be paid for the ensuing five fiscal years a base salary of $135,920
per year adjusted annually to reflect 50% of the annual change in the Consumer
Price Index. Further the agreement provides that upon Mr. Maier's disability,
there shall be paid each year while he is alive for up to ten years a sum equal
to 75% of his average compensation (including incentive compensation) over the
three preceding calendar years (reduced by any disability benefits received
under any disability income plan maintained by the Company), adjusted annually
after the first year to reflect 75% of the annual percentage change in the
Consumer Price Index. In addition, the agreement provides that Mr. Maier is to
be paid for each of the five ensuing fiscal years incentive compensation equal
to 3% of the Company's pre-tax consolidated earnings if in such year pre-tax
consolidated earnings exceed 5% of total revenue of the Company (adjusted to
exclude certain revenue not related to the Company's food service and lodging
operations) after giving effect to such incentive compensation payment.
Incentive compensation is to be paid 80% in cash and 20% in the Company's Common
Stock. The agreement also provides that Mr. Maier will be granted stock options
in any year in which incentive compensation is earned. The number of options
awarded is calculated by dividing the dollar amount of Mr. Maier's incentive
compensation by the average of the highest and the lowest price of the Company's
Common Stock during the year for which the incentive compensation was earned and
multiplying the result by two. The exercise price of the options shall be equal
to the fair market value of the Common Stock on the date of grant. Options may
not be exercised until six months after the date granted or such later time
period as may be required by the Company's Stock Option Committee, which period
may not exceed five years. The options will have a ten year term.
The provisions of the agreement between the Company and Craig F. Maier
with respect to compensation are identical to those in his previous agreement
except that the number of stock options which can be earned has been doubled.
The first
- 12 -
<PAGE> 16
year's base salary is the same as the last year of his previous agreement
increased by 50% of the annual percentage change in the Consumer Price Index.
The basis for the establishment of the base salary and incentive compensation
under the previous agreement was data provided by an independent consultant that
was derived from a survey of comparable restaurant companies and data obtained
from the proxy statements of publicly held restaurant companies. The base salary
was established in the bottom quartile of the base salaries paid by such
companies. The incentive compensation formula was designed to tie performance to
shareholder value by awarding no incentive compensation unless consolidated
pre-tax earnings reach at least 5% of revenue and by permitting the aggregate of
the base salary and incentive compensation to reach the top quartile of total
compensation paid by the aforesaid companies if consolidated pre-tax earnings
targets were achieved. The number of options to be awarded was doubled to
increase the equity component of his compensation.
The Company has entered into agreements with Craig F. Maier and Marvin G.
Fields which provide that if there is a change in control of the Company that
has not been approved by existing management, the Company shall either continue
their employment for up to three years with compensation and perquisites equal
to that which they would have received had there not been such a change or
terminate their employment and make lump sum payments to them equal to the
present value of such compensation and continue such perquisites until the end
of the period for which their employment would have continued. The maximum
aggregate lump sum payments which would be payable Messrs. Maier and Fields
under these agreements if they were terminated on the date of filing of this
Proxy Statement, would be approximately $453,000 and $536,000, respectively. The
discount rate used for determining the amount of such payments was 2.4%, in
accordance with provisions of the agreements.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended May 31, 1998, a franchised restaurant owned
by children of Jack C. Maier, an officer and Director of the Company, and
Blanche F. Maier, a Director of the Company, made purchases from the Company's
commissary totaling $485,749 and paid to the Company advertising fees of
$46,606, employee leasing fees of $600,577, payroll and accounting fees of
$19,683 and franchise fees of $69,909. Other members of Mr. and Mrs. Maier's
family are the owners of a franchised restaurant which during such fiscal year
made purchases from the Company's commissary totaling $623,145 and paid to the
Company advertising fees of $60,589, employee leasing fees of $767,999, payroll
and accounting fees of $22,623 and franchise fees of $90,884.
During the fiscal year ended May 31, 1998, a franchised restaurant owned
by Craig F. Maier, an officer and Director of the Company, made purchases from
the Company's commissary totaling $308,297 and paid to the Company advertising
fees of $30,083, employee leasing fees of $411,392, payroll and accounting fees
of $18,453 and franchise fees of $45,124.
The above described transactions were effected on terms no less
favorable to the Company and no more favorable to the other parties thereto than
would have been agreed upon in transactions with persons having no relationship
with the Company.
CORPORATE PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the
Company's cumulative total stockholder return on its Common Stock over the five
year period ending May 31, 1998 with the Standard & Poor's 500 Stock Index and a
group of the Company's peer issuers, selected by the Company in good faith. The
graph assumes an investment of $100 in the Company's Common Stock, in each index
and in the common stock of the peer group on May 31, 1993, and reinvestment of
all dividends.
FRISCH'S RESTAURANTS, INC.
COMPARISON OF FIVE-YEAR TOTAL RETURN TO
THE S&P 500 INDEX
AND THE PEER GROUP
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
FRS $100 $ 86 $ 58 $ 77 $102 $ 85
S&P 500 INDEX $100 $104 $125 $161 $208 $272
PEER GROUP $100 $ 86 $ 80 $ 83 $ 80 $ 96
- 13 -
<PAGE> 17
The Peer Group consists of the following issuers: Bob Evans Farms,
Consolidated Products, Inc., Cracker Barrel Old Country Store, Denamerica Corp.,
Furrs Bishops, IHOP Corp., Ryan's Family Steak Houses, Inc., Shoney's, Inc. and
VICORP Restaurants.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information, as of August 26, 1998
(unless a different date is specified in the notes to the table), with respect
to each person (including any "group" as that term is used in Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended) known by the Company to be
the beneficial owner of more than 5% of the Company's outstanding Common Stock.
<TABLE>
<CAPTION>
Name and Address of Amount Percent
Beneficial Owner Beneficially Owned of Class
---------------- ------------------ --------
<S> <C> <C>
Blanche F. Maier 1,690,982(1)(5) 28.2%
2800 Gilbert Avenue
Cincinnati, OH 45206
Jack C. Maier 1,140,595(2)(5) 19.0%
2800 Gilbert Avenue
Cincinnati, OH 45206
Craig F. Maier 998,040(3)(5) 16.4%
2800 Gilbert Avenue
Cincinnati, OH 45206
Karen F. Maier 830,668(4)(5) 13.8%
2800 Gilbert Avenue
Cincinnati, OH 45206
William D. Witter, Inc. 617,778(6) 10.3%
153 East 53rd Street
New York, NY 10022
Dimensional Fund Advisors, Inc. 436,247(7) 7.3%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Jerry L. Ruyan, 8730 Red Fox Lane, Cincinnati, 435,698(8) 7.3%
OH 45243, and Barry S. Nussbaum, 2775 Via
La Valle, Suite 205, Del Mar, CA 92014
(Wolverine Partners)
</TABLE>
(1) Includes 614,420 shares over which Mrs. Maier has sole voting and
investment power, 89,170 shares over which she has sole voting but
shared investment power, and 987,392 shares over which she has sole
voting power only. The amounts shown above include 1,076,562 shares
over which she has sole voting power as voting trustee pursuant to a
Voting Trust Agreement dated June 26, 1997, with the following: Jack C.
Maier and herself as Co-Trustees of the Trust established under the
Will of Shirley Heinichen, deceased as to 89,170 shares; Jack C. Maier,
Craig F. Maier and Karen F. Maier, as Co-Trustees of the trust
established under the Will of David Frisch, deceased as to 764,197
shares; and Jack C. Maier, as Trustee under the Annette Frisch Trust
Agreement as to 223,195 shares. See footnotes (2), (3), (4) and (5).
Not
- 14 -
<PAGE> 18
included in this amount are 64,033 shares owned by Jack C. Maier as to
which Mrs. Maier disclaims beneficial ownership.
(2) Includes 64,033 shares over which Mr. Maier has sole voting and
investment power, 223,195 shares over which he has sole investment
power only, and 853,367 shares over which he shares investment power.
The amount shown above includes 764,197 shares over which Mr. Maier,
Craig F. Maier and Karen F. Maier share investment power only as
Co-Trustees of the Trust established under the will of David Frisch,
deceased, and 89,170 shares over which Mr. Maier and Blanche F. Maier
share investment power only as Co-Trustees under the Will of Shirley
Heinichen, deceased. See footnotes (1), (3), (4) and (5). Not included
in this amount are 8,363 shares owned by Blanche F. Maier as to which
Mr. Maier disclaims beneficial ownership.
(3) Includes 136,930 shares over which Mr. Maier has sole voting and
investment power, 764,197 shares over which Mr. Maier, Jack C. Maier
and Karen F. Maier share investment power only as Co-Trustees of the
Trust established under the will of David Frisch, deceased, and 96,913
shares which he has the right to acquire pursuant to the exercise of
employee stock options. See footnotes (1), (2), (4) and (5).
(4) Includes 61,221 shares over which Ms. Maier has sole voting and
investment power, 764,197 shares over which Ms. Maier, Jack C. Maier
and Craig F. Maier share investment power only as Co-Trustees of the
Trust established under the will of David Frisch, deceased, and 5,250
shares which she has the right to acquire pursuant to the exercise of
employee stock options. See footnotes (1), (2), (3) and (5).
(5) Blanche F. Maier is the wife of Jack C. Maier. Craig F. Maier is the
son of Jack C. Maier and Blanche F. Maier and the brother of Karen F.
Maier. Karen F. Maier is the daughter of Jack C. Maier and Blanche F.
Maier and the sister of Craig F. Maier.
(6) The information given is as of January 14, 1998, as reported in an
amended Schedule 13G filed with the Securities and Exchange Commission.
(7) The information given is as of February 6, 1998, as reported in an
amended Schedule 13G filed with the Securities and Exchange Commission.
Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 436,247 shares of
Frisch's Restaurants, Inc. stock as of December 31, 1997, all of which
shares are held in portfolios of DFA Investment Dimensions Group Inc.,
a registered open-end investment company, or in series of the DFA
Investment Trust Company, a Delaware business trust, or the DFA Group
Trust and DFA Participation Group Trust, investment vehicles for
qualified employee benefit plans, all of which Dimensional Fund
Advisors Inc. serves as investment manager. Dimensional disclaims
beneficial ownership of all such shares.
(8) The information given is as of October 3, 1997, as reported in an
amended Schedule 13D filed with the Securities and Exchange Commission,
in which each of the individuals indicates that he is acting together
with the other as a group.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information, as of August 26, 1998, with
respect to the number of shares of Common Stock beneficially owned by (i) each
Director, including each nominee for election as a Director, of the Company,
(ii) each executive officer of the Company named in the Summary Compensation
Table, and (iii) all Directors and executive officers of the Company as a group.
- 15 -
<PAGE> 19
<TABLE>
<CAPTION>
Amount Percent
Name Beneficially Owned of Class
---- ------------------ --------
<S> <C> <C>
Jack C. Maier 1,140,595(1) 19.0%
Daniel W. Geeding 2,057 *
Malcolm M. Knapp 1,500 *
Blanche F. Maier 1,690,982(1) 28.2%
Craig F. Maier 998,040(1) 16.4%
William A. Mauch 5,140 *
Barry S. Nussbaum 435,698(2) 7.3%
Jerry L. Ruyan 435,698(2) 7.3%
Christopher B. Hewett 1,000 *
Lorrence T. Kellar 1,000 *
William J. Reik, Jr. 171,360 2.9%
Marvin G. Fields 12,857(3) *
Gerald N. Fleckinger 2,014(4) *
Donald H. Walker 7,598(5) *
W. Gary King 5,250(6)
All Directors and executive officers
as a group (15 persons) 2,634,332 43.0%
</TABLE>
* Less than 1% of class.
(1) See footnotes (1), (2), (3) and (5) on the preceding page.
(2) See footnote (8) above.
(3) Includes 7,607 shares over which Mr. Fields has sole voting and
investment power and 5,250 shares which he has the right to acquire
pursuant to the exercise of employee stock options.
(4) Includes 1,014 shares over which Mr. Fleckinger has sole voting and
investment power and 1,000 shares which he has the right to acquire
pursuant to the exercise of employee stock options.
(5) Includes 2,348 shares over which Mr. Walker has sole voting and
investment power and 5,250 shares which he has the right to acquire
pursuant to the exercise of employee stock options.
(6) Includes shares which Mr. King has the right to acquire pursuant to
the exercise of employee stock options.
SHAREHOLDER PROPOSALS
It is anticipated that the 1999 annual meeting of shareholders will be
held on Monday, October 4, 1999. Proposals of shareholders intended to be
presented at the 1999 annual meeting must be received at the Company's executive
offices on or before May 12, 1999 in order to be considered for inclusion in the
Proxy and Proxy Statement issued by the Board of Directors with respect to that
meeting.
COST OF SOLICITATION
The cost of preparing and mailing this Proxy Statement, the
accompanying Notice of Annual Meeting and proxy and any additional material
relating to the Meeting and the cost of soliciting proxies will be borne by the
Company. In addition to solicitation by mail, the Company will request banks,
brokers and other custodial nominees and fiduciaries to supply proxy material to
the beneficial owners of the Common Stock of whom they have knowledge, and will
reimburse them
- 16 -
<PAGE> 20
for their expenses in so doing. Certain officers and employees of the Company
may solicit proxies in person or by telephone, facsimile transmission or mail,
for which they will not receive any special compensation.
OTHER MATTERS
The Company's Board of Directors knows of no other matters to be
presented at the Meeting other than those set forth above. However, if any other
matters come before the meeting, the holders of the proxy will vote the shares
represented by the proxy on such matters in accordance with their discretion, in
accordance with the recommendations of the Board, and discretionary authority to
do so in included in the proxy.
BY ORDER OF THE BOARD OF DIRECTORS
W. GARY KING
Dated September 9, 1998 Secretary
MANAGEMENT OF THE COMPANY WILL SUPPLY WITHOUT COST, UPON WRITTEN REQUEST, A COPY
OF THE COMPANY'S MOST RECENT ANNUAL REPORT ON FORM 10-K INCLUDING FINANCIAL
STATEMENTS AND SCHEDULES. SUCH REQUEST SHOULD BE DIRECTED TO MR. DONALD H.
WALKER, CHIEF FINANCIAL OFFICER, FRISCH'S RESTAURANTS, INC., 2800 GILBERT
AVENUE, CINCINNATI, OHIO 45206.
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<PAGE> 21
EXHIBIT A
---------
AMENDED AND RESTATED 1993 STOCK OPTION PLAN
1. Purpose. This Amended and Restated 1993 Stock Option Plan ("Plan")
of Frisch's Restaurants, Inc. ("Frisch's") is adopted to advance the interests
of the Company by providing its directors, officers and key management personnel
with additional incentive and a proprietary interest in the success of the
Company and thereby encouraging them to remain in the employ of, or as directors
of, the Company.
2. Definitions. Unless the context otherwise requires, the following
terms shall have the meanings set forth below:
(a) "Board" means the Board of Directors of Frisch's.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
Reference to any Section of the Code includes the provisions of that
Section as it may be amended or replaced by any other section(s) of
like intent and purpose and also includes any regulations or rules
promulgated thereunder.
(c) "Committee" means the Compensation Committee established by the
Board.
(d) "Company" means Frisch's and any subsidiary of Frisch's, as the
term "subsidiary" is defined in Section 424(f) of the Code.
(e) "Date of Grant" means the date on which, or such later date as
of which, an Option is awarded.
(f) "Director" means a member of the Board who does not qualify as
an Eligible Employee.
(g) "Disability" means permanent and total disability as defined in
Section 22(e)(3) of the Code.
(h) "Eligible Employee" means an officer or other individual
designated by the Committee as a key employee of the Company (other
than a person who receives retirement benefits, stipends, consulting
fees, honorariums and the like) who performs services for the Company
and is included on its regular payroll.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means the mean between the high and low
sales prices of a Share on the American Stock Exchange, or on any other
stock exchange or market system on which the Shares are traded, on the
date value is to be determined or, if there shall have been no sale on
that date, then the mean between the high and low sales prices on the
last preceding date on which such a sale or sales were made. If the
Shares are not traded as described in the preceding sentence, then such
other method as the Board may select shall be used to determine Fair
Market Value.
(k) "Holder" means an Eligible Employee or Director to whom an
Option has been granted.
(l) "Mature Shares" means Shares which have been fully paid and
held, of record or beneficially, by a Holder for at least six months.
(m) "Option" means the right, granted under this Plan and subject
to its terms and to such other terms and conditions as the Committee
may establish, to purchase from Frisch's a stated number of Shares at a
specified price. No Option under the Plan is intended to qualify as an
incentive stock option under Section 422 of the Code.
(n) "Option Price" means the purchase price per Share subject to an
Option. The Option Price shall not be less than 75% of the Fair Market
Value of a Share on the Date of Grant, except that each Option granted
to a Director shall be granted with an Option Price equal to 100% of
the Fair Market Value of a Share on the Date of Grant.
<PAGE> 22
(o) "Share" means one share of the Common Stock, without par value,
of Frisch's.
3. Shares Issuable. Subject to adjustment in accordance with paragraph
11 below, the total number of Shares covered by the Plan is Five Hundred
Sixty-two Thousand Four Hundred Thirty-Two (562,432), which may be treasury
Shares or authorized but unissued Shares. If an Option expires or is terminated
for any reason before it is exercised, the Shares which were subject to such
Option may again be subject to a new Option. The Holder of an Option shall not
be entitled to the rights and privileges of ownership with respect to the Shares
subject to the Option until such Shares have been purchased after exercise of
all or part of the Option.
4. Option Grants. (a) The Committee may from time to time select
Eligible Employees for Option grants under the Plan and grant Options to them,
including Options to satisfy commitments to Eligible Employees under the terms
of their employment contracts. The Committee shall take into account the nature
of the services rendered and to be rendered by such Eligible Employees, their
present and potential contributions to the Company's successful operation and
such other factors as the Committee in its discretion shall deem relevant. An
Eligible Employee may receive Options on more than one occasion. With respect to
Options granted to Eligible Employees, except as specifically limited by the
provisions of this Plan, the Committee shall have authority to:
(i) establish performance criteria in connection with the grant
and/or the exercise of Options, should it so desire;
(ii) determine the number of Shares which are the subject of
each Option, the Option Price and all other terms and conditions of an
Option;
(iii) in its discretion, determine as a condition of any Option
that a stated percentage of Shares covered by such Option shall be
exercisable in any one year or other stated period of time; and
(iv) waive or amend the terms and conditions of an Option under
circumstances selected by the Committee.
The Committee's determinations (which need not be identical with those contained
in other Options granted to the same or to other Eligible Employees under the
Plan) shall be final and binding.
(b) Each person serving as a Director of Frisch's at the close of
business on the date of each Annual Meeting of Shareholders of Frisch's,
commencing with the calendar year 1998 Annual Meeting, shall be granted
automatically an Option to purchase 1,000 Shares. Each such Option shall become
exercisable in full on the first anniversary of its Date of Grant. The Board
shall have authority to determine all other terms and conditions of an Option
granted to a Director and to waive or amend such terms and conditions under
circumstances selected by it.
(c) No amendment of an Option shall impair, or adversely affect in
a material way, the Option without the consent of its Holder.
5. Period of Option. Each Option shall expire ten (10) years from its
Date of Grant unless otherwise specified, at or after the Date of Grant, by the
Committee, in the case of Options granted to Eligible Employees, or by the
Board, in the case of Options granted to Directors.
6. Non-Transferability of Option. During the lifetime of a Holder, an
Option is non-assignable and non-transferable and may be exercised only by the
Holder or the Holder's legal representative or guardian, except that an Option
may be transferred pursuant to a "domestic relations order" as defined in
Section 414(p)(1)(B) of the Code. In the event of the death of a Holder, the
Option shall be transferable pursuant to the Holder's Will or by the laws of
descent and distribution and thereafter may be exercised by the transferee(s) as
provided in paragraph 10.
7. Exercise of Option. Any person entitled to exercise an Option may do
so, without the need for further approval pursuant to Exchange Act Rule 16b-3,
in whole or in part by delivering to Frisch's, attention: Vice President of
Human Resources, at its principal office, a written notice of exercise. The
written notice shall specify the number of Shares for which the Option is being
exercised and shall be accompanied by full payment of the Option Price for the
Shares being purchased. As a condition of an Option and its exercise, Frisch's
shall have complied with all requirements of any regulatory authority having
control of or supervision over the issuance of the Shares (including, but
- 2 -
<PAGE> 23
not limited to, all federal and state securities laws and the regulations of any
stock exchange or market system on which the Shares are listed). Any
certificates representing Shares acquired upon exercise of an Option may bear
such legends as Frisch's deems advisable to assure compliance with all
applicable laws and regulations and to reflect the requirements of paragraph 9
below.
8. Payment. Upon exercise of an Option, and subject to such
administrative requirements as the Committee may impose, payment of the Option
Price may be made, at the election of the Holder, in cash or by the tender of
Mature Shares or by a combination of the foregoing. If payment by the tender of
Mature Shares is selected, the value of each Mature Share shall be deemed to be
the Fair Market Value of a Share on the day the Mature Shares are tendered for
payment, which shall be the date on which the Mature Shares, duly endorsed or
accompanied by a stock power duly endorsed for transfer to Frisch's, are
received by Frisch's. The Option Price also may be paid pursuant to a "cashless"
exercise/sale procedure involving a simultaneous sale by a broker (in which case
the exercise date shall be the trade date); provided that, if the proceeds of
such sale in full payment of the Option Price are not received by Frisch's on
such date, the Holder shall pay Frisch's interest at the prime rate. A Holder
also shall be required, as a condition to exercising any Option, to make such
arrangements with the Company as the Committee shall determine for the payment
of obligatory withholding taxes, including, but not limited to, the retention of
Shares by the Company or the tender of Shares to the Company.
9. Company Right of Repurchase; Holding Period. (a) All Shares acquired
upon exercise of an Option are subject to a right of repurchase by Frisch's, and
no such Shares may be sold, transferred or disposed of (including by gift)
except in compliance with this paragraph 9(a). Prior to the sale, transfer or
other disposition of any such Shares, an Eligible Employee, Director or other
person who has acquired the Shares by Will or by the laws of descent and
distribution (each an "Owner") shall give written and dated notice to Frisch's,
attention: Vice President of Human Resources, specifying the number of Shares
sought to be sold or transferred and, if the Shares are to be transferred other
than by a sale on the open market, the name of the proposed transferee. Within
five business days of the receipt of such notice, Frisch's shall notify the
Owner whether it will purchase the Shares specified in the notice and, if the
Shares are to be purchased, shall, on the same day, mail to the Owner a check in
full payment for the Shares. Frisch's must purchase either all or none of the
Shares specified in the Owner's notice. The purchase price per Share shall be
the Fair Market Value of a Share on the date of the Owner's notice. If Frisch's
elects not to purchase the Shares, the Owner may proceed to sell, transfer or
otherwise dispose of them free of any restriction arising from this paragraph
9(a), but subject to any holding period requirement of paragraph 9(b) and to any
other applicable restrictions on transfer of such Shares. This paragraph 9(a)
shall not apply to the sale of Shares in a "cashless" exercise/sale procedure at
the time of Option exercise. Moreover, at the time an Option is granted or at
any time thereafter, the Committee (or, in the case of an Option granted to a
Director, the Board) may waive the right to repurchase granted to Frisch's by
this paragraph 9(a) and such repurchase right shall expire automatically in the
event of a Change in Control (as defined in paragraph 12).
(b) Shares acquired upon the exercise of an Option may not be sold
or otherwise disposed of, except to Frisch's or except in a brokerage
transaction to the extent necessary to satisfy the Option Price and provide for
payment of obligatory withholding taxes, until they have been held by the
Eligible Employee or Director to whom the Option was granted for a period of
three years following the date of exercise. The Committee (or, in the case of an
Option granted to a Director, the Board) may lessen (but not extend) or waive
entirely this holding period requirement at the time an Option is granted or at
any time thereafter. Any holding period requirement imposed as a result of this
paragraph 9(b) shall terminate upon the death or Disability of the Eligible
Employee or Director or upon a Change in Control, whether or not the Option to
which it pertains has been exercised at that time and whether or not the person
is, at the time, an Eligible Employee or Director.
(c) Frisch's may enforce the requirements of this paragraph 9
by such method(s) as are deemed appropriate by the Committee, including, but not
limited to, legends on any certificates representing Shares, "stop transfer"
orders and/or the retention of Shares by Frisch's.
10. Termination of Options. (a) An Option granted under the Plan will
terminate as follows:
(i) During the period of a Holder's continuous employment
with, or service as a Director of, the Company, the Option will
terminate upon the earlier of the date on which it has been fully
exercised, it expires by its terms or it is terminated by the mutual
agreement of the Company and the Holder.
- 3 -
<PAGE> 24
(ii) Upon termination of a Holder's employment with, or
service as a Director of, the Company for any reason any unexercisable
Option shall immediately terminate. Except as provided in paragraphs
10(a)(iii) and (iv), any Option which is exercisable on the date of
termination of employment, or service as a Director, will terminate
upon the earlier of its full exercise, the expiration of the Option by
its terms or the end of the three-month period following the date of
termination. For purposes of the Plan, a leave of absence approved by
the Company shall not be deemed to be termination of employment.
(iii) Upon termination of a Holder's employment with, or
service as a Director of, the Company for Cause, the Option shall
terminate immediately, whether or not exercisable. "Cause" means
intentional dishonest conduct, intentional willful misconduct or
intentional fraud, conviction of a felony, or gross negligence in the
performance of duties. An act, or failure to act, shall be deemed
"intentional" only if done, or omitted to be done, not in good faith
and without reasonable belief that the action or omission was in, or
not opposed to, the best interest of the Company. Failure to meet
performance standards or objectives of the Company shall not constitute
Cause for purposes hereof.
(iv) If a Holder to whom an Option was granted dies or
becomes subject to a Disability while employed by, or serving as a
Director of, the Company or within three months of termination of
employment or service as a Director, the Option may be exercised at any
time within one year after the date of death or the commencement of
Disability, to the extent that the Holder shall have been entitled to
exercise it at the time of death or the commencement of Disability, by
the Holder or the Holder's legal representative or guardian or by the
representative(s) of the Holder's estate or the person(s) to whom the
Option may have been transferred by Will or by the laws of descent and
distribution.
(b) The Committee, at its discretion, may extend the periods for
Option exercise set forth in this paragraph 10.
11. Adjustment in Number of Shares and in Option Price. In the event
that the outstanding Shares of Frisch's are hereafter increased or decreased or
changed into or exchanged for a different number or kind of shares or other
securities of Frisch's or of another corporation, by reason of reorganization,
merger, consolidation, recapitalization, reclassification, stock split-up,
combination of shares or dividend payable in corporate shares, appropriate
adjustment shall be made by the Committee in the number and kind of shares for
the purchase of which Options may be granted under the Plan. In addition, the
Committee shall make appropriate adjustment in the number and kind of shares as
to which outstanding Options, or portions thereof then unexercised, shall be
exercisable, to the end that the Holder's proportionate interest shall be
maintained as before the occurrence of such event; such adjustment in
outstanding Options shall be made without change in the total price applicable
to the unexercised portion of the Option and with a corresponding adjustment in
the Option Price per share. Any such adjustment made by the Committee shall be
conclusive.
12. Change in Control. Each outstanding Option shall become immediately
exercisable in full in the event of a Change in Control and the requirements of
paragraphs 9(a) and 9(b) shall not apply thereafter.
The term "Change in Control" shall mean:
(a) the execution of an agreement of reorganization, merger or
consolidation of Frisch's with one or more corporations as a result of which
Frisch's is not to be the surviving corporation (whether or not Frisch's shall
be dissolved or liquidated) or the execution of an agreement of sale or transfer
of all or substantially all of the assets of Frisch's; or
(b) any other change in control of Frisch's of a nature that would
be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act, as in effect on the date of
adoption of this Plan; provided that, without limitation, such a Change in
Control shall be deemed to have occurred on the date when (i) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act), or group of
such "persons" (other than Frisch's or its Subsidiaries as such term is defined
in the Exchange Act), is or becomes a "beneficial owner" (as defined in Rule
13d-3 of the Exchange Act), directly or indirectly, of securities of Frisch's
representing 30% or more of the voting power of the then outstanding securities
of Frisch's; provided, however, that any such acquisition that was approved
prior to such acquisition by at least two-thirds of the directors in office
prior to the time such "person" or group of "persons" became the beneficial
owner, directly or indirectly, of securities of Frisch's
- 4 -
<PAGE> 25
representing more than 5% of the voting power of the then outstanding securities
of Frisch's shall not be deemed a Change in Control; or (ii) during any period
of two consecutive calendar years there is a change of 25% or more in the
composition of the Board in office at the beginning of the period, except for
changes approved by at least two-thirds of the directors then in office who were
directors at the beginning of the period.
13. Administration of the Plan. (a) The Plan shall be administered by a
Committee appointed from time to time by the Board, except that only the Board
shall have authority as to matters relating to the Options granted to Directors.
For the purpose of Option grants to and approval of other transactions with
Eligible Employees who are subject to Section 16 of the Exchange Act with
respect to Frisch's, each member of the Committee shall be a "Non-Employee
Director" as defined in Rule 16b-3 under the Exchange Act. The Committee from
time to time may adopt such rules and interpretations and regulations for
carrying out the Plan as it deems proper and in the best interests of the
Company. The interpretation and construction of any provisions of the Plan by
the Committee shall be final and conclusive. All functions of the Committee with
respect to the Plan may be carried out by the Board.
(b) No member of the Committee or the Board shall be liable for any
action or determination taken or made in good faith with respect to the Plan or
any Option granted hereunder and, to the extent not prohibited by applicable
law, all members shall be indemnified by the Company for any liability and
expenses which they may incur as a result of any claim or cause of action, or
threatened claim or cause of action, arising in connection with the
administration of this Plan or the grant of any Option hereunder.
14. Amendment of the Plan. The Board may at any time amend, suspend or
terminate the Plan; provided, however, that shareholder approval shall be
required for any amendment if such approval is required pursuant to the Code or
the Exchange Act, or any rule or regulation thereunder, as such may be in effect
and be interpreted from time to time. No amendment to the Plan shall impair, or
adversely affect in a material way, any Option granted under the Plan without
the consent of its Holder.
15. Expiration of Authority. No Option shall be granted under the Plan
after October 4, 2008, but Options theretofore granted may extend beyond that
date.
16. Effective Date. This Amended and Restated 1993 Stock Option Plan
shall take effect on October 5, 1998.
17. No Right of Employment. Nothing contained in this Plan or in any
Option shall confer upon any person any right to continue in the employ of or as
a Director of the Company or to interfere in any way with the right of the
Company to terminate a person's employment or status as a Director at any time.
So long as a Holder shall continue to be an employee of the Company, the Option
shall not be affected by any change of the employee's duties or position.
18. Governing Law. This Plan shall be construed and administered in
accordance with and governed by the laws of the State of Ohio.
- 5 -
<PAGE> 26
EXHIBIT B
---------
FRISCH'S RESTAURANTS, INC.
EMPLOYEE STOCK OPTION PLAN
<PAGE> 27
TABLE OF CONTENTS
-----------------
1. Purpose...............................................................1
2. Definitions...........................................................1
3. Entry into and Participation in the Plan..............................2
4 Authorized Deductions.................................................2
5. Stock Purchase Accounts...............................................2
6. Grant of Options......................................................3
7. Exercise of Options...................................................3
8. Limitation on Right to Purchase.......................................3
9. Shareholder Rights....................................................3
10. Shares Available......................................................3
11. Beneficiary Designation...............................................3
12. Administration of the Plan............................................4
13. Withdrawals and Distributions.........................................4
14. Amendment of the Plan.................................................4
15. Expiration, Termination and Suspension of the Plan....................4
16. Notices...............................................................4
17. No Right to Continued Employment......................................4
18. Use of Funds..........................................................5
19. Taxes.................................................................5
20. Other Conditions......................................................5
- i -
<PAGE> 28
FRISCH'S RESTAURANTS, INC.
EMPLOYEE STOCK OPTION PLAN
1. PURPOSE
The Frisch's Restaurants, Inc. Employee Stock Option Plan enables an
Eligible Employee to acquire Frisch's Stock through payroll deductions and is
intended to advance the interests of Frisch's by encouraging stock ownership by
Eligible Employees.
2. DEFINITIONS
2.1 "Available Funds" mean authorized payroll deductions and cash
dividends which are credited to a Participant's Stock Purchase Account and are
available for the purchase of Frisch's Stock.
2.2 "Board of Directors" means the Board of Directors of Frisch's.
2.3 "Code" means the Internal Revenue Code of 1986, as amended.
2.4 "Committee" means a committee consisting of at least two members
chosen by the Board of Directors to administer the Plan.
2.5 "Continuous Service" means the length of time an Employee has been
in the continuous employ of Frisch's and/or a Subsidiary as determined by the
continuity of service rules of Frisch's or such Subsidiary.
2.6 "Custodian" means the custodian for this Plan, currently Star Bank,
National Association.
2.7 "Designated Subsidiary" means Frisch Ohio, Inc., Frisch Kentucky,
Inc., Frisch Indiana, Inc., Frisch Florida, Inc. and Kips of Oklahoma, Inc., as
well as any future Subsidiary which is designated by the Board of Directors from
time to time, in its sole discretion, to participate in this Plan.
2.8 "Eligible Employee" means any person who:
(i) is an Employee of Frisch's or a Designated Subsidiary;
(ii) has at least ninety (90) days of Continuous Service; and
(iii) is not deemed for purposes of Section 423(b)(3) of the Code
to own stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of
Frisch's or a parent or subsidiary corporation.
2.9 "Employee" means any person employed by Frisch's or a Designated
Subsidiary.
2.10 "Exercise Date" means the last day of an Offering Period.
2.11 "Exercise Price" means the price at which Frisch's Stock is
purchased for the benefit of Participants in any Offering Period. The Exercise
Price for an Offering Period shall be an amount equal to 85% of the Fair Market
Value of a share of Frisch's Stock on the Grant Date or on the Exercise Date of
that Offering Period, whichever is less.
2.12 "Fair Market Value" means the closing sale price per share of
Frisch's Stock on the principal United States stock exchange or national market
system on which Frisch's Stock is traded, as such closing sale price is reported
in The Wall Street Journal (or such other source as the Committee deems
reliable). If there are no reported sales on the date on which an Offering
Period begins, then the closing sale price on the next following day on which a
sale is transacted shall be used. If there are no reported sales on the date on
which an Offering Period ends, then the closing sale price on the most recent
preceding date on which a sale was transacted shall be used. If for any reason a
closing sale price is not readily available, the Committee shall determine the
price on such basis as it considers appropriate.
- 1 -
<PAGE> 29
2.13 "Frisch's" means Frisch's Restaurants, Inc.
2.14 "Frisch's Stock" means shares of Frisch's Restaurants, Inc. common
stock, no par value.
2.15 "Grant Date" means the first day of an Offering Period.
2.16 "Offering Period" means a period of time which either (i) begins
on May 1 and ends on October 31 or (ii) begins on November 1 and ends on April
30; provided that the Committee shall have the authority to change the beginning
and ending dates and/or the duration of Offering Periods from time to time so
long as any change is announced to Participants at least five days prior to the
scheduled beginning of the first Offering Period to be affected thereafter.
2.17 "Participant" means an Eligible Employee who elects to participate
in the Plan.
2.18 "Plan" means this Frisch's Restaurants, Inc. Employee Stock Option
Plan.
2.19 "Stock Purchase Account" means the account maintained for each
Participant which consists of (i) the Participant's Available Funds, (ii)
Frisch's Stock purchased for the Participant's account with Available Funds and
(iii) any other Frisch's Stock credited to such account.
2.20 "Subsidiary" means any corporation of which not less than 50% of
the voting shares are held by Frisch's or another Subsidiary.
3. ENTRY INTO AND PARTICIPATION IN THE PLAN
Any Eligible Employee may elect to become a Participant in the Plan by
authorizing a payroll deduction on an authorization form provided by Frisch's.
The Eligible Employee's election to participate will be effective as of the
first Grant Date following the delivery to Frisch's (in accordance with Section
16 below) of the fully executed authorization form, and shall remain in effect
until changed or revoked by the Eligible Employee. An Eligible Employee shall
remain a Participant until such Eligible Employee receives distribution of all
Available Funds and Frisch's Stock credited to that Employee's Stock Purchase
Account. No rights of a Participant to purchase Frisch's Stock under this Plan
may in any way be transferred to, or exercised by, another person.
4. AUTHORIZED DEDUCTIONS
A Participant shall authorize a regular payroll deduction from base pay
of any whole dollar amount; provided that the Committee, in its sole discretion,
may instead permit a Participant to authorize a regular payroll deduction of any
whole percentage amount (1%, 2%, etc.) of base pay. Notwithstanding the
foregoing, (i) the minimum deduction shall be Five Dollars ($5.00) per week and
(ii) the maximum deduction in any calendar year shall be limited so as to comply
with Section 8. The authorized deduction shall be made after federal, state and
local income taxes, Social Security taxes, and any other authorized deductions
have been deducted from compensation. A Participant may increase or decrease the
amount of his or her deduction by executing an amended authorization form and
filing it with Frisch's; the change shall be effective with the first paycheck
received by the Participant which is no less than three business days after the
amended authorization form is filed with the Benefits Department of Frisch's. A
Participant also may discontinue deductions at any time; provided, however, that
any Participant who ceases payroll deductions under this Plan altogether (other
than to comply with Section 8), or who withdraws the Available Funds and
Frisch's Stock held in the Participant's Stock Purchase Account, will not be
permitted to resume authorized payroll deductions until a Grant Date that is at
least six (6) months after the date of such cessation of deductions or
withdrawal. A Participant may resume authorized payroll deductions in accordance
with Section 3.
5. STOCK PURCHASE ACCOUNTS
A Stock Purchase Account will be maintained in the name of each
Participant. Authorized deductions will be credited to the Participant's Stock
Purchase Account. Interest will not accrue or be paid on Available Funds held in
a Participant's Stock Purchase Account.
Frisch's Stock purchased will be held in the Stock Purchase Account
maintained by the Custodian for each Participant, and all dividends paid on the
Frisch's Stock will be credited to that Stock Purchase Account. The Participant
will be responsible for all taxes on such dividends. All cash dividends paid on
Frisch's Stock held in a Participant's Stock Purchase Account shall be used to
purchase additional shares of Frisch's Stock.
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<PAGE> 30
Statements of a Participant's Stock Purchase Account balance shall be
distributed to the Participant as soon as practical after the close of each
Offering Period.
6. GRANT OF OPTIONS
On each Grant Date, each Participant shall be granted an option to
purchase on the Exercise Date of such Offering Period the largest number of
whole shares of Frisch's Stock that can be purchased with the Available Funds in
the Participant's Stock Purchase Account at the Exercise Price, provided that
the maximum number of shares of Frisch's Stock that may be purchased for the
Participant may not exceed the limit set forth in Section 8 below.
7. EXERCISE OF OPTIONS
Unless a Participant has withdrawn from the Plan as provided in Section
13.1 or the Plan has been terminated or suspended, a Participant's option to
purchase Frisch's Stock shall be exercised automatically on each Exercise Date.
No fractional shares of Frisch's Stock shall be purchased upon exercise of a
Participant's option. Any Available Funds which are not sufficient to purchase a
whole share of Frisch's Stock shall be retained in the Participant's Stock
Purchase Account for use in a subsequent Offering Period.
8. LIMITATION ON RIGHT TO PURCHASE
In any calendar year, a Participant shall not be permitted to purchase
an amount of Frisch's Stock, through this or any other Code Section 423 plan,
which exceeds $25,000 of fair market value of such Stock, determined on the
Grant Date.
9. SHAREHOLDER RIGHTS
Frisch's Stock purchased on behalf of a Participant as of an Exercise
Date shall, for all purposes, be deemed to have been purchased at the close of
business on such Date. Prior to that time none of the rights or privileges of a
shareholder of Frisch's shall exist with respect to such shares.
10. SHARES AVAILABLE
Not more than 1,000,000 shares of Frisch's Stock may be sold under this
Plan (such aggregate number to be appropriately adjusted to reflect any increase
or decrease in the number of shares of Frisch's Stock resulting from a
subdivision or combination of shares, stock dividend payable to all shareholders
or other capital adjustment). Shares of Frisch's Stock may be purchased directly
from Frisch's (and may be either authorized and unissued shares or treasury
shares) or on the open market. If Frisch's Stock is purchased on the open
market, Frisch's shall pay the difference between the Exercise Price and the
cost of such purchases, including any brokerage fees on all purchases. If, as of
any Exercise Date, the purchase of shares of Frisch's Stock with all Available
Funds would cause the purchase of a number of shares in excess of that number of
shares then available for purchase under the Plan, the Committee shall
proportionately reduce the number of shares that could otherwise be purchased by
each Participant on such Exercise Date in order to eliminate such excess and
thereafter suspend further purchases and payroll deductions and cause the excess
Available Funds of each Participant to be refunded.
11. BENEFICIARY DESIGNATION
A Participant may designate, on a form provided by Frisch's for that
purpose, a beneficiary or beneficiaries to receive the Participant's interest in
this Plan in the event of the Participant's death, but such a designation shall
not be effective for any purpose until it has been filed with Frisch's by the
Participant during the Participant's lifetime. In the event that a Participant
fails to designate a beneficiary, or if for any reason such designation shall be
legally ineffective, or if all designated beneficiaries predecease the
Participant or die simultaneously with the Participant, distribution shall be
made to the Participant's spouse; or if none, to the Participant's children in
equal shares; or if none, to the Participant's parents in equal shares; or if
none, to the Participant's estate.
12. ADMINISTRATION OF THE PLAN
Subject to the general control of, and superseding action by, the Board
of Directors, the Committee shall have full power to administer this Plan,
including the power to construe, interpret and apply the terms of the Plan, to
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<PAGE> 31
determine eligibility and to adjudicate disputes relating to the Plan. Every
finding, decision and determination of the Committee shall, subject as
aforesaid, be final and binding on all parties.
The members of the Committee shall be selected by the Board of
Directors and are subject to removal by the Board of Directors.
13. WITHDRAWALS AND DISTRIBUTIONS
13.1 REQUESTED BY PARTICIPANT
Available Funds and Frisch's Stock held in a Participant's
Stock Purchase Account may be withdrawn by that Participant at any time
by giving written notice to Frisch's on a form provided for that
purpose. A Participate may not withdraw less than all the Available
Funds and Frisch's Stock in the Participant's Stock Purchase Account. A
Participant who makes such a withdrawal must cease all current payroll
deductions under the Plan and will not be permitted to resume
authorized payroll deductions under the Plan until a Grant Date that is
at least six (6) months after the date of withdrawal.
13.2 REQUIRED BY THE PLAN
All Available Funds and Frisch's Stock in a Participant's
Stock Purchase Account shall be distributed to the Participant in the
event:
(i) the Participant ceases to be an Eligible Employee; or
(ii) the Plan is terminated.
14. AMENDMENT OF THE PLAN
The Board of Directors may at any time, or from time to time, alter or
amend this Plan in any respect.
15. EXPIRATION, TERMINATION AND SUSPENSION OF THE PLAN
This Plan is designed to comply with the provisions of Section 423 of
the Code. If this Plan does not at any time comply with Section 423, it will
remain in effect as a nonqualified stock purchase plan unless terminated or
suspended by action of the Board of Directors or by operation of law. This Plan
has no termination date; however, the Board of Directors shall have the right to
terminate or suspend the Plan at any time.
16. NOTICES
Any notice which a Participant files pursuant to this Plan shall be in
the appropriate form and shall be delivered by hand or mailed, postage prepaid,
to Frisch's Human Resources Department.
17. NO RIGHT TO CONTINUED EMPLOYMENT
Nothing contained in this Plan shall be deemed to give any Employee the
right to be retained in the service of Frisch's or any Subsidiary or to
interfere with the right of Frisch's or any Subsidiary to discipline, discharge
or rehire any Employee at any time.
18. USE OF FUNDS
All payroll deductions received or held by Frisch's under the Plan may
be used by Frisch's for any corporate purpose, and Frisch's shall not be
obligated to segregate such amounts.
19. TAXES
At the time an option is exercised, or at the time any Frisch's Stock
acquired under the Plan is disposed of, a Participant must make adequate
provision for any resulting federal, state or other tax withholding obligations
imposed on
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<PAGE> 32
Frisch's. At any time, Frisch's may, but shall not be obligated to, withhold
from the Participant's compensation the amount necessary for Frisch's to satisfy
its withholding obligations, including any withholding required to make
available to Frisch's any tax deductions or benefits attributable to the sale or
early disposition of Frisch's Stock by the Participant.
20. OTHER CONDITIONS
No Frisch's Stock shall be issued pursuant to this Plan unless the
issuance and delivery complies with all applicable provisions of law, including,
without limitation, the Securities Act of 1933, the Securities Exchange Act of
1934, the rules and regulations promulgated under each, and the requirements of
any stock exchange or national market system on which Frisch's Stock may then be
listed.
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<PAGE> 33
PROXY
FRISCH'S RESTAURANTS, INC.
ANNUAL MEETING OF SHAREHOLDERS
October 5, 1998
The undersigned shareholder of Frisch's Restaurants, Inc. (the
"Company") hereby nominates, constitutes and appoints Jack C. Maier and Craig F.
Maier, and each of them, the attorney, agent and proxy of the undersigned, with
full powers of substitution, to vote all the stock of the Company which the
undersigned is entitled to vote at the Annual Meeting of Shareholders of the
Company to be held at the Quality Hotel Riverview, 668 W. Fifth Street,
Covington, Kentucky 41011, on Monday, October 5, 1998 at 10:00 a.m. and at any
and all adjournments thereof, as fully and with the same force and effect as the
undersigned might or could do if personally present as follows:
1. Election of Four Directors.
To elect the four persons below to serve as directors:
Lorrence T. Kellar
Jack C. Maier
William A. Mauch
William J. Reik, Jr.
[ ] AUTHORITY GIVEN [ ] AUTHORITY WITHHELD
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR SOME BUT NOT ALL OF THE
NOMINEES NAMED ABOVE, YOU SHOULD CHECK THE BOX MARKED "AUTHORITY GIVEN" AND YOU
SHOULD ENTER THE NAME(S) OF THE NOMINEE(S) WITH RESPECT TO WHOM YOU WISH TO
WITHHOLD AUTHORITY TO VOTE IN THE SPACE PROVIDED BELOW:
- --------------------------------------------------------------------------------
2. Approval of the Amended and Restated 1993 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of the Frisch's Restaurants, Inc. Employee Stock
Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PLEASE SIGN AND DATE ON THE REVERSE SIDE
<PAGE> 34
4. Ratification of Appointment of Grant Thornton LLP as
Independent Auditors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE OF "AUTHORITY GIVEN" ON
PROPOSAL 1, AND "FOR" ON PROPOSALS 2, 3 AND 4. THE PROXY SHALL BE VOTED IN
ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS UNLESS A CONTRARY
INSTRUCTION IS INDICATED, IN WHICH CASE THE PROXY SHALL BE VOTED IN ACCORDANCE
WITH SUCH INSTRUCTIONS. IF CUMULATIVE VOTING IS PROPERLY DECLARED, THE VOTES
WILL BE CAST IN SUCH A WAY AS TO EFFECT THE ELECTION OF ALL FOUR NOMINEES, OR AS
MANY THEREOF AS POSSIBLE IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF
DIRECTORS. IN ALL OTHER MATTERS, IF ANY, PRESENTED AT THE MEETING, THIS PROXY
SHALL BE VOTED IN THE DISCRETION OF THE PROXY HOLDERS, IN ACCORDANCE WITH THE
RECOMMENDATIONS OF THE BOARD OF DIRECTORS, IF ANY.
<TABLE>
<S> <C> <C>
DATED:______________, 1998 _______________________________________________
(Please Print Your Name)
_______________________________________________
(Signature of Shareholder)
_______________________________________________
(Please Print Your Name)
_______________________________________________
(Signature of Shareholder)
(Please date this proxy and sign your name as
it appears on the stock certificates.
Executors, administrators, trustees, etc.
should give their full titles. All joint owners
should sign.)
</TABLE>
This proxy is solicited on behalf of the Company's Board of Directors, and may
be revoked prior to its exercise by filing with the President of the Company a
written instrument revoking this proxy or a duly executed proxy bearing a later
date, or by appearing in person and voting at the meeting.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY PROMPTLY.
