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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
INTERNATIONAL DAIRY QUEEN, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OF
INTERNATIONAL DAIRY QUEEN, INC.
To the Stockholders of International Dairy Queen, Inc.:
PLEASE TAKE NOTICE that the Annual Meeting of Stockholders of International
Dairy Queen, Inc. will be held on Wednesday, March 8, 1995, at 10:00 a.m. in the
General Offices of the Company at 7505 Metro Boulevard, Minneapolis, Minnesota,
to consider and act upon the following matters:
I. To elect directors for the ensuing year.
II. Amending the Company's Stock Option Plan of 1993 to increase the number
of shares of Class A Common Stock issuable thereunder from 600,000
shares to 1,200,000 shares.
III. To consider and act upon the matter of ratifying the appointment of
Ernst & Young LLP as the independent auditors of the Company for the
fiscal year ending November 30, 1995.
IV. To transact such other business as may properly come before the meeting.
In accordance with Delaware law, a list of the Company's stockholders
entitled to vote at the meeting will be available for examination at the General
Offices of the Company for ten business days prior to the meeting, between the
hours of 9:00 a.m. and 5:00 p.m. Minneapolis time, and at the meeting, during
the whole time thereof.
Accompanying this notice is a Proxy and Proxy Statement and a copy of the
Company's Annual Report for the year ended November 30, 1994. Whether or not you
expect to be present at the meeting, please sign and date the Proxy and return
it in the enclosed envelope provided for that purpose. The Proxy may be revoked
at any time prior to the time that it is voted. Only stockholders of record at
the close of business on January 20, 1995, will be entitled to vote at the
meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Michael P. Sullivan
President
February 8, 1995
<PAGE>
PROXY STATEMENT
INTERNATIONAL DAIRY QUEEN, INC.
7505 METRO BOULEVARD
MINNEAPOLIS, MINNESOTA 55439
ANNUAL MEETING OF STOCKHOLDERS -- MARCH 8, 1995
GENERAL
The enclosed Proxy is solicited by the Board of Directors of International
Dairy Queen, Inc. (the "Company"). Such solicitation is being made by mail and
may also be made by directors, officers and employees of the Company. Any Proxy
given pursuant to such solicitation may be revoked by the stockholder at any
time prior to the voting thereof by so notifying the Company in writing at the
above address, attention: David M. Bond, Secretary, or by appearing in person at
the meeting. Shares represented by Proxies will be voted as specified in such
Proxies. In the absence of specific instructions, Proxies received by the Board
of Directors will be voted (to the extent they are entitled to be voted on such
matters): (1) in favor of the nominees for directors named in this Proxy
Statement; (2) in favor of the proposal to amend the Company's Stock Option Plan
of 1993 to increase the number of shares of Class A Common Stock available for
grants under the plan; (3) for the ratification of the appointment of Ernst &
Young as the independent auditors of the Company; and (4) in the Proxies'
discretion upon such other business as may properly come before the meeting.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the election inspectors appointed for the meeting and will determine whether or
not a quorum is present. The election inspectors will treat abstentions as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum but as unvoted for purposes of determining the approval of
any matter submitted to the stockholders for a vote. If a broker indicates on
the proxy that it does not have discretionary authority as to certain shares to
vote on a particular matter, those shares will not be considered as present and
entitled to vote with respect to that matter.
All of the expenses involved in preparing, assembling and mailing this Proxy
Statement and the material enclosed herewith will be paid by the Company. The
Company may reimburse banks, brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending proxy material
to beneficial owners of stock. This Proxy Statement is being mailed to
stockholders on or about February 9, 1995.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the Company's 1996
Annual Meeting of Stockholders should be received by the President of the
Company at the above address no later than November 11, 1995, in order to be
included in the Company's Proxy Statement and form of Proxy relating to that
meeting.
OUTSTANDING STOCK
Class A Common Stock, $.01 par value ("Class A Common Stock"), of which
there were 14,666,344 shares outstanding on the record date, and Class B Common
Stock, $.01 par value ("Class B Common Stock"), of which there were 8,807,180
shares outstanding on the record date, constitute the only classes of
outstanding voting securities issued by the Company. Each holder of Class A
Common Stock will be entitled to cast one vote in person or by proxy for each
share of Class A Common Stock held for the election of directors to be elected
by the holders of the Class A Common Stock. Each holder of Class B Common Stock
will be entitled to cast one vote in person or by proxy for
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each share of Class B Common Stock held for the election of the directors to be
elected by the holders of the Class B Common Stock and for all other matters
voted on at the meeting. Only stockholders of record at the close of business on
January 20, 1995, will be entitled to vote at the meeting.
Information as to the name, address and stock holdings of each person known
by the Company to be the beneficial owner of more than 5% of its Class A Common
Stock or Class B Common Stock and as to name and the stock holdings of each
director and nominee for election to the Board of Directors and by all officers,
directors and nominees, as a group, as of January 20, 1995, is set forth below.
Except as indicated below, the Company believes that each of such persons has
the sole (or joint with spouse) voting and investment powers with respect to
such shares.
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK
--------------------------- --------------------------------
AMOUNT PERCENT AMOUNT PERCENT
BENEFICIALLY OF BENEFICIALLY OF
STOCKHOLDER/DIRECTOR OWNED CLASS OWNED CLASS
- -------------------------------------------------- ------------ --------- --------------- ---------
<S> <C> <C> <C> <C>
Rudy Luther 1,566,984 10.7% 1,631,850(1) 18.5%
5353 Wayzata Blvd.
Minneapolis, MN 55416
Nicholas Company, Inc. (2) 1,901,700 13.0% 974,400 11.1%
700 North Water Street
Milwaukee, WI 53202
John W. Mooty 565,541(3) 3.9% 853,614(1)(3) 9.7%
33 South Sixth Street
Suite 3400
Minneapolis, MN 55402
Gilbert Stein 220,882(4) 1.5% 845,760(4) 9.6%
4 Bay Ridge
Springfield, IL 62707
Rudy Luther Trusts for Children 100,800 * 550,000(1) 6.2%
7505 Metro Boulevard
Minneapolis, MN 55439
Jane N. Mooty 14,035(5) * 625,882(1)(5) 7.1%
7505 Metro Boulevard
Minneapolis, MN 55439
Ernest F. Dorn None -- None --
Ernest F. Dorn Jr. None -- None --
Richard I. Giertsen 37,994 * 130,345(6) 1.5%
Frank L. Heit 9,900 * 3,000 *
C. David Luther 50,400(7) * 297,000(1)(7) 3.4%
Raymond Mithun None -- None --
Raymond C. Schweigert 17,694 * 11,796 *
Michael P. Sullivan 54,246(8) * 41,880(8) *
All officers and directors 2,885,818(9) 19.3% 4,379,149(9) 49.7%
and nominees as a group (25 persons)
<FN>
- ------------------------
* Less than one percent
(1) During March 1994, members of the John W. Mooty and Jane N. Mooty families
granted certain rights to acquire their shares of the Company's Class B
Common Stock to the members of the Rudy Luther family and the members of
the Rudy Luther family granted reciprocal rights to their shares of Class B
Common Stock to the members of the John W. Mooty and Jane N. Mooty
</TABLE>
2
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<TABLE>
<S> <C>
families. Members of these families, in the aggregate, own approximately
55% of the Company's outstanding shares of Class B Common Stock and
approximately 20% of the Company's outstanding shares of Class A Common
Stock.
(2) The Nicholas Company, Inc. is an investment advisor. Based on information
provided by the Nicholas Company, funds and other client accounts managed
by it hold sole voting power with respect to these shares.
(3) Does not include securities shown opposite Mrs. Mooty's name.
(4) Includes shares owned by Capitol Dairy Queen, Inc. and Illinois Dairy
Queen, Inc.
(5) Does not include securities shown opposite Mr. Mooty's name.
(6) Includes 31,995 shares owned by a trust of which Mr. Giertsen is a
co-trustee.
(7) All of the Class A shares and 275,000 shares of the Class B shares are
owned by one of the Rudy Luther Trusts for Children.
(8) Does not include shares owned by the Rudy Luther Trusts for Children, the
trustee of which is Mr. Sullivan. Includes 30,900 shares subject to options
to acquire shares of the Company's Class A Common Stock which are
exercisable within 60 days of the date of this Proxy Statement.
(9) Includes shares owned by the Rudy Luther Trusts for Children. Includes
290,382 shares subject to options to acquire shares of the Company's Class
A Common Stock which are exercisable within 60 days of the date of this
Proxy Statement.
</TABLE>
ELECTION OF DIRECTORS
The Company's by-laws provide that the size of the Board of Directors shall
be not less than five nor more than fifteen directors. The Proxies granted by
the holders of Class A Common Stock will be voted at the meeting for the
election of the two persons listed below as Class A Nominees as directors of the
Company. The Proxies granted by the holders of Class B Common Stock will be
voted at the meeting for the election of the seven persons listed below as Class
B Nominees as directors of the Company. All of the following persons, except for
Ernest F. Dorn, Jr. and C. David Luther, were elected as directors at the Annual
Meeting of Stockholders on March 9, 1994, to hold office until the next Annual
Meeting of Stockholders and thereafter until their successors have been duly
elected and qualified. Ernest F. Dorn, Jr. and C. David Luther are not now
directors of the Company. In the event that one or more of the below named
persons shall unexpectedly become unavailable for election (the Company has no
knowledge of any such unavailability), votes will be cast pursuant to authority
granted by the enclosed proxy for such person or persons as may be designated by
the Board of Directors, unless the Board determines to reduce its size
appropriately. In no event will the proxies granted by stockholders be voted for
more than two Class A Nominees or seven Class B Nominees.
<TABLE>
<CAPTION>
NAME, AGE AND DIRECTOR
POSITIONS WITH THE COMPANY SINCE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
- ---------------------------------------- --------- -----------------------------------------------------------
<S> <C> <C>
CLASS A NOMINEES:
*Michael P. Sullivan -- 60 1984 President of the Company since November 30, 1987. Mr.
President and Chief Executive Officer Sullivan is a director of Valspar Corporation.
of the Company and a Director
Frank L. Heit -- 58 1992 Private Investor. Mr. Heit retired from his position as
Director Executive Vice President and Treasurer of the Company in
January 1994. Mr. Heit had held this position for more than
five years.
</TABLE>
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<TABLE>
<CAPTION>
NAME, AGE AND DIRECTOR
POSITIONS WITH THE COMPANY SINCE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
- ---------------------------------------- --------- -----------------------------------------------------------
<S> <C> <C>
CLASS B NOMINEES:
*John W. Mooty -- 72 1970 Member of the Minneapolis law firm of Gray, Plant, Mooty,
Chairman of the Board of Directors Mooty & Bennett, P.A. for more than the last five years.
and Executive Committee
Ernest F. Dorn, Jr. -- 62 -- President of Community Credit Co., auto financing and
consumer loans, a subsidiary of Norwest Financial Services,
Inc., for more than the last five years.
Richard I. Giertsen -- 49 1993 General Manager of Giertsen Company, a construction
Director company, for more than five years; Vice President of Nebco
Evans, Inc., a food distribution company, since December
1990; President of LL Distribution Systems, Inc., a food
distribution company, from February 1976 to December 1990;
and Secretary/Treasurer of MIRI Enterprises, Inc. a fast
food restaurant, for more than five years.
C. David Luther -- 38 President of Motors Management Corporation, owner and
operator of an auto leasing company and a number of auto
dealerships, since June 1992. Mr. Luther has served as a
director of Motors Management Corporation for more than the
last five years.
Raymond Mithun -- 85 1970 Private investor for more than the last five years.
Director
Jane N. Mooty -- 73 1970 Private investor for more than the last five years.
Director
Raymond C. Schweigert -- 82 1970 Private investor for more than the last five years.
Director
<FN>
- ------------------------
* Member of the Executive Committee of the Board of Directors.
</TABLE>
Jane N. Mooty is the wife of John W. Mooty. There is no other family
relationship between any of the persons listed above. Board members are paid
$1,000 per board meeting attended.
During fiscal 1994, the Board of Directors of the Company met five times and
the Executive Committee of the Board of Directors met four times. During this
period all directors attended at least 75% of the meetings of the Board of
Directors and all committees of the Board of Directors on which they served. The
Board of Directors does not have a nominating committee.
Rudy Luther, who is not standing for re-election to the Board of Directors,
and John W. Mooty serve on the Board of Directors' Compensation Committee. The
Compensation Committee met three times during fiscal 1994.
Ernest F. Dorn, who is not standing for re-election to the Board of
Directors, and Messrs. Giertsen, Heit and Schweigert are members of the Board of
Directors' Audit Committee. This committee met twice during fiscal 1994 to
review the results for the 1993 audit and the plan for the
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<PAGE>
1994 audit. The functions of the Audit Committee include recommending to the
Board of Directors, subject to stockholder approval, the independent auditors;
reviewing and approving the results of the annual audit; and instructing the
auditors, as deemed appropriate, to undertake special assignments.
AMENDMENT OF STOCK OPTION PLAN OF 1993
The Stock Option Plan of 1993 (the "1993 Plan"), is set forth as Exhibit A
to this Proxy Statement. The following description of the 1993 Plan is qualified
in its entirety by reference to the 1993 Plan set forth in Exhibit A.
The Board of Directors recommends that the current reservation of 600,000
shares of the Company's Class A Common Stock as the maximum number of shares
which may be optioned and sold under the 1993 Plan be increased by an additional
600,000 shares of Class A Common Stock, thereby bringing the total number of
shares of such stock available for options pursuant to the 1993 Plan to
1,200,000 shares of Class A Common Stock. The high and low sale prices of the
Class A Common Stock, as listed in The Wall Street Journal on the Nasdaq
National Market for February 2, 1994, were $16.875 and $16.75, respectively.
The Board of Directors believes that its various stock option plans have
been of benefit to the Company by assisting the Company and its subsidiaries in
attracting, retaining and motivating key employees. The Board of Directors also
believes that the best interests of the Company and its stockholders require
that the Company continue to be in a position to offer options to present and
prospective key personnel and present and prospective consultants. There
currently are only 32,527 shares of Class A Common Stock available for option
grants under the 1993 Plan.
The purpose of the 1993 Plan is to promote the interests of the Company and
its stockholders by helping the Company and its subsidiaries attract, retain,
motivate, and reward key employees and consultants, including officers and
directors of the Company.
The Board of Directors recommends a vote FOR the amendment of the 1993 Plan
and the reservation of an additional 600,000 shares of Class A Common Stock for
issuance thereunder. The affirmative vote of stockholders holding at least a
majority of Class B Common Stock (the only class of stock entitled to vote on
this matter) voting in person or by proxy at the Annual Meeting is necessary for
approval. Unless otherwise specified, proxies solicited by the Board of
Directors will be voted FOR the amendment of the 1993 Plan.
SUMMARY OF THE 1993 PLAN
ADMINISTRATION. The 1993 Plan will be administered by the Board of
Directors and the Company's Stock Option Committee, currently consisting of Rudy
Luther and John W. Mooty. The Committee, membership of which is limited to
non-employee directors of the Company, administers those portions of the 1993
Plan in which directors participate and the Board of Directors administers the
remainder of the 1993 Plan. The members of the Committee are not entitled to
receive options under the 1993 Plan. The Company indemnifies each member of the
Committee and the Board of Directors for actions taken under the 1993 Plan.
INCENTIVE AND NONSTATUTORY STOCK OPTIONS. Both incentive stock options and
options which do not qualify as incentive stock options ("nonstatutory stock
options") may be granted under the 1993 Plan.
ELIGIBILITY. Employees of the Company and its subsidiaries, including
officers and directors currently who are employed by the Company or any
subsidiary of the Company, are eligible to receive incentive stock options and
nonstatutory stock options under the 1993 Plan. The Company and its subsidiaries
have approximately 560 employees. Consultants of the Company and its
subsidiaries, including officers and directors who provide consulting services
to the Company or any subsidiary of the Company, and members of the Company's
Board of Directors, other than the directors who serve on the Stock Option
Committee, who are not employees of the Company or any of its subsidiaries are
5
<PAGE>
eligible to receive nonstatutory stock options under the 1993 Plan. There
currently are no consultants to the Company or its subsidiaries who would be
considered for option grants under the 1993 Plan, and there are seven
non-employee directors of the Company.
It is not possible to state in advance which persons will be granted options
under the 1993 Plan in the future. An aggregate of 95 employees were granted
stock options for 325,540 shares of Common Stock under the 1993 Plan during
fiscal 1994. No directors who were not employees of the Company received options
in fiscal 1994. Optionees in the 1993 Plan are selected by the Board or the
Committee from among those employees and consultants who, in the opinion of the
Board or the Committee, have contributed or are in a position to contribute to
the Company's continued growth and development and to its long-term financial
success. See "Executive Compensation -- Option Grants in Last Year."
STOCK SUBJECT TO 1993 PLAN. The number of shares of Class A Common Stock of
the Company which currently are subject to options granted under the 1993 Plan
is 567,473 shares and 32,527 shares of Class A Common Stock currently are
available for future option grants under the 1993 Plan. Those shares may be
either authorized but unissued shares or shares acquired by the Company,
including shares purchased in the open market, as the Board or the Committee
determines. Shares subject to options which are no longer exercisable will be
available for issuance pursuant to other options.
EXERCISE PRICE. The 1993 Plan provides that the exercise price under each
incentive stock option shall be no less than 100% of the fair market value of
the Common Stock on the day the option is granted. The exercise price for each
nonstatutory stock option granted under the 1993 Plan is the price established
by the Board or the Committee which normally also is expected to be no less than
100% of the fair market value. The exercise price of an option is to be paid in
cash or in such other consideration as the Board or the Committee deems
acceptable.
NON-TRANSFERABILITY. All options granted under the 1993 Plan may be
exercised during the optionee's lifetime only by the optionee and are
non-transferable except by will or the laws of descent and distribution.
EXERCISE. Generally, except as otherwise specified by the Board or the
Committee, the duration of each option is seven years from the date of grant. An
optionee may exercise an option for certain amounts of the shares subject to the
option based on the optionee's number of years of continuous service with the
Company or a subsidiary of the Company from the date on which the option is
granted. Generally, after one year of continuous service, the optionee may
exercise the option for up to 25% of the shares originally subject to the
option; after two years of continuous service, the optionee may exercise the
option for up to 50% of the shares originally subject to the option; after three
years of continuous service, the optionee may exercise the option for up to 75%
of the shares originally subject to the option; and after four years of
continuous service, the optionee may exercise the option for all of the shares
that remain subject to the option. If an employee retires before vesting of all
options is complete, the remaining options shall vest on the date of such
retirement. In no event will an option be exercisable later than ten years from
the date of grant of the option.
EFFECT OF TERMINATION OF SERVICES. Generally, unless, in the case of
nonstatutory stock options, otherwise specified by the Board or the Committee,
if an optionee's employment or provision of services as a consultant, as the
case may be, is terminated: (i) for a reason other than death, disability or
cause, options held by the optionee may be exercised no later than three months
following the optionee's termination; (ii) due to the optionee's death or
permanent and total disability, options held by the optionee may be exercised
for a period of twelve months following the termination; or (iii) for cause, any
options held by the optionee will terminate immediately. In each case, the
options may be exercised only to the extent exercisable on the date of
termination of employment or provision of services as a consultant or a
non-employee director, and in no event is an option exercisable after the
termination date specified in the option grant.
6
<PAGE>
GRANT OF MANAGEMENT PERFORMANCE OPTIONS. Under the 1993 Plan, incentive
stock options or nonstatutory stock options may also be granted to key
management personnel, including employee officers, based on performance
("management performance options"). With respect to employee directors, these
options may be granted only by members of the Committee which is composed
exclusively of non-employee directors who are not eligible to receive such
options.
STOCK DIVIDENDS AND STOCK SPLITS. The number, kind and price of the shares
subject to each outstanding option will be proportionately and appropriately
adjusted in the event of any stock dividend, stock split, recapitalization,
reclassification, or other similar change in the Company's outstanding
securities. The number of shares of Class A Common Stock of the Company reserved
for issuance pursuant to options granted under the 1993 Plan will also be
adjusted by the Board of Directors for any such changes.
REORGANIZATION. If substantially all of the Company's assets or more than
50% of the Company's issued and outstanding shares of Common Stock are acquired
by a person or an affiliated group of persons, the Company may, but is not
obligated to, cancel all options outstanding under the 1993 Plan if the Company
pays to each optionee an amount equal to a reasonable estimate of the difference
between the net amount per share payable as a result of the acquisition less the
exercise price of the option. If the Company is the surviving corporation in a
merger or consolidation, options granted under the 1993 Plan will apply to the
securities to which a holder of the number of shares of Class A Common Stock
subject to the option would have been entitled in the merger or consolidation.
If the Company is not the surviving corporation in a merger or consolidation, or
if the Company is dissolved or liquidated, all options outstanding under the
1993 Plan will terminate; provided, each optionee either (a) will be offered by
the surviving corporation of the merger or consolidation an option to purchase
its shares on terms which will substantially preserve the optionee's rights and
benefits under outstanding options under the 1993 Plan, or (b) will have the
right, immediately prior to the merger, consolidation, dissolution or
liquidation, to exercise any unexercised options, whether or not then
exercisable.
TERM OF 1993 PLAN; AMENDMENT. The 1993 Plan will terminate on March 7,
2003, or, if earlier, upon the purchase of all Class A Common Stock subject to
the 1993 Plan pursuant to the exercise of options granted thereunder. Any
options outstanding after the termination of the 1993 Plan will remain in effect
in accordance with their terms. The Board of Directors may terminate or amend
the 1993 Plan, except that the Board may not, without stockholder approval,
increase the number of shares of Class A Common Stock as to which options may be
granted or change the class of employees or consultants eligible to receive
options under the 1993 Plan.
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. An optionee will not realize taxable compensation
income upon the grant of an incentive stock option under the 1993 Plan. In
addition, an optionee will not realize taxable compensation income as a result
of the exercise of an incentive stock option if the optionee holds the shares
acquired until at least one year after exercise and, if later, until two years
after the date of grant of the option. The amount by which the fair market value
of the shares exceeds the option price at the time of exercise generally is
treated as an adjustment to income for purposes of the alternative minimum tax.
If an optionee acquires stock through the exercise of an incentive stock option
under the 1993 Plan and subsequently sells the stock after holding the stock for
the period described above, the gain which is the difference between the sale
price of the stock and the option exercise price will be taxed as capital gain.
The gain will not be treated as compensation income except when the holding
period requirements discussed above are not satisfied.
An incentive stock option does not entitle the Company to an income tax
deduction except to the extent that an optionee realizes compensation income
therefrom.
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NONSTATUTORY OPTIONS. An optionee will not realize taxable compensation
income upon the grant of a nonstatutory stock option. When an optionee exercises
a nonstatutory stock option, the optionee will realize taxable compensation
income at that time equal to the difference between the option price and the
fair market value of the stock on the date of exercise.
An optionee will generally have a basis in stock acquired through the
exercise of a nonstatutory stock option under the 1993 Plan equal to the fair
market value of the stock on the date of exercise. If the optionee subsequently
sells the stock, the gain which is the difference between the sale price and the
basis will be taxed as long-term or short-term capital gain, depending on the
holding period of the stock.
Any compensation income realized by an optionee upon exercise of a
nonstatutory stock option will be allowable to the Company as a deduction at the
time it is realized by the optionee.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE CHARTER. The purpose of the Compensation Committee
of the Board of Directors is to oversee compensation of officers, key employees,
and directors of the Company. The Committee's policy is to insure that
compensation programs contribute directly to the success of the Company. The
Committee comprises two members of the Board of Directors, neither of whom is an
employee of the Company.
EXECUTIVE COMPENSATION POLICIES AND PROGRAMS. The Company's executive
compensation programs are designed to attract and retain qualified executives.
There are three basic components to the Company's executive compensation
program: base pay, annual incentive bonus, and long-term, equity-based incentive
compensation in the form of stock options. Each component is established in
light of individual and Company performance, compensation levels generally in
the Minneapolis/ St. Paul metropolitan area, equity among employees, and cost
effectiveness.
BASE PAY. Base pay is designed to be competitive, although conservative
as compared to salary levels for equivalent positions at comparable
companies in the Minneapolis/St. Paul metropolitan area. The executive's
actual salary within this competitive framework depends on the individual's
performance, responsibilities, experience, leadership, and potential future
contribution.
ANNUAL INCENTIVE BONUS. In addition to base pay, each executive is
eligible to receive an annual cash bonus. For fiscal 1994 the bonus was
based on the Company's and the individual's performance in comparison to a
plan established at the beginning of the year. In its evaluation of
executive officers and the determination of discretionary bonuses, the
Committee makes a judgment after considering the factors it deems relevant,
which may include consequences for performance that is below expectations.
The initial recommendation with respect to all executive officers other than
the President, is made by the President.
LONG-TERM, EQUITY-BASED INCENTIVE COMPENSATION. The long-term,
equity-based compensation program is tied directly to stockholder return.
Under the current program, long-term incentive compensation consists of
stock options that generally do not fully vest until after five years. Stock
options are awarded with an exercise price equal to the fair market value of
the Company's Common Stock on the date of grant. Accordingly, the executive
is rewarded only if the stockholders receive the benefit of appreciation in
the price of the Common Stock.
Because long-term options vest over time, the Company periodically
(generally once each year) grants new options to provide continuing
incentives for future performance. The size of
8
<PAGE>
previous grants and the number of options held are considered by the
Committee, but are not entirely determinative of future grants. Like the
annual bonus, each executive's actual grants are based upon performance
measured against the criteria described in the preceding paragraphs.
ANNUAL REVIEWS. Each year the Committee reviews its executive compensation
policies and programs and determines what changes, if any, are appropriate for
the following year. In addition, the Committee reviews the performance of the
President.
CHIEF EXECUTIVE OFFICER. The President and Chief Executive Officer's
compensation is established by the Committee based on a subjective consideration
of his performance and the extent to which the Company achieves its strategic
and economy goals established at the beginning of the year, his current level of
compensation in comparison with the level of compensation paid the Chief
Executive Officers of the largest 100 companies in the Minneapolis/St. Paul
metropolitan area and, with respect to grants of additional stock options, the
number of shares of the Company's Common Stock and options he currently owns.
The Committee also considers the President's level of compensation as it relates
to other executive officers of the Company and to the Company's employees in
general.
The foregoing report is submitted by Rudy Luther and John Mooty, current
members of the Compensation Committee.
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and non-cash compensation awarded to
or earned by the Chief Executive Officer of the Company and the four other
highest paid executive officers for fiscal 1994, all of whom were executive
officers at the end of the fiscal year (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
FISCAL ------------------------ -------------
NAME/PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#)
- -------------------------------- --------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Michael P. Sullivan, 1994 $ 329,500 $ 120,000 19,250 shs.
President and Chief 1993 324,000 100,000 14,000 shs.
Executive Officer 1992 314,250 103,000 15,750 shs.
Edward A. Watson, 1994 176,699 55,000 15,850 shs.
Executive Vice 1993 166,157 45,000 12,000 shs.
President -- Operations 1992 159,357 42,000 11,550 shs.
Mark S. Broin, 1994 151,287 12,565 10,625 shs.
Vice President 1993 147,254 9,029 9,000 shs.
Information Services 1992 141,351 9,733 7,875 shs.
Gary H. See, 1994 149,396 15,364 13,500 shs.
Vice President 1993 142,747 9,898 9,000 shs.
Marketing and 1992 136,847 9,445 10,500 shs.
Consumer Research
George H. Fougeron 1994 142,708 10,210 12,062 shs.
Vice President 1993 129,162 18,759 9,000 shs.
Franchise Operations 1992 122,962 24,007 9,187 shs.
</TABLE>
9
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth for the Named Executive Officers the stock
options granted by the Company in fiscal 1994 and the potential value of these
stock options determined pursuant to Securities and Exchange Commission
requirements.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS (1) ANNUAL RATES OF
- --------------------------------------------------------------------------------- STOCK PRICE
PERCENT OF TOTAL EXERCISE APPRECIATION FOR
OPTIONS GRANTED OR BASE OPTION TERM(2)
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION ------------------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ------------------------- ----------- ----------------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Michael P. Sullivan 19,250 5.9% $ 16.00 2/01/01 $ 125,387 $ 292,205
Edward A. Watson 15,850 4.9% 16.00 2/01/01 103,241 240,595
Mark S. Broin 10,625 3.3% 16.00 2/01/01 69,207 161,282
Gary H. See 13,500 4.1% 16.00 2/01/01 87,934 204,923
George H. Fougeron 12,062 3.7% 16.00 2/01/01 78,567 183,095
<FN>
- ------------------------
(1) All stock options granted have an exercise price equal to the fair market
value on the date of grant.
(2) The hypothetical potential appreciation shown in these columns reflects the
required calculations at annual rates of 5% and 10% set by the Securities
and Exchange Commission and therefore is not intended to represent either
historical appreciation or anticipated future appreciation of the Company's
Common Stock price.
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth for the Named Executive Officers the value
realized from stock options exercised during fiscal 1994 and the number and
value of exercisable and unexercisable stock options held at November 30, 1994.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS OPTIONS(1)
ACQUIRED ON ---------------- -------------------
EXERCISE EXERCISABLE/ EXERCISABLE/
(#) UNEXERCISABLE UNEXERCISABLE
-------------- ---------------- -------------------
<S> <C> <C> <C>
Michael P. Sullivan None 18,900/45,700 $14,397/$20,375
Edward A. Watson None 17,325/35,275 13,497/ 16,675
Mark S. Broin None 13,193/23,307 9,203/ 11,188
Gary H. See None 15,750/29,250 12,270/ 14,250
George H. Fourgeron None 14,449/26,300 10,737/ 12,718
</TABLE>
CERTAIN TRANSACTIONS
During fiscal 1993, the Company leased cars from a company the President of
which is C. David Luther, a nominee for election to the Board of Directors and
which is owned by Rudy Luther, a director of the Company, and in connection
therewith paid to such company $795,702. During fiscal 1994, the Company
utilized the services of a travel agency owned by Rudy Luther. The agency
primarily is compensated for such services by airlines, hotels and others with
which the agency makes travel arrangements for the Company. The Company believes
that the lease payments for the cars and the services provided by the travel
agency were as favorable as could have been obtained from nonaffiliated
companies.
10
<PAGE>
During fiscal 1994, the Company paid the law firm of Gray, Plant, Mooty,
Mooty & Bennett, P.A., of which firm John W. Mooty, the Chairman of the Board of
Directors and Executive Committee of the Company, is a member, $1,810,308 for
legal services.
STOCKHOLDER RETURN COMPARISON
Shown below is a line graph comparing the yearly dollar change in the
cumulative total stockholder return on the Company's Common Stock as against the
cumulative total return of the NASDAQ Total Return Index and a "Peer" group of
companies selected by the Company for the period November 30, 1989 through
November 30, 1994. The graph and table assume the investment of $100 on November
30, 1989 in each of the Company's Common Stock, the NASDAQ Total Return Index,
and the Peer Group.
[GRAPH]
<TABLE>
<S> <C>
<FN>
- ------------------------
(1) The Peer Group, each of which companies is engaged to varying degrees in
the franchising of restaurants, includes the following: Carl Karcher
Enterprises, Inc., Checkers Drive-In-Restaurants, Rally's Hamburgers Inc.,
Sbarro Inc., Sonic Corp., TCBY Enterprises Inc. and Wendys International
Inc.
</TABLE>
11
<PAGE>
COMPLIANCE WITH SECTION 16(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten-percent stockholders are also required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and representations that no other reports were
required, during the fiscal year ended November 30, 1994, all Section 16(a)
filing requirements applicable to its officers, directors and greater than
ten-percent beneficial owners were complied with.
SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has appointed Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending November 30, 1995, it being
intended that such appointment would be presented for ratification by the
holders of Class B Common Stock. This firm audited the financial statements of
the Company for the year ended November 30, 1994, and for prior years. Ernst &
Young LLP will have representatives at the meeting who will have an opportunity
to make a statement and will be able to respond to appropriate questions.
In the event the holders of Class B Common Stock (the only class of stock
entitled to vote on this matter) do not ratify the appointment of Ernst & Young
LLP, the selection of other independent auditors will be considered by the Board
of Directors. The Board of Directors recommends that the holders of Class B
Common Stock vote for ratification of the appointment of Ernst & Young LLP.
OTHER MATTERS
The Board of Directors does not intend to bring before the meeting any
business other than as set forth in this Proxy Statement, and has not been
informed that any other business is to be presented to the meeting. However, if
any matters other than those referred to above should properly come before the
meeting, it is the intention of the persons named in the enclosed Proxy to vote
such Proxy in accordance with their best judgment.
Please sign and return promptly the enclosed Proxy or Proxies if you are
both a holder of Class A Common Stock and Class B Common Stock in the envelope
provided. The signing of a Proxy will not prevent your attending the meeting and
voting in person.
BY ORDER OF THE BOARD OF DIRECTORS
Michael P. Sullivan
President
Dated: February 8, 1995
12
<PAGE>
EXHIBIT A
INTERNATIONAL DAIRY QUEEN, INC.
STOCK OPTION PLAN
OF 1993
ARTICLE I. ESTABLISHMENT AND PURPOSE
1.1 ESTABLISHMENT. International Dairy Queen, Inc., a Delaware corporation
("Company"), hereby establishes a stock option plan for Employees and others
providing services to the Company, as described herein, which shall be known as
the "STOCK OPTION PLAN OF 1993" (the "Plan"). It is intended that certain of the
options issued pursuant to the Plan to Employees of the Company may constitute
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code, and that other options issued pursuant to the Plan shall
constitute nonstatutory options. The Board or the Committee shall determine
which options are to be incentive stock options and which are to be nonstatutory
options and shall enter into option agreements with recipients accordingly.
1.2 PURPOSE. The purpose of this Plan is to enhance stockholder investment
by attracting, retaining, motivating and rewarding key Employees and Consultants
of the Company, and to encourage stock ownership by such Employees and
Consultants by providing them with a means to acquire a proprietary interest in
the Company's success.
ARTICLE II. DEFINITIONS
2.1 DEFINITIONS. Whenever used herein, the following terms shall have the
respective meanings set forth below, unless the context clearly requires
otherwise, and when said meaning is intended, the term shall be capitalized.
(a)"BOARD" means the Board of Directors of the Company.
(b)"CODE" means the Internal Revenue Code of 1986, as amended.
(c)"COMMITTEE" shall mean the Committee provided for by Article IV hereof.
(d)"COMPANY" means International Dairy Queen, Inc., a Delaware corporation.
(e)"CONSULTANT" means any person or entity, including an officer or
director of the Company, who provides services (other than as an
Employee) to the Company, and shall include a Non-Employee Director, as
defined below.
(f)"DATE OF EXERCISE" means the date the Company receives notice, by an
Optionee, of the exercise of an Option pursuant to Section 8.1 of this
Plan. Such notice shall indicate the number of shares of Stock the
Optionee intends to exercise and shall be accompanied by payment
therefor.
(g)"EMPLOYEE" means any person, including an officer or director of the
Company, who is employed by the Company in a full or part-time capacity.
(h)"FAIR MARKET VALUE" means the fair market value of Stock upon which an
option is granted under this Plan.
(i)"INCENTIVE STOCK OPTION" means an Option granted under this Plan which
is intended to qualify as an "incentive stock option" within the meaning
of Section 422 of the Code.
(j)"NON-EMPLOYEE DIRECTOR" means a member of the Board who is not an
employee of the Company or of any Subsidiary Corporation at the time an
Option is granted hereunder.
1
<PAGE>
(k)"NONSTATUTORY OPTION" means an Option granted under this Plan which is
not intended to qualify as an incentive stock option within the meaning
of Section 422 of the Code. Nonstatutory Options may be granted at such
times and subject to such restrictions as the Board or the Committee
shall determine without conforming to the statutory rules of Section 422
of the Code applicable to incentive stock options.
(l)"OPTION" means the right, granted under this Plan, to purchase Stock of
the Company at the option price for a specified period of time. For
purposes of this Plan, an Option may be either an Incentive Stock Option
or a Nonstatutory Option.
(m)"OPTIONEE" means an Employee or Consultant holding an Option under the
Plan.
(n)"PARENT CORPORATION" shall have the meaning set forth in Section 424(e)
of the Code with the Company being treated as the employer corporation
for purposes of this definition.
(o)"SUBSIDIARY CORPORATION" shall have the meaning set forth in Section
424(f) of the Code with the Company being treated as the employer
corporation for purposes of this definition.
(p)"SIGNIFICANT SHAREHOLDER" means an individual who, within the meaning of
Section 422(b)(6) of the Code, owns stock possessing more than ten
percent of the total combined voting power of all classes of stock of the
Company or of any Parent Corporation or Subsidiary Corporation of the
Company. In determining whether an individual is a Significant
Shareholder, an individual shall be treated as owning stock owned by
certain relatives of the individual and certain stock owned by
corporations in which the individual is a shareholder, partnerships in
which the individual is a partner, and estates or trusts of which the
individual is a beneficiary, all as provided in Section 424(d) of the
Code.
(q)"STOCK" means the Class A Common Stock, $.01 par value, of the Company.
2.2 GENDER AND NUMBER. Except when otherwise indicated by the context, any
masculine terminology when used in this Plan also shall include the feminine
gender, and the definition of any term herein in the singular also shall include
the plural.
ARTICLE III. ELIGIBILITY AND PARTICIPATION
3.1 ELIGIBILITY AND PARTICIPATION. All Employees are eligible to
participate in this Plan and receive Incentive Stock Options and/or Nonstatutory
Options hereunder. All Consultants are eligible to participate in this Plan and
receive Nonstatutory Options hereunder. Optionees in the Plan shall be selected
by the Board or the Committee from among those Employees and Consultants who, in
the opinion of the Board or the Committee, have contributed or are in a position
to contribute materially to the Company's continued growth and development and
to its long-term financial success; provided, however, that only the Committee
shall have the power to select Optionees from among those Employees and
Consultants who are directors or officers of the Company.
ARTICLE IV. ADMINISTRATION
4.1 ADMINISTRATION. The Board shall administer those portions of the Plan
the administration of which is not delegated to the Committee by the Board or
reserved to the Committee by the Plan. The Board is authorized to interpret the
Plan; to prescribe, amend, and rescind rules and regulations relating to the
Plan; to provide for conditions and assurances deemed necessary or advisable to
protect the interests of the Company; and to make all determinations necessary
or advisable for the administration of those portions of the Plan that it
administers, but only to the extent not contrary to the express provisions of
the Plan. Determinations, interpretations, or other actions made or taken by the
Board, pursuant to the provisions of this Plan, shall be final, binding, and
conclusive for all purposes and upon all persons.
2
<PAGE>
Those portions of the Plan pursuant to which Options are granted to
Employees or Consultants who are also directors or officers of the Company shall
be administered exclusively by the Company's Stock Option Committee, which shall
consist of not less than two (2) members of the Board. The members of such
Committee shall be Non-Employee Directors of the Company who have not, within
twelve months prior to making any grant to an employee director or consultant
director under this Plan, received any grant of equity securities or derivative
securities of the Company pursuant to an employee benefit plan of the Company
except a formula grant as defined in Rule 16b-3(c)(2) or similar or successor
rule promulgated under the Securities and Exchange Act of 1934 (the "Act"). The
Committee shall have full power and authority, subject to the limitations of the
Plan and any limitations imposed by the Board, to construe, interpret and
administer this Plan and to make determinations which shall be final, conclusive
and binding upon all persons, including, without limitation, the Company, its
stockholders, its directors and any persons having any interests in any Options
which may be granted under this Plan, and, by resolution or resolution providing
for the creation and issuance of any such Option, to fix the terms upon which,
the time or times at or within which, and the price or prices at which any such
shares may be purchased from the Company upon the exercise of such Option, which
terms, time or times and price or prices shall, in every case, be set forth or
incorporated by reference in the instrument or instruments evidencing such
Option, and shall be consistent with the provisions of this Plan.
The Board may from time to time remove members from, or add members to, the
Committee. Vacancies on the Committee, howsoever caused, shall be filled by the
Board. The Committee shall hold meetings at such times and places as the
Chairman may determine. A majority of the Committee at which a quorum is
present, or acts reduced to or approved in writing by all of the members of the
Committee, shall be the valid acts of the Committee. A quorum shall consist of
two-thirds (2/3) of the members of the Committee.
References herein to actions to be taken by the Board shall be deemed to
refer to the Committee as well with respect to portions of the Plan administered
by the Committee. No member of the Board or the Committee shall be liable for
any action or determination made in good faith with respect to the Plan or any
Option granted under it.
4.2 SPECIAL PROVISIONS FOR GRANTS TO OFFICERS OR DIRECTORS. Rule 16b-3
under the Act provides that the grant of a stock option to a director or officer
of a company subject to the Act will be exempt from the provisions of Section
16(b) of the Act if the conditions set forth in said Rule are satisified. Unless
otherwise specified by the Board or the Committee, grants of Options hereunder
to individuals who are officers or directors of the Company shall be made in a
manner that satisfies the conditions of said Rule.
ARTICLE V. STOCK SUBJECT TO THE PLAN
5.1 NUMBER. 600,000 shares (1,200,000 shares if proposed amendment is
approved) of Stock are hereby reserved and made available for issuance under the
Plan. The number of shares of Stock available under this Plan shall also be
subject to adjustment as provided in Section 5.3. The shares of Stock may be
authorized but unissued shares of Stock, or shares acquired by purchase as
directed by the Board from time to time in its discretion, to be used for
issuance upon exercise of Options granted hereunder.
5.2 UNUSED STOCK. If an Option shall expire or terminate for any reason
without having been exercised in full, the unpurchased shares of Stock subject
thereto shall (unless the Plan shall have terminated) become available for other
Options under the Plan.
5.3 ADJUSTMENT IN CAPITALIZATION. In the event of any change in the
outstanding shares of Stock by reason of a stock dividend or split,
recapitalization, reclassification, or other similar corporate change, the
number of shares of Stock set forth in Section 5.1 shall be appropriately
adjusted by the Board, whose determination shall be conclusive; provided,
however, that fractional shares shall be
3
<PAGE>
rounded to the nearest whole share. In any such case, the number and kind of
shares that are subject to any Option (including any Option outstanding after
termination of employment) and the Option price per share shall be
proportionately and appropriately adjusted without any change in the aggregate
Option price to be paid therefor upon exercise of the Option.
ARTICLE VI. DURATION OF THE PLAN
6.1 DURATION OF THE PLAN. The Plan shall be in effect for ten years from
the date of its approval by the stockholders of the Company. Any Options
outstanding at the end of said period shall remain in effect in accordance with
their terms. The Plan shall terminate before the end of said period, if all
Stock subject to it has been purchased pursuant to the exercise of Options
granted under the Plan.
ARTICLE VII. TERMS OF STOCK OPTIONS
7.1 GRANT OF OPTIONS. Subject to section 5.1, Options may be granted to
Employees or Consultants at any time and from time to time as determined by the
Board or the Committee; provided, however, that only the Committee may grant
Options to directors of the Company; and that Consultants may receive only
Nonstatutory Options, and may not receive Incentive Stock Options. The Board or
the Committee shall have complete discretion in determining the number of
Options granted to each Optionee. In making such determinations, the Board or
the Committee may take into account the nature of services rendered by such
Employees or Consultants, their present and potential contributions to the
Company, and such other factors as the Board or the Committee in its discretion
shall deem relevant. The Board or the Committee also shall determine whether an
Option is to be an Incentive Stock Option or a Nonstatutory Option.
In addition to grants of Options made by the Board or the Committee as
provided above, grants of Management Performance Options may be made to key
management personnel pursuant to Section 7.8 hereof.
In the case of Incentive Stock Options the total Fair Market Value
(determined at the date of grant) of shares of Stock with respect to which
incentive stock options granted after December 31, 1986 are exercisable for the
first time by the Optionee during any calendar year under all plans of the
Company under which incentive stock options may be granted (and all such plans
of any Parent Corporations and any Subsidiary Corporations) shall not exceed
$100,000. (Hereinafter, this requirement is sometimes referred to as the
"$100,000 Limitation".)
Nothing in this Article VII of the Plan shall be deemed to prevent the grant
of Options permitting exercise in excess of the maximums established by the
preceding paragraph where such excess amount is treated as a Nonstatutory
Option.
The Board or the Committee is expressly given the authority to issue amended
or replacement Options with respect to shares of Stock subject to an Option
previously granted hereunder. An amended Option amends the terms of an Option
previously granted and thereby supersedes the previous Option. A replacement
Option is similar to a new Option granted hereunder except that it provides that
it shall be forfeited to the extent that a previously granted Option is
exercised, or except that its issuance is conditioned upon the termination of a
previously granted Option.
7.2 NO TANDEM OPTIONS. Where an Option granted under this Plan is intended
to be an Incentive Stock Option, the Option shall not contain terms pursuant to
which the exercise of the Option would affect the Optionee's right to exercise
another Option, or vice versa, such that the Option intended to be an Incentive
Stock Option would be deemed a tandem stock option within the meaning of the
regulations under Section 422 of the Code.
7.3 OPTION AGREEMENT; TERMS AND CONDITIONS TO APPLY UNLESS OTHERWISE
SPECIFIED. As determined by the Board or the Committee on the date of grant,
each Option shall be evidenced by an Option agreement (the "Option Agreement")
that includes the nontransferability provisions required
4
<PAGE>
by Section 10.2 hereof and specifies: whether the Option is an Incentive Stock
Option or a Nonstatutory Option; the Option price; the duration of the Option;
the number of shares of Stock to which the Option applies; any vesting or
exercisability restrictions which the Board or the Committee may impose; in the
case of an Incentive Stock Option, a provision implementing the $100,000
Limitation, if appropriate; and any other terms or conditions which the Board or
the Committee may impose. All such terms and conditions shall be determined by
the Board or the Committee at the time of grant of the Option.
If not otherwise specified by the Board or the Committee, and except for
certain different terms and conditions which are to apply to Management
Performance Options granted pursuant to Section 7.8 hereof, the following terms
and conditions shall apply to Options granted under the Plan:
(a)TERM. The duration of the Option shall be seven (7) years from the date
of grant (five (5) years in the case of an Incentive Stock Option granted
to a Significant Shareholder).
(b)EXERCISE OF OPTION. Unless an Option is terminated as provided
hereunder, an Optionee may exercise his Option for up to, but not in
excess of, the amounts of shares subject to the Option specified below,
based on the Optionee's number of years of continuous service with the
Company or a Subsidiary Corporation of the Company from the date on which
the Option is granted. In the case of an Optionee who is an Employee,
continuous service shall mean continuous employment; in the case of an
Optionee who is a Consultant, continuous service shall mean the
continuous provision of consulting services. In applying said
limitations, the amount of shares, if any, previously purchased by the
Optionee under the Option shall be counted in determining the amount of
shares the Optionee can purchase at any time. The Optionee may exercise
his Option in the following amounts:
(i) After one (1) year of such continuous services, for up to but not in
excess of one fourth of the shares originally subject to the Option;
(ii) After two (2) years of such continuous services, for up to but not
in excess of one half of the shares originally subject to the Option;
(iii) After three (3) years of such continuous services, for up to but
not in excess of three-fourths of the shares originally subject to
the Option;
(iv) At the expiration of the fourth (4th) year of such continuous
services or upon the earlier retirement of an Optionee at the normal
retirement age of sixty-five (65) or early retirement of the Optionee
with the consent of the Company, the Option may be exercised at any
time and from time to time within its terms in whole or in part, but
it shall not be exercisable after the expiration of seven (7) years
(five (5) years in the case of an Incentive Stock Option granted to a
Significant Shareholder) from the date on which it was granted.
The Board or the Committee shall be free to specify terms and conditions
other than those set forth above, in its discretion.
All Option Agreements shall incorporate the provisions of this Plan by
reference, with certain provisions to apply depending upon whether the Option
Agreement applies to an Incentive Stock Option or to a Nonstatutory Option.
7.4 OPTION PRICE. No Incentive Stock Option granted pursuant to this Plan
shall have an Option price that is less than the Fair Market Value of Stock on
the date the Option is granted. Incentive Stock Options granted to Significant
Shareholders shall have an Option price of not less than 110 percent of the Fair
Market Value of Stock on the date of grant. The Option price for Nonstatutory
Options shall be established by the Board or the Committee and shall not be
subject to the restrictions applicable to Incentive Stock Options.
5
<PAGE>
7.5 TERM OF OPTIONS. Each Option shall expire at such time as the Board or
the Committee shall determine when it is granted, provided however that no
Option shall be exercisable later than the tenth anniversary date of its grant.
By its terms, an Incentive Stock Option granted to a Significant Shareholder
shall not be exercisable after five years from the date of grant.
7.6 EXERCISE OF OPTIONS. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions as
the Board or the Committee shall in each instance approve, which need not be the
same for all Optionees.
7.7 PAYMENT. Payment for all shares of Stock shall be made at the time
that an Option, or any part thereof, is exercised, and no shares shall be issued
until full payment therefor has been made. Payment shall be made (i) in cash, or
(ii) if acceptable to the Board or the Committee, in Stock or in some other
form; provided, however, in the case of an Incentive Stock Option, that said
other form of payment does not prevent the Option from qualifying for treatment
as an "incentive stock option" within the meaning of the Code.
7.8 MANAGEMENT PERFOMANCE OPTIONS. The Board or the Committee may from
time to time grant to Employees of the Company, a Subsidiary Corporation or a
Parent Corporation Incentive Stock Options or Nonstatutory Options to purchase a
number of shares of stock based on the extent to which Employee satisfies
performance criteria established by the Board or the Committee; provided,
however, that only the Committee may set performance criteria for and grant
Management Performance Options to directors of the Company. These Options shall
be designated "Management Performance Options." If not otherwise specified by
the Board or the Committee, the following terms and conditions shall apply to
Management Performance Options granted under the Plan:
(a)TERM. The duration of the Management Performance Option shall be seven
(7) years from the date of grant.
(b)EXERCISE OF OPTION. The Management Performance Option shall be
immediately exercisable in whole or in part, at any time and from time to
time, commencing on the date the Management Performance Option is
granted.
(c)OPTION PRICE. The Price at which the Management Performance Option will
be exercisable will be the Fair Market Value of the Stock on the date the
Management Performance Option is granted.
(d)RETIREMENT. If an Optionee's employment with the Company or a Subsidiary
Corporation or Parent Corporation of the Company terminates because of
retirement at the normal retirement age of sixty-five (65) or early
retirement with the consent of the Company, any Management Performance
Options that are Nonstatutory Options shall remain in effect until their
expiration.
(e)OTHER TERMS. Except as specified above, the other terms of the
Management Performance Option shall be the same as the terms applicable
to other Options granted under this Plan.
ARTICLE VIII. WRITTEN NOTICE, ISSUANCE OF STOCK CERTIFICATES, STOCKHOLDER
PRIVILEGES
8.1 WRITTEN NOTICE. An Optionee wishing to exercise an Option shall give
written notice to the Company, in the form and manner prescribed by the Board.
Full payment for the shares exercised pursuant to the Option must accompany the
written notice.
8.2 ISSUANCE OF STOCK CERTIFICATES. As soon as practicable after the
receipt of written notice and payment, the Company shall deliver to the Optionee
or to a nominee of the Optionee a certificate or certificates for the requisite
number of shares of Stock.
8.3 PRIVILEGES OF A STOCKHOLDER. An Optionee or any other person entitled
to exercise an Option under this Plan shall not have stockholder privileges with
respect to any Stock covered by the Option until the date of issuance of a stock
certificate for such stock.
6
<PAGE>
ARTICLE IX. TERMINATION OF EMPLOYMENT OR SERVICES
9.1 DEATH. If an Optionee's employment in the case of an Employee, or,
unless otherwise provided in the case of a Nonstatutory Option, provision of
services as a Consultant, in the case of a Consultant, terminates by reason of
death, the Option may thereafter be exercised at any time prior to the
expiration date of the Option or within 12 months after the date of such death,
whichever period is the shorter, by the person or persons entitled to do so
under the Optionee's will or, if the Optionee shall fail to make a testamentary
disposition of an Option or shall die intestate, the Optionee's legal
representative or representatives. The Option shall be exercisable only to the
extent that such Option was exercisable as of the date of death, unless
otherwise provided in the case of Nonstatutory Options.
9.2 TERMINATION OTHER THAN FOR CAUSE OR DUE TO DEATH. In the event of an
Optionee's termination of employment, in the case of an Employee, or, unless
otherwise provided in the case of Nonstatutory Options, termination of the
provision of services as a Consultant, in the case of a Consultant, other than
by reason of death or retirement of persons holding Management Performance
Options as provided in Section 7.8(d), or as otherwise provided in the case of
Nonstatutory Options, the Optionee may exercise such portion of his Option as
was exercisable by him at the date of such termination (the "Termination Date")
at any time within three (3) months of the Termination Date; provided, however,
that where the Optionee is an Employee, and is terminated due to disability
within the meaning of Code Section 422, he may exercise such portion of his
Option as was exercisable by him on his Termination Date within one year of his
Termination Date. In the case of Nonstatutory Options, the Board or the
Committee may extend the three (3) month exercise period, or otherwise modify
the terms of the Option; provided that, in any event, the Option cannot be
exercised after the expiration of the term of the Option. Options not exercised
within the applicable period specified above shall terminate.
In the case of an Employee, a change of duties or position within the
Company or an assignment of employment in a Subsidiary Corporation or Parent
Corporation of the Company, if any, or from such a Corporation to the Company,
shall not be considered a termination of employment for purposes of this Plan.
The Option Agreements may contain such provisions as the Board or the Committee
shall approve with reference to the effect of approved leaves of absence upon
termination of employment.
9.3 TERMINATION FOR CAUSE. In the event of an Optionee's termination of
employment, in the case of an Employee, or termination of the provision of
services as a Consultant, in the case of a Consultant, which termination is by
the Company for cause, any Option or Options held by him under the Plan, to the
extent not exercised before such termination, shall forthwith terminate, unless
otherwise provided by the Board or the Committee.
ARTICLE X. RIGHTS OF OPTIONEES
10.1 SERVICE. Nothing in this Plan shall interfere with or limit in any
way the right of the Company to terminate any Employee's employment, or any
Consultant's services, at any time, nor confer upon any Employee any right to
continue in the employ of the Company, or upon any Consultant any right to
continue to provide services to the Company.
10.2 NONTRANSFERABILITY. All Options granted under this Plan shall be
nontransferable by the Optionee, other than by will or the laws of descent and
distribution, and shall be exercisable during the Optionee's lifetime only by
the Optionee.
ARTICLE XI. OPTIONEE-EMPLOYEE'S TRANSFER OR LEAVE OF ABSENCE
11.1 OPTIONEE-EMPLOYEE'S TRANSFER OR LEAVE OF ABSENCE. For Plan purposes--
(a) A transfer of an Optionee who is an Employee from the Company to a
Subsidiary Corporation or Parent Corporation, or from one such
Corporation to another, or
7
<PAGE>
(b) a leave of absence for such an Optionee (i) which is duly authorized in
writing by the Company, and (ii) if the Optionee holds an Incentive Stock
Option, which qualifies under the applicable regulations under the Code
which apply in the case of incentive stock options,
shall not be deemed a termination of employment. However, under no circumstances
may an Optionee exercise an Option during any leave of absence, unless
authorized by the Board or the Committee.
ARTICLE XII. AMENDMENT, MODIFICATION, AND TERMINATION OF THE PLAN
12.1 AMENDMENT, MODIFICATION, AND TERMINATION OF THE PLAN. The Board may
at any time terminate, and from time to time may amend or modify the Plan. No
action of the Board, without approval of the stockholders, shall:
(a) increase the total amount of Stock which may be purchased through
Options granted under the Plan, except as provided in Article V; or
(b) change the class of Employees or Consultants eligible to receive
Options.
No amendment, modification, or termination of the Plan shall in any manner
adversely affect any outstanding Option under the Plan without the consent of
the Optionee holding the Option.
ARTICLE XIII. ACQUISITION, MERGER, OR LIQUIDATION
13.1 ACQUISITION. In the event that an Acquisition occurs with respect to
the Company, the Company shall have the option, but not the obligation, to
cancel Options outstanding as of the effective date of Acquisition, whether or
not such Options are then exercisable, in return for payment to the Optionees of
an amount equal to a reasonable estimate of an amount (hereinafter the "Spread")
equal to the difference between the net amount per share payable in the
Acquisition, or as a result of the Acquisition, less the exercise price of the
Option. In estimating the Spread, appropriate adjustments to give effect to the
existence of the Options shall be made, such as deeming the Options to have been
exercised, with the Company receiving the exercise price payable thereunder, and
treating the shares receivable upon exercise of the Options as being outstanding
in determining the net amount per share. For purposes of this section, an
"Acquisition" shall mean any transaction in which substantially all of the
Company's assets are acquired or in which a controlling amount of the Company's
outstanding shares are acquired, in each case by a single person or entity or an
affiliated group of persons and/or entities. For purposes of this Section a
controlling amount shall mean more than fifty percent (50%) of the issued and
outstanding shares of Stock of the Company. The Company shall have such an
option regardless of how the Acquisition is effectuated, whether by direct
purchase, through a merger or similar corporate transaction, or otherwise. In
cases where the acquisition consists of the acquisition of assets of the
Company, the net amount per share shall be calculated on the basis of the net
amount receivable with respect to shares of Stock upon a distribution and
liquidation by the Company after giving effect to expenses and charges,
including but not limited to taxes, payable by the Company before the
liquidation can be completed.
Where the Company does not exercise its option under this Section 13.1 the
remaining provisions of this Article XIII shall apply, to the extent applicable.
13.2 MERGER OR CONSOLIDATION. Subject to any required action by the
stockholders, if the Company shall be the surviving corporation in any merger or
consolidation, any Option granted hereunder shall pertain to and apply to the
securities to which a holder of the number of shares of Stock subject to the
Option would have been entitled in such merger or consolidation.
13.3 OTHER TRANSACTIONS. A dissolution or a liquidation of the Company or
a merger and consolidation in which the Company is not the surviving corporation
shall cause every Option outstanding hereunder to terminate as of the effective
date of such dissolution, liquidation, merger or consolidation. However, the
Optionee either (i) shall be offered a firm commitment whereby the
8
<PAGE>
resulting or surviving corporation in a merger or consolidation will tender to
the Optionee an option (the "Substitute Option") to purchase its shares on terms
and conditions both as to number of shares and otherwise, which will
substantially preserve to the Optionee the rights and benefits of the Option
outstanding hereunder granted by the Company, or (ii) shall have the right
immediately prior to such dissolution, liquidation, merger, or consolidation to
exercise any unexercised Options whether or not then exercisable, subject to the
provisions of this Plan. The Board shall have absolute and uncontrolled
discretion to determine whether the Optionee has been offered a firm commitment
and whether the tendered Substitute Option will substantially preserve to the
Optionee the rights and benefits of the Option outstanding hereunder. In any
event, any Substitute Option for an Incentive Stock Option shall comply with the
requirements of Section 424(a) of the Code.
ARTICLE XIV. SECURITIES REGISTRATION
14.1 SECURITIES REGISTRATION. In the event that the Company shall deem it
necessary or desirable to register under the Securities Act of 1933, as amended,
or any other applicable statute, any Options or any Stock with respect to which
an Option may be or shall have been granted or exercised, or to qualify any such
Options or Stock under the Securities Act of 1933, as amended, or any other
statute, then the Optionee shall cooperate with the Company and take such action
as is necessary to permit registration or qualification of such Options or
Stock.
Unless the Company has determined that the following representation is
unnecessary, each person exercising an Option under the Plan may be required by
the Company, as a condition to the issuance of the shares pursuant to exercise
of the Option, to make a representation in writing (a) that he is acquiring such
shares for his own account for investment and not with a view to, or for sale in
connection with, the distribution of any part thereof, (b) that before any
transfer in connection with the resale of such shares, he will obtain the
written opinion of counsel for the Company, or other counsel acceptable to the
Company, that such shares may be transferred. The Company may also require that
the certificates representing such shares contain legends reflecting the
foregoing.
ARTICLE XV. TAX WITHHOLDING
15.1 TAX WITHHOLDING. Whenever shares of Stock are to be issued in
satisfaction of Options exercised under this Plan, the Company shall have the
power to require the recipient of the Stock to remit to the Company an amount
sufficient to satisfy federal, state, and local withholding tax requirements.
ARTICLE XVI. INDEMNIFICATION
16.1 INDEMNIFICATION. To the extent permitted by law, each person who is
or shall have been a member of the Board or the Committee shall be indemnified
and held harmless by the Company against and from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by him in connection
with or resulting from any claim, action, suit, or proceeding to which he may be
a party or in which he may be involved by reason of any action taken or failure
to act under the Plan and against and from any and all amounts paid by him in
settlement thereof, with the Company's approval, or paid by him in satisfaction
of judgment in any such action, suit, or proceeding against him, provided he
shall give the Company an opportunity, at its own expense, to handle and defend
the same before he undertakes to handle and defend it on his own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such persons may be entitled under the Company's
certificate of incorporation or bylaws, as a matter of law, or otherwise, or any
power that the Company may have to indemnify them or hold them harmless.
9
<PAGE>
ARTICLE XVII. REQUIREMENTS OF LAW
17.1 REQUIREMENTS OF LAW. The granting of Options and the issuance of
shares of Stock upon the exercise of an Option shall be subject to all
applicable laws, rules, and regulations, and to such approvals by any
governmental agencies or securities exchanges as may be required.
17.2 GOVERNING LAW. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Minnesota.
ARTICLE XVIII. EFFECTIVE DATE OF PLAN
18.1 EFFECTIVE DATE. The Plan shall be effective on the date of its
approval by the stockholders of the Company.
ARTICLE XIX. COMPLIANCE WITH CODE.
19.1 COMPLIANCE WITH CODE. Incentive Stock Options granted hereunder are
intended to qualify as "incentive stock options" under Section 422A of the Code.
If any provision of this Plan is susceptible to more than one interpretation,
such interpretation shall be given thereto as is consistent with Incentive Stock
Options granted under this Plan being treated as incentive stock options under
the Code.
ARTICLE XX. NO OBLIGATION TO EXERCISE OPTION.
20.1 NO OBLIGATION TO EXERCISE. The granting of an Option shall impose no
obligation upon the holder thereof to exercise such Option.
10
<PAGE>
INTERNATIONAL DAIRY QUEEN, INC. CLASS A COMMON STOCK
PROXY FOR CLASS A COMMON STOCK
SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS
MARCH 8, 1995
The undersigned stockholder of International Dairy Queen, Inc. (the
"Company"), hereby appoints John W. Mooty and Michael P. Sullivan or either of
them, as attorneys, agents and proxies of the undersigned with full power of
substitution in each of them, to vote, in the name and on behalf of the
undersigned at the Annual Meeting of Stockholders of the Company to be held on
March 8, 1995, at 10:00 a.m., in the General Offices of the Company, 7505 Metro
Boulevard, Minneapolis, Minnesota, and at all adjournments thereof, all of the
shares of Class A Common Stock of the Company which the undersigned would be
entitled to vote if personally present, with all powers the undersigned would
possess if personally present.
<TABLE>
<C> <S> <C>
I. / / Grant authority to vote for the election of the following
/ / Withhold persons to serve as directors (the Board recommends
that you GRANT this authority):
M. Sullivan F. Heit
</TABLE>
YOU MAY WITHHOLD AUTHORITY TO VOTE FOR A NOMINEE BY LINING THROUGH THE
NOMINEE'S NAME ON THE ABOVE LIST
all as set out in the Notice of Annual Meeting of Stockholders and Proxy
Statement dated February 8, 1995, receipt of which is hereby acknowledged.
(CONTINUED, AND TO BE SIGNED, ON OTHER SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
ALL SHARES WILL BE VOTED AS SPECIFIED. IF NO CHOICE IS SPECIFIED, THE SHARES
WILL BE VOTED FOR THE NOMINEES.
Either of said attorneys or their substitutes who shall be present and act,
or if only one shall attend, then that one, shall have and may exercise all the
powers of said attorneys hereunder.
Dated: ____________________, 1995.
----------------------------------
(Signature)
----------------------------------
(Joint Owner's Signature)
When signing as attorney,
guardian, executor, administrator
or trustee, please give title. If
the signer is a corporation,
please give the full corporate
name, and sign by a duly
authorized officer, showing the
officer's title. EACH joint owner
is required to sign.
PLEASE EXECUTE AND RETURN THIS PROXY PROMPTLY, YOUR COOPERATION WILL BE
APPRECIATED
<PAGE>
INTERNATIONAL DAIRY QUEEN, INC. CLASS B COMMON STOCK
PROXY FOR CLASS B COMMON STOCK
SOLICITED BY THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS
MARCH 8, 1995
The undersigned stockholder of International Dairy Queen, Inc. (the
"Company"), hereby appoints John W. Mooty and Michael P. Sullivan or either of
them, as attorneys, agents and proxies of the undersigned with full power of
substitution in each of them, to vote, in the name and on behalf of the
undersigned at the Annual Meeting of Stockholders of the Company to be held on
March 8, 1995, at 10:00 a.m., in the General Offices of the Company, 7505 Metro
Boulevard, Minneapolis, Minnesota, and at all adjournments thereof, all of the
shares of Class B Common Stock of the Company which the undersigned would be
entitled to vote if personally present, with all powers the undersigned would
possess if personally present.
<TABLE>
<C> <S> <C>
I. / / Grant authority to vote for the election of
/ / Withhold the following persons to serve as
directors (the Board recommends that you
GRANT this authority):
E. Dorn, Jr. C.D. Luther J.W. Mooty R.
Giertsen R. Mithun R. Schweigert J.N. Mooty
</TABLE>
YOU MAY WITHHOLD AUTHORITY TO VOTE FOR A NOMINEE BY LINING THROUGH THE NOMINEE'S
NAME ON THE ABOVE LIST
<TABLE>
<C> <S> <C>
II. / / For approving an amendment to the Company's
/ / Against Stock Option Plan of 1993 to increase
/ / Abstain the shares of Class A Common Stock
issuable thereunder from 600,000 shares
to 1,200,000 shares (the Board
recommends you vote FOR this proposal).
III. / / For approving the appointment of Ernst &
/ / Against Young by the Board of Directors as the
/ / Abstain independent auditors of the Company for
the fiscal year ending November 30, 1995
(the Board recommends you vote FOR this
proposal).
</TABLE>
(CONTINUED, AND TO BE SIGNED, ON OTHER SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
<TABLE>
<C> <S> <C>
III. / / Grant authority to vote, in their discretion,
/ / Withhold upon such other business as may properly
come before the meeting (the Board of
Directors recommends that you GRANT this
authority).
</TABLE>
all as set out in the Notice of Annual Meeting of Stockholders and Proxy
Statement dated February 8, 1995, receipt of which is hereby acknowledged.
ALL SHARES WILL BE VOTED AS SPECIFIED. IF NO CHOICE IS SPECIFIED, THE SHARES
WILL BE VOTED FOR THE NOMINEES, TO APPROVE THE AMENDMENT OF THE STOCK OPTION
PLAN OF 1993, TO APPROVE THE APPOINTMENT OF ERNST & YOUNG AND IN ACCORDANCE WITH
THE PROXIES' DISCRETION IN CONNECTION WITH SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING.
Either of said attorneys or their substitutes who shall be present and act,
or if only one shall attend, then that one, shall have and may exercise all the
powers of said attorneys hereunder.
Dated: _____________________, 1995.
-----------------------------------
(Signature)
-----------------------------------
(Joint Owner's Signature)
When signing as attorney, guardian,
executor, administrator or trustee,
please give title. If the signer is
a corporation, please give the full
corporate name, and sign by a duly
authorized officer, showing the
officer's title. EACH joint owner
is required to sign.
PLEASE EXECUTE AND RETURN THIS PROXY PROMPTLY, YOUR COOPERATION WILL BE
APPRECIATED
