<PAGE>
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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
Chart House Enterprises, 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:
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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):
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(4) Proposed maximum aggregate value of transaction:
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(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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Notes:
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[LOGO OF CHART HOUSE RESTAURANTS]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 6, 1998
To the Stockholders of
Chart House Enterprises, Inc.:
The Annual Meeting of Stockholders (the "Annual Meeting") of Chart House
Enterprises, Inc., a Delaware corporation (the "Company"), will be held at One
North Franklin Street, 3rd Floor, Chicago, Illinois 60606, on Wednesday, May
6, 1998 at 1:00 p.m. local time for the following purposes:
(1) To amend the Company's Certificate of Incorporation to eliminate
classes of directors relating to term of office (the "Amendment");
(2) To elect directors;
(3) To approve the Stock Option Grant to Non-employee Director, F. Philip
Handy;
(4) To approve the Stock Option Grant to the Company's President, Thomas
J. Walters;
(5) To approve the 1998 Employee Stock Purchase Plan; and
(6) To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on March 12, 1998 as
the record date for the determination of stockholders entitled to notice of,
and to vote at, the Annual Meeting and any adjournment thereof. A list of such
stockholders will be available for examination by any stockholder, for any
purpose germane to the Annual Meeting, during ordinary business hours at the
offices of the Company at 115 South Acacia Avenue, Solana Beach, California,
or at 203 N. LaSalle Street, Suite 2100, Chicago, Illinois, during the ten
days prior to the Annual Meeting.
In order to constitute a quorum for the conduct of business at the Annual
Meeting, holders of a majority of all outstanding shares of the Company's
Common Stock must be present in person or be represented by proxy. WE HOPE
THAT YOU WILL TAKE THIS OPPORTUNITY TO TAKE AN ACTIVE PART IN THE AFFAIRS OF
THE COMPANY BY VOTING ON THE BUSINESS TO COME BEFORE THE ANNUAL MEETING,
EITHER BY EXECUTING AND RETURNING THE ENCLOSED PROXY IN THE POSTAGE PAID,
RETURN ENVELOPE PROVIDED OR BY CASTING YOUR VOTE IN PERSON AT THE ANNUAL
MEETING.
By Order of the Board of Directors
[LOGO OF SIGNATURE]
Susan Obuchowski
Secretary
Solana Beach, California
April 3, 1998
<PAGE>
CHART HOUSE ENTERPRISES, INC.
115 SOUTH ACACIA AVENUE
SOLANA BEACH, CA 92075
----------------
PROXY STATEMENT
----------------
1998 ANNUAL MEETING OF STOCKHOLDERS
MAY 6, 1998
GENERAL INFORMATION ON THE MEETING
This proxy statement is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Directors of Chart House Enterprises,
Inc., a Delaware corporation (the "Company"), for use at the Annual Meeting
(including any adjournments or postponements thereof) to be held at One
Franklin Street, 3rd Floor, Chicago, Illinois, 60606, on Wednesday, May 6,
1998, at 1:00 p.m., local time.
The entire cost of soliciting Proxies will be borne by the Company,
including expenses in connection with preparing and mailing proxy solicitation
materials. The Company has retained the services of Corporate Investor
Communications, Inc. ("CIC") to assist in obtaining proxies from stockholders
for the Annual Meeting. The estimated cost of such service is $5,500 plus out-
of-pocket expenses. In addition to use of the mails, Proxies may be solicited
by certain officers, directors and regular employees of the Company, without
extra compensation, by telephone, facsimile transmission or personal
interview. The Company will reimburse brokerage houses and other custodians,
nominees and fiduciaries for their reasonable expenses in sending proxies and
proxy material to the beneficial owners of the Company's common stock, par
value $.01 per share (the "Common Stock"). This Proxy Statement, the
accompanying form of Proxy and the other enclosed documents are first being
mailed to stockholders of the Company on or about April 3, 1998.
RECORD DATE AND VOTING
Only stockholders of record at the close of business on March 12, 1998 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting
and any adjournment thereof. As of the close of business on the Record Date,
11,728,589 shares of the Company's Common Stock were issued and outstanding.
Each stockholder is entitled to one vote for each share of Common Stock held
on all matters to come before the meeting. A list of stockholders will be
available for examination by stockholders at the Annual Meeting.
The presence, either in person or by proxy, of persons entitled to vote a
majority of the outstanding shares of the Company's Common Stock is necessary
to constitute a quorum for the transaction of business at the Annual Meeting.
A stockholder giving a proxy may revoke it at any time before it is voted by
filing with the Secretary of the Company written notice of revocation or by
appearing at the meeting and voting in person. A prior proxy is automatically
revoked by a stockholder giving a valid proxy bearing a later date. Shares
represented by all valid proxies will be voted in accordance with the
instructions contained in the proxies. In the absence of instructions, shares
represented by valid proxies will be voted as recommended by the directors.
For each of the Proposals, all outstanding shares of the Company's Common
Stock will vote together as a single class. Assuming a quorum is present,
Proposal No. 1 (Amendment of the Company's Certificate of Incorporation)
requires the approval at the Annual Meeting of the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting
power of all of the outstanding shares of the Company's Common Stock. The
election of directors (Proposal No. 2) will be determined by a plurality of
the votes cast. In
1
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the case of shares that are present at the Annual Meeting for quorum purposes,
not voting those shares for a particular nominee for director (including
withholding authority on the proxy) will not operate to prevent the election of
that nominee if he otherwise receives the requisite affirmative votes. Proposal
No. 3 (Non-employee Director Stock Option Grant), Proposal No. 4 (Stock Option
Grant to President) and Proposal No. 5 (Employee Stock Purchase Plan) will
require the affirmative vote of the holders of a majority of the shares present
in person or by proxy and entitled to vote at the Annual Meeting. Abstentions do
not constitute a vote "for" or "against" any matter and thus will be disregarded
in the calculation of "votes cast." For the purposes of determining the outcome
of any matter, "broker non-votes" (i.e., shares held by brokers or nominees that
are represented at the meeting by properly signed and returned proxies but with
respect to which the broker or nominee is not empowered to vote on a particular
matter) will be treated as not present and not entitled to vote with respect to
that matter (although such shares may be entitled to vote on other matters), and
will be deemed to be present and entitled to vote for quorum purposes.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of March 12, 1998 (unless otherwise
indicated in a footnote), information concerning the beneficial ownership of
voting securities of the Company by the persons who are known by the Company to
own beneficially more than 5% of the outstanding shares of the Company's voting
stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
-------------- ------------------- ----------------- --------
<S> <C> <C> <C>
Common Stock... Samstock, L.L.C. 1,860,000(2) 29.0%
Samstock/ZFT, L.L.C. 705,808(2)
Chart House Investors, L.L.C. 428,591(2)
F. Philip Handy, as Trustee of
Blaine Trust 103,539(2)
Robert Saltsman 4,137(2)
Thomas Gaffney and Donna
Gaffney, as tenants by the entirety 20,708(2)
Richard Rivera 75,000(2)
MelChart, LLC 202,217(2)
(see footnote 2 below for addresses)
Common Stock... Metropolitan Life Insurance Co. 1,477,575(3) 12.6%
One Madison Avenue
New York, New York 10010-3690
Common Stock... The TCW Group, Inc. 627,500(4) 5.4%
865 South Figueroa Street
Los Angeles, California 90017
</TABLE>
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(1) Unless otherwise indicated in a footnote, each person listed as a
beneficial owner has sole voting and investment power.
(2) Based upon information set forth in Amendments No. 4 and No. 5 to the
Schedule 13D by Chart House Investors, L.L.C., and pursuant to the
Stockholder's Agreement dated October 1, 1997 among the referenced entities.
According to such Stockholder's Agreement each entity/Stockholder appointed
Samstock, L.L.C., its true and lawful attorney and proxy during the period
of such Stockholder's Agreement, to appear for, represent, and vote the
shares held by each Stockholder, as defined in the Stockholder's Agreement,
subject to the voting restrictions contained in such Stockholder's
Agreement. The addresses for these entities are as follows: Samstock,
L.L.C., Samstock/ZFT, L.L.C. and Chart House Investors, L.L.C., c/o Equity
Group Investments, Inc., Two North Riverside Plaza, Suite 600, Chicago,
Illinois 60606; F. Philip Handy, as Trustee of Blaine Trust, Robert Saltsman
and Thomas Gaffney and Donna Gaffney, as tenants by the
2
<PAGE>
entirety, 222 West Comstock, Winter Park, Florida 32789; Richard Rivera,
1290 N. Palm Avenue, Suite 101, Sarasota, Florida 34236; and Melchart,
L.L.C., 5419 N. Sheridan Road, Chicago, Illinois 60640.
(3) According to information filed with the Company as of February 2, 1998,
Metropolitan Life Insurance Company, has sole voting power for these
shares.
(4) Based upon information set forth in a Schedule 13G statement as of
February 12, 1998, Robert Day, an individual, may be deemed to control The
TCW Group, Inc.
PROPOSALS
PROPOSAL NO. 1--AMEND ARTICLE SIXTH OF THE COMPANY'S CERTIFICATE OF
INCORPORATION
Subject to approval of the stockholders, the Company's Board of Directors,
at a meeting held on February 3, 1998, adopted an amendment to the Restated
Certificate of Incorporation (the "Certificate") which will eliminate the
division of Directors into three classes (the "Staggered Board") and replace
it with a single class of Directors who are elected annually.
Article SIXTH of the Certificate currently provides as follows:
SIXTH:
A. The number of directors shall initially be nine and, thereafter, shall
be fixed from time to time exclusively by the Board of Directors pursuant
to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously
authorized directorships at the time any such resolution is presented to
the Board for adoption). The directors shall be divided into three classes,
as nearly equal in number as reasonably possible, with the term of office
of the first class (consisting initially of three directors) to expire at
the 1988 annual meeting of stockholders, the term of office of the second
class (consisting initially of three directors) to expire at the 1989
annual meeting of stockholders and the term of office of the third class
(consisting initially of three directors) to expire at the 1990 annual
meeting of stockholders. At each annual meeting of stockholders following
such initial classification and election, directors elected to succeed
those directors whose terms expire shall be elected for a term of office to
expire at the third succeeding annual meeting of stockholders after their
election.
B. Subject to the rights of the holders of any series of Preferred Stock
then outstanding, newly created directorships resulting from any increase
in the authorized number of directors or vacancies in the Board of
Directors resulting from death, resignation, retirement, disqualification,
removal from office or other cause may be filled only by a majority vote of
the directors then in office though less than a quorum, and directors so
chosen shall hold office for a term expiring at the annual meeting of
stockholders at which the term of office of the class to which they have
been elected expires. No decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent director.
C. Subject to the rights of the holders of any series of Preferred Stock
then outstanding, any directors, or the entire Board of Directors, may be
removed from office at any time, but only for cause and only by the
affirmative vote of the holders of at least a majority of the voting power
of all of the then outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors, voting together as
a single class.
The adoption by the Company, and many other publicly-held corporations, of a
staggered board reflected widespread concern at the time over the use of
abusive techniques by corporate "raiders" and others who were engaged in
hostile and non-negotiated attempts to acquire corporations to the
disadvantage of stockholders. Proponents of a staggered board believe that a
staggered board helps maintain a greater continuity of experience and
stability because the majority of directors at any given time will have
experience with the business affairs of the Company and that in the event of a
hostile takeover attempt, a staggered board may encourage a person seeking
control of the Company to initiate arm's-length discussions with management
and the Board, who are in a position to negotiate a more favorable transaction
for stockholders.
3
<PAGE>
Some investors have come to view staggered boards as having the effect of
insulating directors from a corporation's stockholders, and a number of major
corporations have determined that principles of good corporate governance
dictate that all directors of a corporation should be elected annually,
regardless of the merits of a staggered board in deterring coercive takeover
attempts. The Company's Board of Directors agrees with this conclusion.
The Board believes that all directors should be equally accountable at all
times for the Company's performance and that the Company should no longer
retain the Staggered Board because of the negative perception among many
potential investors and investor groups concerning staggered boards in
general. The Company's Board believes that all of the Company's directors
should be elected annually in order to best serve the interests of the Company
and its stockholders.
If the proposed amendment is approved, Article SIXTH of the Company's
Certificate would be amended and restated as follows:
SIXTH:
A. The number of directors shall initially be seven and, thereafter,
shall be fixed from time to time exclusively by the Board of Directors
pursuant to a resolution adopted by a majority of the total number of
authorized directors (whether or not there exist any vacancies in
previously authorized directorships at the time any such resolution is
presented to the Board for adoption). Each director shall be elected by the
stockholders at each annual meeting.
B. Subject to the rights of the holders of any series of Preferred Stock
then outstanding, newly created directorships resulting from any increase
in the authorized number of directors or vacancies in the Board of
Directors resulting from death, resignation, retirement, disqualification,
removal from office or other cause may be filled only by a majority vote of
the directors then in office though less than a quorum, and directors so
chosen shall hold office for a term expiring at the next annual meeting of
stockholders. No decrease in the number of directors shall shorten the term
of any incumbent director.
There are currently seven authorized and six acting directors on the
Company's Board. In conjunction with its adoption of the above amendment to
Article SIXTH of the Certificate, the Company's Board of Directors, on
February 3, 1998, and subject also to the approval of this Proposal 1, amended
Article II, Section 1 of the Company's By-Laws (which also provides for the
Staggered Board), to similarly provide for the annual election of all
directors.
If this amendment to Article SIXTH of the Certificate is not approved by the
requisite vote of stockholders, the Company will continue with the Staggered
Board. If this amendment is approved, the Company will file a certificate with
the Secretary of State of the State of Delaware on the date of the Annual
Meeting reflecting the changes resulting from the amendment, such changes to
become effective on the filing thereof. If Proposal 1 is approved, the terms
of the directors currently serving in Class I whose terms would otherwise
expire at the 2000 Annual Meeting of Stockholders and the terms of directors
serving in Class III whose terms would otherwise expire at the 1999 Annual
Meeting of Stockholders, will have their terms as directors expire at the 1998
Annual Meeting of Stockholders. Accordingly, if Proposal 1 is approved,
commencing with the 1998 Annual Meeting of Stockholders, the entire Board of
Directors of the Company will be elected annually.
Under the terms of the Certificate, approval of this amendment to the
Certificate requires an affirmative vote of at least sixty-six and two-thirds
percent (66 2/3%) of the outstanding Common Stock. An abstention or broker
non-vote will have the same effect as a vote against Proposal 1.
YOUR BOARD OF DIRECTORS HAS APPROVED THIS AMENDMENT AND RECOMMENDS THAT YOU
VOTE IN FAVOR OF THIS PROPOSAL 1.
4
<PAGE>
PROPOSAL NO. 2--ELECTION OF DIRECTORS
There are currently seven authorized and six acting directors on the
Company's Board. The Board currently is divided into three classes of
directors serving staggered three-year terms. The Class I directors (terms
expiring in 2000) are Messrs. Handy, Mayer and Zell, the Class II directors
(terms expiring in 1998) are Messrs. Diefenderfer and Walters, and the Class
III director (term expiring in 1999) is Mr. Nagle. There is currently one
vacancy in Class III. The purpose of Proposal 2 is to elect the directors of
the Company, in Class II only or as a whole, depending upon the outcome of the
stockholders' vote on Proposal 1. If Proposal 1 is approved, the Nominating
Committee of the Board of Directors has nominated Ms. Allen, Ms. Bynoe,
Mr. Diefenderfer, Mr. Handy, Mr. Ottmann, Mr. Walters and Mr. Zell to hold
office for a term of one year, expiring at the next succeeding Annual Meeting.
Messrs. Nagle and Mayer have elected not to stand for reelection at the Annual
Meeting. In the event that Proposal 1 is not approved, the Nominating
Committee of the Board of Directors has nominated Mr. Diefenderfer and Mr.
Walters to hold office for a term of three years, expiring at the third
succeeding Annual Meeting. Further, if Proposal 1 is not approved, Messrs.
Nagle and Mayer intend to resign from the Board and Ms. Allen will be
appointed by the Board as a Class I director and Ms. Bynoe and Mr. Ottmann
will be appointed by the Board as Class III directors.
Each of the nominees has agreed to serve if elected. The proxy holders will
vote the proxies received by them for all seven nominees if so instructed on a
proxy card or if no instruction is given, if Proposal 1 is approved, or the
two Class II nominees only, if Proposal 1 is not approved, or, in the unlikely
event that any nominee becomes unable to serve as a director, for other
persons designated by the Board of Directors. Set forth opposite the name of
each nominee and each director is his age, principal occupation for the past
five years, the name and principal business of any corporation or other
organization in which such employment is carried on and other business
directorships held by the nominee or director. The Company is not presently
aware of any circumstance which would prevent any nominee from fulfilling his
or her duties as a director of the Company.
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION AGE
---- -------------------- ---
<C> <S> <C>
Barbara R. Allen......... Barbara R. Allen has been a food service 45
industry executive for over 20 years. She
served as Executive Vice President of
International Quaker Food Products of the
Quaker Oats Company ("Quaker") from 1995 to
March 1998, and has held other positions
within Quaker including Vice President of
Corporate Planning (1992-1995); President of
the Frozen Foods Division (1990-1992); Vice
President of Marketing in U.S. Foods (1987-
1990) and Director of Marketing (1985-1987).
She also held positions of Brand Assistant,
Brand Manager and Group Marketing Manager
within the Quaker U.S. Foods Marketing
Division. Ms. Allen serves on the boards of
directors of Maytag Corporation, Coty, Inc.
and the University of Illinois--
International Exchange Program.
Linda Walker Bynoe....... Linda Walker Bynoe is President and Chief 45
Executive Officer of Telemat Ltd., a private
investment and financial services firm. Ms.
Bynoe has been a principal with Telemat Ltd.
since June 1989. She was employed by the
investment banking firm of Morgan Stanley &
Company starting in July 1978, and held the
position of Vice President from December
1984 to May 1985. From June 1975 to
September 1976, Ms. Bynoe was an associate
with Arthur Andersen & Co. Ms. Bynoe serves
on the boards of directors of American
Odyssey Funds, Inc. and Walden Residential
Properties, Inc. She also is a trustee of
The Museum of Contemporary Art in Chicago
and a director of The Executives Club of
Chicago.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION AGE
---- -------------------- ---
<C> <S> <C>
William M. Diefenderfer William M. Diefenderfer III is a partner in 51
III..................... the law firm of Diefenderfer, Hoover, Boyle &
Wood. He was Deputy Director of the Office of
Management and Budget from February 1989 to
May 1991. He served in the Ford White House,
as Chief Counsel on two US Senate Committees
and Counsel to a committee in the House of
Representatives. He serves on the board of
directors of the Student Loan Marketing
Association. Mr. Diefenderfer has been a
member of the Company's board of directors
since 1991.
F. Philip Handy.......... F. Philip Handy is the Acting Chief Executive 53
Officer of the Company. He is a managing
director of EGI Corporate Investments, Inc. a
division of Equity Group Investments, Inc.
("Equity Group"). Prior to joining Equity
Group, Mr. Handy was Chairman and President
of Winter Park Capital Company, a private
investment firm he founded in 1980. Mr. Handy
has been a director of the Company since
1997. He also serves on the boards of
directors of Anixter International Inc.,
Banca Quadrum, S.A., Q-Tel, S.A. de C.V.,
Jacor Communications, Inc. and Transmedia
Network Inc.
Stephen Ottmann.......... Stephen Ottmann is President and Chief 43
Operating Officer of Lettuce Entertain You
Enterprises, Inc. ("Lettuce Entertain You").
From January 1996 to February 1998, Mr.
Ottmann was Executive Vice President and
Chief Operating Officer of Lettuce Entertain
You. He also held the positions of Partner
and Divisional Vice President at Lettuce
Entertain You from March 1984 to January
1996. He currently serves on the board of
directors of Lettuce Entertain You.
Thomas J. Walters........ Thomas J. Walters joined the Company as 39
President, Chief Operating Officer and
director on February 23, 1998. From March
1995 until February 1998, Mr. Walters was
President of Morton's of Chicago ("Morton's")
restaurants nationwide. He also held the
positions at Morton's of Vice President of
Operations and Regional Manager from March
1993 to March 1995. Prior to Mr. Walters
association with Morton's, he was Director of
Food and Beverage with the Ritz-Carlton Hotel
Corporation for six years. He also has held
positions as Director of Food and Beverage
for the La Costa Resort & Spa and Director of
Catering and Banquet for the Hyatt Hotels
Corporation. Mr. Walters serves on the board
of directors of Make-a-Wish Foundation.
Samuel Zell.............. Samuel Zell is Chairman of the Board of Equity 56
Group Investments, Inc., an entrepreneurial
real estate and corporate investment firm
that he founded in 1968. Mr. Zell has been a
director of the Company since 1997. Mr. Zell
serves as Chairman of Anixter International
Inc., American Classic Voyages Co., Jacor
Communications, Inc. and Manufactured Home
Communities, Inc. Mr. Zell also serves as
Chairman of the board of trustees of Equity
Residential Properties Trust, Equity Office
Properties Trust and Capital Trust. Mr. Zell
is a director of Fred Meyer, Inc. and Tele
Tech Holdings, Inc. He is a non-executive
director of RAMCO Energy plc.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES LISTED
ABOVE.
6
<PAGE>
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors held ten meetings and took actions by unanimous
written consent eleven times during 1997. Each director attended at least 75%
of the total number of meetings of the Board of Directors and of Board
committees of which he was a member.
The Board of Directors has established four standing committees, the Audit
Committee, the Compensation Committee, the Performance Compensation Committee
and the Nominating Committee.
Audit Committee. The Audit Committee, which held one meeting in 1997, has
the primary responsibility for ensuring the integrity of the financial
information reported by the Company. The Audit Committee's functions include:
(i) to make recommendations concerning the selection of independent auditors;
(ii) to review the scope of the annual audit to be performed by the
independent auditors; (iii) to review the results of those audits; and (iv) to
meet periodically with management and the Company's independent public
accountants to review financial, accounting and internal control matters. The
Audit Committee consists of Messrs. Diefenderfer and Nagle.
Compensation Committee. The Compensation Committee reviews and makes
recommendations to the Board on the compensation and benefits payable to the
officers and key employees of the Company and is responsible for administering
the Company's stock option and incentive compensation plans. The Compensation
Committee held two meetings in 1997, and took actions by unanimous written
consent three times. The Compensation Committee consists of Messrs.
Diefenderfer, Handy and Nagle.
Performance Compensation Committee. Effective February 23, 1998, the Company
established the Performance Compensation Committee. The Performance
Compensation Committee sets Company policy and authorizes actions to be taken
with respect to any performance compensation matters as defined in
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
including but not limited to granting stock options and administering the
Company's stock option plans with respect to executive officers, and is
comprised solely of "outside" directors independent of management within the
meaning of Section 162(m) of the Code. The Performance Compensation Committee
consists of Messrs. Nagle and Diefenderfer. There were no meetings held in
1997 since the Performance Compensation Committee was established in 1998.
Nominating Committee. The Nominating Committee, which held one meeting in
1997, is responsible for (i) recommending nominees for election as directors
and for appointment as directors to fill vacancies; (ii) considering any
nominations for election as director submitted by stockholders; and (iii)
making recommendations concerning the organization and size of the Company's
Board of Directors and committees of the Board. The Nominating Committee
consists of Messrs. Handy, Mayer, Nagle and Zell. Stockholders who want to
submit recommendations of nominees for election as directors should submit the
recommendations to the Company at its executive offices stating in detail the
qualifications of the proposed candidates.
COMPENSATION OF DIRECTORS
The Company pays its outside directors a $2,000 fee plus expenses for each
meeting of the Board of Directors they attend and for each meeting of any
committee of the Board of Directors they attend. Directors may elect to
receive stock in lieu of cash compensation pursuant to the 1996 Nonemployee
Director Stock Compensation Plan which was approved by stockholders at the
1996 Annual Meeting. If more than one Board or committee meeting is held on
the same or successive days, only one payment is made. A $1,000 fee is paid in
the case of meetings held by conference telephone. No fee is paid in the case
of actions taken by unanimous written consent. In addition, each continuing
outside director is granted 2,500 stock options annually on the date of the
Company's Annual Meeting. The first grant was effective as of the date of the
1997 Annual Meeting. Such stock options become exercisable over a two-year
period.
Effective April 1, 1998, the Company will pay an annual fee to its directors
in the amount of $15,000 in lieu of separate fees for each meeting. Such fees
may be paid in stock pursuant to the 1996 Nonemployee Director Stock
Compensation Plan.
7
<PAGE>
PROPOSAL NO. 3--APPROVAL OF STOCK OPTION GRANT
TO NON-EMPLOYEE DIRECTOR, F. PHILIP HANDY
On May 19, 1997 and subject to approval by the stockholders of the Company,
the Board of Directors of the Company granted a non-qualified option (the
"Handy Option") to purchase 100,000 shares of Common Stock to Mr. Handy in
order to reward Mr. Handy for his service to the Company and, in consideration
of his efforts on behalf of the Company, particularly in recruiting and
retaining qualified CEO candidates. The terms of the Handy Option provide,
among other things, for the grant to Mr. Handy of an option to purchase
100,000 shares of Common Stock at an exercise price of $6.75 per share, which
was the fair market value of a share of Common Stock on the date of grant. If
the Handy Option is not approved by the stockholders on or before December 31,
1998, the Handy Option shall be cancelled and become null and void. The Handy
Option is a non- qualified option inasmuch as it does not qualify as a
"incentive stock option" within the meaning of Section 422 of the Code.
The full text of the agreement evidencing the Handy Option is set forth in
Annex I to this Proxy Statement. The following summary of the principal
features of the agreement underlying the Handy Option (the "Handy Option
Agreement") is subject to, and qualified in its entirety by, Annex I.
DESCRIPTION OF HANDY OPTION
The Handy Option shall become exercisable as to the entire number of shares
of Common Stock subject thereto upon the later of (i) six months after the
date of grant, or (ii) stockholder approval. The Handy Option will remain
exercisable until the earlier of (i) the tenth anniversary of the grant date,
on which date the unexercised portion of the option will expire, or (ii) three
months after the effective date of termination of Mr. Handy's board service,
except in the case of Mr. Handy's death or permanent and total disability, in
which event, the Handy Option shall terminate as to any unvested portion
thereof one year from the date of death or the date of permanent and total
disability.
The Handy Option is exercisable in whole or in part by written notice to the
Company specifying the number of shares being purchased, accompanied by
payment of the purchase price for the shares in cash or by certified or
cashier's check paid to the order of the Company, or, in whole or in part, by
the surrender to the Company of shares of previously acquired Common Stock
which shall be valued at fair market value on the date that the Handy Option
is exercised. The Company shall be entitled to require payment in cash from
Mr. Handy of any sums required by federal, state or local tax laws to be
withheld with respect to the exercise of the Handy Option. The compensation
attributable to the Handy Option may be subject to limitation on deductible
compensation contained in Section 162(m) of the Code. Please see the
discussion set forth below under the caption "Certain Tax Matters."
CHANGE IN CONTROL
In the event of a "change in control" prior to the date the Handy Option
becomes exercisable, the Board of Directors may provide for the acceleration
of the right to exercise the Handy Option prior to the anticipated effective
date of any such Change in Control transaction. For purposes of the Handy
Option Agreement, a "Change in Control" shall be deemed to have occurred if
(i) the percentage of the voting stock of the Company owned by one or more
persons ("person" as that term is defined for purposes of Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) or entities becomes
more than 50% of the outstanding shares of Common Stock (determined on the
basis of all outstanding stock of the Company and not just with regard to a
percentage increase of such persons or entities over their prior interest),
whether such increase occurs by way of a merger, consolidation, redemption,
direct transfer, or sale of stock or otherwise, (ii) as a result of or in
connection with any tender or exchange offer, any contested election of
directors or any combination thereof, the persons who were directors of the
Company immediately before such tender or exchange offer, contested election
or any combination thereof cease to constitute a majority of the Board, (iii)
the stockholders of the Company approve a plan of complete liquidation of the
Company, or (iv) the stockholders of the Company approve an
8
<PAGE>
agreement for the sale or disposition of all or substantially all of the
assets of the Company. Notwithstanding the foregoing, a Change in Control
shall not be deemed to occur solely because fifty percent (50%) or more of the
combined voting power of the Company's then outstanding securities is acquired
by (A) a trustee or other fiduciary holding securities under one or more
employee benefit plans maintained by the Company or any of its subsidiaries,
or (B) any company which, immediately prior to such acquisition, is owned,
directly or indirectly, by the stockholders of the Company in the same
proportion as their ownership of stock in the Company immediately prior to
such acquisition. Further, notwithstanding anything to the contrary set forth
in the "Change in Control" definition, if a transaction that would otherwise
create or result in a "Change in Control" of the Company is approved by the
affirmative vote of not less than two-thirds of the members of the Board, who
are members of the Board immediately prior to such transaction, then no Change
in Control of the Company shall be deemed to have occurred for the purposes of
the Handy Option.
ADJUSTMENTS
In the event that each of the outstanding shares of Common Stock of the
Company are hereafter changed into or exchanged for cash or a different number
or kind of shares of stock or other securities of the Company or another
corporation by reason of a reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, stock dividend or
combination of shares, then for each share of Common Stock of the Company
subject to the Handy Option, there shall be substituted and exchanged therefor
the number and kind of shares of stock or other securities into which each
outstanding share of Common Stock of the Company shall be so changed or
exchanged to the end that the proportionate interest of the holder of the
Handy Option shall, to the extent practicable, be maintained as before the
occurrence of such event. Such adjustment in the outstanding Option shall be
made without change in the total price applicable to the unexercised portion
of the Option, but with a corresponding adjustment in the exercise price per
Share.
NON-ASSIGNABILITY
The Handy Option may be transferred only by will or by the laws of descent
and distribution. During Mr. Handy's lifetime, the Handy Option is exercisable
only by Mr. Handy.
CERTAIN TAX MATTERS
The following discussion is a general summary of the material federal income
tax consequences to Mr. Handy under the Handy Option Agreement. This
discussion is based on the Code, regulations thereunder and rulings and
decisions now in effect, all of which are subject to change. State and local
income taxes are not discussed and may vary from locality to locality.
There were no tax consequences to Mr. Handy or the Company by reason of the
grant of the Handy Option because the Handy Option does not have an
ascertainable fair market value as of the date of grant. Upon exercise of the
Handy Option, Mr. Handy will recognize taxable ordinary income equal to the
excess of the fair market value of the Common Stock on the date of exercise
over the exercise price. The Company is required to withhold from regular
wages or supplemental wage payments an amount based on the ordinary income
recognized. Subject to the requirement of reasonableness, the satisfaction of
any income tax reporting obligation and the provisions of Section 162(m) of
the Code, the Company will be entitled to a business expense deduction equal
to the taxable ordinary income recognized by Mr. Handy. Upon disposition of
the stock, Mr. Handy will recognize a capital gain or loss equal to the
difference between the selling price and the sum of the amount paid for such
stock plus any amount recognized as ordinary income upon the exercise of the
Handy Option. Such gain or loss will be long or short-term depending on
whether the stock was held for more than eighteen months. In addition, gain on
the disposition of the stock may be eligible for reduced capital gains tax
rates under certain provisions enacted by the Taxpayer Relief Bill of 1997.
If the Handy Option is exercised through the delivery of already-owned
shares of Common Stock, under published Internal Revenue Service rulings, to
the extent that an equivalent value of shares is acquired upon
9
<PAGE>
exercise, Mr. Handy will recognize no gain and Mr. Handy's basis in the shares
acquired upon exercise will be equal to Mr. Handy's basis in the surrendered
shares, any additional shares acquired upon such exercise will be compensation
to Mr. Handy, taxable under the rules described above, and Mr. Handy's basis
in any such additional shares will be their fair market value.
POTENTIAL LIMITATION ON COMPANY DEDUCTIONS
Section 162(m) of the Code denies a deduction to any publicly held
corporation for compensation paid to certain employees in a taxable year to
the extent that compensation exceeds $1,000,000 for a covered employee. It is
possible that compensation attributable to stock options, when combined with
all other types of compensation received by a covered employee from the
Company, may cause this limitation to be exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with applicable Treasury regulations issued under Section 162(m),
compensation attributable to stock options will qualify as performance-based
compensation, provided that: either (a)(i) the option plan contains a per-
employee limitation on the number of shares for which options may be granted
during a specified period, (ii) the per-employee limitation is approved by the
stockholders, (iii) the option is granted by a Compensation Committee
comprised solely of "outside directors" (as defined in Section 162(m)) and
(iv) the exercise price of the option is no less than the fair market value of
the stock on the date of grant; or (b) the option is granted by a Compensation
Committee comprised solely of "outside directors" and is granted (or
exercisable) only upon the achievement (as certified in writing by the
Compensation Committee) of an objective performance goal established by the
Compensation Committee while the outcome is substantially uncertain and
approved by the stockholders. Because the Company's Board of Directors, rather
than the Performance Compensation Committee, approved the Handy Option, the
Handy Option will not qualify as "performance-based compensation."
RECOMMENDATION OF THE BOARD CONCERNING APPROVAL OF THE HANDY OPTION
The affirmative vote of the holders of a majority of the shares of Common
Stock present or represented at the Meeting and entitled to vote is required
for approval of the Handy Option. The Board recommends that the stockholders
vote FOR the proposal approving the Handy Option. Abstentions with respect to
this proposal will be treated as shares that are present or represented at the
Meeting and entitled to vote, but will not be counted as a vote in favor of
such proposal. Accordingly, an abstention from voting will have the same
effect as a vote against such proposal. Broker non-votes with respect to this
proposal will not be considered as present or represented at the Meeting and
entitled to vote with respect to this proposal.
PROPOSAL NO. 4--APPROVAL OF STOCK OPTION GRANT
TO PRESIDENT AND CHIEF OPERATING OFFICER, THOMAS J. WALTERS
On March 4, 1998, the Performance Compensation Committee of the Board of
Directors of the Company, contingent on the approval of the stockholders,
granted a non-qualified option (the "Walters Option") to purchase 160,000
shares of Common Stock to Mr. Walters in connection with the commencement of
his employment by the Company as its President and Chief Operating Officer.
The exercise price per share of Common Stock subject to the Walters Option is
$7.00, which was the fair market value of a share of Common Stock on its date
of grant. As the grant of the Walters Option was contingent on the approval of
the stockholders, if this Proposal is not approved, the Walters Option will be
null and void. If approved, the Walters Option will be a non-qualified option
inasmuch as it will not qualify as a "incentive stock option" within the
meaning of Section 422 of the Code.
10
<PAGE>
The full text of the agreement evidencing the Walters Option (the "Walters
Option Agreement") is set forth in Annex II to this Proxy Statement. The
following summary of the principal terms of the Walters Option Agreement is
subject to, and qualified in its entirety by, Annex II.
DESCRIPTION OF WALTERS OPTION
The Walters Option will become exercisable in equal installments of 25% on
each of the first four anniversaries of its date of grant. The Walters Option
may become exercisable with respect to a higher percentage of the shares
subject thereto before the fourth anniversary of the date of grant as set
forth below. The Walters Option will become exercisable with respect to: (i)
one-third of the shares subject thereto on the grant date if the closing price
of the Common Stock is maintained above $10.00 per share for 20 or more
consecutive trading days, (ii) two-thirds of the shares subject thereto on the
grant date if the closing price of the Common Stock is maintained above $15.00
per share for 20 or more consecutive trading days and (iii) all of the shares
subject thereto if the closing price of the Common Stock is maintained above
$20 per share for 20 or more consecutive trading days.
The Walters Option may be exercised (to the extent then exercisable) until
the earlier of (i) the tenth anniversary of the grant date, (ii) 90 days after
the effective date of termination of Mr. Walters' employment with the Company
or one year from the date of Mr. Walters' death or the date of his termination
of employment by reason of permanent and total disability, or (iii) the date
upon which Mr. Walters' employment is terminated for good cause.
The Walters Option may be exercised, in whole or in part, by written notice
to the Company specifying the whole number of shares being purchased,
accompanied by payment of the purchase price for the shares in cash or by
certified or cashier's check paid to the order of the Company, or, with the
consent of the Performance Compensation Committee of the Board of Directors of
the Company, (i) through the delivery of shares of Common Stock owned by Mr.
Walters, duly endorsed for transfer to the Company with a fair market value on
the date of delivery equal to the aggregate exercise price of the Walters
Option or exercised portion thereof, (ii) through the surrender to the Company
of shares of Common Stock then issuable upon exercise of the Walters Option
having a fair market value on the date of exercise of the Walters Option equal
to the aggregate exercise price of the Walters Option or exercised portion
thereof, (iii) through the delivery of a full recourse promissory note bearing
interest and payable on the terms approved by the Performance Compensation
Committee, or (iv) through any combination of (i), (ii) or (iii). The Company
is entitled to require payment in cash from Mr. Walters of any sums required
by federal, state or local tax laws to be withheld with respect to the
exercise of the Walters Option.
The minimum number of shares of Common Stock with respect to which the
Walters Option may be exercised at any one time is fifty, except with respect
to the final exercise.
CHANGE IN CONTROL, ADJUSTMENTS AND ASSIGNABILITY
The provisions of the Walters Option relating to a change in control of the
Company, adjustments to the Walters Option and assignability of the Walters
Option are substantially similar to the same such provisions contained in the
Handy Option. Accordingly, please see Proposal 3 relating to the Handy Option
for a discussion of such provisions.
CERTAIN TAX MATTERS, AND POTENTIAL LIMITATION ON COMPANY DEDUCTIONS
The tax consequences of the Walters Option and the potential limitation on
Company deductions of the Compensation attributable to Mr. Walters on account
of the Walters Option are substantially similar to the same such consequences
and/or limitations of the Handy Option, with the exception that the Walters
Option is intended to qualify under Section 162(m) of the Code as "performance
based compensation." Accordingly, please see Proposal 3 relating to the Handy
Option for a discussion of such consequences and limitations.
11
<PAGE>
RECOMMENDATION OF THE BOARD CONCERNING APPROVAL OF THE WALTERS OPTION
The affirmative vote of the holders of a majority of the shares of Common
Stock present or represented at the Meeting and entitled to vote is required
for approval of the grant of the Walters Option. The Board recommends that the
stockholders vote FOR the proposal to approve the grant of the Walters Option.
Abstentions with respect to this proposal will be treated as shares that are
present or represented at the Meeting and entitled to vote, but will not be
counted as a vote in favor of such proposal. Accordingly, an abstention from
voting will have the same effect as a vote against such proposal. Broker non-
votes with respect to this proposal will not be considered as present or
represented at the Meeting and entitled to vote with respect to this proposal.
PROPOSAL NO. 5--APPROVAL OF THE 1998 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors of the Company, at its meeting on March 18, 1998,
adopted the Chart House Enterprises, Inc. 1998 Employee Stock Purchase Plan
(the "Stock Purchase Plan"), subject to approval of the Company's
stockholders.
The Board of Directors authorized the issuance of up to 250,000 shares of
the Company's Common Stock under the Stock Purchase Plan at its meeting on
March 18, 1998.
Set forth below is a summary of certain important features of the Stock
Purchase Plan, which summary is qualified in its entirety by reference to the
full text of the plan which is attached as Annex III to this Proxy Statement.
All capitalized terms which are not defined herein are defined in the Stock
Purchase Plan.
Purpose of Plan. The Stock Purchase Plan is intended as an incentive and to
encourage stock ownership by all eligible employees of the Company and its
subsidiaries, so that they may share in the fortunes of the Company by
acquiring or increasing their proprietary interest in the Company. The Stock
Purchase Plan is also designed to encourage eligible employees to remain in
the employ of the Company. The Stock Purchase Plan provides eligible employees
with an opportunity to purchase Common Stock through payroll deductions.
Shares Reserved for Issuance under the Stock Purchase Plan. The Stock
Purchase Plan provides eligible employees of the Company with a means to
purchase in the aggregate up to 250,000 shares of Common Stock at a discount,
subject to adjustments under certain circumstances such as stock splits, stock
dividends, recapitalization or other changes in the outstanding Common Stock.
The reserved shares consist of authorized but unissued Common Stock or shares
of Common Stock reacquired by the Company, including any shares purchased by
the Company in the open market. In the event such shares would be purchased on
the open market, the Company will bear all brokerage costs and will pay any
difference between the actual stock purchase price and the amount paid by
employees under the Stock Purchase Plan.
Offerings. The first offering under the Stock Purchase Plan will commence on
January 1, 1999 or on such later date as may be specified by the Company, and
terminate on June 30, 1999. Thereafter, offerings will commence on July 1 and
terminate on the following December 31 and commence on January 1 and terminate
on June 30 until the Board of Directors terminates the Stock Purchase Plan or
no additional shares of Common Stock are available for purchase under the
Stock Purchase Plan.
Eligible Employees. The Stock Purchase Plan provides that all employees of
the Company will be eligible to participate in the Stock Purchase Plan,
provided that each such employee (a) is customarily employed, as of the
applicable Offering Date as defined below, for more than 20 hours per week;
(b) has been employed, as of the applicable Offering Date, for at least 6
months; (c) is employed by the Company on the applicable Offering Date; and
(d) has a timely completed Enrollment Agreement in effect for such applicable
offering. January 1 and July 1, as applicable, are hereafter referred to as
the "Offering Date." To participate in the plan, each eligible employee must
complete an Enrollment Agreement and related documents at least ten days prior
to the commencement of the initial, or any subsequent, offering in which he or
she desires to participate. Pursuant to the Stock Purchase Plan, any timely
filed Enrollment Agreement shall be effective for all subsequent offerings,
unless earlier terminated by the employee under the terms of the plan.
However, participation in one offering
12
<PAGE>
does not limit, or require, participation in any other offering.
Notwithstanding the above, no employee who, after the grant of options under
the plan, owns shares possessing 5% or more of the total combined voting power
or value of all classes of shares of the Company or its parent, if any, or any
subsidiary corporation, after taking into account outstanding options and
certain attribution rules, shall be eligible to receive an option. Further
notwithstanding the above, if a participating employee requests that
certificates for shares of Common Stock that have been purchased under the
Plan be issued to him or her before one year from the date such shares were
purchased, the employee will not be permitted to participate in the next
offering. Approximately 2,300 employees would be eligible to participate in
the Stock Purchase Plan as of March 1, 1998.
Common Stock Purchases. The Stock Purchase Plan authorizes the grant of
options to purchase Common Stock to eligible participating employees on
January 1 and July 1 of each year. The option exercise price is payable by the
employee through automatic payroll deductions during the year, which
deductions may not be less than $10 or more than the dollar amount or
percentage of his or her base pay that is designated by the participant. No
employee may subscribe for or receive options to purchase shares of Common
Stock with an aggregate Fair Market Value (as defined below), determined on
the date of the grant, of $25,000 or more in any year.
The purchase price for each share of Common Stock subject to an option
granted under the Stock Purchase Plan will be 85% of the average Fair Market
Value of the Common Stock during the offering, determined by averaging the
Fair Market Value of the Common Stock on each business day of the offering,
provided that the purchase price shall not be less than the lesser of (i) 85%
of the Fair Market Value of Common Stock on the Offering Date, or (ii) 85% of
the Fair Market Value of the Common Stock on the last business day of the
offering. "Fair Market Value" of a share of Common Stock on a given day is
defined in the plan as the closing price for Common Stock on a national stock
exchange or, if the stock is not traded on an exchange, the last sale price or
Common Stock as reported on the Nasdaq National Market for trades occurring on
such day.
On the Offering Date, each eligible employee who elects to participate in an
offering will receive an option to purchase the number of shares of Common
Stock that he or she will be able to purchase with the payroll deduction
credited to his or her account during such offering period, provided that the
maximum number of shares that an eligible employee may purchase under an
offering is 5,000.
Subject to certain limitations set forth in the Stock Purchase Plan, an
employee is permitted, at any time prior to the end of an offering, to
terminate or to withdraw all of the amounts in his or her account, without
interest. Upon the termination of the employee's employment with the Company
prior to the last day of an offering for any reason other than death,
disability or retirement, the employee's only right will be to receive the
amount of cash that is in his or her account, without interest. If an
employee's employment is terminated (a) within 90 days of the last day of the
current offering by reason of retirement or disability or (b) at any time
during the current offering by reason of death, he or she will have the right
prior to the end of the current offering to elect to have the balance of his
or her account either paid to him or her in cash or applied at the end of the
current offering toward the purchase of Common Stock. Other than as set forth
in this paragraph, an employee may not change the amount of this or her
payroll deductions during an offering.
The Stock Purchase Plan may be amended from time to time by the Board of
Directors provided, however, that no amendment will be effective without the
prior approval of the stockholders to increase the aggregate number of shares
to be issued under the Plan, change the class of employees eligible to receive
options, or if approval is required to comply with Rule 16b-3 promulgated
under the Exchange Act. The Stock Purchase Plan may be terminated at any time
by the Board of Directors.
Federal Income Tax Consequences. The Stock Purchase Plan is intended to
qualify as an employee stock purchase plan under Section 423 of the Code, such
that the transfer of a share of Common Stock to an employee pursuant to the
plan will generally be governed by Section 421(a) of the Code. Under Section
421(a), an employee will not be required to recognize income at the time the
option is granted or at the time the option is exercised. The Company will not
be entitled to any deduction with respect to the plan, except in connection
with a disqualifying disposition (as discussed below).
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<PAGE>
When a plan participant disposes of Common Stock acquired under the plan (or
in the event of death of the employee while owning such Common Stock whether
or not the holding period requirements are met), he or she will recognize
compensation income (taxed as ordinary income) in an amount equal to the
lesser of (i) the excess of the fair market value of the Common Stock at the
time of such disposition or death over the amount paid for the Common Stock,
or (ii) the excess of the fair market value of Common Stock on the date the
option was granted over an amount equal to 85% of the fair market value of
Common Stock on the date the option was granted. Any additional gain or any
loss resulting from the disposition will be taxed as long-term capital gain or
loss.
In order to receive such favorable tax treatment, the Code requires that the
employee make no disposition of the Common Stock within two years from the
date the option was granted nor within one year from the date the option was
exercised and the Common Stock transferred to him or her. If an employee
disposes of Common Stock acquired under the plan before the expiration of
these holding periods (a "disqualifying disposition"), the employee will
recognize ordinary income in an amount equal to the excess of the fair market
value of the Common Stock on the date the option was exercised over the option
price. The amount recognized as ordinary income will increase the employee's
basis in such shares. Any gain or loss resulting from the disposition will be
taxed as capital gain or loss. At the time of such a disqualifying
disposition, the Company would be allowed a deduction equal to the amount
included in the employee's income as ordinary income.
Vote Required. The affirmative vote of the holders of a majority of the
shares of Common Stock present or represented at the Annual Meeting is
required for approval of the Stock Purchase Plan. The Board recommends that
the stockholders vote FOR the proposal to approve the Stock Purchase Plan.
Abstentions with respect to this proposal will be treated as shares that are
present or represented at the Meeting and entitled to vote, but will not be
counted as a vote in favor of such proposal. Accordingly, an abstention from
voting will have the same effect as a vote against such proposal. Broker non-
votes with respect to this proposal will not be considered as present or
represented at the Meeting and entitled to vote with respect to this proposal.
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth compensation for services in all capacities
to the Company for the fiscal years ended December 29, 1997, December 30, 1996
and December 31, 1995, of those persons who were, during the fiscal year ended
December 29, 1997 (i) the chief executive officer, or acting in that capacity
and (ii) the other four most highly compensated executive officers of the
Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL ------------
COMPENSATION(1) AWARDS
NAME AND PRINCIPAL ------------------ ------------ ALL OTHER
POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(2)
------------------ ---- --------- -------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
F. Philip Handy......... 1997 -- -- 102,500 --
Acting Chief Executive 1996 -- -- -- --
Officer(3) 1995 -- -- -- --
Richard E. Rivera....... 1997 116,923 267,813 500,000 --
Former President and 1996 -- -- -- --
Chief Executive 1995 -- -- -- --
Officer(4)
William R. Kuntz, Jr.... 1997 77,808 -- 5,000 477,250
Former Executive Vice 1996 169,050 68,000 77,500 1,250
President-- Finance 1995 160,000 38,198 15,000 1,250
and Administration,
General Counsel and
Secretary(5)
Stephen J. McGillin..... 1997 129,472 -- 30,000 461,250
Former Executive Vice 1996 133,626 49,399 40,000 1,250
President-- 1995 100,000 71,594 15,000 1,250
Operations(6)
Randall P. McNamara..... 1997 150,769 60,186 52,000 1,250
Vice President--Opera- 1996 119,000 53,934 5,000 1,250
tions 1995 100,000 79,867 15,000 1,250
James C. Wendler........ 1997 114,058 45,800 21,000 1,071
Vice President--Finance 1996 100,000 15,000 5,000 768
and Chief Financial 1995 90,000 6,400 1,500 719
Officer
Richard D. Tipton....... 1997 111,039 30,350 16,000 1,250
Vice President--Legal 1996 100,000 15,000 5,000 1,250
Affairs and General 1995 90,000 8,400 2,000 1,226
Counsel
</TABLE>
- --------
(1) Amounts shown include cash compensation earned and received by executive
officers as well as amounts earned but deferred at the election of those
officers under the Company's 401-k Plan.
(2) Includes Company matching contributions (maximum of $1,250 annually) on
behalf of the executive officer to the Company's 401-k Plan. Amounts also
include cash severance received by former executive officers ($476,000 for
Mr. Kuntz and $460,000 for Mr. McGillin) upon their resignations.
(3) Mr. Handy assumed duties and responsibilities of chief executive officer
following the resignation of Mr. Rivera on December 11, 1997. Mr. Handy
received two option grants in his capacity as a director, one in the
amount of 100,000 shares on May 19, 1997 and the second in the amount of
2,500 shares on May 20, 1997.
(4) Mr. Rivera became President and Chief Executive Officer on August 11, 1997
and resigned from the Company on December 11, 1997. Upon Mr. Rivera's
resignation, the bonus in the amount of $267,813 was reimbursed to the
Company and all stock options granted to Mr. Rivera by the Company
automatically expired.
(5) Mr. Kuntz resigned from the Company effective June 13, 1997. Mr. Kuntz,
collectively with Mr. McGillin, assumed the duties and responsibilities of
president and chief executive officer from November 15, 1996 to the date
of his resignation.
15
<PAGE>
(6) Mr. McGillin resigned from the Company effective September 15, 1997. Mr.
McGillin assumed the duties and responsibilities of president and chief
executive officer, collectively with Mr. Kuntz from November 15, 1996 to
June 13, 1997, and individually from June 14, 1997 to August 11, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------- POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES % OF TOTAL ANNUAL RATES OF STOCK
UNDERLYING OPTIONS PRICE APPRECIATION
OPTIONS GRANTED TO EXERCISE FOR OPTION TERM(2)
GRANTED EMPLOYEES PRICE EXPIRATION ---------------------
NAME (#)(1) IN 1997 ($/SH) DATE 5%($) 10%($)
---- ---------- ---------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
F. Philip Handy(3)...... 100,000 11.7% $6.75 5/19/2007 $ 424,504 $1,075,776
2,500 0.3% $6.63 5/20/2007 $ 10,416 $ 26,396
Richard E. Rivera(4).... 400,000 47.0% $8.25 7/29/2007 $2,075,352 $5,259,350
100,000 11.7% $5.75 8/11/2007 $ 768,838 $1,564,838
William R. Kuntz,
Jr.(5)................. 5,000 0.6% $5.63 1/22/2007 $ 17,688 $ 44,824
Stephen J. McGillin(6).. 5,000 0.6% $5.63 1/22/2007 $ 17,688 $ 44,824
25,000 2.9% $8.38 8/22/2007 $ 131,675 $ 333,690
Randall P. McNamara..... 2,000 0.2% $5.63 1/22/2007 $ 7,075 $ 17,930
15,000 1.8% $8.38 8/22/2007 $ 79,005 $ 200,214
35,000 4.1% $7.88 9/15/2007 $ 173,339 $ 439,275
James C. Wendler........ 1,000 0.1% $5.63 1/22/2007 $ 3,538 $ 8,965
20,000 2.3% $8.38 8/22/2007 $ 105,340 $ 266,952
Richard D. Tipton....... 1,000 0.1% $5.63 1/22/2007 $ 3,538 $ 8,965
15,000 1.8% $8.38 8/22/2007 $ 79,005 $ 200,214
</TABLE>
- --------
(1) With the exception of options granted to Mr. Handy and Mr. Rivera, non-
qualified stock options were granted to employees at various times during
the year under the Company's 1996 Stock Option Plan, have an exercise
price equal to fair market value on the date of grant, become exercisable
at a rate of 20% per year over five years, and expire ten years from date
of grant.
(2) Potential realizable value amounts are based on an assumption that the
Company's stock price will appreciate at the annual compounded rates shown
over the ten year option terms. There can be no assurances that the stock
price will appreciate at these rates or experience any appreciation at
all.
(3) Mr. Handy received these two option grants in his capacity as a director
before assuming duties and responsibilities of acting chief executive
officer following the resignation of Mr. Rivera on December 11, 1997. See
"Compensation of Directors" on page 7 and Proposal No. 3--"Approval of
Stock Option Grant" on page 8.
(4) Mr. Rivera's option grant for 400,000 shares was made outside of the
Company's existing stock option plans and had an exercise price equal to
fair market value at the date of grant. The option grant for
100,000 shares, covered under the 1996 Stock Option Plan, had an exercise
price lower than fair market value at date of grant ($8.63). Mr. Rivera's
options expired unvested and unexercised following his resignation on
December 11, 1997.
(5) Mr. Kuntz resigned as an executive officer of the Company effective June
13, 1997. The options granted to Mr. Kuntz during 1997 expired unvested
and unexercised following his resignation.
(6) Mr. McGillin resigned as an executive officer of the Company effective
September 15, 1997. The options granted to Mr. McGillin during 1997
expired unvested and unexercised following his resignation.
16
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 29, 1997 (#)(1) DECEMBER 29, 1997 ($)(2)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
F. Philip Handy(3)...... 0 $ 0 0 102,500 $ 0 $ 0
Richard E. Rivera....... 0 $ 0 0 0 $ 0 $ 0
William R. Kuntz, Jr.... 26,900 $87,138 0 0 $ 0 $ 0
Stephen J. McGillin..... 25,400 $37,863 0 0 $ 0 $ 0
Randall P. McNamara..... 0 $ 0 40,400 66,600 $4,500 $3,500
James C. Wendler........ 0 $ 0 5,500 26,000 $ 875 $1,000
Richard D. Tipton....... 0 $ 0 6,000 21,000 $1,000 $1,000
</TABLE>
- --------
(1) Options outstanding represent non-qualified stock options granted from
1989 to 1997 at exercise prices ranging from $5.63 to $13.50 per share.
(2) Value is based on the closing price on the New York Stock Exchange of the
Company's Common Stock on that date ($6.50). There is no negative value
attributed to options which have exercise prices higher than the closing
market price.
(3) Mr. Handy received two option grants in his capacity as a director before
assuming duties and responsibilities of acting chief executive officer
following the resignation of Mr. Rivera on December 11, 1997. See
"Compensation of Directors" on page 7 and Proposal No. 3--"Approval of
Stock Option Grant" on Page 8.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
Effective as of February 12, 1996, the Company entered into executive
severance agreements with Messrs. Kuntz, McGillin and McNamara. During 1997,
Messrs. Kuntz and McGillin each terminated their employment with the Company.
The executive severance agreements are not for a specified term and employment
may be terminated by either party at any time in accordance with the terms of
the agreement with or without cause. Pursuant to such agreements, under
certain circumstances, upon termination of employment without "cause" or as a
result of specified adverse changes in the executive's employment conditions
(collectively, a "Terminating Event"), the executive will be entitled to
receive one times the executive's current annual base salary in effect at the
time of the Terminating Event plus the amount of any bonus, commission and
incentive compensation paid during the twelve month period immediately
preceding the Terminating Event. In the event of a Terminating Event that
occurs in connection with a "change in control" of the Company, the executive
will be entitled to payment of two times the executive's current annual base
salary in effect at the time of the Terminating Event plus two times the
amount of any bonus, commission and incentive compensation paid during the
twelve month period immediately preceding the date of the Terminating Event.
The Company is also obligated to continue to provide health, life and
disability insurance premiums and the executive benefits for a period of one
year following termination of employment in connection with a "change in
control."
The Board of Directors has the discretion to determine the time of the
payments due under the executive severance agreements which can be made either
in a lump sum or in installments, the final payment of which must be made
within twelve months of the executive's termination date. Under the terms of
the executive severance agreements, if the executive is terminated for
"cause," the executive will not be entitled to receive the severance payments
described above. For purposes of the agreement, "cause" means termination on
the grounds of personal dishonesty, incompetence, willful misconduct, breach
of fiduciary duty involving personal profit, intentional failure to perform
stated duties, willful violation of any law, rule or regulation (other than
traffic violations or similar minor offenses) or final cease-and-desist order,
or in the event of a material breach by the executive of the terms of the
executive severance agreement.
17
<PAGE>
A "change in control" shall be deemed to have occurred under the executive
severance agreements upon the occurrence of one or more of the following
events: (i) the acquisition by any person or entity of 50 percent or more of
the combined voting power of the Company's then outstanding shares, or any
merger, acquisition, consolidation, or corporate reorganization in which 50
percent or more of the combined voting power of the Company's then outstanding
shares changes hands; (ii) a change in the majority composition of the Board
of Directors during any two-year period; (iii) a merger, consolidation, or
other combination in which the Company is not the surviving entity; and/or
(iv) a complete liquidation of the Company approved by the stockholders.
Notwithstanding the foregoing, a change in control shall not be deemed to
occur solely because 50 percent or more of the combined voting power of the
Company's then outstanding securities is acquired by (A) a trustee or other
fiduciary holding securities under one or more employee benefit plans
maintained by the Company or any of its subsidiaries or (B) any corporation
which, immediately prior to such acquisition, is owned directly or indirectly
by the stockholders of the Company in the same proportion as their ownership
of stock in the Company immediately prior to such acquisition. The preceding
definition of a "change in control" does not apply to the executive if the
executive: (i) is a member of a group which first announces a proposal which
would result in a "change in control" and is ultimately successful and/or (ii)
acquires at least a two percent equity interest in the entity which ultimately
acquired the Company pursuant to that transaction.
During 1997, Messrs. Kuntz and McGillin each terminated their employment
with the Company. In connection with the termination of Mr. Kuntz's
employment, the Company became obligated to pay Mr. Kuntz an aggregate of
$476,000, payable in twelve monthly installments pursuant to his executive
severance agreement with the Company. In connection with the termination of
Mr. McGillin's employment, the Company paid Mr. McGillin a total of $460,000
in two installments in December 1997 and January 1998, pursuant to his
executive severance agreement with the Company.
In addition to the executive severance agreements discussed above, the
Company adopted a severance policy on March 3, 1997 which may cause some
executive officers to receive in excess of $100,000 in connection with the
termination of their employment. Under the policy, executive officers are
treated as follows: (i) the President/Chief Executive Officer is entitled to
52 weeks of severance pay, regardless of length of service, (ii) each Vice
President, whether or not he or she is an executive officer, is entitled to 3
weeks of severance pay per year of service, up to a maximum of 52 weeks,
subject to a minimum of 13 weeks. Total compensation for computing severance
under the policy includes the sum of the employee's base salary plus the
amount of any bonuses or incentives paid to the employee during the past 12
months. It is anticipated that pursuant to the terms of the severance policy
Mr. Wendler will receive severance pay in the amount of $118,246.00 during
1998 for his termination in connection with the relocation of the Company's
corporate office.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Diefenderfer, Handy and Nagle were members of the Compensation
Committee during 1997. Mr. Handy, a director of the Company, serves as a
member of the compensation committee of Jacor Communications, Inc., and Mr.
Zell, a director of the Company, is an executive officer and director of Jacor
Communications, Inc.
Notwithstanding anything to the contrary set forth in any of the Company's
filings under the Securities Act of 1933, or the Exchange Act that might
incorporate future filings, including this Proxy Statement, in whole or in
part, the report presented below and the Performance Graph following shall not
be incorporated by reference into any such filings.
18
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
reviewing and determining the compensation of the executive officers of the
Company, administering the Company's executive compensation plans, including
incentive compensation, stock option and other employee benefit plans, and
making recommendations to the Board of Directors regarding the adoption of new
executive compensation plans. The Compensation Committee consists of three
directors who are not employees of the Company.
COMPENSATION PHILOSOPHY
The Compensation Committee's primary objective in developing and
administering the Company's executive compensation system is to attract and
motivate a quality management team to increase stockholder value. The
Company's compensation system emphasizes incentives tied to the attainment of
financial performance goals.
The executive compensation system consists of three major components: base
salary, annual incentive and long-term incentive.
Base Salary. Base salaries for executives are established at a level
commensurate with the executive's position in the Company and relative to
peers in other companies. Annual base salary increases generally are made
based on performance evaluations and in recognition of added duties and
responsibilities taken on by the executive.
Annual Incentive Compensation. The Company has traditionally relied on
incentive bonus compensation as a major component of executive compensation.
Under the Corporate Management Compensation Plan, which became effective
beginning with the 1997 fiscal year, annual bonuses are earned based primarily
on the Company's financial performance as measured against budget targets, and
secondarily on the performance of the individual management employee as
measured against performance criteria established by the employee and his or
her supervisor.
The maximum annual bonus available under the Corporate Management
Compensation Plan ranged from 10% to 40% of base salary during 1997, depending
on the individual's position in the Company. One executive officer did not
participate under the Corporate Management Compensation Plan, but rather
received bonus compensation under the Restaurant Management Compensation Plan
in effect during 1997 which carried a maximum annual bonus of 10% to 30% of
base salary. For 1998, the bonus percentage range under the Corporate
Management Compensation Plan is 10% to 50% of base salary, depending on
position. In 1998, all executive officers other than the Vice President--
Operations, will participate under this plan.
Long-Term Incentive. Long-term incentives are provided to Company executives
in the form of annual or semi-annual stock option grants under the Company's
1996 Stock Option Plan and stock options previously granted under the 1989 and
1992 stock option plans. The 1996 Stock Option Plan authorizes the grant of
options for the purchase of up to 1,000,000 shares of Common Stock. As of
December 29, 1997, 580,100 shares remained available for option grants under
the 1996 Stock Option Plan. The Compensation Committee believes that equity
incentives are an effective way of motivating management to increase value to
the stockholder and that stock options are the most appropriate type of equity
incentive given the characteristics of the Company and its management team.
1997 EXECUTIVE OFFICER COMPENSATION
All executive officers employed at the end of 1996 departed the Company
during 1997. Certain individuals who became executive officers in 1997
received base salary increases due to increased duties and responsibilities.
Executive officers received base salary adjustments determined by the
Compensation Committee based on recommendations made by the chief executive
officer and information regarding industry peer group compensation.
19
<PAGE>
Bonus compensation paid to executive officers during 1997 consisted of
payments under the Corporate Management Compensation Plan or Restaurant
Management Compensation Plan, and payments of special bonuses. The
Compensation Committee determined that the portion of the bonus based upon the
Company's financial performance under the Corporate Management Compensation
Plan should not be awarded. However, the portion relating to individual
performance under such plan was awarded in the amounts of $10,350 and $10,800
for Messrs. Tipton and Wendler, respectively. Mr. McNamara was awarded a bonus
in the amount of $30,030 under the Restaurant Management Compensation Plan,
which provides bonus compensation based on restaurant-level financial
performance on a quarterly basis. In addition, due to significant changes in
senior management and other circumstances during 1997, retention and special
bonuses were paid to executive officers and certain other members of senior
management who fulfilled their duties with the Company through December 31,
1997.
1997 CEO COMPENSATION
During 1997, there were four individuals who served as chief executive
officer ("CEO") or acting CEO for the Company. From November 15, 1996 through
May 30, 1997, Messrs. Kuntz and McGillin jointly assumed the CEO duties and
responsibilities.
Mr. Kuntz's base salary rate of $170,000 per year for 1997 was the same as
for 1996, and the amount of base salary paid for 1997 reflects his resignation
on June 13, 1997. Mr. Kuntz did not receive any bonus compensation for 1997.
In connection with termination of his employment, the Company is obligated to
pay Mr. Kuntz an aggregate of $476,000, payable in twelve monthly
installments, pursuant to his executive severance agreement with the Company.
Mr. McGillin's base salary for 1997 was increased from $150,000 per year to
$170,000 per year effective January 1, 1997 in connection with his shared
responsibility for the CEO position with Mr. Kuntz. Mr. McGillin assumed sole
responsibility for the CEO duties on June 1, 1997, at which time his base
salary was increased to $190,000. The base salary paid to Mr. McGillin during
1997 reflects his resignation on September 15, 1997. Mr. McGillin did not
receive any bonus compensation for 1997. In connection with the termination of
his employment, the Company paid Mr. McGillin a total of $460,000 in two
installments in December 1997 and January 1998, pursuant to his executive
severance agreement with the Company.
Mr. Rivera joined the Company on August 11, 1997 as president and CEO with a
compensation package determined by the Board of Directors consisting of a base
salary of $400,000 per year, a one-time signing bonus of $267,813, an annual
incentive bonus of 50% of base salary, an option grant covering 100,000 shares
of Company stock under the 1996 Stock Option Plan, and an option grant
covering 400,000 shares of Company stock outside of the 1996 Stock Option
Plan. Mr. Rivera's compensation package reflected his reputation as a leading
restaurant industry CEO. Upon Mr. Rivera's resignation on December 11, 1997,
the signing bonus in the amount of $267,813 previously paid to Mr. Rivera was
reimbursed to the Company and all stock options granted to Mr. Rivera by the
Company automatically expired. The Company did not pay any annual bonus to Mr.
Rivera nor did the Company make any payment to Mr. Rivera as a result of the
termination of his employment.
Mr. Handy, a member of the Board of Directors, assumed the role of acting
CEO of the Company on December 11, 1997. Mr. Handy did not receive any
compensation from the Company during fiscal 1997 for his duties as acting CEO.
In May 1997, Mr. Handy received two stock option grants from the Company in
his capacity as a director. The first option grant was in the amount of 2,500
shares, granted to each continuing non-employee director pursuant to the 1996
Non-employee Director Stock Compensation Plan. The second option grant was in
the amount of 100,000 shares and was granted in consideration of Mr. Handy's
efforts on behalf of the Company, particularly in recruiting and retaining
qualified CEO candidates.
20
<PAGE>
POLICY ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Code generally provides that certain compensation in
excess of $1 million per year paid to a company's chief executive officer and
any of its four other highest paid executive officers is not deductible by a
company unless the compensation qualifies for an exception. This deduction
limit generally applies only to compensation that could otherwise be deducted
by a company in a taxable year. For 1997, the Compensation Committee does not
expect that Section 162(m) will limit the Company's deductibility of
compensation paid to any of its executive officers.
Section 162(m) provides an exception to the deductibility limit for
performance-based compensation if certain procedural requirements, including
stockholder approval of the material terms of the performance goal, are
satisfied. In some cases, it may be necessary in order to attract, retain and
incentivize certain individuals to grant options or other performance-based
compensation without satisfying the procedural requirements under Section
162(m). The Compensation Committee believes that grants of options at or above
then-current market price under the 1996 Stock Option Plan qualify for full
deductibility under Section 162(m). In 1998, the Board of Directors created a
Performance Compensation Committee comprised of two or more "outside
directors" within the meaning of Section 162(m) to oversee, among other
things, all stock option grants to the CEO and four other most highly
compensated executive officers. The Compensation Committee will continue to
review and evaluate, as necessary, the impact of Section 162(m) on the
Company's compensation programs.
Respectfully submitted,
William M. Diefenderfer III
F. Philip Handy
Arthur J. Nagle
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1997, the Company retained the services of Rosenberg & Liebentritt,
P.C., a law firm which performs legal services exclusively for entities in
which Mr. Zell has an interest. The Company believes that such services have
been on terms no less favorable to the Company than could have been obtained
with other independent parties. In 1997, the Company paid legal fees and
expenses to Rosenberg & Liebentritt in the amount of $38,173.08.
During 1997, the Company hired Lettuce Entertain You Enterprises, Inc.
("LEYEI") as a consultant to evaluate the Company's business operations and
restaurant concepts and develop new concepts and menu offerings. The Company
paid LEYEI a total of $734,323 in fees and expenses during the year ended
December 29, 1997. Mr. Ottmann, a nominee for director of the Company, is
President, Chief Operating Officer and a minority shareholder of LEYEI.
21
<PAGE>
PERFORMANCE GRAPH
The following graph compares cumulative total stockholder return on the
Company's Common Stock with the performance of the Dow Jones Equity Market
Index and a restaurant industry peer group index (Standard Industrial
Classification (SIC) Code 5812--Eating Places) for the five fiscal year period
ended December 29, 1997. The graph assumes that the value of an investment in
the Company's Common Stock and each index was $100 on December 31, 1992.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG
COMPANY, DOW JONES EQUITY MARKET INDEX AND PEER GROUP
<TABLE>
<CAPTION>
Measurement Period Chart House Dow Jones Equity Peer Group
(Fiscal Year Covered) Enterprises, Inc. Market Index (SIC CODE 5812)
- -------------------- ----------------- ---------------- ---------------
<S> <C> <C> <C>
Measurement Pt-1992 $100.00 $100.00 $100.00
FYE 1993 $177.78 $113.54 $114.83
FYE 1994 $138.89 $111.33 $100.56
FYE 1995 $ 88.89 $144.36 $137.71
FYE 1996 $ 74.07 $173.90 $144.37
FYE 1997 $ 96.30 $228.78 $151.95
</TABLE>
22
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of March 12, 1998, information concerning
the number of shares of the Company's Common Stock, and options to purchase
Common Stock that are currently exercisable, or exercisable within 60 days of
the date of this table, beneficially owned by each of the directors and
nominees for election as director, the executive officers named in the Summary
Compensation Table and all directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------------ -------------------- --------
<S> <C> <C>
Barbara R. Allen.............................. 0 *
Linda Walker Bynoe............................ 0 *
William M. Diefenderfer III................... 44,586(1) *
F. Philip Handy............................... 3,400,000(2) 29.0%
William E. Mayer.............................. 32,148 *
Arthur J. Nagle............................... 31,885 *
Stephen Ottmann............................... 4,348(3) *
Thomas J. Walters............................. 0 *
Samuel Zell................................... 3,400,000(2) 29.0%
Richard E. Rivera............................. 75,000 *
William R. Kuntz, Jr. ........................ 65,135(4) *
Stephen J. McGillin........................... 24,417(5) *
Randall P. McNamara........................... 54,099(6) *
James C. Wendler.............................. 8,712(7) *
Richard D. Tipton............................. 6,723(8) *
All directors and executive officers as a
group
(15 persons)................................. 3,667,705(9) 31.1%
</TABLE>
- --------
* Less than one percent.
(1) Includes 29,011 shares owned directly by Mr. Diefenderfer, 3,255 shares
owned by Mr. Diefenderfer in an individual retirement account, 720 shares
owned in a supplemental executive retirement plan, 2,100 shares owned by
an independent trustee for the benefit of Mr. Diefenderfer's two sons, and
9,500 shares owned by his wife. Mr. Diefenderfer disclaims beneficial
ownership of the 9,500 shares owned by his wife.
(2) Includes 1,860,000 shares owned by Samstock, L.L.C., 705,808 shares owned
by Samstock/ZFT, L.L.C., 428,591 shares owned by Chart House Investors,
L.L.C., 103,539 shares owned by F. Philip Handy, as Trustee of the Blaine
Trust, 4,137 shares owned by Robert Saltsman, 20,708 shares owned by
Thomas Gaffney and Donna Gaffney, as tenants by the entirety, 75,000
shares owned by Richard Rivera and 202,217 owned by MelChart, LLC.
According to the Stockholder's Agreement among these noted entities, each
entity/Stockholder appointed Samstock, L.L.C. its true and lawful attorney
and proxy during the period of said Stockholder's Agreement, to appear
for, represent, and vote the shares held by each Stockholder, as defined
in the Stockholder's Agreement, subject to the voting restrictions
contained in said Agreement. The Stockholder's Agreement also reflects an
option for Mr. Handy to acquire 163,581 of the shares owned by Chart House
Investors, L.L.C. Mr. Handy and Mr. Zell have disclaimed beneficial
ownership of 3,038,541 and 834,192 shares, respectively.
(3) Includes 4,348 shares owned indirectly by Mr. Ottmann as trustee under a
revocable trust, which owns a 2.15% non-managing member interest in
MelChart, LLC, which owns 202,217 shares subject to the Stockholder's
Agreement referenced in footnote (2) above.
(4) Includes 59,135 shares owned directly by Mr. Kuntz and 6,000 shares owned
by his children.
(5) Includes 23,732 shares owned directly by Mr. McGillin and 685 shares owned
by Mr. McGillin in an individual retirement account.
23
<PAGE>
(6) Includes 8,111 shares owned directly by Mr. McNamara 2,866 shares which
Mr. McNamara has a right to control under the Company's 401-k plan, 522
shares which Mr. McNamara has a right to control under the Company's
former thrift plan and 42,600 shares which Mr. McNamara has the right to
acquire upon exercise of exercisable stock options.
(7) Includes 1,201 shares owned directly by Mr. Wendler, 1,411 shares which
Mr. Wendler has a right to control under the Company's 401-k plan and
6,100 shares which Mr. Wendler has the right to acquire upon exercise of
exercisable stock options.
(8) Includes 123 shares owned directly by Mr. Tipton and 6,600 shares which
Mr. Tipton has the right to acquire upon exercise of exercisable stock
options.
(9) Includes a total of 55,300 shares which executive officers of the Company
have the right to acquire upon the exercise of exercisable stock options.
Includes 164,552 shares held by three former executives, representing 1.4%
of the Company's Common Stock.
SECTION 16 BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and persons who own more than ten percent of a
registered class of the Company's equity securities ("Reporting Persons") to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission (the "SEC"). Reporting Persons are required by SEC
regulations to furnish the Company with copies of all Section 16(a) reports
they file.
Based solely on its review of the copies of such forms received by it and
written representations from certain Reporting Persons, the Company believes
that during 1997 its Reporting Persons complied with all requirements
applicable to them.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP was the Company's public accountant for the year ended
December 29, 1997. During the past fiscal year, the Company also engaged
Arthur Andersen LLP to render certain nonaudit professional services involving
assistance on tax planning matters and general consultations.
The appointment of auditors is approved annually by the Board of Directors,
which is based in part on the recommendations of the Audit Committee. In
making its recommendations, the Audit Committee reviews both the audit scope
and estimated audit fees for the coming year. Arthur Andersen LLP has been
selected by the Audit Committee and approved by the Board of Directors for the
current year. Stockholder approval is not sought in connection with this
selection. Each professional service performed by Arthur Andersen LLP during
fiscal 1997 was approved, and the possible effect of such service on the
independence of such firm was considered, by the Audit Committee.
Representatives of Arthur Andersen LLP will be present at the Annual Meeting
and will be given an opportunity to make a statement if they desire to do so
and will respond to appropriate questions from stockholders.
STOCKHOLDER PROPOSALS AND NOMINATIONS
Any stockholder intending to submit to the Company a proposal for inclusion
in the Company's Proxy Statement and proxy for the 1999 Annual Meeting must
submit such proposal so that it is received by the Company no later than
December 1, 1998. Stockholder proposals should be submitted to the Secretary
of the Company. No stockholder proposals were received for inclusion in this
proxy statement.
Pursuant to the Company's Bylaws, no nomination for election of directors
will be considered properly brought before the next annual meeting by a
stockholder unless notice is received by the Company not fewer
24
<PAGE>
than ninety (90) days prior to the meeting. Unless fewer than forty-five (45)
days' notice or prior public disclosure of the date of the Annual Meeting is
given or made to Stockholders, no business proposal will be considered
properly made at the next annual meeting by a stockholder, unless notice is
received by the Company not less than thirty-five (35) days prior to the
meeting. All notices received must contain certain information required by the
Bylaws and SEC rules and regulations.
MISCELLANEOUS
The Company knows of no matters other than the foregoing to be brought
before the Annual Meeting, but if any other matter properly comes before the
meeting or any adjournment thereof, it is the intention of the persons named
in the accompanying form of Proxy to vote the proxies in accordance with their
best judgment.
25
<PAGE>
ANNUAL REPORT TO STOCKHOLDERS
The Company's Annual Report for the year ended December 29, 1997 is being
mailed to stockholders together with this Proxy Statement.
THE COMPANY WILL SEND TO STOCKHOLDERS UPON WRITTEN REQUEST, WITHOUT CHARGE,
A COPY OF THE COMPANY'S 1997 ANNUAL REPORT ON FORM 10-K (WITHOUT EXHIBITS) AND
ANY DOCUMENTS INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT, FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. REQUESTS FOR COPIES OF DOCUMENTS
SHOULD BE DIRECTED TO THE SECRETARY, CHART HOUSE ENTERPRISES, INC., 115 S.
ACACIA AVENUE, SOLANA BEACH, CA 92075.
STOCKHOLDERS ARE URGED TO IMMEDIATELY MARK, DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ENVELOPE PROVIDED, TO WHICH NO POSTAGE NEED BE AFFIXED
IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors
LOGO
Susan Obuchowski
Secretary
Solana Beach, California
April 3, 1998
26
<PAGE>
ANNEX I
STOCK OPTION AGREEMENT
BETWEEN CHART HOUSE ENTERPRISES, INC. AND
F. PHILIP HANDY
<PAGE>
CHART HOUSE ENTERPRISES, INC.
STOCK OPTION AGREEMENT
This Agreement is made as of the 19th day of May, 1997, by and between CHART
HOUSE ENTERPRISES, INC., a Delaware corporation (the "Company"), and F. PHILIP
HANDY (the "Optionee").
1. Grant of Option. The Company hereby grants to the Optionee the right and
option to purchase from the Company all or any part of an aggregate of 100,000
shares (the "Shares") of the Company's common stock, par value $.01 per share
("Common Stock"), at the purchase price of $6.75 per share, on the terms and
conditions set forth herein (the "Option"). The Option is granted pursuant to
resolutions adopted by the Board of Directors of the Company at its meeting
held on May 19, 1997, and is granted separate and apart from the Company's
existing stock option plans. The Option is not intended to be, and will not be
treated as, an incentive stock option within the meaning of Section 422A of
the Internal Revenue Code of 1986, as amended. The number of shares with
respect to which this Option is exercisable, and the purchase price with
respect to each share to be acquired pursuant to the exercise of the Option,
each are subject to adjustment under certain circumstances, as more fully set
forth in Section 7 hereof. The term "Common Stock" as used herein shall
include any other class of stock or other securities resulting from such
adjustment.
2. Expiration of Option. The Option, to the extent that it has not
previously been exercised, shall expire at 11:59 p.m. on May 19, 2007, being
ten (10) years from the date of grant of this Option, except that the term of
this Option is subject to earlier termination pursuant to Section 11 of this
Agreement.
3. Exercise of Option. Except as provided below in this section, the Option
may not be exercised during the first six (6) months after its grant. On
November 19, 1997, six (6) months after the Option grant, or upon stockholder
approval in accordance with Section 11 below, whichever occurs later, the
Option shall become exercisable as to one hundred percent (100%) of the total
number of Shares subject thereto.
Notwithstanding the foregoing, if during the term of the Option a "Change of
Control" of the Company occurs, the Board of Directors may provide for the
acceleration of the right to exercise the Option prior to the anticipated
effective date of any such transaction. For purposes of this Agreement, the
term "Change in Control" shall be deemed to have occurred if (i) the
percentage of the voting stock of the Company owned by one or more persons
("person" as that term is defined for purposes of Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended) or entities becomes more than
fifty percent (50%) of the outstanding shares of Common Stock (determined on
the basis of all outstanding stock of the Company and not just with regard to
a percentage increase of such persons or entities over their prior interest),
whether such increase occurs by way of a merger, consolidation, redemption,
direct transfer, or sale of stock or otherwise, (ii) as a result of or in
connection with any tender or exchange offer, any contested election of
directors or any combination thereof, the persons who were directors of the
Company immediately before such tender or exchange offer, contested election
or any combination thereof cease to constitute a majority of the Board, (iii)
the stockholders of the Company approve a plan of complete liquidation of the
Company, or (iv) the stockholders of the Company approve an agreement for the
sale or disposition of all or substantially all of the assets of the Company.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because fifty percent (50%) or more of the combined voting power
of the Company's then outstanding securities is acquired by (A) at trustee or
other fiduciary holding securities under one or more employee benefit plans
maintained by the Company or any of its Subsidiaries or (B) any company which,
immediately prior to such acquisition, is owned directly or indirectly by the
stockholders of the Company in the same proportion as their ownership of stock
in the Company immediately prior to such acquisition.
Notwithstanding anything to the contrary set forth in this definition, if a
transaction that would otherwise create or result in a "Change in Control" of
the Company pursuant to subsection (ii) above is approved by the affirmative
vote of not less than two thirds of the members of the Board, who are members
of the Board
A-1-1
<PAGE>
immediately prior to such transaction, then no Change in Control of the
Company shall be deemed to have occurred for the purposes of this Agreement.
In the event of the termination of Board service for any reason other than
death or permanent and total disability, the Optionee shall have three (3)
months after the effective date of termination within which to exercise the
Option to the extent it has become exercisable on or before the date of
termination, and the unvested portion of the Option shall terminate on the
date of termination of board service.
In the event of the death or permanent and total disability of the Optionee,
the Option shall terminate as to any unvested portion thereof and the
Optionee, or the Optionee's heir(s) or legal representative(s), as the case
may be, shall have one (1) year from the date of the Optionee's death, or the
date of permanent and total disability, within which to exercise that portion
of the Option, if any, that has vested on or before the date of death or the
date of permanent and total disability, as the case may be.
4. Option Exercise Procedures. Each exercise of the Option shall be by means
of a written notice of exercise delivered to the Secretary of the Company at
its principal executive office, specifying the number of Shares to be
purchased and accompanied by payment in cash or by certified or cashier's
check payable to the order of the Company of the full purchase price of the
Shares to be purchased or in whole or in part by the surrender to the Company
of shares of previously acquired Common Stock which shall be valued at the
fair market value on the date this Option is exercised. For purposes of this
Agreement, "fair market value" of stock means, as of any given date, (a) the
closing sale price of a share of the Company's Common Stock on the principal
exchange on which shares of Common Stock are then trading, if any, on such
date, or if shares are not traded on such date, then on the closest preceding
date on which a trade occurred, or (ii) if the Company's Common Stock is not
traded on an exchange, the mean between the closing representative bid and
asked prices for the Common Stock on such date as reported by NASDAQ, or, if
NASDAQ is not then in existence, by its successor quotation system, or (iii)
if the Company's Common Stock is not publicly traded, the fair market value as
determined by the Company's Compensation Committee of the Board of Directors
acting in good faith and considering all relevant and available information
and data. Upon receipt of the notice and purchase price in proper form, and of
a written unqualified representation and warranty of the Optionee to the
effect that the Optionee is acquiring the Shares specified in the notice for
his own account for investment and not with a view to, or for sale in
connection with, the distribution of any Shares, and not for resale or
redistribution, in a form approved by the Company, the Company shall make
immediate delivery of the Shares issuable to the Optionee provided that, if
any law or regulation requires the Company to take any action with respect to
the Shares specified in the notice before issuance thereof, then the date of
delivery of the Shares shall be extended for the period required by the
Company to take the action.
5. Investment Representation. By accepting this Option, the Optionee
represents and warrants that none of the Shares purchased upon exercise of the
Option will be distributed in violation of the applicable federal and state
laws and regulations, and the Optionee shall furnish evidence satisfactory to
the Company (including a written and signed representation letter and a
consent to be bound by all transfer restrictions imposed by applicable law,
legend condition, or otherwise) to that effect, prior to delivery of the
purchased Shares.
6. Acknowledgments by Optionee. The Optionee acknowledges that:
(a) The issuance of Shares pursuant to the exercise of the Option, and
any resale of the Shares, may only be effected in compliance with
applicable state and federal laws and regulations;
(b) The Optionee is not entitled to any rights as a stockholder with
respect to any Shares issuable hereunder until the Optionee becomes a
stockholder of record;
(c) Upon termination of the Optionee's board service, including death or
permanent and total disability, this Option terminates, subject to exercise
under certain circumstances within a limited period of time, as provided in
Section 3 above; and
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<PAGE>
(d) The Shares subject hereto may be adjusted in the event of certain
changes in the capital structure of the Company, as provided in Section 7
below.
7. Adjustments. In the event that each of the outstanding shares of Common
Stock of the Company are hereafter changed into or exchanged for cash or a
different number or kind of shares of stock or other securities of the Company
or another corporation by reason of a reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, stock dividend or
combination of shares, then for each share of Common Stock of the Company
subject to this Agreement there shall be substituted and exchanged therefor
the number and kind of shares of stock or other securities into which each
outstanding share of Common Stock of the Company shall be so changed or
exchanged to the end that the proportionate interest of the holder of the
Option shall, to the extent practicable, be maintained as before the
occurrence of such event. Such adjustment in the outstanding Option shall be
made without change in the total price applicable to the unexercised portion
of the Option but with a corresponding adjustment in the exercise price per
Share.
8. Restriction on Disposition. The Option may not be sold, pledged, assigned
or transferred in any manner otherwise than by will or the laws of descent or
distribution, and may be exercised during the lifetime of the Optionee only by
the Optionee. Any attempt to transfer the Option or any interest therein by
assignment, pledge, hypothecation or otherwise, except as herein provided, or
the levy of any execution, attachment, or similar process upon the Option,
shall be null and void and without effect. The Shares issued upon exercise of
the Option will not be registered under the Securities Act of 1933, as amended
(the "Act") in reliance upon the investment representation of the Optionee and
no interest in the Shares may be transferred except in conformity to the
provisions of the Act and the rules and regulations promulgated thereunder.
9. Restrictive Legend on Stock Certificates Issued upon Exercise of the
Option. A copy of this Agreement shall be filed with the Secretary of the
Company. The Company will cause (or instruct the Transfer Agent for its shares
to cause) the following restrictive legend to be imprinted upon all stock
certificates issued to the Optionee upon exercise of the Option:
"The shares represented by this certificate were issued as provided in a
Stock Option Agreement dated May 19, 1997, by and between the holder of
this certificate and Chart House Enterprises, Inc. and are subject to the
restrictions on transfer contained therein and in an investment
representation executed by the holder of this certificate. Copies of the
Agreement and of the investment representation are on file in the office of
the Secretary of Chart House Enterprises, Inc."
10. Date of Grant. The date of grant of the Option is the date of this
Agreement.
11. Stockholder Approval. Notwithstanding any provision of this Agreement to
the contrary, the Option shall not be exercisable prior to the time when this
Agreement is approved by the stockholders of the Company representing a
majority of the votes cast at a stockholders meeting so long as the holders of
a majority of the outstanding shares vote at the meeting. This Agreement will
be submitted for the approval of the Company's stockholders not later than the
Company's next annual meeting of stockholders. If this Agreement is not
approved by the stockholders on or before December 31, 1998, this Option shall
be canceled and become null and void.
12. No Right to Continue as Director. Nothing contained in this Agreement
will confer upon Optionee any right to continue as a member of the Board of
Directors or affect the right of the Company, the Board of Directors or the
stockholders to terminate the directorship of Optionee at any time with or
without cause.
13. Tax Withholding. The Company shall be entitled to require payment in
cash of any sums required by federal, state or local tax law to be withheld
with respect to the exercise of the Option.
14. Securities Laws Requirements. This Option and the issuance and delivery
of shares of Common Stock upon exercise of the Option are subject to
compliance with all applicable federal and state laws, rules and
A-1-3
<PAGE>
regulations (including, but not limited to, state and federal securities laws
and federal margin requirements) and to such approvals by any listing,
regulatory or governmental authority as may, in the opinion of counsel for the
Company, be necessary or advisable in connection therewith. The Company shall
be under no obligation to register any of the Shares covered by this Option
with the Securities and Exchange Commission.
15. Headings. The section headings are contained herein for convenience only
and are not to serve as a basis for interpretation or construction of this
Agreement.
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
17. Complete Agreement. This Agreement comprises the entire understanding
between the parties and may not be modified or terminated orally.
This Agreement has been executed as of the day and year first set forth
above.
CHART HOUSE ENTERPRISES, INC.
By: _________________________________
Name: _______________________________
Its: ________________________________
OPTIONEE:
By: _________________________________
F. Philip Handy
A-1-4
<PAGE>
ANNEX II
STOCK OPTION AGREEMENT
BETWEEN CHART HOUSE ENTERPRISES, INC. AND
THOMAS J. WALTERS
<PAGE>
CHART HOUSE ENTERPRISES, INC.
STOCK OPTION AGREEMENT
AGREEMENT dated as of March 4, 1998 by and between Chart House Enterprises,
Inc., a Delaware corporation (the "Company") and Thomas J. Walters (the
"Optionee").
W I T N E S S E T H:
--------------------
1. Grant of Option. The Company hereby grants to the Optionee, contingent
upon shareholder approval, the right and option to purchase from the Company
all or any part of an aggregate of 160,000 shares (the "Shares") of the
Company's common stock ("Common Stock") at the purchase price of $7.00 per
share, on the terms and conditions set forth herein (the "Option"). The Option
is granted pursuant to resolutions adopted at a meeting of the Performance
Compensation Committee (the "Committee") of the Board of Directors of the
Company on March 4, 1998 contingent upon shareholder approval and is granted
separate and apart from the Company's 1996 Stock Option Plan or any other
stock option plan. The Option is not intended to be and will not be treated
as, an incentive stock option within the meaning of Section 422A of the
Internal Revenue Code of 1986, as amended (the "Code"). The number of Shares
with respect to which this Option is exercisable, and the purchase price with
respect to each Share to be acquired pursuant to the exercise of the Option,
each are subject to adjustment under certain circumstances, as more fully set
forth in the Plan and in Section 7 hereof entitled "Adjustments." The term
"Common Stock" as used herein shall include any other class of stock or other
securities resulting from such adjustment. This Agreement shall be null and
void and shall terminate if shareholder approval of the grant of the Option is
not obtained at the next shareholders' meeting.
2. Duration of Option. The Option herein granted, to the extent not earlier
exercised, will expire at 11:59 p.m. on March 4, 2008, being ten (10) years
from the date of grant, except that the term of this Option is subject to
earlier termination pursuant to Section 3 of this Agreement, and shall
automatically expire if shareholder approval of the grant of this Option is
not obtained at the next shareholders' meeting.
3. Exercise of Option; Vesting Schedule.
(a) The Vested Portion (as hereinafter defined) of the Option may be
exercised to the extent not previously exercised in whole or in part at any
time, or from time to time, prior to the expiration of the Option.
(b) The "Vested Portion" of the Option means the percentage (set forth in
the table below) of the total number of Shares specified in Section 1 above,
for which the Option is exercisable. The Vested Portion shall be the greater
of the amounts determined by the following vesting schedules:
(i) VESTING SCHEDULE 1:
<TABLE>
<CAPTION>
VESTED
PERIOD ENDING ON DATE PORTION
--------------------- -------
<S> <C>
(aa) One Year After
Date of Grant.................................. 25%
(bb) Two Years After
Date of Grant.................................. 50%
(cc) Three Years After
Date of Grant.................................. 75%
(dd) Four Years After
Date of Grant.................................. 100%
</TABLE>
A-2-1
<PAGE>
(ii) VESTING SCHEDULE 2:
<TABLE>
<CAPTION>
VESTED
PERIOD PORTION
------ -------
<S> <C>
(aa) The closing price of the Company's Common Stock, as
reported on the principal exchange on which the Common
Stock is traded, is maintained above $10.00 per share
for 20 or more consecutive trading days................. 33 1/3%
(bb) The closing price of the Company's Common Stock, as
reported on the principal exchange on which the Common
Stock is traded, is maintained above $15.00 per share
for 20 or more consecutive trading days................. 66 2/3%
(cc) The closing price of the Company's Common Stock, as
reported on the principal exchange on which the Common
Stock is traded, is maintained above $20.00 per share
for 20 or more consecutive trading days................. 100%
</TABLE>
(c) This Option shall terminate prior to the expiration of its term upon the
Optionee's Termination of Employment (as defined below) and in the event of
Termination of Employment of Optionee, the Optionee may exercise this Option
to the extent of the Vested Portion of the Option as of the date of
Termination of Employment as follows:
(1) In the case of Termination of Employment due to permanent and total
disability within the meaning of Section 22(e)(3) of the Code, or death,
the earlier of the scheduled expiration date set forth in Section 2 above
or one (1) year following such Termination of Employment;
(2) In the case of Termination of Employment due to retirement, the
earlier of the scheduled expiration date set forth in Section 2 above or
ninety (90) days from the date of such Termination of Employment;
(3) In the case of Termination of Employment for any reason other than
retirement, permanent and total disability, death or resulting from a
discharge for good cause (as determined by the Committee in its sole
discretion), the earlier of the scheduled expiration date set forth in
Section 2 above or ninety (90) days following such Termination of
Employment;
(4) In the case of Termination of Employment resulting from a discharge
for good cause (as determined by the Committee in its sole discretion), the
date of such Termination of Employment.
"Termination of Employment" shall mean the time when the employee-employer
relationship between the Optionee and the Company or any subsidiary
corporation ("Subsidiary") is terminated for any reason, including, but not by
way of limitation, a termination by resignation, discharge, death, disability
or retirement; but excluding (i) a termination where there is a simultaneous
reemployment, continuing employment of Optionee by the Company or any
Subsidiary, (ii) at the discretion of the Committee, a termination which
results in a temporary severance of the employee-employer relationship, and
(iii) at the discretion of the Committee, a termination which is followed by
the simultaneous establishment of a consulting relationship by the Company or
a Subsidiary with the Optionee. The Committee, in its absolute discretion,
shall determine the effect of all matters and questions relating to
Termination of Employment, including, but not by way of limitation, the
question of whether a Termination of Employment resulted from a discharge for
good cause, and all questions of whether a particular leave of absence
constitutes a Termination of Employment. Notwithstanding any other provision
of this Agreement, the Company or any Subsidiary has an absolute and
unrestricted right to terminate Optionee's employment at any time for any
reason whatsoever, with or without cause, except to the extent expressly
provided otherwise in writing.
(d) If, during the term of this Option, in the event of a "Change in
Control" of the Company (as defined below) or in the event of a
reorganization, merger, consolidation, recapitalization, reclassification,
stock split-up, stock dividend or combination or other adjustment or event
which results in shares of Common Stock being exchanged for or converted into
cash, securities or other property, this Option shall be exercisable as to all
the Shares covered hereby, notwithstanding that this Option may not yet have
become fully exercisable under Section 3(b); provided, however, that this
acceleration of exercisability shall not take place if: this Option becomes
unexercisable under Section 3(c) prior to the effective date of such event.
A-2-2
<PAGE>
"Change of Control" shall be deemed to have occurred if (i) the percentage
of the voting stock of the Company owned by one or more persons ("person" as
that term is defined for purposes of Sections 13(d) and 14(d) of the Exchange
Act) or entities becomes more than fifty percent (50%) of the outstanding
shares of Common Stock (determined on the basis of all outstanding stock of
the Company and not just with regard to a percentage increase of such persons
or entities over their prior interest), whether such increase occurs by way of
a merger, consolidation, redemption, direct transfer, or sale of stock or
otherwise, (ii) as a result of or in connection with any tender or exchange
offer, any contested election of directors or any combination thereof, the
persons who were directors of the Company immediately before such tender or
exchange offer, contested election or combination thereof cease to constitute
a majority of the Board, (iii) the stockholders of the Company approve a plan
of complete liquidation of the Company, or (iv) the stockholders of the
Company approve an agreement for the sale or disposition of all or
substantially all of the assets of the Company.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because fifty percent (50%) or more of the combined voting power
of the Company's then outstanding securities is acquired by (A) a trustee or
other fiduciary holding securities under one or more employee benefit plans
maintained by the Company or any of its Subsidiaries or (B) any Company which,
immediately prior to such acquisition, is owned directly or indirectly by the
stockholders of the Company in the same proportion as their ownership of stock
in the Company immediately prior to such acquisition.
Notwithstanding anything to the contrary set forth in this definition, if a
transaction that would otherwise create or result in a "Change in Control" of
the Company pursuant to subsection (ii) above is approved by the affirmative
vote of not less than two thirds of the members of the Board, who are members
of the Board immediately prior to such transaction, then no Change in Control
of the Company shall be deemed to have occurred for the purposes of this
Agreement.
4. Option Exercise Procedure. The Option granted hereunder may be exercised
in whole or in part, and may be exercised in part from time to time, all
subject to the limitations on exercise set forth in the preceding section.
Exercise shall be accomplished by compliance with all applicable rules
established by the Committee and by delivery to the Company of a timely
written notice of election to exercise in the form attached hereto as Exhibit
"1," which shall be irrevocable upon delivery to the principal office of the
Company, and addressed to the attention of the Committee or to the Secretary
of the Company, accompanied by payment of the purchase price for the Shares
with respect to which the Option is exercised. The minimum number of Shares
with respect to which this Option may be exercised at any one time is fifty
(50), except with respect to the final exercise of this Option this minimum
shall not apply. In no event may this Option be exercised for any number of
Shares that would require the issuance of anything other than whole Shares.
5. Payment of Option Price. At the time of exercise, the purchase price of
the Shares as to which the Option is exercised shall be tendered in full to
the Company. The purchase price of the Shares shall be paid:
(a) In cash (including by check) for the Shares with respect to which the
Option or portion thereof is exercised; or
(b) With the consent of the Committee, through the delivery of shares of
Common Stock owned by Optionee, duly endorsed for transfer to the Company
with a Fair Market Value on the date of delivery equal to the aggregate
exercise price of the Option or exercised portion thereof; or
(c) With the consent of the Committee, through the surrender of shares of
Common Stock then issuable upon exercise of the Option having a Fair Market
Value on the date of exercise of the Option equal to the aggregate exercise
price of the Option or exercised portion thereof; or
(d) With the consent of the Committee, through the delivery of a full
recourse promissory note bearing interest (at no less than the rate as
shall then preclude the imputation of interest under the Code) and payable
upon those terms as may be prescribed by the Committee. The Committee may
also prescribe the form of the note and the security to be given for the
note. The Option may not be exercised, however, by delivery
A-2-3
<PAGE>
of a promissory note or by a loan from the Company when or where the loan
or other extension of credit is prohibited by law; or
(e) With the consent of the Committee any combination of the
consideration provided in the foregoing subparagraphs (a), (b), (c) and
(d).
6. Investment Representations. Optionee hereby represents, warrants and
covenants that none of the Shares purchased upon exercise of the Option will
be distributed in violation of applicable federal and state laws and
regulations. Upon exercise of the Option, the Optionee shall be deemed to have
reaffirmed, as of the date of exercise, the representations made herein. The
Committee may, in its absolute discretion, take whatever additional actions it
deems appropriate to insure the observance and performance of such
representations and agreements of Optionee and to effect compliance with
applicable federal and state securities laws and regulations.
7. Acknowledgments by Optionee. The Optionee acknowledges that:
(a) The issuance of Shares pursuant to the exercise of the Option, and
any resale of the Shares, may only be effected in compliance with
applicable state and federal laws and regulations;
(b) The Optionee is not entitled to any rights as a stockholder with
respect to any Shares issuable hereunder until the Optionee becomes a
stockholder of record;
(c) Upon termination of employment of the Optionee, including death or
permanent and total disability, this Option terminates, subject to exercise
under certain circumstances within a limited period of time, as provided in
Section 3 above; and
(d) The Shares subject hereto may be adjusted in the event of certain
changes in the capital structure of the Company, as provided in Section 8
below.
8. Adjustments. In the event that each of the outstanding shares of Common
Stock of the Company are hereafter changed into or exchanged for cash or a
different number or kind of shares of stock or other securities of the Company
or another corporation by reason of a reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, stock dividend or
combination of shares, then for each share of Common Stock of the Company
subject to the Plan (whether or not such shares are at the time subject to
outstanding Options) there shall be substituted and exchanged therefor the
number and kind of shares of stock or other securities into which each
outstanding share of Common Stock of the Company shall be so changed or
exchanged to the end that the proportionate interest of the holder of the
Option shall, to the extent practicable, be maintained as before the
occurrence of such event. Such adjustment in the outstanding Option shall be
made without change in the total price applicable to the unexercised portion
of the Option but with a corresponding adjustment in the exercise price per
Share. If any of the events enumerated in the first sentence of this Paragraph
occur, the target prices of the Common Stock set forth in Vesting Schedule 2
under Paragraph 3(b) hereof will be adjusted to new prices which are
equivalent to those set forth on Vesting Schedule 2 as of the date hereof.
9. Conditions to Issuance of Stock Certificates. The shares of stock
deliverable upon the exercise of the Option, or any portion thereof, may be
either previously authorized but unissued shares or issued shares which have
then been reacquired by the Company. Such shares shall be fully paid and non-
assessable. The Company shall not be required to issue or deliver any
certificate or certificates for Shares of Common Stock purchased upon the
exercise of the Option or portion thereof prior to fulfillment of all of the
following conditions: (a) the admission of the Shares to listing on all stock
exchanges, if any, on which that class of stock is then listed; (b) the
completion of any registration or other qualification of the Shares under any
state or federal law or under the rulings or regulations of the Securities and
Exchange Commission or any other governmental regulatory body, which the
Committee shall, in its absolute discretion, deem necessary or advisable; (c)
the obtaining of any approval or other clearance from any state or federal
governmental agency which the Committee shall, in its absolute discretion,
determine to be necessary or advisable; (d) the payment to the Company of all
amounts which it is required to withhold under federal, state or local law in
connection with the exercise of the Option; and (e) the lapse of such
reasonable period of time following the exercise of the Option as the
Committee may from time to time establish for reasons of administrative
convenience.
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<PAGE>
10. Nontransferability. This Option shall not be transferable other than by
will or by the laws of descent and distribution. During the lifetime of the
Optionee, this Option shall be exercisable by the Optionee only. This Option
shall not be pledged or hypothecated in any way and shall not be subject to
execution, attachment, or similar process, without the express written consent
of the Committee.
11. Rights of Stockholder. The Optionee shall have no rights as a stockholder
with respect to any Shares subject to this Option prior to the date of issuance
to him of a certificate or certificates for those Shares.
12. Consideration to Company. In consideration of the granting of this Option
by the Company, the Optionee agrees to render faithful and efficient services
as an employee to the Company, a parent corporation or a subsidiary corporation
for a period of at least one (1) year from the date this Option is granted.
Nothing in this Agreement shall confer upon the Optionee any right to continue
as an employee to the Company, any parent corporation or any subsidiary
corporation, or shall interfere with or restrict in any way the rights of the
Company, its parent corporations and its Subsidiary Corporations, which are
hereby expressly reserved, to discharge the Optionee at any time for any reason
whatsoever, with or without cause.
13. Compliance with Law and Regulations. This Option and the obligation of
the Company to sell and deliver shares shall be subject to applicable federal
and state laws, rules and regulations, and to such approvals by any government
or regulatory agency as may be required.
14. Tax Withholding. The Company shall be entitled to require payment in cash
of any sums required by federal, state or local tax law to be withheld with
respect to the exercise of the Option.
15. Headings. The section headings are contained herein for convenience only
and are not to serve as a basis for interpretation or construction of this
Agreement.
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
17. Notices. Any notice hereunder to the Company shall be addressed to Chart
House Enterprises, Inc., 115 South Acacia Avenue, Solana Beach, California
92075, Attention: Secretary. Any notice hereunder to the Optionee shall be
addressed to him at the address set forth below, subject to the right of either
party to designate at any time hereafter in writing a different address.
18. Complete Agreement. This Agreement comprises the entire understanding
between the parties and may not be modified or terminated orally.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer and the Optionee, in acceptance of the above-
mentioned Option, subject to the terms of the Plan and this Agreement, has
executed this Agreement, all as of the day and year first above written.
CHART HOUSE ENTERPRISES, INC. ________________________, Optionee
By: _______________________________________ Address of Optionee:
Title: ____________________________________
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<PAGE>
ANNEX III
CHART HOUSE ENTERPRISES, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
CHART HOUSE ENTERPRISES, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose of the Plan. The Plan is intended as an incentive and to
encourage stock ownership by all eligible employees of Chart House
Enterprises, Inc., a Delaware corporation (the "Company"), and the Company's
Subsidiaries, so that they may share in the fortunes of the Company by
acquiring or increasing their proprietary interest in the Company. The Plan is
designed to encourage eligible employees to remain in the employ of the
Company. It is intended that options issued pursuant to this Plan shall
constitute options issued pursuant to an "employee stock purchase plan" within
the meaning of Section 423 of the Internal Revenue Code of 1986, as amended
(the "Code").
2. Definitions.
2.1 "Base Pay" means regular base compensation or straight time earnings.
2.2 "Common Stock" means the Company's Common Stock, $.01 par value.
2.3 "Fair Market Value" means the closing price for the Common Stock on a
national stock exchange or, if the stock is not traded on an exchange, the
last sale price for the Common Stock as reported on the NASDAQ National
Market.
2.4 "Investment Account" shall mean the separate account for each
participating employee reflecting the number of shares of Common Stock
purchased under the terms of the Plan that have not been withdrawn by the
employee.
2.5 "Offering Date" means the commencement date of the offering if such date
is a regular business day or the first business day following such
commencement date. A different date may be set by resolution of the Board of
Directors of the Company (the "Board").
2.6 "Parent" means any corporation, other than the Company, in an unbroken
chain of corporations ending with the Company if each of the corporations
other than the Company owns stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
2.7 "Payroll Deduction Account" shall mean the funds accumulated with
respect to an individual employee as a result of deductions from his or her
paycheck for the purpose of purchasing stock under this Plan. The funds
allocated to an employee's Payroll Deduction Account shall remain the property
of the respective employee at all times during each offering.
2.8 "Plan Year" means the calendar year.
2.9 "Subsidiary" or "Subsidiaries" means any corporation or corporations
other than the Company in an unbroken chain of corporations beginning with the
Company if each of the corporations other than the last corporation in the
unbroken chain owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
3. Employees Eligible to Participate. All employees of the Company and its
Subsidiaries that, from time to time, adopt the Plan with the approval of the
Plan Administrator shall be eligible to participate in the Plan with respect
to each offering, provided each of such employees:
(a) is customarily employed, as of the applicable Offering Date, for more
than 20 hours per week;
(b) has been employed, as of the applicable Offering Date, for at least 6
months;
(c) is employed on the applicable Offering Date and has a timely
completed Enrollment Agreement in effect for that offering; and
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(d) does not own, immediately after the right to purchase Shares under
the Plan is granted, stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the Company
or a Subsidiary. In determining stock ownership for purposes of the
preceding sentence, the rules of Section 424(d) of the Code shall apply and
stock which the employee may purchase under outstanding options shall be
treated as stock owned by the employee.
4. Offerings. The first offering under this Plan shall commence on January
1, 1999 or on such later date as may be specified by the Company, and
terminate on June 30, 1999. Thereafter, offerings shall commence on July 1 and
terminate on the following December 31 and commence on January 1 and terminate
on the following June 30 until the Plan is terminated by the Board or no
additional shares of Common Stock of the Company are available for purchase
under the Plan.
5. Price. The purchase price per share shall be 85% of the average Fair
Market Value of the Common Stock during the offering, determined by averaging
the Fair Market Value of the Common Stock on each business day of the
offering, provided that the purchase price shall not be less than the lesser
of (1) 85% of the Fair Market Value of the Common Stock on the Offering Date;
and (2) 85% of the Fair Market Value of the Common Stock on the last business
day of the offering.
6. Stock Subject to the Plan. The stock subject to the plan shall be shares
of the Company's authorized but unissued Common Stock or shares of Common
Stock reacquired by the Company, including shares purchased in the open
market. The aggregate number of shares which may be issued pursuant to the
Plan is 250,000, subject to increase or decrease by reason of stock split-ups,
reclassifications, stock dividends, changes in par value and the like.
7. Changes in Capital Structure.
7.1 In the event that the outstanding shares of Common Stock of the Company
are hereafter increased or decreased or changed into or exchanged for a
different number or kind of shares or other securities of the Company or of
another corporation, by reason of any reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, combination of shares, or
dividend payable in shares, appropriate adjustment shall be made by the Board
in the number or kind of shares as to which an option granted under this Plan
shall be exercisable, to the end that the participant's proportionate interest
shall be maintained as before the occurrence of such event. Any such
adjustment made by the Board shall be conclusive.
7.2 If the Company is not the surviving or resulting corporation in any
reorganization, merger, consolidation or recapitalization, then immediately
prior to such reorganization, merger, consolidation or recapitalization, the
offering shall end, and the payroll deductions credited to each participant's
Payroll Deduction Account under the Plan shall be applied to purchase shares
of Common Stock pursuant to Section 11.
8. Participation. Except as provided in Paragraph 13.1, an eligible employee
may become a participant by completing, signing and filing an enrollment
agreement ("Enrollment Agreement") and any other necessary papers with the
Company at least ten days prior to the commencement of the initial, or any
subsequent, offering in which he or she wishes to participate. Any timely
filed Enrollment Agreement shall be effective for all subsequent offerings
unless earlier terminated by the employee as provided in Section 14, or as
otherwise provided in Paragraph 13.1. Except to the extent provided in the
foregoing sentence, participation in one offering under the Plan shall neither
limit, or require, participation in any other offering.
9. Payroll Deductions.
9.1 At the time a participant files his or her Enrollment Agreement, he or
she shall elect to have deductions made from his or her pay at such regular
intervals as may be determined by the Committee during the time he or she is a
participant in an offering at not less than $10 or more than the dollar amount
or percentage of his or her Base Pay during the offering period that is
designated by the participant, subject to the limitations under Section 10.
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9.2 All payroll deductions made for a participant shall be credited to his
or her Payroll Deduction Account under the Plan. A participant may not make
any separate cash payment into such Payroll Deduction Account nor may payment
for shares be made other than by payroll deduction.
9.3 A participant may discontinue his or her payroll deductions or
participation in the Plan as provided in Section 14, but no other change can
be made during an offering and, specifically, except as provided in
Section 14, a participant may not alter the rate of his or her payroll
deductions for that offering.
10. Granting of Option.
10.1 On the Offering Date, this Plan shall be deemed to have granted to the
participant an option for as many full shares as he or she will be able to
purchase with the payroll deductions credited to his or her Payroll Deduction
Account during his or her participation in that offering; provided that the
maximum number of shares that a participant may purchase under an offering
shall be 5,000.
10.2 Notwithstanding the foregoing, no employee shall be granted an option
which permits his or her rights to purchase Common Stock under the Plan and
any similar employee stock purchase plans of the Company and, if applicable, a
Subsidiary and, if applicable, a Parent to accrue at a rate which exceeds
$25,000 of Fair Market Value of such stock (determined at the time such option
is granted) for each calendar year which such option is outstanding at any
time. The purpose of the limitation in the preceding sentence is to comply
with Section 423(b)(8) of the Code.
10.3 If the total number of shares for which options are to be granted on
any date in accordance with Paragraph 10.1 exceeds the number of shares than
available under the Plan (after deduction of all shares for which options have
been exercised or are then outstanding), the Company shall make a pro rata
allocation of the shares remaining available in as nearly a uniform manner as
shall be practical and as it shall determine to be equitable.
11. Exercise of Option. Each employee who continues to be a participant in
an offering on the last business day of that offering shall be deemed to have
exercised his or her option on such date and shall be deemed to have purchased
from the Company such number of full shares of Common Stock (subject to the
limitations under Section 10) reserved for the purpose of the Plan as his or
her accumulated payroll deductions on such date will pay for at the purchase
price. All such shares purchased shall be credited to the participant's
Investment Account. The Company, or its designated agent, shall hold in its
name or in the name of its nominee all certificates for shares purchased until
shares are withdrawn by the Participant under Section 13.
12. Employee's Rights as a Stockholder.
12.1 No participating employee shall have any right as a stockholder with
respect to any shares under the Plan until the shares have been purchased in
accordance with Section 11 above and the stock certificate has actually been
issued.
12.2 All cash dividends paid with respect to shares of Common Stock in a
participant's Investment Account shall, unless otherwise directed by the
Committee, be used to purchase additional shares of Common Stock on the next
date shares are purchased pursuant to Section 11, subject to the limitations
in Section 10. Such shares shall be added to the participant's Investment
Account.
12.3 Each participant shall be entitled to direct the Company, or its
designated agent, as to the voting of any shares of Common Stock held in the
participant's Investment Account.
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13. Withdrawal from Investment Account.
13.1 A participant shall have the right to request, not more than once per
calendar quarter, that a certificate be issued for all or a portion of the
Common Stock credited to his or her Investment Account by giving notice to the
Company; provided that if any of the Common Stock with respect to which a
certificate has been requested has been credited to the participant's
Investment Account for less than one year, the participant shall not be
permitted to participate in the offering that commences immediately after such
certificate is issued.
13.2 Each certificate withdrawn by a participant may be registered only in
the name of the participant, or if the participant so directs, in the names of
the participant and one other person, as joint tenants with right of
survivorship, tenants in common, or as community property, to the extent and
in the manner permitted by applicable law.
14. Withdrawal from Payroll Deduction Account.
14.1 An employee may withdraw from the Plan, in whole but not in part, at
any time prior to the last business day of each offering by delivering a
withdrawal notice ("Withdrawal Notice") to the Company, in which event the
Company will refund the entire balance of his or her Payroll Deduction Account
as soon as practicable thereafter.
14.2 To re-enter the Plan, an employee who has previously withdrawn must
file a new Enrollment Agreement in accordance with Section 8. His or her re-
entry into the Plan cannot, however, become effective before the beginning of
the next offering following his or her withdrawal.
14.3 An employee may elect to discontinue his or her payroll deductions
during the course of a particular offering, at any time prior to the last
business day preceding the final pay day during such offering by delivering an
election to discontinue deductions to the Company, and such election shall not
constitute a withdrawal for the purposes of this Section 14. In the event that
an employee elects to discontinue his or her payroll deductions pursuant to
this Paragraph 14.3, the employee shall remain a participant in such offering
and shall be entitled to purchase from the Company such number of full shares
of Common Stock as set forth and in accordance with Section 11 of the Plan.
15. Carryover of Payroll Deduction Account. To the extent that, immediately
after shares of Common Stock have been purchased on the last day of the
Offering, the balance of a participant's Payroll Deduction Account consists of
an amount equal to less than the fair market value of one share of Common
Stock, the Company shall carryover the balance of the participant's Payroll
Deduction Account to the next offering unless the participant does not
participate in the next offering, in which event the balance of the
participant's Payroll Deduction Account shall be refunded to the participant.
If the balance of the participant's Payroll Deduction Account, determined
immediately after shares of Common Stock have been purchased on the last day
of the Offering, consists of an amount equal to or in excess of the fair
market value of one share of Common Stock, the Company shall refund to the
participant the balance of the participant's Payroll Deduction Account. In
addition, upon termination of the Plan, the balance of each participant's
Payroll Deduction Account shall be returned to the participant.
16. Interest. No interest will be paid or allowed on any money in the
Payroll Deduction Accounts of participating employees.
17. Rights Not Transferable. No participant shall be permitted to sell,
assign, transfer, pledge, or otherwise dispose of or encumber either the
payroll deductions credited to his or her Payroll Deduction Account, Common
Stock credited to his or her Investment account, or any rights with regard to
the exercise of an option or to receive shares under the Plan other than by
will or the laws of descent and distribution, and such right and interest
shall not be liable for, or subject to, the debts, contracts, or liabilities
of the employee. If any such action is taken by the participant, or any claim
is asserted by any other party in respect of such right and interest whether
by garnishment, levy, attachment or otherwise, such action or claim will be
treated as an election to withdraw in accordance with Sections 13 or 14,
whichever is applicable.
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18. Termination of Employee's Rights. An employee's rights under the Plan
will terminate when he or she ceases to be an employee because of resignation,
layoff, or discharge. A Withdrawal Notice will be considered as having been
received from the employee on the day his or her employment ceases, and all
payroll deductions not used will be refunded.
If an employee's employment shall be terminated (a) within 90 days of the
last day of the current offering by reason of retirement or disability or (b)
at any time during the current offering by reason of death, he or she (or his
or her designated beneficiary, in the event of his or her death, or if none,
his or her legal representative) shall have the right prior to the end of the
current offering to elect to have the balance of his or her Payroll Deduction
Account either paid to him or her in cash or applied at the end of the current
offering toward the purchase of Common Stock. If an employee's employment
shall be terminated more than 90 days from the last day of the current
offering by reason of retirement or disability, the balance of the employee's
Payroll Deduction Account shall be paid to him or her in cash.
19. Administration of the Plan. The Plan Administrator shall be a committee
consisting of not less than two directors who shall be appointed from time to
time by, and shall serve at the discretion of the Board (the "Committee"). To
the extent required to comply with Rule 16b-3 under the Securities Exchange
Act of 1934, as amended, each member of the Committee shall qualify as a "non-
employee director" as defined in Rule 16b-3 or any successor definition
adopted by the Securities and Exchange Commission.
Subject to the provisions of this Plan, and with a view to effecting its
purpose, the Plan Administrator shall have sole authority, in its absolute
discretion, to (a) designate from time to time the Subsidiaries who may adopt
the Plan so that its employees will be eligible to participate in the Plan;
(b) construe and interpret this Plan; (c) define the terms used in this Plan;
(d) prescribe, amend and rescind rules and regulations relating to this Plan;
(e) correct any defect, supply any omission or reconcile any inconsistency in
this Plan; (f) determine all other terms and conditions of options; and (g)
make all other determinations necessary or advisable for the administration of
this Plan. All decisions, determinations and interpretations made by the Plan
Administrator shall be binding and conclusive on all participants in this Plan
and on their legal representatives, heirs and beneficiaries. The Committee
may, in its sole discretion, delegate to an officer or officers of the Company
the administration of the Plan under this Section; provided, however, that no
such delegation by the Committee shall be made with respect to the
administration of the Plan as it affects officers of the Company or its
Subsidiaries and provided further that the Committee may not delegate its
authority to correct errors, omissions or inconsistencies in the Plan.
20. Termination and Amendments to Plan. The Plan may be terminated at any
time by the Board. The Plan will terminate in any case on the date on which
all or substantially all of the unissued shares of Common Stock reserved for
the purpose of the Plan have been purchased. Upon termination of the Plan, all
payroll deductions not used to purchase Common Stock will be refunded.
The Board also reserves the right to amend the Plan from time to time in any
respects, provided, however, that no amendment shall be effective without
prior approval of the stockholders (a) which would, except as provided in
Section 6 and 7, increase the aggregate number of shares of Common Stock to be
issued under the Plan, (b) which would, except as provided in Section 3,
change the class of employees eligible to receive options under the Plan or
(c) if such amendment requires stockholder approval for any other reason in
order for the Plan to be eligible or continue to qualify for the benefits
conferred by Securities and Exchange Commission Rule 16b-3, as amended from
time to time, or any successor rule or regulatory requirements.
21. Effective Date. The effective date of the Plan is March 18, 1998.
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SKU No. 0300-PS-98
<PAGE>
DETACH HERE
PROXY
CHART HOUSE ENTERPRISES, INC.
115 South Acacia Avenue
Solana Beach, California 92075
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 6, 1998
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints F. Philip Handy and James C. Wendler, or
either of them, as proxies, each with the power to appoint his substitute, to
vote all the shares of common stock of Chart House Enterprises, Inc. held of
record by the undersigned on March 12, 1998, at the Annual Meeting of
Stockholders to be held on May 6, 1998, or any adjournment thereof, as indicated
on the reverse hereof on the proposals described in the proxy statement for the
meeting, and as those proxies may determine in the exercise of their best
judgment on any other matters which may properly come before the meeting. IN THE
ABSENCE OF SPECIFIC INSTRUCTIONS, THIS PROXY WILL BE VOTED FOR THE PROPOSALS AND
FOR THE ELECTION OF ALL NOMINEES LISTED ON THE REVERSE SIDE.
PLEASE SIGN ON THE REVERSE SIDE AND
MAIL PROMPTLY IN THE ENCLOSED ENVELOPE
[SEE REVERSE SIDE]
<PAGE>
[LOGO OF CHART HOUSE RESTAURANTS] THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
Dear Stockholder:
We cordially invite you to attend the Annual Meeting of Stockholders of
Chart House Enterprises, Inc. (the "Company") to be held at 1:00 p.m. local time
on Wednesday, May 6, 1998 at One Franklin Street, 3rd Floor, Chicago, Illinois
60606.
Please read the proxy statement which describes the proposals and presents
other important information, and complete, sign and return your proxy promptly
in the enclosed envelope.
DETACH HERE
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE
(The Board of
Directors recommends a vote
"FOR" Items 1, 2, 3, 4 and 5)
1. APPROVAL OF 2. ELECTION OF DIRECTORS:
Amendment of Certificate of (PLEASE VOTE UNDER SECTIONS 2a and
Incorporation ---
2b BELOW.)
FOR AGAINST ABSTAIN
[_] [_] [_] a. If Proposal 1 is approved, the
Nominees are: Barbara R. Allen,
Linda Walker Bynoe, William M.
3. APPROVAL OF STOCK OPTION Diefenderfer III, F. Philip Handy,
GRANT TO NON-EMPLOYEE DIRECTOR Stephen Ottmann, Thomas J. Walters
and Samuel Zell
FOR AGAINST ABSTAIN
[_] [_] [_] FOR WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
[_] [_]
4. APPROVAL OF STOCK OPTION GRANT TO
PRESIDENT AND COO [_]
------------------------------
FOR AGAINST ABSTAIN For all nominees, except vote
[_] [_] [_] withheld from the above nominee(s)
b. If Proposal 1 is not approved, the
Nominees are William M.
5. APPROVAL OF 1998 EMPLOYEE STOCK Diefenderfer III and Thomas J.
PURCHASE PLAN Walters
FOR AGAINST ABSTAIN FOR WITHHELD
[_] [_] [_] ALL FROM ALL
NOMINEES NOMINEES
[_] [_]
[_]
-----------------------------
For all nominees, except vote
withheld from the above nominee
MARK HERE FOR
ADDRESS CHANGE [_]
AND NOTE AT LEFT
Please sign exactly as name appears
hereon. Joint owners should each sign.
When signing as attorney, executor,
administrator, trustee or guardian
please give full title as such.
Signature: Date: Signature: Date:
