<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.
SKYLINE CHILI, 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 ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
1) Title of each class of securities to which
transaction applies:
-------------------------------------------
2) Aggregate number of securities to which
transaction applies:
-------------------------------------------
3) Per unit price or other underlying value of
transaction computed pursuant to Exchange
Act Rule 0-11: (Set forth the amount on
which the filing fee is calculated and state
how it was determined):
-------------------------------------------
<PAGE> 2
4) Proposed maximum aggregate value of
transaction:
-------------------------------------------
5) Total fee paid:
-------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
1) Amount Previously Paid:
-------------------------------------------
2) Form, Schedule or Registration Statement No.:
-------------------------------------------
3) Filing Party:
-------------------------------------------
4) Date Filed:
-------------------------------------------
2
<PAGE> 3
NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS
OF SKYLINE CHILI, INC.
TO BE HELD ON MARCH 11, 1997
TO: THE SHAREHOLDERS OF SKYLINE CHILI, INC.
Notice is hereby given that the 1997 Annual Meeting of the Shareholders
(the "Meeting") of Skyline Chili, Inc. (the "Company"), an Ohio corporation,
will be held on Tuesday, March 11, 1997 at 2:00 p.m., E.S.T., at the Cincinnati
Marriott, 11320 Chester Road, Sharonville, Ohio 45246, for the following
purposes:
(1) To elect seven directors to hold office until the next Annual
Meeting of the Shareholders and until their successors shall have been duly
elected and qualified;
(2) To ratify the Board of Directors' selection of Ernst & Young LLP as
the Company's Independent Auditors for its fiscal year ending October 26, 1997;
and
(3) To transact such other business as may properly be brought before
the Meeting, or any adjournment thereof.
The Company's Board of Directors designated February 3, 1997 as the
record date for the determination of shareholders entitled to notice of and to
vote at the Meeting or any adjournment thereof. Only shareholders of record at
the close of business on February 3, 1997 will be entitled to vote at the
Meeting. The Company's shareholders are invited to attend the Meeting. Whether
or not you expect to attend, we urge you to sign, date and return the enclosed
proxy card in the enclosed, postage pre-paid envelope. If you attend the
Meeting, you may vote your shares in person, after revoking your proxy.
REGARDLESS OF HOW MANY SHARES YOU OWN, YOUR VOTE IS IMPORTANT.
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD TODAY.
CINCINNATI, OHIO BY ORDER OF THE BOARD
FEBRUARY 11, 1997 OF DIRECTORS,
MARK J. ZUMMO
SECRETARY
<PAGE> 4
SKYLINE CHILI, INC.
1997 ANNUAL SHAREHOLDERS' MEETING
MARCH 11, 1997 - 2:00 P.M., E.S.T.
----------------------------------
DIRECTIONS TO THE CINCINNATI MARRIOTT
-------------------------------------
To reach the Cincinnati Marriott from downtown Cincinnati:
Take I-75 North.
Exit off of I-75 at Exit 15, Sharon Road.
Turn left at the end of the exit ramp.
Travel west on Sharon Road until you reach the second traffic
light.
Turn right at that traffic light onto Chester Road.
Travel north on Chester Road approximately 0.6 miles. The
Cincinnati Marriott is on your right at 11320 Chester
Road.
2
<PAGE> 5
PROXY STATEMENT
FOR
1997 ANNUAL MEETING OF SHAREHOLDERS
SKYLINE CHILI, INC.
Cincinnati, Ohio February 11, 1997
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Skyline Chili, Inc. (the "Company") of proxies to
be voted at the Company's 1997 Annual Meeting of Shareholders (the "Meeting").
The Meeting will be held on Tuesday, March 11, 1997 at 2:00 p.m. E.S.T., at the
Cincinnati Marriott, 11320 Chester Road, Sharonville, Ohio 45246, to act upon
the following:
(1) The election of seven directors to serve until the 1998 Annual
Meeting of Shareholders;
(2) The proposal to ratify the selection of Ernst & Young LLP as the
Company's Independent Auditors for its 1997 fiscal year; and
(3) Such other business as may properly come before the Meeting or any
adjournment thereof.
All shares of the Company's common stock represented by duly executed
proxies, in the form accompanying this Proxy Statement, received by the Board of
Directors prior to the Meeting will be voted at the Meeting. Where shareholders
specify in the proxy a choice with respect to any matter to be acted upon, the
shares represented by such proxy will be voted as specified. If no choice is
specified, the shares represented by the proxy will be voted "FOR" the Board's
nominees for director and "FOR" the proposal described in Part II of this Proxy
Statement. A shareholder who signs and returns a proxy in the accompanying form
may revoke it at any time before it is voted by giving notice of such revocation
to the Company in writing or at the Meeting, or by filing with the Company a
duly executed proxy bearing a later date. The mere presence at the Meeting of
the person appointing a proxy does not revoke the proxy.
The Company's Board of Directors fixed the close of business on
February 3, 1997, as the record date for determining the shareholders who are
entitled to notice of, and who may vote at, the Meeting. As of the record date,
the Company had 3,390,273 shares of no par value common stock (the "Common
Stock") outstanding. Each share of common stock is entitled to one vote.
The mailing address of the principal executive offices of the Company
is 4180 Thunderbird Lane, Fairfield, Ohio 45014. The Company's telephone number
at that address is (513) 874-1188. This Proxy Statement and the accompanying
form of proxy will be mailed to the Company's shareholders on or about February
11, 1997. The Company's Annual Report to Shareholders for its fiscal year ended
October 27, 1996, including consolidated financial statements, is also enclosed
with this Proxy Statement.
<PAGE> 6
I. ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
NOMINEES FOR ELECTION AS DIRECTORS
- ----------------------------------
Seven directors will be elected at the 1997 Annual Meeting of
Shareholders to hold office until the 1998 Annual Meeting, and until their
successors are duly elected and qualified. The Board of Directors has designated
the seven nominees described below as candidates for election as directors at
the 1997 Annual Meeting. Each of the seven nominees is currently a director of
the Company and all were previously elected by the shareholders.
The shares represented by the accompanying form of proxy will be voted
as specified thereon, or if no instructions are given, "FOR" the Board's
nominees. If any nominee should become unavailable for any reason, it is
intended that the persons named as proxies in the accompanying form of proxy
will vote for the election of such other person as the Board of Directors may
recommend in place of such nominee. The Board of Directors is not aware of any
circumstances under which any of the nominees described below would decline or
become unavailable to serve. The candidates receiving the greatest number of
votes cast by shareholders present in person or by proxy at the Meeting, a
quorum being present, will be elected as directors. The Company's Amended
Articles of Incorporation do not permit cumulative voting in the election of
directors.
The name, age, principal occupation, business experience and period of
previous service as a director of the Company, of each of the nominees for
election to the Company's Board of Directors are set forth below. No individual
was selected as a director or nominee pursuant to any arrangement or
understanding with any other person, except that pursuant to the provisions of
certain consulting agreements entered into between the Company and Lambert,
Christie and William N. Lambrinides, the Company has agreed to nominate them for
election as directors at each Annual Meeting of Shareholders during the
consulting term. For a description of the consulting agreements, see, "Executive
Compensation - Employment Contracts and Termination of Employment and
Change-In-Control Arrangements."
<TABLE>
<CAPTION>
YEAR FIRST
PRINCIPAL OCCUPATIONS, OTHER DIRECTORSHIPS AND ELECTED AS
NAME OF NOMINEE AGE POSITIONS WITH THE COMPANY A DIRECTOR
- --------------- --- -------------------------- ----------
<S> <C> <C> <C>
Lambert N. Lambrinides 73 Mr. Lambrinides has served as the Company's Chairman 1965
of the Board since October 1994 and is currently a
consultant to the Company. Mr. Lambrinides served as
the Company's Senior Chairman of the Board from
November 1992 to October 1994 and as its Chairman of
the Board from 1984 to November 1992. Prior to that
time, Mr. Lambrinides served as the Company's
President.
</TABLE>
2
<PAGE> 7
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE PRINCIPAL OCCUPATIONS, OTHER DIRECTORSHIPS AND YEAR FIRST
- --------------- --- POSITIONS WITH THE COMPANY ELECTED AS
-------------------------- A DIRECTOR
----------
<S> <C> <C> <C>
Kevin R. McDonnell 44 Mr. McDonnell has served as the Company's President 1992
and Chief Executive Officer since October 1994. Mr.
McDonnell served as the Company's President, Chief
Operating Officer and Chief Financial Officer from
November 1992 to October 1994 and served as its
Executive Vice President and Chief Financial Officer
from December 1991 to November 1992. Mr.
McDonnell joined the Company in January 1991 as its
Director of Finance and Chief Financial Officer.
Christie N. Lambrinides 69 Mr. Lambrinides is currently a consultant to the 1965
Company. Mr. Lambrinides served as a Vice President of
the Company from 1965 to October 1994 and also served
as the Company's Secretary (1981 to October 1994).
William N. Lambrinides 69 Mr. Lambrinides is currently a consultant to the 1965
Company. Mr. Lambrinides served as a Vice President of
the Company from 1965 to October 1994 and also served
as the Company's Treasurer (1980 to October 1994) and
Assistant Secretary (1985 to October 1994).
Lawrence R. Burtschy 60 Mr. Burtschy is currently the Chairman of L.R. Burtschy 1985
& Company, an investment management firm, and has
been so engaged since 1969. Mr. Burtschy is also a
director of Hillenbrand Industries, a diversified
manufacturing corporation in the health care, casket and
funeral services, and consumer durables industries.
David A Kohnen 59 Mr. Kohnen is currently a financial and business 1990
consultant and has been so engaged since September
1994. Prior to that time, Mr. Kohnen was a member of
the law firm of Kohnen & Patton, Cincinnati, Ohio.
Joseph E. Madigan 64 Mr. Madigan is currently the Chairman of the Board of 1990
Directors, the Executive Committee and the Audit
Committee of Cardinal Realty Services, Inc. Mr.
Madigan is also a corporate financial consultant and has
been so engaged since 1988. Prior to that time, Mr.
Madigan served as the Executive Vice President and
Chief Financial Officer of Wendy's International, Inc.
from 1980 to 1987, and as a director of Wendy's
International, Inc. from 1981 to 1987. Wendy's
International, Inc. is primarily engaged in the business of
operating, developing, and franchising a system of
distinctive quick-service restaurants. Mr. Madigan is
also a director of the Cooker Restaurant Corp.
</TABLE>
3
<PAGE> 8
OTHER INFORMATION CONCERNING BOARD AND BOARD COMMITTEES
- -------------------------------------------------------
During fiscal 1996, the Company's Board of Directors met four times.
Each incumbent director attended 75% or more of all of the meetings of the Board
and the Board Committees of which he was a member during fiscal 1996.
The standing committees of the Board of Directors are the Executive
Committee, the Audit Committee, the Compensation Committee, the Nominating
Committee, and the Committees administering the Company's 1986 Stock Option Plan
and 1990 Stock Option and Stock Incentive Plan.
The Executive Committee currently consists of Joseph E. Madigan,
Chairman, Kevin R. McDonnell, Lambert N. Lambrinides and David A. Kohnen. The
Executive Committee may exercise any of the powers and authority of the Board in
the interval between meetings of the full Board, except the authority to fill
vacancies on the Board or any Committees. The Executive Committee did not meet
during fiscal 1996.
The Audit Committee is currently comprised of Mr. Madigan, Chairman,
Mr. Burtschy, Mr. Kohnen, Mr. Christie N. Lambrinides and Mr. William N.
Lambrinides. The Audit Committee met twice during fiscal 1996. The Audit
Committee reviews and approves the Company's annual financial statements, and
reviews external and internal auditing matters. The Audit Committee is also
responsible for the selection of the Company's independent auditors, subject to
the approval of the Board, and reviews with representatives of the independent
auditors the scope of their examination, their fees, the results of their
examination, and any conditions requiring attention identified by them regarding
internal controls.
The Compensation Committee is currently comprised of Mr. Burtschy,
Chairman, Mr. Madigan, Mr. Kohnen and Mr. Lambert N. Lambrinides. The
Compensation Committee met twice during fiscal 1996. The Compensation Committee
determines the compensation of the Company's executive officers, reviews the
officers' and key employees' compensation programs, and monitors the Company's
stock option, stock incentive, profit sharing, bonus, and other compensation
plans.
The Nominating Committee is currently comprised of Mr. Burtschy, Mr.
William N. Lambrinides and Mr. Christie N. Lambrinides. The Nominating Committee
did not meet during fiscal 1996. The Nominating Committee develops criteria for
selecting and retaining Board members. The Nominating Committee will consider
shareholder recommendations for nominees for membership on the Board, provided
such recommendations, together with a description of the proposed nominee's
qualifications and other relevant biographical information and the written
consent of the proposed nominee to act as a director if nominated and elected,
are submitted to the Company's Secretary.
During fiscal 1996, the committees administering the Company's 1986
Stock Option Plan and 1990 Stock Option and Stock Incentive Plan consisted of
Mr. Lambert N. Lambrinides, Mr. William N. Lambrinides and Mr. Christie N.
Lambrinides. Effective November 1, 1996, they were replaced by Mr. Madigan, Mr.
Kohnen and Mr. Burtschy. These Committees determine those employees and officers
who will be granted options under the plans, the number of shares for which
options will be granted, the exercise price, the time of exercise, and the other
material terms of the options. The members of these Committees are not eligible
to receive options under the Company's two stock option plans.
Lambert N. Lambrinides, William N. Lambrinides and Christie N.
Lambrinides are brothers.
4
<PAGE> 9
In April 1995, in connection with a dispute over certain legal billing
practices, Mr. Kohnen plead guilty to one count of mail fraud involving a total
of $3,600. Mr. Kohnen offered to resign from the Board. The directors requested
Mr. Kohnen to remain on the Board in recognition of the value of his current and
prior services as a director.
EXECUTIVE OFFICERS OF THE COMPANY
- ---------------------------------
The following table lists the names and ages of all of the executive
officers of the Company, and indicates all positions and offices with the
Company held by such persons. No person other than those listed below has been
chosen to become an executive officer of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ---- --- -------------------------
<S> <C> <C>
Lambert N. Lambrinides 73 Chairman of the Board and Director
Kevin R. McDonnell 44 President, Chief Executive Officer and Director
Jeffry W. Shelton 33 Corporate Vice President - Finance, Chief Financial
Officer and Treasurer
Thomas L. Allen 34 Corporate Vice President - Marketing
Victor L. Peeples 44 Corporate Vice President -
Restaurant Operations
Phillip M. Lewis, Jr. 54 Corporate Vice President - Real Estate and Construction
</TABLE>
The Company's executive officers serve at the discretion of the Board of
Directors and are elected on an annual basis. Each of the Company's current
executive officers will serve until the first meeting of the Board of Directors
following the Meeting, and until his successor has been duly elected and
qualified. There is no understanding between any executive officer and the
Company or any other person pursuant to which any executive officer was or is to
be elected or appointed to such position.
The following is a brief summary of the business experience of Messrs.
Shelton, Allen, Peeples and Lewis. For a description of the business experience
of Messrs. Lambert N. Lambrinides and McDonnell, see "Nominees for Election as
Directors" above.
Jeffry W. Shelton was elected the Company's Corporate Vice President -
Finance in October 1996, and he has served as Chief Financial Officer and
Treasurer since December 1994. He served as Vice President from December 1994 to
October 1996. He served as the Company's Vice President/Controller from December
1992 to December 1994. He joined the Company in April 1989 and has served as its
Controller since November 1990. Mr. Shelton is a certified public accountant.
Thomas L. Allen was elected the Company's Corporate Vice President -
Marketing in December 1991. Mr. Allen joined the Company as Director of
Marketing in January 1991. Prior to joining the Company, he was employed as an
account supervisor with Ads & Associates in Cincinnati, Ohio from May 1989 to
January 1991, and prior to that in various capacities in the areas of
advertising, sales and marketing for Sive/Young and Rubicam and the Procter &
Gamble Distributing Co.
5
<PAGE> 10
Victor L. Peeples was elected the Company's Corporate Vice President -
Restaurant Operations in December 1991. Mr. Peeples joined the Company as
Director - Restaurant Operations in August 1991. Prior to joining the Company,
Mr. Peeples was employed as Director of Restaurant Operations by Wharfside
Restaurants in Jasper, Indiana from November 1987 to August 1991. Wharfside
Restaurants is a franchisee of Long John Silvers, Wendy's, Grandy's, Jerry's and
Day's Inn. Mr. Peeples has also served as Franchise Area Director for Wendy's
International and held positions of Manager Trainee, Restaurant Manager, Area
Training Supervisor, District Manager and Regional Projects Manager for Taco
Bell.
Phillip M. Lewis, Jr. was elected as the Company's Corporate Vice President
- - Real Estate and Construction in October 1996. Mr. Lewis joined the Company in
October 1995 as its Director-Real Estate Administration and Construction. From
July 1994 to October 1995, Mr. Lewis was the principal of P.M. Lewis, Inc., a
firm providing construction consulting services. Prior thereto he served as
Corporate Director Facility Engineering for Hook-SuperX, Inc.
BENEFICIAL OWNERSHIP OF COMMON STOCK
- ------------------------------------
The following table sets forth certain information with respect to the
beneficial ownership of the Company's common stock as of February 3, 1997, by:
(i) each person or entity known to the Company to be a beneficial owner of more
than 5% of the Company's common stock, (ii) each director, nominee for director,
and executive officer named in the Summary Compensation Table, and (iii) all
directors and officers of the Company as a group. Except as otherwise indicated
in the footnotes, the individual named has sole voting and dispositive power
over the shares, and the individual's business address is 4180 Thunderbird Lane,
Fairfield, Ohio 45014.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SHARES PERCENTAGE
BENEFICIALLY OF
NAME OF BENEFICIAL OWNER OWNED OWNERSHIP(1)
- --------------------------------------------------------------------------------
<S> <C> <C>
Lambert N. Lambrinides(2)(3) 601,333 17.74%
- --------------------------------------------------------------------------------
Christie N. Lambrinides(2)(4) 628,033 18.52%
- --------------------------------------------------------------------------------
William N. Lambrinides(2)(5) 658,233 19.42%
- --------------------------------------------------------------------------------
Lawrence R. Burtschy(6)
14 Fulton Street
P.O. Box 933
Charleston, South Carolina 29402 269,311 7.94%
- --------------------------------------------------------------------------------
William G. Kagler(7)
18 Hampton Court
Cincinnati, Ohio 45208 405,762 11.43%
- --------------------------------------------------------------------------------
Kevin R. McDonnell(7) 87,500 2.52%
- --------------------------------------------------------------------------------
Thomas L. Allen (7) 27,500 **
- --------------------------------------------------------------------------------
Victor L. Peeples (7) 27,500 **
- --------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 11
<TABLE>
- --------------------------------------------------------------------------------
<S> <C> <C>
David A. Kohnen (8)
1818 Carew Tower
Cincinnati, Ohio 45202 53,455 1.58%
- --------------------------------------------------------------------------------
Joseph E. Madigan (9)
9457 Avemore Court
Dublin, Ohio 43017 2,000 **
- --------------------------------------------------------------------------------
All Directors and Officers as a Group
(11 Persons) (7) 2,368,615 66.95%
- --------------------------------------------------------------------------------
<FN>
NOTES:
**Less than One Percent (1)%
(1) Assumes 3,390,273 shares of common stock outstanding as of February 3,
1997, plus, with respect to each individual or group named, the number
of shares of common stock subject to options held by them which are or
will become exercisable on or before April 3, 1997.
(2) The Lambrinides brothers disclaim any beneficial ownership in each
other's shares.
(3) Includes 460,333 shares owned by Mr. L. Lambrinides in his name alone
and 141,000 shares owned by his spouse in her name alone. Nothing in
this Proxy Statement should be construed as an admission by Mr. L.
Lambrinides that he beneficially owns the shares owned by his spouse.
(4) Includes 502,333 shares owned by Mr. C. Lambrinides in his name alone,
120,000 shares owned by his spouse in her name alone, and 5,700 shares
owned by his spouse's Individual Retirement Account. Nothing in this
Proxy Statement should be construed as an admission by Mr. C.
Lambrinides that he beneficially owns the shares owned, directly or
indirectly, by his spouse.
(5) Includes 507,333 shares owned by Mr. W. Lambrinides in his name alone,
and 150,900 shares owned by his spouse in her name alone. Nothing in
this Proxy Statement should be construed as an admission by Mr. W.
Lambrinides that he beneficially owns the shares owned by his spouse.
(6) Includes: (a) 51,434 shares owned by Mr. Burtschy in his name alone and
30,000 shares held in joint tenancy with his spouse, with whom he
shares voting and dispositive powers; (b) 67,550 shares owned by Mr.
Burtschy's spouse in her name alone; (c) 43,027 shares held by L.R.
Burtschy & Company, an Ohio corporation, of which Mr. Burtschy is the
Chairman; and (d) 77,300 shares owned by the George C. Hillenbrand
September 11, 1985 Trust, of which Mr. Burtschy is one of three
co-trustees, with shared voting and dispositive powers. Mr. Burtschy
disclaims any beneficial ownership in the Trust's shares, other than
the shared voting and dispositive powers. Nothing in this Proxy
Statement should be construed as an admission by Mr. Burtschy that he
beneficially owns the shares owned by his spouse.
(7) Includes shares subject to options which are or will become exercisable
on or before April 3, 1997 in the following amounts: Mr. Kagler,
161,017; Mr. McDonnell, 80,000; Mr. Allen, 27,500; Mr. Peeples, 27,500;
and all directors and officers as a group, 147,750.
</TABLE>
7
<PAGE> 12
(8) Includes 45,455 shares owned by Mr. Kohnen in his name alone, 2,000
shares owned by his spouse in her name alone, and 6,000 shares owned by
his three children. Nothing in this Proxy Statement should be construed
as an admission by Mr. Kohnen that he beneficially owns the shares
owned by his spouse or children.
(9) Consists of 2,000 shares owned indirectly by Mr. Madigan's Keogh
Retirement Plan Trust.
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
- -----------------------------------------
Based solely upon: (i) a review of Forms 3 and 4 and amendments thereto
furnished to the Company during its 1996 fiscal year and Forms 5 and amendments
thereto furnished to the Company with respect to its 1996 fiscal year, and (ii)
certain written representations received by the Company, to the best of the
Company's knowledge, there were no directors, officers or beneficial owners of
more than 10% of the Company's Common Stock that failed to file on a timely
basis reports required by Section 16(a) of the Exchange Act during the Company's
1996 fiscal year.
EXECUTIVE COMPENSATION
- ----------------------
Summary Compensation Table
--------------------------
The following Table summarizes all compensation earned by or granted to
the Company's Chief Executive Officer and certain other most highly compensated
executive officers for all services performed by them for the Company during its
last three completed fiscal years:
<TABLE>
<CAPTION>
---------------------------------
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------------------------------------
AWARDS PAYOUTS
- -------------------------------------- -----------------------------------------------
OTHER REST- ALL
NAME AND PRINCIPAL ANNUAL RICTED OTHER
POSITION DURING FISCAL FISCAL COMPEN- STOCK LTIP COMPEN-
1996 YEAR SALARY(1) BONUS SATION AWARDS OPTIONS PAYOUTS(2) SATION(3)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Kevin R. McDonnell, 1996 $140,000 $85,000 ---- ---- 10,000 ---- $6,612
President and Chief 1995 130,000 48,750 ---- ---- 20,000 ---- 5,796
Executive Officer 1994 108,654 46,500 ---- ---- ---- $60,000 4,198
- --------------------------------------------------------------------------------------------------------------------------
Thomas L. Allen, Corporate 1996 78,846 47,900 ---- ---- --- ---- 4,075
Vice President-Marketing 1995 73,846 27,500 ---- ---- 10,000 ---- 4,111
1994 70,000 34,664 ---- ---- ---- 60,000 2,610
- --------------------------------------------------------------------------------------------------------------------------
Victor L. Peeples, 1996 90,938 48,000 ---- ---- --- ---- 4,648
Corporate Vice President - 1995 85,865 28,500 ---- ---- 10,000 ---- 4,472
Restaurant Operations 1994 80,961 34,840 ---- ---- ---- 60,000 3,101
- ----------------------------- ------- ---------- ---------- -------- ---------- ----------- --------- --------
<FN>
(1) Includes amounts deferred at the election of the named executive
officer pursuant to the Skyline Chili, Inc. Non-Qualified Deferred
Compensation Plan (the "Non-Qualified Plan") during fiscal 1996, 1995
and 1994.
(2) For fiscal 1994, consists of the total cash payout to the named
executive officer under the Company's long-term incentive compensation
plan covering fiscal years 1992, 1993 and 1994. For a description
</TABLE>
8
<PAGE> 13
of the Company's current long-term incentive compensation plan, see the
discussion under the "Long Term Incentive Plan ("LTIP") Awards Table."
(3) Consists of the amount of the discretionary and matching contributions
made by the Company to the Skyline Chili, Inc. Profit Sharing Plan
("401(k) Plan") and the Non-Qualified Plan and allocated to the
account of the named executive officer.
Stock Option Plans
------------------
The Company's 1986 Stock Option Plan (the "1986 Plan") became effective
on September 18, 1986 and terminated on September 18, 1996 upon the expiration
of its ten-year term. No further options may be granted under the 1986 Plan.
Subject to adjustment in the case of certain changes in the capital structure of
the Company, there were as of February 3, 1997 outstanding non-qualified options
under the 1986 Plan to purchase a total of 104,000 shares of the Company's
common stock, and these options will continue to be exercisable according to
their terms. The 1986 Plan is administered by a Committee of the Board of
Directors of the Company, consisting of not less than three "non-employee"
directors. A non-employee director is a director who is not an officer or
employee of the Company and who does not, apart from being a director, have a
material business relationship with the Company or an interest in a material
transaction with the Company. Subject to the limitations contained in the 1986
Plan, the Committee has complete authority to interpret the 1986 Plan and to
take all other actions necessary or advisable for the proper administration of
the 1986 Plan. The price per share payable by a participant on the exercise of
each option granted under the 1986 Plan was determined by the Committee;
however, the exercise price of each option cannot be less than 85% of the fair
market value of the Company's common stock on the date of the grant. The
exercise price of any option granted under the 1986 Plan may be paid in cash, or
in the discretion of the Committee in shares of common stock, or in any
combination thereof.
The Company's 1990 Stock Option and Stock Incentive Plan (the "1990
Plan") became effective on March 7, 1990 and will terminate on March 7, 2000.
The following kinds or types of awards may be granted under the 1990 Plan: (i)
incentive stock options, (ii) non-qualified stock options, (iii) stock
appreciation rights, (iv) restricted stock, (v) performance units, and (vi)
other stock unit awards or bonuses. Subject to adjustment in the case of certain
changes in the capital structure of the Company, a maximum of 434,017 shares of
the Company's common stock are currently available for issuance pursuant to
awards granted under the 1990 Plan. The 1990 Plan is administered by a committee
of the Board of Directors of the Company, consisting of not less than three
"non-employee" directors. Subject to the limitations contained in the 1990 Plan,
the Committee has the sole and complete authority to select participants, to
grant awards, to determine the terms and conditions of the awards, to interpret
the 1990 Plan, and to take all other actions necessary or advisable for the
proper administration of the 1990 Plan. Only persons who are officers or
full-time employees of the Company are eligible to participate in and receive
awards under the 1990 Plan. Neither the members of the Committee nor any member
of the Company's Board of Directors who is not also an officer or full-time
employee may participate in the 1990 Plan. The purchase price per share, payable
by a participant upon the exercise of each option granted under the 1990 Plan is
determined by the Committee. However, the exercise price of each non-qualified
stock option cannot be less than 85% of the fair market value of the Company's
common stock on the date of the grant, and the exercise price of each incentive
stock option cannot be less than 100% of such fair market value. The exercise
price of any option granted under the 1990 Plan may be paid in cash, or in the
discretion of the Committee in shares of common stock, or in any combination
thereof.
9
<PAGE> 14
Option Grants Table
-------------------
The following table summarizes certain information concerning options
to purchase shares of common stock granted during fiscal 1996 to each of the
named executive officers.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
OPTION GRANTS IN FISCAL 1996
INDIVIDUAL GRANTS
- ----------------------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURI- PERCENT OF TOTAL
TIES UNDERLYING OPTIONS GRANTED TO
OPTIONS GRANTED EMPLOYEES IN FISCAL EXERCISE OR BASE PRICE
NAME (1) YEAR (2) ($/SHARE) EXPIRATION DATE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kevin R. McDonnell 10,000 25% $4.31 September 9, 2006
- ----------------------------------------------------------------------------------------------------------------------------------
Thomas L. Allen ----- ---- ---- --------
- ----------------------------------------------------------------------------------------------------------------------------------
Victor L. Peeples ----- ---- ---- -------
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) The options described in the table vest at the rate of 25% per year
beginning September 9, 1997. The options will also vest immediately in
the event of a change-in-control of the Company.
(2) The Company granted stock options for a total of 40,000 shares to all
employees during fiscal 1996.
</TABLE>
Aggregated Option Exercises in Fiscal 1996 and Fiscal Year-End Option
---------------------------------------------------------------------
Values
------
The following table summarizes certain information concerning the
number and the fiscal 1996 year-end value of unexercised options held by the
named executive officers. The named executive officers did not exercise any
options during fiscal 1996.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
FISCAL 1996 YEAR-END OPTION VALUES
------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
- -----------------------------------------------------------------------------------------------------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kevin R. McDonnell 69,500 30,500 $179,893 $52,588
- -----------------------------------------------------------------------------------------------------------------------------------
Thomas L. Allen 25,000 10,000 55,313 20,938
- -----------------------------------------------------------------------------------------------------------------------------------
Victor L. Peeples 25,000 10,000 56,913 20,938
- -----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) The average of the bid and asked prices per share of the common stock
on October 25, 1996, the last business day of the Company's 1996 fiscal
year, was $5.125 as reported on the Nasdaq Stock Market.
</TABLE>
Long Term Incentive Plan ("LTIP") Awards Table
----------------------------------------------
The following table summarizes certain information regarding each award
made to a named executive officer during fiscal 1996 under any LTIP.
10
<PAGE> 15
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------
LONG-TERM INCENTIVE PLANS - AWARDS IN FISCAL 1996(1)
---------------------------------------------------------------------------------------------
Estimated Future Payouts Under
Non-Stock Price-Based Plans
- ------------------------ -----------------------------------------------------
PERFORMANCE OR OTHER PERIOD UNTIL THRESHOLD TARGET MAXIMUM
NAME MATURATION OR PAYOUT ($ OR #) ($ OR #) ($ OR #)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kevin R. McDonnell 3 year period ending October 26, 1997 $40,000
- ---------------------------------------------------------------------------------------------------------------------
Thomas L. Allen 3 year period ending October 26, 1997 $40,000
- ---------------------------------------------------------------------------------------------------------------------
Victor L. Peeples 3 year period ending October 26, 1997 $40,000
- ---------------------------------------------------------------------------------------------------------------------
<FN>
(1) The Company has adopted a separate long-term incentive compensation
plan that could result in cash bonuses being paid to the plan's
participants at the end of the Company's 1997 fiscal year. Bonuses will
be paid under this plan only if the Company exceeds certain earnings
and financial position targets and meets minimum stock price and new
franchised unit targets (the "Target Amount"). The total amount of
bonuses to be paid, if any, will be equal to a varying percentage of
any actual amounts in excess of the Target Amount. The plan's current
participants are the following five executive officers: the President
and Chief Executive Officer; the Chief Financial Officer; the Corporate
Vice President Marketing; the Corporate Vice President - Restaurant
Operations; and the Corporate Vice President - Real Estate and
Construction. The Company has accrued $176,000 under this plan based on
fiscal 1996 and fiscal 1995 results, 50% of which will be divided
equally between the first four participants and 50% of which will be
divided equally between all five participants. The accrued amount could
be increased or decreased based on fiscal 1997 results. There is no
maximum limit on amounts that could be paid under this plan.
</TABLE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-
- -----------------------------------------------------------------
CONTROL ARRANGEMENTS
- --------------------
Agreements with Executive Officers
----------------------------------
The Company has entered into "Employment Agreements" with Kevin R.
McDonnell, its President and Chief Executive Officer, Thomas L. Allen, its
Corporate Vice President - Marketing, and Victor L. Peeples, its Corporate Vice
President - Restaurant Operations. These Employment Agreements provide that if
the officer's employment with the Company is terminated by the Company without
cause, including in connection with a change-in-control of the Company, the
officer will become entitled to certain severance benefits, including: (i) the
continuation of his salary and medical benefits for a period of one year, (ii) a
pro-rata share of his annual and long-term bonus, and (iii) the continuation of
the term of his stock options for a period of one year. The officer's receipt of
these severance benefits is conditioned upon the officer providing the Company
with a written general release and reaffirming or entering into certain
confidentiality and non-compete covenants. These Employment Agreements expire in
June 1998.
Consulting Agreements with Lambrinides Brothers.
------------------------------------------------
Lambert N. Lambrinides, Christie N. Lambrinides and William N.
Lambrinides (the "Lambrinides Brothers") retired as full-time employees of the
Company, effective October 30, 1994. The Company and the Lambrinides Brothers
have entered into consulting agreements dated August 31, 1994, pursuant to which
each of the Lambrinides Brothers will provide consulting and related services to
the Company in consideration for
11
<PAGE> 16
an annual consulting fee of $125,000. As part of these consulting services, the
Lambrinides Brothers have agreed to assist the Company in maintaining the high
quality of the Company's food products, in developing new food products, and in
training designated employees of the Company in the preparation of the Company's
secret recipe chili. The initial term of the consulting agreements expired at
the end of fiscal 1996, and they were renewed for fiscal 1997 by mutual
agreement of the parties. The consulting agreements may be further renewed on an
annual basis by mutual agreement of the parties. It is anticipated that the
consulting agreements will be renewed for fiscal 1998. The consulting agreements
will terminate if there is a change-in-control of the Company. During the term
of the consulting agreements, the Company will provide the Lambrinides Brothers
with reasonable expense reimbursements and certain insurance and other fringe
benefits. During fiscal 1996, the Company paid or reimbursed the Lambrinides
Brothers for such items in the following amounts: Lambert Lambrinides - $9,187;
Christie Lambrinides - $4,282; and William Lambrinides - $3,689. The Lambrinides
Brothers and their spouses may continue to participate in the Company's health
care plan in their capacity as directors. If one of the Lambrinides Brothers
dies during the term of the consulting agreement, his annual consulting fee will
be continued for a period of six months. The consulting agreements contain
confidentiality and non-compete provisions. The Lambrinides Brothers intend to
continue their services as directors of the Company.
Stock Option Agreements
-----------------------
All of the Company's stock option agreements with its officers and
employees provide that the options will become 100% vested and exercisable in
the event of a change-in-control of the Company.
DIRECTORS COMPENSATION
- ----------------------
During fiscal 1996, each member of the Company's Board of Directors who
was not also an employee of the Company received an annual fee of $10,000 for
serving as a director. In addition, such directors received a fee of $850 for
attendance at each Board meeting, and a fee of $750 for attendance at each Board
Committee meeting. Directors who were also employees of the Company did not
receive any separate fees for serving on the Company's Board or for attending
Board or Committee meetings.
RELATED PARTY TRANSACTIONS
- --------------------------
During all or part of the Company's 1995 and 1996 fiscal years, five of
the Company's franchised restaurants were owned and operated by corporations or
other business entities which are or were owned or partially owned by directors,
executive officers, or more than 5% shareholders of the Company, or by members
of their immediate families.
Charis, Inc. owns and operates one franchised Skyline Chili Restaurant
located in Cincinnati, pursuant to the terms and conditions of one of the
Company's standard Individual Restaurant Franchise Agreements. Charis, Inc. is
an Ohio corporation owned by John Lambrinides, who is a son of Lambert N.
Lambrinides.
JoJonco, Inc. owns and operates one franchised Skyline Chili Restaurant
located in Cincinnati, pursuant to the terms and conditions of one of the
Company's standard Individual Restaurant Franchise Agreements. JoJonco, Inc. is
an Ohio corporation owned by Joseph Lambrinides, who is a son of Lambert N.
Lambrinides.
12
<PAGE> 17
In fiscal 1995 and fiscal 1996, Kajac, Inc. owned and operated one
franchised Skyline Chili Restaurant located in Cincinnati, pursuant to the terms
and conditions of one of the Company's standard Individual Restaurant Franchise
Agreements. Kajac, Inc. is an Ohio corporation owned by Joseph Lambrinides.
Ronjo Joint Venture owns and operates one franchised Skyline Chili
Restaurant located in Cincinnati, pursuant to the terms and conditions of one of
the Company's standard Individual Restaurant Franchise Agreements. Ronjo is an
Ohio partnership owned in part by an entity owned by Joseph Lambrinides.
The Company and Joseph Lambrinides are parties to a Skyline Chili
Restaurants Development Option Agreement (the "Option Agreement") dated July 30,
1991. The Option Agreement provides Joseph Lambrinides with the exclusive right
to develop up to three Skyline Chili Restaurants as franchises in three
locations in and around the greater Cincinnati, Ohio area or to exercise a right
of first refusal to develop as a franchise any location that the Company intends
to develop as a Skyline Chili Restaurant within the area in and around
Cincinnati, Ohio, lying west of Interstate 75 and within the Interstate 275
beltway. The right of first refusal is for one location only and must be taken
in lieu of one of the three identified locations, so that Joseph Lambrinides may
develop a maximum of three franchises under the terms of the Option Agreement.
The Option Agreement contains a development schedule for the three franchise
locations. If Joseph Lambrinides fails to meet the development schedule, his
rights under the Option Agreement will terminate. In order to exercise his right
to develop a location under the Option Agreement, Joseph Lambrinides is required
to enter into one of the Company's standard Individual Restaurant Franchise
Agreements for that location. Joseph Lambrinides has exercised his right to
develop two locations under the Option Agreement.
In January 1996, GaBi Enterprises, Ltd., an Ohio limited liability
company, owned and managed in part by William G. Kagler, a more than 5%
shareholder and former executive officer and director of the Company, purchased
one parcel of unimproved real estate (approximately .66 acres) from the Company
for a total purchase price of $197,000, its approximate appraised value. The
Company and GaBi Enterprises, Ltd. have also entered into one of the Company's
standard Individual Restaurant Franchise Agreements, pursuant to which GaBi has
constructed and now operates a franchised Skyline Chili Restaurant on the site
purchased from the Company. The Company had purchased the site in May 1995 for
$186,000 and had incurred certain additional development costs in the amount of
approximately $11,000.
In October 1994, the Company acquired LCW Skyline Co. ("LCW"), the
owner of one of the Company's franchised restaurants. The owners of LCW were
Lambert N. Lambrinides, Christie N. Lambrinides and William N. Lambrinides (the
"Shareholders"), each of whom was an executive officer and is a director and
more than 5% shareholder of the Company. As consideration for the acquisition,
the Company issued 77,333 shares of its common stock to each of Shareholders,
having a value of $3.125 per share and an aggregate value of $725,000. LCW has
been merged into the Company.
II. RATIFICATION OF SELECTION OF INDEPENDENT AUDITOR
(ITEM 2 ON PROXY CARD)
The Audit Committee of the Company's Board of Directors has selected
the firm of Ernst & Young LLP as the Company's independent auditor for fiscal
1997. The Company's Board of Directors has ratified this selection. Ernst &
Young LLP has been the Company's independent auditor since fiscal 1984, and the
Board believes it desirable and in the best interest of the Company to continue
the employment of that firm. Although not required by law, the Board is seeking
shareholder ratification of this selection. A representative of Ernst & Young
LLP will be present at the 1997 Annual Shareholders Meeting, will be available
to answer appropriate questions, and will be given an opportunity to make a
statement if he or she desires.
13
<PAGE> 18
Authorization by a majority of the votes cast at the Meeting will be
required for ratification of this appointment. The Board of Directors recommends
a vote "FOR" this proposal.
III. SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
In order for proposals of shareholders to be considered for inclusion
in the Company's Proxy Statement and Proxy Form for the 1998 Annual Meeting of
Shareholders, such proposals must be received by the Secretary of the Company by
October 16, 1997.
IV. OTHER MATTERS
THE ACCOMPANYING FORM OF PROXY IS BEING SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE COMPANY.
The expenses of the solicitation of the proxies for the 1997 Annual
Meeting of Shareholders, including the cost of preparing, assembling and mailing
the Notice, Proxy, Proxy Statement and return envelopes; the handling and
tabulation of proxies received, and charges of brokerage houses and other
institutions, nominees or fiduciaries for forwarding such documents to
beneficial owners, will be paid by the Company. In addition to the mailing of
the proxy material, solicitation may be made in person or by telephone by
officers, directors or regular employees of the Company.
The Board of Directors is not aware of any other matters which may
properly be presented for action at the meeting. If, however, other matters are
properly presented, the accompanying Proxy will be voted in accordance with the
best judgment of the Proxy-holders with respect to such matters.
CINCINNATI, OHIO BY ORDER OF THE BOARD OF DIRECTORS,
FEBRUARY 11, 1997
KEVIN R. MCDONNELL, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
<PAGE> 19
SKYLINE CHILI, INC.
4180 THUNDERBIRD LANE
FAIRFIELD, OHIO 450114
The undersigned hereby appoints KEVIN R. MCDONNEL and LAMBERT N.
LAMBRINIDES, and each of them with power of substitution, the proxies of the
undersigned to represent and to vote as indicated below, all of the Common
Shares of Skyline Chili, Inc. held of record by the undersigned on February 3,
1997, at the Annual Meeting of Shareholders of Skyline Chili, Inc. to be held on
March 11, 1997, and at any adjournments thereof, for the following purposes:
(1) The election of the following seven nominees so serve as directors of the
Company until the next Annual Meeting of Shareholders: LAMBERT N.
LAMBRINIDES, CHRISTIE N. LAMBRINIDES, WILLIAM N. LAMBRINIDES, LAWRENCE R.
BURTSCHY, DAVID A. KOHNEN, JOSEPH E MADIGAN, KEVIN R. MCDONNELL.
<TABLE>
<S> <C> <C>
[ ] FOR all nominees listed [ ] WITHHOLD authority to (INSTRUCTIONS: To withold authority to vote for any individual
(except as marked to the vote for all nominees nominee, write that nominee's name in the space provided below.)
contrary to the right). listed.
-----------------------------------------------------------
</TABLE>
(2) Proposal to ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for fiscal 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) In their discretion, the proxies are authorized to vote on all other
matters (none known at the time of the solicitation of this Proxy) which
may properly come before the Annual Meeting, or any adjournments thereof.
Either of said proxies, or substitutes, who shall be present and shall act at
the Annual Meeting, shall have and may exercise all the powers of said proxies
hereunder.
PLEASE MARK YOUR PROXY, SIGN IT AND DATE IT, AND RETURN IT
PROMPTLY IN THE ENVELOPE PROVIDED.
<PAGE> 20
Skyline Chili, Inc.
c/o Corporate Trust Services-15th Floor
MD 1090F5
38 Fountain Square Plaza
Cincinnati, OH 45263
NAME APPEARS
detach here
................................................................................
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER INDICATED BY THE
UNDERSIGNED SHAREHOLDER. UNLESS OTHERWISE INDICATED IN THE SPACES PROVIDED, THE
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF ALL PERSONS
NAMED AS NOMINEES IN ITEM (1), AND WILL BE VOTED "FOR" THE PROPOSAL DESCRIBED IN
ITEM (2). The undersigned hereby acknowledges receipt of the notice of the
Annual Meeting of Shareholders dated February 11, 1997, the Proxy Statement
furnished herewith, and the Company's 1996 Annual Report to Shareholders. Any
proxy heretofore given to vote said shares is hereby revoked.
NUMBER OF SHARES
NAME APPEARS
-----------------------------------
Signature
-----------------------------------
Date
This Proxy is solicited on behalf of
the Company's Board of Directors
