<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
RARE HOSPITALITY INTERNATIONAL, 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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[RARE HOSPITALITY INTERNATIONAL, INC. LOGO]
8215 ROSWELL ROAD
BUILDING 200
ATLANTA, GEORGIA 30350
April 15, 1998
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
of RARE Hospitality International, Inc., which will be held at the Swissotel
Atlanta, 3391 Peachtree Road NE, Atlanta, Georgia, on Wednesday, May 20, 1998,
at 2:00 p.m. local time.
I hope you are planning to attend the meeting so that you can become
acquainted with the members of our Board of Directors and our management team.
The items of business that will be considered and voted upon this year are
explained in the accompanying Proxy Statement. Even if you are planning to
attend and to vote your shares in person, please complete the enclosed proxy
card and return it to us.
If you have any questions about the Proxy Statement or the 1997 Annual
Report to Shareholders, please contact Mr. W. Douglas Benn at (770) 399-9595.
We look forward to seeing you on May 20, 1998.
Sincerely,
/s/ George W. McKerrow, Jr.
GEORGE W. McKERROW, JR.
Chairman of the Board of Directors
<PAGE> 3
RARE HOSPITALITY INTERNATIONAL, INC.
8215 ROSWELL ROAD
BUILDING 200
ATLANTA, GEORGIA 30350
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 20, 1998
Notice is hereby given that the Annual Meeting of Shareholders (the
"Meeting") of RARE Hospitality International, Inc. (the "Company"), will be held
at the Swissotel Atlanta, 3391 Peachtree Road NE, Atlanta, Georgia, on
Wednesday, May 20, 1998, at 2:00 p.m. local time, for the following purposes:
1. To elect two directors in Class III to serve until the 2001
Annual Meeting of Shareholders, and one director in Class II to serve
until the 2000 Annual Meeting of Shareholders.
2. To vote on a proposal to approve the RARE Hospitality
International, Inc. 1997 Long-Term Incentive Plan, as amended.
3. To ratify the selection of KPMG Peat Marwick LLP as the
Company's independent auditors to serve for the fiscal year ending
December 27, 1998.
4. To transact such other business as may properly come before
the Meeting or any adjournments thereof.
Only those shareholders of record at the close of business on April 2,
1998, are entitled to notice of and to vote at the Meeting and any adjournments
thereof. The transfer books will not be closed. A complete list of shareholders
entitled to vote at the Meeting will be available at the Meeting.
By Order of the Board of Directors,
/s/ W. Douglas Benn
W. DOUGLAS BENN
Secretary
Atlanta, Georgia
April 15, 1998
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING IN PERSON,
PLEASE VOTE, SIGN, DATE, AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED
BUSINESS REPLY ENVELOPE. IF YOU DO ATTEND THE MEETING YOU MAY, IF YOU WISH,
WITHDRAW YOUR PROXY AND VOTE IN PERSON.
<PAGE> 4
RARE HOSPITALITY INTERNATIONAL, INC.
8215 ROSWELL ROAD
BUILDING 200
ATLANTA, GEORGIA 30350
April 15, 1998
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 20, 1998
INTRODUCTION
This Proxy Statement is furnished to shareholders of RARE Hospitality
International, Inc., a Georgia corporation (herein, unless the context otherwise
requires, the "Company"), in connection with the solicitation of proxies by the
Company's Board of Directors from holders of the outstanding shares of common
stock of the Company ("Common Stock") for use at the Annual Meeting of
Shareholders to be held at the Swissotel Atlanta, 3391 Peachtree Road NE,
Atlanta, Georgia, on Wednesday, May 20, 1998, at 2:00 p.m. local time, and at
any adjournments thereof (the "Meeting").
The Meeting will be held for the following purposes: (i) to elect two
directors in Class III to serve until the 2001 Annual Meeting of Shareholders,
and one director in Class II to serve until the 2000 Annual Meeting of
Shareholders; (ii) to vote on a proposal to approve the RARE Hospitality
International, Inc. 1997 Long-Term Incentive Plan, as amended; (iii) to ratify
the selection of KPMG Peat Marwick LLP as the Company's independent auditors for
the fiscal year ending December 27, 1998; and (iv) to transact such other
business as may properly come before the Meeting.
The Company's mailing address and the location of its principal
executive offices is 8215 Roswell Road, Building 200, Atlanta, Georgia 30350.
This Proxy Statement and the accompanying Proxy are first being mailed to
shareholders of the Company on or about April 15, 1998.
SHAREHOLDERS ENTITLED TO VOTE
Only shareholders of record of the Company at the close of business on
April 2, 1998 (the "Record Date"), will be entitled to notice of, and to vote
at, the Meeting. On the Record Date, there were 12,008,308 shares of Common
Stock issued and outstanding held by approximately 385 shareholders of record.
Notwithstanding the Record Date specified above, the Company's stock transfer
books will not be closed and shares may be transferred subsequent to the Record
Date. However, all votes must be cast in the names of shareholders of record on
the Record Date.
QUORUM AND VOTING REQUIREMENTS
The presence, in person or by proxy, of the holders of a majority of
the votes entitled to be cast on a matter at the Meeting will constitute a
quorum to conduct business at the Meeting. Pursuant to the Bylaws of the
Company, holders of Common Stock will be entitled to one vote for each share
held.
The election of directors will require the affirmative vote of a
majority of the shares represented at the Meeting and entitled to vote, provided
a quorum is present. With respect to the election of directors, shareholders
may: (1) vote "for" all of the director nominees; (2) "withhold" authority to
vote for all of the nominees; or (3) withhold authority to vote for any
individual nominee or nominees but vote for all other nominees. In the election
of directors, votes to withhold authority
<PAGE> 5
and broker nonvotes (which occur when shares held by brokers or nominees for
beneficial owners are voted on some matters but not on others), both of which
are considered present at the Meeting and counted for purposes of establishing a
quorum, will have the same effect as a vote "against" the nominee.
The approval of the RARE Hospitality International, Inc. 1997 Long-Term
Incentive Plan, as amended, will require that votes cast in favor of the
proposal exceed the votes cast against the proposal, provided a quorum is
present. With respect to the approval of the RARE Hospitality International,
Inc. 1997 Long-Term Incentive Plan, as amended, shareholders may: (1) vote "for"
approval; (2) vote "against" approval; or (3) "abstain" from voting on the
proposal. Abstentions and broker nonvotes will have no effect on the approval of
the RARE Hospitality International, Inc. 1997 Long-Term Incentive Plan.
The ratification of the appointment of KPMG Peat Marwick LLP as
independent auditors will require that votes cast in favor of the proposal
exceed the votes cast against the proposal, provided a quorum is present. With
respect to the approval of the auditors, shareholders may: (1) vote "for"
approval; (2) vote "against" approval; or (3) "abstain" from voting on the
proposal. Abstentions and broker nonvotes will have no effect on the approval of
the auditors.
PROXIES
If the enclosed Proxy is executed, returned in time and not revoked,
the shares represented thereby will be voted in accordance with the instructions
indicated in such Proxy. IF NO INSTRUCTIONS ARE INDICATED, SUCH PROXIES WILL BE
VOTED (I) FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR OF THE COMPANY, (II) FOR
APPROVAL OF THE RARE HOSPITALITY INTERNATIONAL, INC. 1997 LONG-TERM INCENTIVE
PLAN, (III) FOR RATIFICATION OF THE SELECTION OF KPMG PEAT MARWICK LLP AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 27, 1998, AND
(IV) IN THE SOLE DISCRETION OF THE PROXIES AS TO ANY OTHER MATTERS WHICH MAY
PROPERLY COME BEFORE THE MEETING.
A shareholder who has given a Proxy may revoke it at any time prior to
its exercise at the Meeting by (i) giving written notice of revocation to the
Secretary of the Company, (ii) properly submitting to the Company a duly
executed Proxy bearing a later date, or (iii) appearing at the Meeting and
voting in person. All written notices of revocation of Proxies should be
addressed as follows: RARE Hospitality International, Inc., 8215 Roswell Road,
Building 200, Atlanta, Georgia 30350, Attention: Mr. W. Douglas Benn, Secretary.
-2-
<PAGE> 6
PROPOSAL I
ELECTION OF DIRECTORS
The Company's Board of Directors has nominated Messrs. Ronald W. San
Martin and John G. Pawly for election as Class III directors to hold office
until the 2001 Annual Meeting of Shareholders of the Company and until their
successors shall have been elected and qualified, and Mr. Philip J. Hickey, Jr.
for election as a Class II director to hold office until the 2000 Annual Meeting
of Shareholders of the Company and until his successor shall have been elected
and qualified.
It is believed that all of the nominees will be available and able to
serve as directors. It is anticipated that management shareholders of the
Company will grant authority to vote for the election of all the nominees.
The Company's Board of Directors currently consists of seven directors
divided into three classes, with two directors currently in each of Classes I
and III and three directors in Class II. The term of Class III, composed of
Messrs. San Martin and Pawly, expires at the Meeting. The terms of Class I and
Class II expire at the Annual Meetings of Shareholders in 1999 and 2000,
respectively. Directors hold office until the Annual Meeting of Shareholders of
the Company in the year in which the term of their Class expires and until their
successors have been duly elected and qualified.
Mr. Richard E. Rivera, a former director in Class II, resigned
effective August 12, 1997, leaving a vacant position in Class II. In accordance
with the Company's Bylaws, the Board of Directors elected Mr. Hickey to fill the
vacancy in Class II on October 30, 1997, to serve until the next Annual Meeting
of Shareholders and until his successor has been elected and qualified.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE THREE NOMINEES FOR
ELECTION AS DIRECTORS. THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES
REPRESENTED AND ENTITLED TO VOTE AT THE MEETING AT WHICH A QUORUM IS PRESENT IS
REQUIRED FOR THE ELECTION OF THE NOMINEES.
CERTAIN INFORMATION CONCERNING NOMINEES AND DIRECTORS
The table on the following page sets forth the names of the nominees
and of the directors continuing in office, their ages, the year in which each
was first elected a director, their position(s) with the Company, their
principal occupations and employers for at least the last five years, and any
other directorships held by them in certain other companies. For information
concerning membership on committees of the Board of Directors, see "Meetings of
the Board of Directors and Committees" below. For information concerning
directors' ownership of Common Stock, see "Beneficial Owners of More Than Five
Percent of the Company's Common Stock; Shares Held by Directors and Executive
Officers" below.
-3-
<PAGE> 7
NOMINEES TO THE BOARD OF DIRECTORS
CLASS III
TERM EXPIRING ANNUAL MEETING 2001
<TABLE>
<CAPTION>
POSITIONS WITH THE COMPANY, PRINCIPAL OCCUPATIONS
DURING AT LEAST THE PAST FIVE YEARS,
NAME AND YEAR FIRST ELECTED A DIRECTOR AGE AND OTHER DIRECTORSHIPS
- -------------------------------------- --- -----------------------
<S> <C> <C>
Ronald W. San Martin............. 50 Mr. San Martin serves as President of 490 East Paces Ferry,
1985 Inc., a developer and operator of restaurants, and has held the
position of Chief Financial Officer (since June 1995) and
Secretary (since January 1996) of We're Cookin' Inc., a
restaurant operating company. Mr. San Martin was the Chief
Financial Officer and the Secretary of the Company from May
1985 until June 1995. Prior to joining the Company, Mr. San
Martin was a tax manager at Evans, Snyder & Co., Certified
Public Accountants.
John G. Pawly.................... 69 Mr. Pawly has retired as a senior consultant for Attwood
1993 Corporation, a manufacturer of boating accessories and general
hardware, a position he held since its merger in January 1994
with Pawly Industries Corporation, a privately held manufacturer
of boating accessories. Mr. Pawly served as President and
principal shareholder of Pawly Industries Corporation and
Chairman and Chief Executive Officer of L.S. Brown Co., a
division of Pawly Industries Corporation, for more than five
years prior to January 1994.
CLASS II
TERM EXPIRING ANNUAL MEETING 2000
Philip J. Hickey, Jr............. 43 Mr. Hickey became the Company's President and Chief
1997 Operating Officer and a director in October 1997. From
November 1992 until he joined the Company in October 1997,
Mr. Hickey served as President and Chief Operating Officer of
Innovative Restaurant Concepts, Inc. ("IRC") and Rio Bravo
International, Inc., operators and franchisors of casual dining
restaurants that were acquired by Applebee's International, Inc.
in March 1995. In 1990, Mr. Hickey co-founded the Green
Hills Grille concept in Nashville, Tennessee, which was acquired
by IRC in 1992.
</TABLE>
-4-
<PAGE> 8
MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE
CLASS I - TERM EXPIRING ANNUAL MEETING 1999
<TABLE>
<CAPTION>
POSITIONS WITH THE COMPANY, PRINCIPAL OCCUPATIONS
DURING AT LEAST THE PAST FIVE YEARS,
NAME AND YEAR FIRST ELECTED A DIRECTOR AGE AND OTHER DIRECTORSHIPS
- -------------------------------------- --- -----------------------
<S> <C> <C>
George W. McKerrow, Sr........... 72 Mr. McKerrow, Sr. was Chairman of the Board of Directors of the Company
1982 from its organization in 1982 until February 1994 and continues as a
director and employee of the Company. Before joining the Company, Mr.
McKerrow, Sr. was the Vice President and General Manager of the Dairypak
Division of Champion International Corporation. Mr. McKerrow's son,
George W. McKerrow, Jr., is the Chairman of the Board of Directors of
the Company.
Don L. Chapman................... 58 Mr. Chapman is President and Chief Executive Officer of Tug
1992 Manufacturing Corporation, a manufacturer of aircraft towing equipment,
a position he has held for more than five years. Mr. Chapman is also a
director of AirTran Airlines, Inc. and serves on the compensation
committee of that board. Mr. Chapman served as the Chief Executive
Officer of Opti-World, Inc. from June 1983 until February 1995.
</TABLE>
CLASS II - TERM EXPIRING ANNUAL MEETING 2000
<TABLE>
<CAPTION>
POSITIONS WITH THE COMPANY, PRINCIPAL OCCUPATIONS
DURING AT LEAST THE PAST FIVE YEARS,
NAME AND YEAR FIRST ELECTED A DIRECTOR AGE AND OTHER DIRECTORSHIPS
- -------------------------------------- --- -----------------------
<S> <C> <C>
George W. McKerrow, Jr........... 47 Mr. McKerrow, Jr. is the Chairman of the Board of Directors and the
1982 Chief Executive Officer of the Company. He has been Chief Executive
Officer since August 1997 and Chairman of the Board of Directors since
February 1994. Mr. McKerrow previously served as President and a
director of the Company from its organization in 1982 until February
1994, and also served as President of the Company from August 1997 to
October 1997. Before opening the first LongHorn Steakhouse restaurant
in 1981, Mr. McKerrow, Jr. was the Southeastern Regional Manager of
Victoria Station Restaurants. Mr. McKerrow, Jr. is the son of George W.
McKerrow, Sr., a director of the Company.
Edward P. Grace, III............. 47 Mr. Grace has been Vice Chairman of the Board of Directors since October
1996 1997 and has been a director since September 1996 when he became a
director pursuant to the acquisition of Bugaboo Creek Steak House, Inc.
by the Company. Mr. Grace serves as President of Phelps Grace
International, Inc., a developer and operator of restaurants. From 1989
until September 1996, Mr. Grace served as Chairman of the Board,
President and Chief Executive Officer of Bugaboo Creek Steak House,
Inc., an operator of restaurants.
</TABLE>
-5-
<PAGE> 9
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
Board of Directors. The property, affairs and business of the Company
are under the general management of its Board of Directors as provided by the
laws of Georgia and the Bylaws of the Company. The Company has standing Audit,
Compensation and Stock Option Committees of the Board of Directors and does not
have a Nominating Committee.
Audit Committee. The members of the Audit Committee are Don L. Chapman,
John G. Pawly and Ronald W. San Martin. The Audit Committee recommends the
independent accountants for approval by the Board of Directors to audit the
financial statements of the Company, which includes an inspection of the books
and accounts of the Company, and reviews with such accountants the scope of
their audit and their report thereon, including any questions and
recommendations that may arise relating to such audit and report or the
Company's internal accounting procedures. The Audit Committee held one meeting
during the 1997 fiscal year.
Compensation Committee. The members of the Compensation Committee are
Don L. Chapman, Edward P. Grace, III and John G. Pawly. The function of the
Compensation Committee is to review and approve the compensation of executive
officers including salary, bonus and other annual compensation awards. The
Compensation Committee reports to the Board of Directors. The Compensation
Committee held one meeting during the 1997 fiscal year.
Stock Option Committee. The members of the Stock Option Committee are
Don L. Chapman and John G. Pawly. The Stock Option Committee establishes targets
and then recommends incentive awards under the incentive compensation plans of
the Company for executive officers and other key personnel of the Company. The
Stock Option Committee held one meeting during the 1997 fiscal year.
During the 1997 fiscal year, the Company's Board of Directors met nine
times. Each director, during the period he was a director, attended at least 75%
of the aggregate number of meetings of the Board of Directors and the committees
of the Board of Directors of which he was a member.
EXECUTIVE OFFICERS OF THE COMPANY
Except for Messrs. McKerrow, Jr., and Hickey, discussed above, the
following table sets forth the names of the executive officers of the Company,
their ages, their position(s) with the Company, their principal occupations and
employers for at least the last five years, and any other directorships held by
them in certain other companies. For information concerning ownership of Common
Stock, see "Beneficial Owners of More Than Five Percent of the Company's Common
Stock; Shares Held by Directors and Executive Officers" below.
<TABLE>
<CAPTION>
POSITIONS WITH THE COMPANY, PRINCIPAL OCCUPATIONS
NAME AGE DURING AT LEAST THE PAST FIVE YEARS
- ---- --- -----------------------------------
<S> <C> <C>
Eugene I. Lee.................... 37 Mr. Lee became the Company's Executive Vice President, Operations -
LongHorn Steakhouse Division in October 1997. Previously, Mr. Lee was
the Company's Executive Vice President, Operations - Bugaboo Creek
Steak House Division from January 1997 until October 1997. For more
than five years prior to joining the Company, he occupied various
positions with Uno Restaurant Corporation, an operator of restaurants,
including Senior Vice President - Operations.
</TABLE>
-6-
<PAGE> 10
<TABLE>
<CAPTION>
POSITIONS WITH THE COMPANY, PRINCIPAL OCCUPATIONS
NAME AGE DURING AT LEAST THE PAST FIVE YEARS
- ---- --- -----------------------------------
<S> <C> <C>
William A. Burnett............... 48 Mr. Burnett has served as the Company's Executive Vice President,
Operations - The Capital Grille Division since November 1997, and was
Executive Vice President, Operations - The Capital Grille and Bugaboo
Creek Steak House Divisions from November 1997 to March 1998. From
September 1996 until October 1997, Mr. Burnett was the President of
Hometown Ventures, Inc., a joint venture partner with the Company in
the operation of LongHorn Steakhouse restaurants. From the time he
joined the Company in March 1994 until September 1996, Mr. Burnett
served as Vice President of Operations of the Company. From December
1989 until he joined the Company, Mr. Burnett was the Vice President of
Operations of Western Sizzlin, Inc., an operator and franchisor of
restaurants.
W. Douglas Benn.................. 43 Mr. Benn became the Company's Executive Vice President, Chief Financial
Officer and Secretary in April 1998. Before joining the Company, Mr.
Benn was an independent financial consultant providing consulting
services primarily to companies in the restaurant industry, including
the Company, from February 1997 until March 1998. From April 1987
until February 1997 Mr. Benn was the Chief Financial Officer of
Innovative Restaurant Concepts, Inc., an operator and franchisor of
casual dining restaurants that was acquired by Applebee's
International, Inc. in March 1995.
</TABLE>
OTHER KEY EMPLOYEES
<TABLE>
<CAPTION>
POSITIONS WITH THE COMPANY, PRINCIPAL OCCUPATIONS
NAME AGE DURING AT LEAST THE PAST FIVE YEARS
- ---- --- -----------------------------------
<S> <C> <C>
Nancy J. Winship................. 39 Ms. Winship became the Company's Vice President of Human Resources in
January 1997. Prior to that, she held various positions at the Company
including Director of Human Resources starting in 1995, Director of
Recruiting and Training starting in 1994, and Management Recruiter
starting in 1992. Before joining the Company, Ms. Winship served in
management recruiting at Cracker Barrel Old Country Store, Inc.
Rick H. Kaskel................... 43 Mr. Kaskel became the Company's Vice President, Operations - Bugaboo
Creek Steak House Division in March 1998. For more than five years
prior to joining the Company, he was Vice President of Operations for
Battleground Restaurant Group, an operator of casual dining restaurants.
</TABLE>
-7-
<PAGE> 11
BENEFICIAL OWNERS OF MORE THAN FIVE PERCENT OF THE COMPANY'S COMMON STOCK;
SHARES HELD BY DIRECTORS AND EXECUTIVE OFFICERS
Based solely on information made available to the Company, the
following table sets forth certain information with respect to the beneficial
ownership of the Company's Common Stock as of February 20, 1998, by (i) each
person who is known by the Company to beneficially own more than 5% of the
outstanding shares of Common Stock of the Company, (ii) each director and
nominee for director of the Company, (iii) the Named Executive Officers of the
Company (as defined under "Executive Compensation" below), and (iv) all of the
Company's executive officers and directors as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
NAME(1) SHARES PERCENT
- ------- ------ -------
<S> <C> <C>
George W. McKerrow, Jr................................................... 259,993(2) 2.2
Philip J. Hickey, Jr..................................................... 22,100(3) *
Ronald W. San Martin..................................................... 262,500(4)(5) 2.2
George W. McKerrow, Sr................................................... 365,000(6) 3.0
Edward P. Grace, III..................................................... 510,244(4)(7) 4.3
Don L. Chapman........................................................... 25,500(4)(8) *
John G. Pawly............................................................ 22,500(4) *
William A. Burnett....................................................... 37,264(4)(9) *
Eugene I. Lee............................................................ 6,000(4) *
Richard E. Rivera(10).................................................... -- --
Anne D. Huemme(10)....................................................... 23,400(4) *
Robert Ferngren(10)...................................................... -- --
All executive officers and directors as a group (ten persons)... 1,511,101(4) 12.5
</TABLE>
- ------------------------------------
* Less than one percent.
(1) The named shareholders have sole voting and investment power with
respect to all shares shown as being beneficially owned by them, except
as otherwise indicated. Shares of Common Stock underlying options to
purchase Common Stock are deemed to be outstanding for the purpose of
computing the outstanding Common Stock owned by the particular person
and by the group, but are not deemed outstanding for any other purpose.
(2) Includes 5,265 shares of Common Stock held by Mr. McKerrow, Jr. as
custodian for one of his daughters.
(3) Consists of 10,000 shares of Common Stock held by Mr. Hickey in an
irrevocable trust for his daughter, 10,000 shares of Common Stock held
by Mr. Hickey in an irrevocable trust for his son, and 2,100 shares
owned jointly with his wife.
(4) Includes 37,500 shares with respect to Mr. San Martin, 11,250 shares
with respect to Mr. Grace, 18,500 shares with respect to Mr. Chapman,
16,500 shares with respect to Mr. Pawly, 36,560 shares with respect to
Mr. Burnett, 6,000 shares with respect to Mr. Lee, 23,400 shares with
respect to Ms. Huemme and 126,310 shares with respect to executive
officers and directors as a group that are subject to currently
exercisable stock options.
(5) Includes 100,000 shares of Common Stock pledged to secure a loan to Mr.
San Martin over which Mr. San Martin has sole voting and shared
investment power.
(6) Consists of 365,000 shares held by the George W. McKerrow, Sr. Revocable
Trust. Mr. McKerrow is the sole trustee of such trust with sole voting
and dispositive power over all 365,000 shares held by the trust.
(7) Includes 246,251 shares held as Trustee of a retained annuity trust,
60,542 held by the Grace Family Limited Partnership and 192,131 shares
held as a General Partner of Grace Associates general partnership. The
address for Mr. Grace is RARE Hospitality International, Inc., 8215
Roswell Road, Building 200, Atlanta, Georgia 30350.
(8) Includes 7,000 shares owned jointly with his wife.
(9) Includes 704 shares of Common Stock held by Mr. Burnett's wife in an
individual retirement account.
(10) Mr. Rivera resigned as an officer of the Company effective August 12,
1997, Ms. Huemme resigned as an officer of the Company effective January
7, 1998 and Mr. Ferngren resigned as an officer of the Company effective
November 1, 1997.
-8-
<PAGE> 12
EXECUTIVE COMPENSATION
The following table presents certain summary information concerning
compensation paid or accrued by the Company for services rendered in all
capacities during the fiscal years ended December 31, 1995, December 29, 1996,
and December 28, 1997, for (i) all individuals serving as the registrant's chief
executive officer or acting in a similar capacity during the last completed
fiscal year; (ii) each of the four other most highly compensated executive
officers of the Company (determined as of the end of the last fiscal year) whose
total annual salary and bonus exceeded $100,000 (collectively, the "Named
Executive Officers"); and (iii) Philip J. Hickey, Jr., the President and Chief
Operating Officer of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- --------------------------- ---- ------ ----- ------- ------------
<S> <C> <C> <C> <C> <C>
George W. McKerrow, Jr............... 1997 $ 190,694 $ -- -- $ 4,603(1)
Chairman of the Board of Directors 1996 120,000 -- -- 3,761(1)
and Chief Executive Officer 1995 192,028 -- -- 4,620(1)
Richard E. Rivera.................... 1997 183,695 -- -- 11,150(3)
Former President and Chief 1996 262,019 125,000 -- 9,600(4)
Executive Officer and Director(2) 1995 250,000 275,000 -- 9,600(4)
Eugene I. Lee........................ 1997 142,634 30,000 180,000 2,536(4)
Executive Vice President, Operations
- LongHorn Steakhouse Division(5)
William A. Burnett................... 1997 67,033 -- 150,000 3,851(6)
Executive Vice President, Operations 1996 138,942 27,000 -- 12,038(7)(8)
- The Capital Grille Division 1995 135,000 47,000 11,400 12,662(8)(9)
Anne D. Huemme....................... 1997 117,003 23,438 2,000 12,945(11)
Former Chief Financial 1996 105,730 11,000 -- 6,588(4)
Officer (10) 1995 48,475 25,000 58,500 4,800(4)
Robert Ferngren...................... 1997 163,805 53,601 150,000 66,868(13)
Former Executive Vice President for
LongHorn Steakhouse(12)
Philip J. Hickey, Jr................. 1997 41,209 50,000 300,000 --
President and Chief Operating
Officer and a Director(14)
</TABLE>
(footnotes on following page)
-9-
<PAGE> 13
- -----------------------
(1) Consists of discretionary and matching contributions to the Company's
401(k) Plan. The matching contributions are based on pre-tax elective
contributions (included under salary and bonus) made to such plan.
(2) Mr. Rivera resigned as an officer of the Company effective August 12,
1997.
(3) Consists of $6,400 in automobile allowance and $4,750 in discretionary
and matching contributions to the Company's 401(k) plan.
(4) Consists of automobile allowance.
(5) Mr. Lee was employed by the Company effective January 20, 1997.
(6) Consists of $2,249 in automobile allowance and $1,602 in discretionary
and matching contributions to the Company's 401(k) plan.
(7) Includes $2,438 in discretionary and matching contributions to the
Company's 401(k) Plan. The matching contributions are based on pre-tax
elective contributions (included under salary and bonus) made to such
plan.
(8) Includes a $9,600 automobile allowance.
(9) Includes $3,062 in discretionary and matching contributions to the
Company's 401(k) Plan. The matching contributions are based on pre-tax
elective contributions (included under salary and bonus) made to such
plan.
(10) Ms. Huemme resigned as an officer of the Company effective January 7,
1998.
(11) Consists of $9,685 in automobile allowance and $3,260 in discretionary
and matching contributions to the Company's 401(k) plan.
(12) Mr. Ferngren was employed by the Company effective February 10, 1997
and resigned as an officer of the Company effective November 1, 1997.
(13) Consists of $6,400 in automobile allowance, $34,795 in severance pay
and $25,673 in payments to compensate Mr. Ferngren for the difference
between rental income received with respect to his Dallas house and his
mortgage payment on such house.
(14) Mr. Hickey was employed by the Company effective October 30, 1997. See
"Executive Compensation - Employment Contracts."
-10-
<PAGE> 14
OPTION GRANTS IN 1997
The following table presents further information on grants of stock
options during the year ended December 28, 1997 to the Named Executive Officers
and to Philip J. Hickey, Jr. Such grants are reflected in the Summary
Compensation Table above.
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------- Potential Realizable
% of Value at Assumed
Number of Options Annual Rates of Stock
Securities Granted to Exercise Price Appreciation for
Underlying Employees or Base Option Term(1)
Options in Price Expiration --------------
Name Granted (#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- ---- ----------- ----------- ------ ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
George W. McKerrow, Jr. -- -- -- -- -- --
Richard E. Rivera(2) -- -- -- -- -- --
Eugene I. Lee 30,000(3) 3.0 17.25 1/20/07 325,453 824,762
50,000(4) 5.1 9.88 10/15/07 310,674 787,309
50,000(5) 5.1 12.00 10/15/07 204,674 681,309
50,000(6) 5.1 15.00 10/15/07 54,674 531,309
William A. Burnett 50,000(7) 5.1 9.88 11/2/07 310,674 787,309
25,000(8) 2.5 12.00 11/2/07 102,337 340,654
25,000(9) 2.5 15.00 11/2/07 27,337 265,654
25,000(10) 2.5 18.00 11/2/07 -- 190,654
25,000(11) 2.5 21.00 11/2/07 -- 115,654
Anne D. Huemme(12) 2,000(13) 0.2 14.25 2/21/07 17,923 45,423
Robert Ferngren(14) 50,000(15) 5.1 15.50 2/10/07 487,393 1,235,150
50,000(16) 5.1 24.00 2/10/07 62,393 810,150
50,000(17) 5.1 27.00 2/10/07 -- 660,150
Philip J. Hickey, Jr. 114,999(18) 11.7 9.13 10/29/07 660,302 1,673,335
91,667(19) 9.3 12.00 10/29/07 263,250 1,070,750
93,334(20) 9.5 15.00 10/29/07 -- 810,220
</TABLE>
-11-
<PAGE> 15
- -------------------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options at the end of the option term, which is one day less
than ten years for all options listed. The assumed 5% and 10% rates of
stock appreciation are mandated by the rules of the SEC and may not
accurately reflect the appreciation of the price of the Common Stock
from the grant date until the end of the option term. These assumptions
are not intended to forecast future price appreciation of the Company's
Common Stock.
(2) Mr. Rivera resigned as an officer of the Company effective August 12,
1997.
(3) This option becomes exercisable with respect to 20% of the shares each
year for five years commencing January 20, 1998.
(4) This option will become exercisable on October 16, 1998.
(5) This option will become exercisable on October 16, 1999.
(6) This option will become exercisable on October 16, 2000.
(7) This option will become exercisable on November 3, 1998.
(8) This option will become exercisable on November 3, 1999.
(9) This option will become exercisable on November 3, 2000.
(10) This option will become exercisable on November 3, 2001.
(11) This option will become exercisable on November 3, 2002.
(12) Ms. Huemme resigned as an officer of the Company effective January 7,
1998.
(13) This option is no longer exercisable.
(14) Mr. Ferngren resigned as an officer of the Company effective November
1, 1997.
(15) This option terminated without vesting upon Mr. Ferngren's departure.
(16) This option terminated without vesting upon Mr. Ferngren's departure.
(17) This option terminated without vesting upon Mr. Ferngren's departure.
(18) This option became exercisable with respect to one-half of the shares
on March 30, 1998 and will become exercisable with respect to the other
one-half of the shares on September 30, 1998.
(19) This option will become exercisable on September 30, 1999.
(20) This option will become exercisable on September 30, 2000.
-12-
<PAGE> 16
AGGREGATED OPTION EXERCISES IN 1997
AND YEAR-END OPTION VALUES
The following table presents information with respect to options
exercised by the Named Executive Officers and Philip J. Hickey, Jr. during 1997
and the fiscal year end values of unexercised options to purchase the Company's
Common Stock held by the Named Executive Officers and Philip J. Hickey, Jr. as
of December 28, 1997.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year-End (#) at Fiscal Year-End ($)(2)
Shares Acquired Value ------------------------------ -----------------------------
Name on Exercise (#) Realized($)(1) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
George W. McKerrow, Jr. -- -- -- -- -- --
Richard E. Rivera 275,000 1,053,125 -- -- -- --
Eugene I. Lee -- -- -- 180,000 --(3) --(3)
William A. Burnett 4,000 29,000 36,560 180,840 750 1,500
Anne D. Huemme -- -- 23,400 37,100 --(3) --(3)
Robert Ferngren -- -- -- 150,000 --(3) --(3)
Philip J. Hickey, Jr. -- -- -- 300,000 --(3) 28,175
</TABLE>
- -------------------
(1) "Value Realized" represents the amount equal to the excess of the fair
market value of the shares at the time of exercise over the exercise
price.
(2) Represents the fair market value as of December 26, 1997, the last
trading day before the Company's fiscal year-end ($9.375), of the
option shares less the exercise price of the options.
(3) The exercise price of the options was equal to or greater than the fair
market value of the Common Stock on December 26, 1997, the last trading
day before the Company's fiscal year-end ($9.375), and as a result none
of the options were "in the money" as of such date.
-13-
<PAGE> 17
Compensation of Directors. Directors of the Company who are not also
employees receive an annual retainer of $4,000, director fees of $1,000 per
meeting attended and $500 per committee meeting attended, plus reimbursement of
travel and other expenses incurred in connection with the performance of their
duties. Directors who are also employees of the Company are not paid any
compensation for their services as directors. In addition, non-employee
Directors are also eligible to receive formula plan stock options under the
Company's 1996 Stock Plan for Outside Directors ("Directors Plan"). In 1997,
Messrs. Chapman, Metz (a former director of the Company), Pawly and San Martin
each received options to purchase 2,500 shares of Common Stock at an exercise
price of $15.25 under the Directors Plan.
Employment Contracts. Effective January 1, 1992, the Company entered
into an employment agreement with Mr. McKerrow, Jr. which provided for annual
salary of $220,000. Effective January 1, 1993, the annual salary of Mr.
McKerrow, Jr. was changed to $235,000 and, on August 1, 1995, Mr. McKerrow's
annual salary was changed to $120,000. Mr. McKerrow's annual salary was then
increased to $290,000 effective August 1, 1997 and reduced to $250,000 effective
December 29, 1997. This agreement also provides for the employment of Mr.
McKerrow, Jr. for an indefinite period in the position he currently occupies,
which employment may be terminated by either party at will. In addition, Mr.
McKerrow, Jr. agrees that for a period of one year following the termination of
his employment with the Company, without the consent of the Company he will not
engage, in a general management capacity, in the operation of a steak restaurant
within the Company's then current market areas.
On September 30, 1997, the Company entered into an employment agreement
(the "Hickey Employment Agreement") with Mr. Philip J. Hickey, Jr., who began
serving as the Company's President and Chief Operating Officer effective October
30, 1997. Under the Hickey Employment Agreement, which expires on December 31,
2000, Mr. Hickey receives an annual salary of $250,000 plus such additional
amounts as may be approved by the Company's Board of Directors, and an annual
bonus of up to 100% of his annual salary as determined and paid in accordance
with a bonus program for the executive officers of the Company that is to be
established with Mr. Hickey's input. In addition, Mr. Hickey received an
initial, one-time only bonus of $50,000 for entering into the Hickey Employment
Agreement with the Company. The Hickey Employment Agreement also provided for
the granting of options to purchase an aggregate of 300,000 shares of the
Company's Common Stock to Mr. Hickey. The exercisability of these options may
accelerate upon the termination of Mr. Hickey's employment under certain
conditions. The exercise prices and periods of exercisability of such options
are set forth above under "Executive Compensation -- Option Grants in 1997."
The term of the Hickey Employment Agreement ends on December 31, 2000,
but it will be automatically renewed for successive one-year periods after the
end of the term unless either Mr. Hickey or the Company has given earlier notice
of nonrenewal. The Hickey Employment Agreement is subject to earlier termination
upon the death or disability of Mr. Hickey. The Hickey Employment Agreement may
also be terminated with or without cause by the Company, and with or without
"reason" by Mr. Hickey. In the event Mr. Hickey is terminated due to his death
or disability, the Company terminates Mr. Hickey without cause or Mr. Hickey
terminates his employment for "reason": (i) Mr. Hickey will be entitled to
receive the compensation consisting of both base salary and bonus under the
Hickey Employment Agreement as calculated and owed to Mr. Hickey but unpaid for
performance rendered as of the date of termination and any additional
compensation he may be entitled to receive under the terms of any employee
benefit plan; (ii) the exercisability of options granted under the Hickey
Employment Agreement will accelerate as provided in the agreements governing
such options, and (iii) the Company shall continue to provide for and pay
certain employee benefits to Mr. Hickey and his family for 12 months. In
addition, (i) in the event Mr. Hickey is terminated due to his
-14-
<PAGE> 18
death the Company will pay to the personal representative of Mr. Hickey a lump
sum amount equal to one-half of his annual salary as in effect on the date of
his death; (ii) in the event Mr. Hickey is terminated due to incapacity the
Company will pay to Mr. Hickey, for up to 90 days, an amount equal to the
difference between the amount of Mr. Hickey's then level of base compensation
and the amount paid to Mr. Hickey under any short-term disability insurance
policy obtained by Mr. Hickey under the Company's group coverage until the
Company's long-term disability insurance begins to pay; (iii) in the event Mr.
Hickey is terminated without cause or Mr. Hickey terminates his employment "for
reason," Mr. Hickey will be entitled to receive his base compensation as of the
date of termination of such employment from the date of such termination for the
greater of eighteen (18) months or the period of time from the date of such
termination to October 30, 1999. In the event Mr. Hickey elects to terminate the
Hickey Employment Agreement (as might be the case if he resigned), or is
terminated "for cause," Mr. Hickey will only be entitled to receive the
compensation owed but unpaid for performance rendered under the Hickey
Employment Agreement as of the date of termination and any additional
compensation he may be entitled to receive under the terms of any employee
benefit plan.
The Hickey Employment Agreement also contains certain provisions
relating to unauthorized disclosure of confidential information, recognition of
proprietary rights and non-competition provisions which provide that without the
consent of the Company Mr. Hickey will not compete with the Company during his
employment nor for a period of 12 months following his termination.
On October 16, 1997, the Company entered into an employment agreement
(the "Lee Employment Agreement") with Mr. Eugene I. Lee, who began serving as
the Company's Executive Vice President, Operations - LongHorn Steakhouse
Division effective as of such date. Under the Lee Employment Agreement, which is
terminable at will by either the Company or Mr. Lee at any time, Mr. Lee
receives an annual salary of $185,000 plus such additional amounts as may be
approved by the Company's Board of Directors, and an annual bonus as determined
and paid in accordance with the bonus program for the executive officers of the
Company as approved by the Company's Board of Directors from time to time. The
Lee Employment Agreement also provided for the granting of options to purchase
an aggregate of 150,000 shares of the Company's Common Stock to Mr. Lee. The
exercisability of these options may accelerate upon the termination of Mr. Lee's
employment under certain conditions. The exercise prices and periods of
exercisability of such options are set forth above under "Executive Compensation
- -- Option Grants in 1997."
In the event the term of Mr. Lee's employment is terminated for any
reason other than Mr. Lee's death or disability or "for cause," Mr. Lee will be
entitled to receive the compensation owed but unpaid for performance rendered
under the Lee Employment Agreement as of the date of termination and any
additional compensation he may be entitled to receive under the terms of any
employee benefit plan. Upon termination of Mr. Lee's employment by the death of
Mr. Lee, Mr. Lee's estate will be entitled to receive the base compensation
under the Lee Employment Agreement as calculated and owed to Mr. Lee but unpaid
for performance rendered as of the date of termination and any additional
compensation he may be entitled to receive under the terms of any employee
benefit plan, plus the Company will pay to Mr. Lee's personal representative a
lump sum amount equal to one-half of Mr. Lee's annual base compensation as in
effect on the date of his death. In the event of termination upon Mr. Lee's
disability, Mr. Lee will be entitled to receive the base compensation under the
Lee Employment Agreement as calculated and owed to Mr. Lee but unpaid for
performance rendered as of the date of termination and any additional
compensation he may be entitled to receive under the terms of any employee
benefit plan, plus the Company shall pay to Mr. Lee, for up to 90 days, an
amount equal to the difference between the amount of Mr. Lee's then level of
base compensation and 150% of the amount paid to Mr. Lee under any short-term
disability policy obtained by Mr. Lee and paid by the Company through the
Company's group coverage until the Company's long-term disability insurance
begins to pay. In the event that the Company terminates Mr. Lee's employment
other than for cause
-15-
<PAGE> 19
within 18 months following a change in control of the Company, Mr. Lee will be
entitled to receive the base compensation under the Lee Employment Agreement as
calculated and owed to Mr. Lee but unpaid for performance rendered as of the
date of termination and an additional amount equal to the sum of his annual base
compensation as of the date of termination of such employment and his bonus for
the preceding calendar year. In the event that the Company terminates Mr. Lee's
employment other than for cause prior to October 16, 1999 and not within 18
months of a change in control, the Company shall pay to Mr. Lee the base
compensation under the Lee Employment Agreement as calculated and owed to Mr.
Lee but unpaid for performance rendered as of the date of termination and shall
continue to pay Mr. Lee's annual base compensation as of the date of termination
from the date of such termination for 12 months. In the event that the Company
terminates Mr. Lee's employment other than for cause after October 16, 1999 and
not within 18 months of a change in control, the Company shall pay to Mr. Lee
the base compensation under the Lee Employment Agreement as calculated and owed
to Mr. Lee but unpaid for performance rendered as of the date of termination and
shall continue to pay Mr. Lee's annual base compensation as of the date of
termination from the date of such termination for 6 months.
The Lee Employment Agreement also contains certain provisions relating
to unauthorized disclosure of confidential information, recognition of
proprietary rights and non-competition provisions which provide that without the
consent of the Company Mr. Lee will not compete with the Company during his
employment nor for a period of 12 months following his termination.
On November 3, 1997, the Company entered into an employment agreement
(the "Burnett Employment Agreement") with Mr. William A. Burnett, who began
serving as the Company's Executive Vice President for The Capital Grille and
Bugaboo Creek Steak House effective as of such date. Under the Burnett
Employment Agreement, which is terminable at will by either the Company or Mr.
Burnett at any time, Mr. Burnett receives an annual salary of $160,000 plus such
additional amounts as may be approved by the Company's Board of Directors, and
an annual bonus as determined and paid in accordance with the bonus program for
the executive officers of the Company as approved by the Company's Board of
Directors from time to time. The Burnett Employment Agreement also provided for
the granting of options to purchase an aggregate of 150,000 shares of the
Company's Common Stock to Mr. Burnett. The exercisability of these options may
accelerate upon the termination of Mr. Burnett's employment under certain
conditions. The exercise prices and periods of exercisability of such options
are set forth above under "Executive Compensation -- Option Grants in 1997."
In the event the term of Mr. Burnett's employment is terminated for any
reason other than Mr. Burnett's death or disability or "for cause," Mr. Burnett
will be entitled to receive the compensation owed but unpaid for performance
rendered under the Burnett Employment Agreement as of the date of termination
and any additional compensation he may be entitled to receive under the terms of
any employee benefit plan. Upon termination of Mr. Burnett's employment by the
death of Mr. Burnett, Mr. Burnett's estate will be entitled to receive the base
compensation under the Burnett Employment Agreement as calculated and owed to
Mr. Burnett but unpaid for performance rendered as of the date of termination
and any additional compensation he may be entitled to receive under the terms of
any employee benefit plan, plus the Company will pay to Mr. Burnett's personal
representative a lump sum amount equal to one-half of Mr. Burnett's annual base
compensation as in effect on the date of his death. In the event of termination
upon Mr. Burnett's disability, Mr. Burnett will be entitled to receive the base
compensation under the Burnett Employment Agreement as calculated and owed to
Mr. Burnett but unpaid for performance rendered as of the date of termination
and any additional compensation he may be entitled to receive under the terms of
any employee benefit plan, plus the Company shall pay to Mr. Burnett, for up to
90 days, an amount equal to the difference between the amount of Mr. Burnett's
then level of base compensation and 150% of the amount paid to Mr. Burnett
-16-
<PAGE> 20
under any short-term disability policy obtained by Mr. Burnett and paid by the
Company through the Company's group coverage until the Company's long-term
disability insurance begins to pay. In the event that the Company terminates Mr.
Burnett's employment other than for cause within 18 months following a change in
control of the Company, and the change in control occurs prior to November 3,
1999, Mr. Burnett will be entitled to receive the base compensation under the
Burnett Employment Agreement as calculated and owed to Mr. Burnett but unpaid
for performance rendered as of the date of termination and an additional amount
equal to the sum of one-half his annual base compensation as of the date of
termination of such employment and one-half his bonus for the preceding calendar
year. In the event that the Company terminates Mr. Burnett's employment other
than for cause prior to November 3, 1999 and not within 18 months of a change in
control, the Company shall pay to Mr. Burnett the base compensation under the
Burnett Employment Agreement as calculated and owed to Mr. Burnett but unpaid
for performance rendered as of the date of termination and shall continue to pay
Mr. Burnett his annual base compensation as of the date of termination from the
date of such termination for 6 months.
The Burnett Employment Agreement also contains certain provisions
relating to unauthorized disclosure of confidential information, recognition of
proprietary rights and non-competition provisions which provide that without the
consent of the Company Mr. Burnett will not compete with the Company during his
employment nor for a period of 12 months following his termination.
Robert Ferngren's employment with the Company terminated effective
November 1, 1997. Pursuant to his severance package, Mr. Ferngren will continue
to receive his salary until October 31, 1998 and was paid his guaranteed bonus
on January 31, 1998. In addition, the Company made payments to Mr. Ferngren to
cover the difference between rental income received by Mr. Ferngren with respect
to his prior residence and the mortgage payments on his new residence for a
period of four months.
-17-
<PAGE> 21
SHAREHOLDER RETURN ANALYSIS
The following line-graph presentation compares cumulative shareholder
returns of the Company with the Nasdaq Stock Market (U.S. Companies) and a Peer
Index for the period beginning on December 31, 1992 (assuming the investment of
$100 in the Company's Common Stock, the Nasdaq Stock Market (U.S. Companies),
and the Peer Index on December 31, 1992 and reinvestment of all dividends).
COMPARISON OF CUMULATIVE TOTAL RETURNS
RARE HOSPITALITY INTERNATIONAL, INC.
[GRAPH]
YEAR-END TOTAL RETURNS
<TABLE>
<CAPTION>
1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
RARE HOSPITALITY INTERNATIONAL, INC. 35.5 36.6 76.3 81.7 40.3
NASDAQ STOCK MARKET 114.8 112.2 158.7 195.4 230.6
PEER INDEX 102.9 74.0 84.6 81.6 94.1
</TABLE>
Total return calculations for the Nasdaq Stock Market (U.S. Companies)
and the Peer Index were prepared by the Center for Research in Security Prices,
The University of Chicago. The Peer Index is composed of 50 companies, including
the Company, offering a wide variety of restaurant services and franchising
found primarily in the Standard Industrial Classification ("SIC") Code groups
5810 and 5812 with one company in group 6790. Information with regard to SIC
classifications in general can be found in the Standard Industrial
Classification Manual published by the Executive Office of the President, Office
of Management and Budget. Specific information regarding the companies
comprising the Peer Index will be provided to any shareholder upon request to
the Secretary of the Company.
-18-
<PAGE> 22
COMPENSATION AND STOCK OPTION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation of the Company's executives, including those with
employment agreements, is subject to annual review and approval by the
Compensation Committee. Compensation of executives generally consists of base
salary, cash bonuses and the award of stock options which under the Company's
Amended and Restated 1992 Incentive Plan are granted by the Stock Option
Committee and under the 1997 Long-Term Incentive Plan directly by the
Compensation Committee. In establishing compensation policies and levels, the
Compensation Committee seeks to attract and retain an outstanding group of
executives and to align the interests of those executives with the Company's
overall business strategies and goals.
In January 1997, the Compensation Committee reviewed the compensation
of the Company's executives and determined salaries in light of the level of
responsibility of the executives, prior experience and achievements and the
importance of each executive's contribution to the Company. The Compensation
Committee's determinations of the level of compensation for the Named Executive
Officers described in "Executive Compensation" above was also based upon a
review of compensation levels at comparable companies in the Peer Index and the
prior level of the executive's base compensation.
Base salaries for the Company's former President and Chief Executive
Officer, former Chief Financial Officer and former Executive Vice President for
LongHorn Steakhouse were set in January 1997 in connection with the Compensation
Committee's review of the compensation of the Company's executives and set in
light of the Company's performance in 1996 and the contribution of these
executive officers. The base compensation of George W. McKerrow, Jr. was
increased to $290,000 in August 1997 when Mr. McKerrow assumed the duties of
Chief Executive Officer in addition to those of the Chairman of the Board of
Directors. The salary of Eugene I. Lee, who had been employed by the Company
since January 1997, was increased by the Compensation Committee in October 1997,
to reflect the additional responsibility and duties of Mr. Lee when he became
Executive Vice President, Operations - LongHorn Steakhouse Division. The base
compensation for Philip J. Hickey, Jr., President of the Company, and for
William A. Burnett, Executive Vice President, Operations - The Capital Grille
Division, were negotiated with these two officers when they joined the Company
in October and November 1997, respectively, and these salaries are reflected in
their employment agreements with the Company.
For 1997, the Company's executives were entitled to receive bonuses
under a plan that based bonuses on the Company's earnings or a combination of
the Company's earnings and the performance of the concept in which the executive
was employed. In addition, Eugene Lee and Robert Ferngren were entitled to
minimum bonuses under the terms on which they joined the Company in 1997 and the
Company paid an additional discretionary bonus to Ms. Anne Huemme in recognition
of her services during the year.
For 1997, cash bonuses were paid to Anne D. Huemme, former Chief
Financial Officer of the Company, Robert Ferngren, former Executive Vice
President for LongHorn Steakhouse and Eugene I. Lee, who is now Executive Vice
President, Operations - LongHorn Steakhouse Division. No bonuses were paid to
any other Named Executive Officers for 1997, but Philip J. Hickey, Jr. was paid
a sum of $50,000 upon the signing of the Hickey Employment Agreement.
The Stock Option Committee determines from time to time the key
employees of the Company who are entitled to receive options under the Company's
Amended and Restated 1992 Incentive Plan and from time to time grants to such
key employees options under the Incentive Plan to provide greater incentive to
such employees to increase the long-term value of the Company and its stock.
With the
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<PAGE> 23
adoption of the Company's 1997 Long-Term Incentive Plan in October 1997, which
plan is administered by the Compensation Committee, stock options or other
stock-based incentive awards may be granted directly by the Compensation
Committee.
During 1997, the Compensation Committee approved the Company's
employment agreements with Philip J. Hickey, Jr., Eugene I. Lee and William A.
Burnett. These agreements provide for the base level of compensation for each of
these executives, that the executives will participate in such executive bonus
compensation plan as may be in effect from time to time and will be granted
options to purchase shares of the Company's stock, which options generally vest
over a three-year period at increasing exercise prices. The options that were
granted under the Amended and Restated 1992 Incentive Plan were also approved by
the Stock Option Committee.
Section 162(m) of the Internal Revenue Code (the "Code") adopted as
part of the Revenue Reconciliation Act of 1993, generally limits to $1 million
the deduction that can be claimed by any publicly-held corporation for
compensation paid to any "covered employee" in any taxable year beginning after
December 31, 1993. The term "covered employee" for this purpose is defined
generally as the Chief Executive Officer and the four other highest paid
employees of the Company. Performance-based compensation is outside the scope of
the $1 million limitation and, hence, generally can be deducted by a
publicly-held corporation without regard to amount, provided that, among other
requirements, such compensation is approved by the shareholders. Because of the
current levels of compensation of the Company's highest paid employees, the
Compensation Committee has not yet developed a formal policy on this matter.
Generally speaking, the Compensation Committee's executive compensation policies
are performance-based, as described above.
COMPENSATION COMMITTEE STOCK OPTION COMMITTEE
Don L. Chapman Don L. Chapman
Edward P. Grace, III John G. Pawly
John G. Pawly
CERTAIN TRANSACTIONS
LongHorn of Tennessee. LongHorn Steaks of Tennessee, Inc., which was
acquired by the Company in April 1992, operated two LongHorn Steakhouses in
Nashville, Tennessee pursuant to a franchise agreement with the Company. In
connection with the acquisition, the Company assumed a lease on one restaurant
site and agreed to indemnify the former shareholders of LongHorn of Tennessee,
including Messrs. McKerrow, Sr., McKerrow, Jr. and San Martin, from any losses
resulting from the Company's failure to perform its obligations under this
lease. Future minimum lease payments under this lease aggregated $134,375 at
December 28, 1997.
Other Transactions. The Company leases the land and buildings in which
it operates its Tucker, Georgia LongHorn Steakhouse from a partnership that is
owned 15% by Mr. McKerrow, Sr., 15% by Mr. McKerrow, Jr., 10% by Mr. San Martin
and 60% by three unrelated individuals. This lease was entered into for a term
of five years beginning on July 1, 1986, renewable for two additional five year
periods, and provides for monthly rent equal to the greater of $3,700 ($4,200
and $4,700, respectively, in the two subsequent five-year periods) or 5% of the
restaurant's adjusted gross revenues. The lease was renewed for an additional
five-year period beginning on July 1, 1996. Under the terms of the lease, the
Company pays all taxes, utilities, and maintenance of the leased premises. This
lease is on substantially the same terms as other leases the Company has entered
into with
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<PAGE> 24
unrelated parties with respect to other Company-owned restaurants. The Company
paid the partnership rent of $106,000 in 1997.
During the transitional period in the Company's leadership from August
to December, 1997, Ronald W. San Martin served the Company in a full-time
capacity as its chief operating officer. The Board of Directors voted to
compensate Mr. San Martin for this full-time service to the Company at a rate of
$175,000 per year. Mr. San Martin was paid $88,527 by the Company for his
full-time service during this period.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997 Messrs. Chapman, Grace and Pawly served on the Compensation
Committee, as did John C. Metz, a former director of the Company.
PROPOSAL II
APPROVAL OF THE 1997 LONG-TERM INCENTIVE PLAN
On October 13, 1997, the Board of Directors adopted the RARE
Hospitality International, Inc. 1997 Long-Term Incentive Plan, and on March 20,
1998 the Board of Directors adopted Amendment No. 1 to the RARE Hospitality
International, Inc. 1997 Long-Term Incentive Plan (as amended, the "Incentive
Plan"). The Company has reserved 750,000 shares of its Common Stock for issuance
in connection with options and awards under this plan. The Incentive Plan will
be effective as of its adoption by the Board. However, if the shareholders fail
to approve the Incentive Plan at the Annual Meeting, any incentive stock options
previously granted under the plan will be automatically converted to
non-qualified stock options.
A summary of the Incentive Plan is set forth below. The summary is
qualified in its entirety by reference to the full text of the Incentive Plan,
which is attached to this Proxy Statement as Appendix A.
GENERAL
The purpose of the Incentive Plan is to promote the success, and
enhance the value, of the Company by linking the personal interests of
employees, officers, directors, consultants and advisors to those of the
shareholders, and by providing such employees, officers, directors, consultants
and advisors with an incentive for outstanding performance. As of March 31,
1998, there were approximately 8,100 persons eligible to participate in the
Incentive Plan.
The Incentive Plan authorizes the granting of awards ("Awards") to
employees, officers and directors of the Company or its subsidiaries in the
following forms: (i) options to purchase shares of Common Stock ("Options"),
which may be incentive stock options or non-qualified stock options, (ii) stock
appreciation rights ("SARs"); (iii) performance units ("Performance Units");
(iv) restricted stock ("Restricted Stock"); (v) dividend equivalents ("Dividend
Equivalents"); and (vi) other stock-based awards.
Pursuant to Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), the Company may not deduct compensation in excess of $1
million paid to the Chief Executive Officer and the four next most highly
compensated executive officers of the Company. The Incentive Plan is
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<PAGE> 25
designed to comply with Code Section 162(m) so that the grant of Options and
SARs under the plan, and other Awards, such as Performance Units, that are
conditioned on the performance goals described in Section 13.11 of the Incentive
Plan, will be excluded from the calculation of annual compensation for purposes
of Code Section 162(m) and will be fully deductible by the Company. The Board
has approved the Incentive Plan for submission to the shareholders in order to
permit the grant of Awards thereunder that will constitute deductible
performance-based compensation for purposes of Code Section 162(m).
Subject to adjustment as provided in the Incentive Plan, the aggregate
number of shares of Common Stock reserved and available for Awards or which may
be used to provide a basis of measurement for or to determine the value of an
Award (such as with a SAR or Performance Unit) is 750,000. The maximum number of
shares of Common Stock with respect to one or more Options and/or SARs that may
be granted during any one calendar year under the Incentive Plan to any one
participant is 250,000. The maximum fair market value of any Awards (other than
Options and SARs) that may be received by a participant (less any consideration
paid by the participant for such Award) during any one calendar year under the
Incentive Plan is $1,000,000.
ADMINISTRATION
The Incentive Plan will be administered by the Compensation Committee
of the Board of Directors of the Company (the "Committee"). The Committee has
the power, authority and discretion to designate participants; determine the
type or types of Awards to be granted to each participant and the terms and
conditions thereof; establish, adopt or revise any rules and regulations as it
may deem necessary or advisable to administer the Incentive Plan; and make all
other decisions and determinations that may be required under, or as the
Committee deems necessary or advisable to administer, the Incentive Plan.
AWARDS
Stock Options. The Committee is authorized to grant Options, which may
be incentive stock options ("ISOs") or nonqualified stock options ("NSOs"), to
participants. All Options will be evidenced by a written Award Agreement between
the Company and the participant, which will include such provisions as may be
specified by the Committee. The terms of any ISO must meet the requirements of
Section 422 of the Code.
Stock Appreciation Rights. The Committee may grant SARs to
participants. Upon the exercise of a SAR, the participant has the right to
receive the excess, if any, of: the fair market value of one share of Common
Stock on the date of exercise, over the grant price of the SAR as determined by
the Committee, which will not be less than the fair market value of one share of
Common Stock on the date of grant in the case of any SAR related to an ISO. All
awards of SARs will be evidenced by an Award Agreement, reflecting the terms,
methods of exercise, methods of settlement, form of consideration payable in
settlement, and any other terms and conditions of the SAR, as determined by the
Committee at the time of grant.
Performance Units. The Committee may grant Performance Units to
participants on such terms and conditions as may be selected by the Committee.
The Committee will have the complete discretion to determine the number of
Performance Units granted to each participant and to set performance goals and
other terms or conditions to payment of the Performance Units in its discretion
which, depending on the extent to which they are met, will determine the number
and value of Performance Units that will be paid to the participant.
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<PAGE> 26
Restricted Stock Awards. The Committee may make awards of Restricted
Stock to participants, which will be subject to such restrictions on
transferability and other restrictions as the Committee may impose (including,
without limitation, limitations on the right to vote Restricted Stock or the
right to receive dividends, if any, on the Restricted Stock).
Dividend Equivalents. The Committee is authorized to grant Dividend
Equivalents to participants subject to such terms and conditions as may be
selected by the Committee. Dividend Equivalents entitle the participant to
receive payments equal to dividends with respect to all or a portion of the
number of shares of Common Stock subject to an Option Award or SAR Award, as
determined by the Committee. The Committee may provide that Dividend Equivalents
be paid or distributed when accrued or be deemed to have been reinvested in
additional shares of Common Stock, or otherwise reinvested.
Other Stock-Based Awards. The Committee may, subject to limitations
under applicable law, grant to participants such other Awards that are payable
in, valued in whole or in part by reference to, or otherwise based on or related
to shares of Common Stock, as deemed by the Committee to be consistent with the
purposes of the Incentive Plan, including without limitation shares of Common
Stock awarded purely as a "bonus" and not subject to any restrictions or
conditions, convertible or exchangeable debt securities, other rights
convertible or exchangeable into shares of Common Stock, and Awards valued by
reference to book value of shares of Common Stock or the value of securities of
or the performance of specified subsidiaries of the Company. The Committee will
determine the terms and conditions of any such Awards.
Performance Goals. The Committee may determine that any Award will be
determined solely on the basis of (a) the achievement by the Company or a
subsidiary of a specified target, or target growth in return, or target growth
in return, on equity or assets, (b) the Company's or subsidiary's stock price,
(c) the achievement by a business unit of the Company or subsidiary of a
specified target, or target growth in, net income or earnings per share, or (d)
any combination of the goals set forth in (a) through (c) above. Furthermore,
the Committee reserves the right for any reason to reduce (but not increase) any
Award, notwithstanding the achievement of a specified goal. If an Award is made
on such basis, the Committee must establish goals prior to the beginning of the
period for which such performance goal relates (or such later date as may be
permitted under Code Section 162(m) or the regulations thereunder). Any payment
of an Award granted with performance goals will be conditioned on the written
certification of the Committee in each case that the performance goals and any
other material conditions were satisfied.
Limitations on Transfer; Beneficiaries. No Award will be assignable or
transferable by a participant other than by will or the laws of descent and
distribution or, except in the case of an ISO, pursuant to a qualified domestic
relations order. However, a participant may, in the manner determined by the
Committee, designate a beneficiary to exercise the rights of the participant and
to receive any distribution with respect to any Award upon the participant's
death.
Acceleration Upon Certain Events. Upon the participant's death or
disability, all outstanding Options, SARs, and other Awards in the nature of
rights that may be exercised will become fully exercisable and all restrictions
on outstanding Awards will lapse. Any Options or SARs will thereafter continue
or lapse in accordance with the other provisions of the Incentive Plan and the
Award Agreement. In the event of a Change in Control of the Company (as defined
in the Incentive Plan), all outstanding Options, SARs, and other Awards in the
nature of rights that may be exercised will become fully vested and all
restrictions on all outstanding Awards will lapse. In the event of (i) the
commencement of a public tender offer for all or any portion of the Common
Stock, or (ii) a proposal to merge, consolidate or otherwise combine into and
with another corporation (in which transaction the
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<PAGE> 27
Company would not survive) is submitted to the stockholders of the Company for
approval, the Board may in its sole discretion declare all outstanding Options,
SARs, and other Awards in the nature of rights that may be exercised to become
fully vested, and/or all restrictions on all outstanding Awards to lapse, in
each case as of such date as the Board may, in its sole discretion, declare,
which may be on or before the consummation of such tender offer or other
transaction or event.
TERMINATION AND AMENDMENT
With the approval of the Board, at any time and from time to time, the
Committee may terminate, amend or modify the Incentive Plan without shareholder
approval; provided, however, that the Committee may condition any amendment on
the approval of shareholders of the Company if such approval is necessary or
deemed advisable with respect to tax, securities or other applicable laws,
policies or regulations. No termination, amendment, or modification of the
Incentive Plan may adversely affect any Award previously granted under the
Incentive Plan, without the written consent of the participant.
CERTAIN FEDERAL INCOME TAX EFFECTS
Nonqualified Stock Options. Under present federal income tax
regulations, there will be no federal income tax consequences to either the
Company or the participant upon the grant of a non-discounted NSO. However, the
participant will realize ordinary income on the exercise of the NSO in an amount
equal to the excess of the fair market value of the Common Stock acquired upon
the exercise of such option over the exercise price, and the Company will
receive a corresponding deduction. The gain, if any, realized upon the
subsequent disposition by the participant of the Common Stock will constitute
short- or long-term capital gain, depending on the participant's holding period.
Incentive Stock Options. Under present federal income tax regulations,
there will be no federal income tax consequences to either the Company or the
participant upon the grant of a non-discounted ISO or the exercise thereof by
the participant. If the participant holds the shares of Common Stock for the
greater of two years after the date the Option was granted or one year after the
acquisition of such shares of Common Stock (the "required holding period"), the
difference between the aggregate option price and the amount realized upon
disposition of the shares of Common Stock will constitute a long-term capital
gain or loss, and the Company will not be entitled to a federal income tax
deduction. If the shares of Common Stock are disposed of in a sale, exchange or
other "disqualifying disposition" during the required holding period, the
participant will realize taxable ordinary income in an amount equal to the
excess of the fair market value of the Common Stock purchased at the time of
exercise over the aggregate option price, and the Company will be entitled to a
federal income tax deduction equal to such amount.
SARs. Under present federal income tax regulations, a participant
receiving a non-discounted SAR will not recognize income, and the Company will
not be allowed a tax deduction, at the time the Award is granted. When a
participant exercises the SAR, the amount of cash and the fair market value of
any shares of Common Stock received will be ordinary income to the participant
and will be allowed as a deduction for federal income tax purposes to the
Company.
Performance Units. Under present federal income tax regulations, a
participant receiving Performance Units will not recognize income and the
Company will not be allowed a tax deduction at the time the Award is granted.
When a participant receives payment of Performance Units, the amount of cash and
the fair market value of any shares of Common Stock received will be ordinary
income to the participant and will be allowed as a deduction for federal income
tax purposes to the Company.
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<PAGE> 28
Restricted Stock. Under present federal income tax regulations, and
unless the participant makes an election to accelerate recognition of the income
to the date of grant, a participant receiving a Restricted Stock Award will not
recognize income, and the Company will not be allowed a tax deduction, at the
time the Award is granted. When the restrictions lapse, the participant will
recognize ordinary income equal to the fair market value of the Common Stock,
and the Company will be entitled to a corresponding tax deduction at that time.
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<PAGE> 29
BENEFITS TO NAMED EXECUTIVE OFFICERS AND OTHERS
As of April 15, 1998, stock options had been granted or approved for
grant under the Incentive Plan to the persons and groups shown in the table
below. Any additional future Awards will be made at the discretion of the
Committee. Therefore, it is not presently possible to determine the number or
terms of Awards to be made in the future to the persons and groups shown in the
table below.
<TABLE>
<CAPTION>
DOLLAR NUMBER OF
NAME AND POSITION VALUE(1) OPTIONS
<S> <C> <C>
George W. McKerrow, Jr. $213,000 100,000
Chairman of the Board of Directors
and Chief Executive Officer
Richard E. Rivera -- --
Former President and Chief
Executive Officer and Director
Eugene I. Lee -- --
Executive Vice President, Operations
- LongHorn Steakhouse Division
William A. Burnett 100,000 150,000
Executive Vice President, Operations
- The Capital Grille Division
Anne D. Huemme -- --
Former Chief Financial
Officer
Robert Ferngren -- --
Former Executive Vice President for
LongHorn Steakhouse
Philip J. Hickey, Jr. -- 93,334
President and Chief Operating
Officer and a Director
All Executive Officers as a Group 344,875 457,084
(including the above)
All Non-Executive Directors as a 127,800 60,000
Group (including the
above)
All Non-Executive Officer 84,600 65,000
Employees as a Group
</TABLE>
- ---------------------------------------------------
(1) The dollar value of the above Options is dependent on the difference
between the exercise price and the fair market value of the underlying
shares on the date of exercise. The above dollar values were calculated
based on a fair market value of $11.88, the closing price of the
Company's Common Stock on March 31, 1998.
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<PAGE> 30
ADDITIONAL INFORMATION
The closing price of the Common Stock, as reported by the Nasdaq
National Market on March 31, 1998, was $11.88.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
INCENTIVE PLAN. APPROVAL OF THE INCENTIVE PLAN REQUIRES THAT THE VOTES CAST IN
FAVOR OF APPROVAL EXCEED THE VOTES CAST AGAINST APPROVAL AT THE MEETING AT WHICH
A QUORUM IS PRESENT.
PROPOSAL III
RATIFICATION OF SELECTION OF AUDITORS
The Company's Board of Directors has selected KPMG Peat Marwick LLP to
conduct the annual audit of the financial statements of the Company for the
fiscal year ending December 27, 1998. The ratification by the shareholders of
the selection of KPMG Peat Marwick LLP as independent auditors is not required
by law or by the Bylaws of the Company. The Board of Directors, consistent with
the practice of most publicly held corporations, is nevertheless submitting this
selection to the shareholders. If this selection is not ratified at the Meeting,
the Board of Directors intends to reconsider its selection of independent
auditors for the fiscal year ending December 27, 1998.
Representatives of KPMG Peat Marwick LLP will be present at the Meeting
with an opportunity to make statements, if they so desire, and to respond to
appropriate questions with respect to that firm's audit of the Company's
financial statements for the fiscal year ended December 28, 1997.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
SELECTION OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS FOR THE FISCAL YEAR
ENDING DECEMBER 27, 1998. RATIFICATION OF KPMG PEAT MARWICK LLP REQUIRES THAT
THE VOTES CAST IN FAVOR OF RATIFICATION EXCEED THE VOTES CAST AGAINST
RATIFICATION AT THE MEETING AT WHICH A QUORUM IS PRESENT.
SHAREHOLDER PROPOSALS
ANY PROPOSAL WHICH A COMPANY SHAREHOLDER INTENDS TO BE PRESENTED AT THE
NEXT ANNUAL MEETING OF SHAREHOLDERS TO BE HELD IN 1999 MUST BE RECEIVED BY THE
COMPANY ON OR BEFORE DECEMBER 11, 1998. Only proper proposals which are timely
received will be included in the Proxy Statement and Proxy.
OTHER MATTERS
EXPENSES OF SOLICITATION
The cost of soliciting proxies in the accompanying form will be borne
by the Company. In addition to the use of the mails, proxies may be solicited by
directors, officers or other employees of the Company, personally, or by
telephone. The Company does not expect to pay any compensation for the
solicitation of proxies, but may reimburse brokers, custodians or other persons
holding stock in their names or in the names of nominees for their expenses in
sending proxy materials to principals and obtaining their instructions.
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<PAGE> 31
SECTION 16(a) REPORTING
Based solely on a review of the copies of reports furnished to the
Company, or written representations that no annual forms (Form 5) were required,
the Company believes that, during the 1997 fiscal year, all filing requirements
of its officers, directors and 10% shareholders for reporting to the Securities
and Exchange Commission their ownership and changes in ownership of Common Stock
(as required pursuant to Section 16(a) of the Securities Exchange Act of 1934)
were complied with, except for the following: (i) Messrs. Metz, San Martin,
Pawly and Chapman each neglected to file a Form 4 with respect to one
transaction; and (ii) Mr. Chapman reported one transaction on a Form 4 in the
month subsequent to the month in which it should have been reported.
MISCELLANEOUS
Management does not know of any matters to be brought before the
Meeting other than as described in this Proxy Statement. Should any other
matters properly come before the Meeting, the persons designated as proxies will
vote in their sole discretion on such matters.
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<PAGE> 32
APPENDIX A
RARE HOSPITALITY INTERNATIONAL, INC.
1997 LONG-TERM INCENTIVE PLAN
<PAGE> 33
APPENDIX A
RARE HOSPITALITY INTERNATIONAL, INC.
1997 LONG-TERM INCENTIVE PLAN
ARTICLE I
PURPOSE
1.1 GENERAL. The purpose of the RARE Hospitality International,
Inc. 1997 Long-Term Incentive Plan (the "Plan") is to promote the success, and
enhance the value, of RARE Hospitality International, Inc. (the "Corporation"),
by linking the personal interests of its employees, officers, directors,
consultants and advisors to those of Corporation shareholders and by providing
its employees, officers, directors, consultants and advisors with an incentive
for outstanding performance. The Plan is further intended to provide flexibility
to the Corporation in its ability to motivate, attract, and retain the services
of employees, officers, directors, consultants and advisors upon whose judgment,
interest, and special effort the successful conduct of the Corporation's
operation is largely dependent. Accordingly, the Plan permits the grant of
incentive awards from time to time to selected employees, officers, directors,
consultants and advisors.
ARTICLE 2
EFFECTIVE DATE
2.1 EFFECTIVE DATE. The Plan shall be effective as of the date
upon which it shall be approved by the Board. However, the Plan shall be
submitted to the shareholders of the Corporation for approval within 12 months
of the Board's approval thereof. No Incentive Stock Options granted under the
Plan may be exercised prior to approval of the Plan by the shareholders and if
the shareholders fail to approve the Plan within 12 months of the Board's
approval thereof, any Incentive Stock Options previously granted hereunder shall
be automatically converted to Non-Qualified Stock Options without any further
act. In the discretion of the Committee, Awards may be made to Covered Employees
which are intended to constitute qualified performance-based compensation under
Code Section 162(m). Any such Awards shall be contingent upon the shareholders
having approved the Plan.
ARTICLE 3
DEFINITIONS
3.1 DEFINITIONS. When a word or phrase appears in this Plan with
the initial letter capitalized, and the word or phrase does not commence a
sentence, the word or phrase shall generally be given the meaning ascribed to it
in this Section or in Section 1.1 unless a clearly different meaning is required
by the context. The following words and phrases shall have the following
meanings:
(a) "Award" means any Option, Stock Appreciation Right,
Restricted Stock Award, Performance Share Award, Dividend Equivalent
Award, or Other Stock-Based Award, or any other right or interest
relating to Stock or cash, granted to a Participant under the Plan.
(b) "Award Agreement" means any written agreement, contract,
or other instrument or document evidencing an Award.
(c) "Board" means the Board of Directors of the Corporation.
<PAGE> 34
(d) "Change in Control" means and includes each of the
following:
(1) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the 1934 Act) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the 1934 Act) of 25%
or more of the combined voting power of the then outstanding
voting securities of the Corporation entitled to vote
generally in the election of directors (the "Outstanding
Corporation Voting Securities"); provided, however, that for
purposes of this subsection (1), the following acquisitions
shall not constitute a Change of Control: (i) any acquisition
by a Person who is on the Effective Date the beneficial owner
of 25% or more of the Outstanding Corporation Voting
Securities, (ii) any acquisition by the Corporation, (iii) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Corporation or any corporation
controlled by the Corporation, or (iv) any acquisition by any
corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (3) of this
definition;
(2) Individuals who, as of the Effective Date,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the Effective Date whose election, or nomination
for election by the Corporation's shareholders, was approved
by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or
removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(3) Consummation of a reorganization, merger, share
exchange or consolidation or sale or other disposition of all
or substantially all of the assets of the Corporation (a
"Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners of the
Outstanding Corporation Voting Securities immediately prior to
such Business Combination beneficially own, directly or
indirectly, more than 50% of the combined voting power of the
then outstanding voting securities entitled to vote generally
in the election of directors of the corporation resulting from
such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the
Corporation or all or substantially all of the Corporation's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Corporation Voting Securities, and (ii) no Person
(excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of
the Corporation or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 25% or more of the combined voting power of the
then outstanding voting securities of such corporation except
to the extent that such ownership existed prior to the
Business Combination, and (iii) at least a majority of the
members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent
Board at the time of the execution of the initial agreement,
or of the action of the Board, providing for such Business
Combination; or
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<PAGE> 35
(4) approval by the shareholders of the Corporation
of a complete liquidation or dissolution of the Corporation.
(e) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(f) "Committee" means the committee of the Board described in
Article 4.
(g) "Corporation" means RARE Hospitality International, Inc.,
a Delaware corporation.
(h) "Covered Employee" means a covered employee as defined in
Code Section 162(m)(3).
(i) "Disability" shall mean any illness or other physical or
mental condition of a Participant that renders the Participant
incapable of performing his customary and usual duties for the
Corporation, or any medically determinable illness or other physical or
mental condition resulting from a bodily injury, disease or mental
disorder which, in the judgment of the Committee, is permanent and
continuous in nature. The Committee may require such medical or other
evidence as it deems necessary to judge the nature and permanency of
the Participant's condition.
(j) "Dividend Equivalent" means a right granted to a
Participant under Article 11.
(k) "Effective Date" has the meaning assigned such term in
Section 2.1.
(l) "Fair Market Value", on any date, means (i) if the Stock
is listed on a securities exchange or is traded over the Nasdaq
National Market, the closing sales price on such exchange or over such
system on such date or, in the absence of reported sales on such date,
the closing sales price on the immediately preceding date on which
sales were reported, or (ii) if the Stock is not listed on a securities
exchange or traded over the Nasdaq National Market, the mean between
the bid and offered prices as quoted by Nasdaq for such date, provided
that if it is determined that the fair market value is not properly
reflected by such Nasdaq quotations, Fair Market Value will be
determined by such other method as the Committee determines in good
faith to be reasonable.
(m) "Incentive Stock Option" means an Option that is intended
to meet the requirements of Section 422 of the Code or any successor
provision thereto.
(n) "Non-Qualified Stock Option" means an Option that is not
an Incentive Stock Option.
(o) "Option" means a right granted to a Participant under
Article 7 of the Plan to purchase Stock at a specified price during
specified time periods. An Option may be either an Incentive Stock
Option or a Non-Qualified Stock Option.
(p) "Other Stock-Based Award" means a right, granted to a
Participant under Article 12, that relates to or is valued by reference
to Stock or other Awards relating to Stock.
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<PAGE> 36
(r) "Parent" means a corporation which beneficially owns a
majority of the outstanding voting stock or voting power of the
Corporation. For Incentive Stock Options, the term shall have the same
meaning as set forth in Code Section 424(e).
(q) "Participant" means a person who, as an employee, officer,
director, consultant or advisor of the Corporation or any Parent or
Subsidiary, has been granted an Award under the Plan.
(o) "Performance Share" means a right granted to a Participant
under Article 9, to receive cash, Stock, or other Awards, the payment
of which is contingent upon achieving certain performance goals
established by the Committee.
(p) "Plan" means the RARE Hospitality International, Inc. 1997
Long-Term Incentive Plan, as amended from time to time.
(q) "Restricted Stock Award" means Stock granted to a
Participant under Article 10 that is subject to certain restrictions
and to risk of forfeiture.
(r) "Retirement" means a Participant's termination of
employment with the Corporation, Parent or Subsidiary after attaining
any normal or early retirement age specified in any pension, profit
sharing or other retirement program sponsored by the Corporation, or,
in the event of the inapplicability thereof with respect to the person
in question, as determined by the Committee in its reasonable judgment.
(s) "Stock" means the no par value common stock of the
Corporation and such other securities of the Corporation as may be
substituted for Stock pursuant to Article 14.
(t) "Stock Appreciation Right" or "SAR" means a right granted
to a Participant under Article 8 to receive a payment equal to the
difference between the Fair Market Value of a share of Stock as of the
date of exercise of the SAR over the grant price of the SAR, all as
determined pursuant to Article 8.
(u) "Subsidiary" means any corporation, limited liability
company, partnership or other entity of which 50% or more the
outstanding voting stock, voting power, general partnership interest,
or membership interest is beneficially owned directly or indirectly by
the Corporation. For Incentive Stock Options, the term shall have the
meaning set forth in Code Section 424(f).
(v) "1933 Act" means the Securities Act of 1933, as amended
from time to time.
(w) "1934 Act" means the Securities Exchange Act of 1934, as
amended from time to time.
ARTICLE 4
ADMINISTRATION
4.1 COMMITTEE. The Plan shall be administered by the Compensation
Committee of the Board or, at the discretion of the Board from time to time, by
the Board. The Committee shall consist of two or more members of the Board who
are (i) "outside directors" as that term is used in Section 162(m) of the Code
and the regulations promulgated thereunder, and (ii) "non-employee directors" as
such term is defined in Rule 16b-3 promulgated under Section 16 of the 1934 Act
or any successor
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provision. During any time that the Board is acting as administrator of the
Plan, it shall have all the powers of the Committee hereunder, and any reference
herein to the Committee (other than in this Section 4.1) shall include the
Board.
4.2 ACTION BY THE COMMITTEE. For purposes of administering the Plan,
the following rules of procedure shall govern the Committee. A majority of the
Committee shall constitute a quorum. The acts of a majority of the members
present at any meeting at which a quorum is present, and acts approved
unanimously in writing by the members of the Committee in lieu of a meeting,
shall be deemed the acts of the Committee. Each member of the Committee is
entitled to, in good faith, rely or act upon any report or other information
furnished to that member by any officer or other employee of the Corporation or
any Parent or Subsidiary, the Corporation's independent certified public
accountants, or any executive compensation consultant or other professional
retained by the Corporation to assist in the administration of the Plan.
4.3 AUTHORITY OF COMMITTEE. The Committee has the exclusive power,
authority and discretion to:
(a) Designate Participants;
(b) Determine the type or types of Awards to be granted to
each Participant;
(c) Determine the number of Awards to be granted and the
number of shares of Stock to which an Award will relate;
(d) Determine the terms and conditions of any Award granted
under the Plan, including but not limited to, the exercise price, grant
price, or purchase price, any restrictions or limitations on the Award,
any schedule for lapse of forfeiture restrictions or restrictions on
the exercisability of an Award, and accelerations or waivers thereof,
based in each case on such considerations as the Committee in its sole
discretion determines;
(e) Accelerate the vesting or lapse of restrictions of any
outstanding Award, based in each case on such considerations as the
Committee in its sole discretion determines;
(f) Determine whether, to what extent, and under what
circumstances an Award may be settled in, or the exercise price of an
Award may be paid in, cash, Stock, other Awards, or other property, or
an Award may be canceled, forfeited, or surrendered;
(g) Prescribe the form of each Award Agreement, which need not
be identical for each Participant;
(h) Decide all other matters that must be determined in
connection with an Award;
(i) Establish, adopt or revise any rules and regulations as it
may deem necessary or advisable to administer the Plan;
(j) Make all other decisions and determinations that may be
required under the Plan or as the Committee deems necessary or
advisable to administer the Plan; and
(k) Amend the Plan or any Award Agreement as provided herein.
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4.4. DECISIONS BINDING. The Committee's interpretation of the Plan, any
Awards granted under the Plan, any Award Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and
conclusive on all parties.
ARTICLE 5
SHARES SUBJECT TO THE PLAN
5.1. NUMBER OF SHARES. Subject to adjustment as provided in Section
14.1, the aggregate number of shares of Stock reserved and available for Awards
or which may be used to provide a basis of measurement for or to determine the
value of an Award (such as with a Stock Appreciation Right or Performance Share
Award) shall be 500,000, no more than 20% of which shall be Restricted Stock
Awards.
5.2. LAPSED AWARDS. To the extent that an Award is canceled,
terminates, expires or lapses for any reason, any shares of Stock subject to the
Award will again be available for the grant of an Award under the Plan and
shares subject to SARs or other Awards settled in cash will be available for the
grant of an Award under the Plan.
5.3. STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may
consist, in whole or in part, of authorized and unissued Stock, treasury Stock
or Stock purchased on the open market.
5.4. LIMITATION ON AWARDS. Notwithstanding any provision in the Plan to
the contrary, the maximum number of shares of Stock with respect to one or more
Options and/or SARs that may be granted during any one calendar year under the
Plan to any one Covered Employee shall be 250,000. The maximum fair market value
of any Awards (other than Options and SARs) that may be received by a Covered
Employee (less any consideration paid by the Participant for such Award) during
any one calendar year under the Plan shall be $1,000,000.
ARTICLE 6
ELIGIBILITY
6.1. GENERAL. Awards may be granted only to individuals who are
employees, officers, directors, consultants or advisors of the Corporation or a
Parent or Subsidiary.
ARTICLE 7
STOCK OPTIONS
7.1. GENERAL. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(a) EXERCISE PRICE. The exercise price per share of Stock
under an Option shall be determined by the Committee.
(b) TIME AND CONDITIONS OF EXERCISE. The Committee shall
determine the time or times at which an Option may be exercised in
whole or in part. The Committee also shall determine the performance or
other conditions, if any, that must be satisfied before all or part of
an Option may be exercised. The Committee may waive any exercise
provisions at any time in whole or in part based upon factors as the
Committee may determine in its sole discretion so that the Option
becomes exercisable at an earlier date.
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(c) PAYMENT. The Committee shall determine the methods by
which the exercise price of an Option may be paid, the form of payment,
including, without limitation, cash, shares of Stock, or other property
(including "cashless exercise" arrangements), and the methods by which
shares of Stock shall be delivered or deemed to be delivered to
Participants. Without limiting the power and discretion conferred on
the Committee pursuant to the preceding sentence, the Committee may, in
the exercise of its discretion, but need not, allow a Participant to
pay the Option price by directing the Corporation to withhold from the
shares of Stock that would otherwise be issued upon exercise of the
Option that number of shares having a Fair Market Value on the exercise
date equal to the Option price, all as determined pursuant to rules and
procedures established by the Committee.
(d) EVIDENCE OF GRANT. All Options shall be evidenced by a
written Award Agreement between the Corporation and the Participant.
The Award Agreement shall include such provisions as may be specified
by the Committee.
7.2. INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock Options
granted under the Plan must comply with the following additional rules:
(a) EXERCISE PRICE. The exercise price per share of Stock
shall be set by the Committee, provided that the exercise price for any
Incentive Stock Option shall not be less than the Fair Market Value as
of the date of the grant.
(b) EXERCISE. In no event may any Incentive Stock Option be
exercisable for more than ten years from the date of its grant.
(c) LAPSE OF OPTION. An Incentive Stock Option shall lapse
under the earliest of the following circumstances; provided, however,
that the Committee may, prior to the lapse of the Incentive Stock
Option under the circumstances described in paragraphs (3), (4) and (5)
below, provide in writing that the Option will extend until a later
date, but if the Option is exercised after the dates specified in
paragraphs (3), (4) and (5) above, it will automatically become a
Non-Qualified Stock Option:
(1) The Incentive Stock Option shall lapse as of the
option expiration date set forth in the Award Agreement.
(2) The Incentive Stock Option shall lapse ten years
after it is granted, unless an earlier time is set in the
Award Agreement.
(3) If the Participant terminates employment for any
reason other than as provided in paragraph (4) or (5) below,
the Incentive Stock Option shall lapse, unless it is
previously exercised, three months after the Participant's
termination of employment; provided, however, that if the
Participant's employment is terminated by the Corporation for
cause or by the Participant without the consent of the
Corporation, the Incentive Stock Option shall (to the extent
not previously exercised) lapse immediately.
(4) If the Participant terminates employment by
reason of his Disability, the Incentive Stock Option shall
lapse, unless it is previously exercised, one year after the
Participant's termination of employment.
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(5) If the Participant dies while employed, or during
the three-month period described in paragraph (3) or during
the one-year period described in paragraph (4) and before the
Option otherwise lapses, the Option shall lapse one year after
the Participant's death. Upon the Participant's death, any
exercisable Incentive Stock Options may be exercised by the
Participant's beneficiary.
Unless the exercisability of the Incentive Stock Option is
accelerated as provided in Article 13, if a Participant exercises an
Option after termination of employment, the Option may be exercised
only with respect to the shares that were otherwise vested on the
Participant's termination of employment.
(d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market
Value (determined as of the time an Award is made) of all shares of
Stock with respect to which Incentive Stock Options are first
exercisable by a Participant in any calendar year may not exceed
$100,000.00.
(e) TEN PERCENT OWNERS. No Incentive Stock Option shall be
granted to any individual who, at the date of grant, owns stock
possessing more than ten percent of the total combined voting power of
all classes of stock of the Corporation or any Parent or Subsidiary
unless the exercise price per share of such Option is at least 110% of
the Fair Market Value per share of Stock at the date of grant and the
Option expires no later than five years after the date of grant.
(f) EXPIRATION OF INCENTIVE STOCK OPTIONS. No Award of an
Incentive Stock Option may be made pursuant to the Plan after the day
immediately prior to the tenth anniversary of the Effective Date.
(g) RIGHT TO EXERCISE. During a Participant's lifetime, an
Incentive Stock Option may be exercised only by the Participant or, in
the case of the Participant's Disability, by the Participant's guardian
or legal representative.
(h) DIRECTORS. The Committee may not grant an Incentive Stock
Option to a non-employee director. The Committee may grant an Incentive
Stock Option to a director who is also an employee of the Corporation
or Parent or Subsidiary, but only in that individual's position as an
employee and not as a director.
ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1. GRANT OF SARs. The Committee is authorized to grant SARs to
Participants on the following terms and conditions:
(a) RIGHT TO PAYMENT. Upon the exercise of a Stock
Appreciation Right, the Participant to whom it is granted has the right
to receive the excess, if any, of:
(1) The Fair Market Value of one share of Stock on
the date of exercise; over
(2) The grant price of the Stock Appreciation Right
as determined by the Committee, which shall not be less than
the Fair Market Value of one share of Stock on the date of
grant in the case of any SAR related to an Incentive Stock
Option.
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(b) OTHER TERMS. All awards of Stock Appreciation Rights shall
be evidenced by an Award Agreement. The terms, methods of exercise,
methods of settlement, form of consideration payable in settlement, and
any other terms and conditions of any Stock Appreciation Right shall be
determined by the Committee at the time of the grant of the Award and
shall be reflected in the Award Agreement.
ARTICLE 9
PERFORMANCE SHARES
9.1. GRANT OF PERFORMANCE SHARES. The Committee is authorized to grant
Performance Shares to Participants on such terms and conditions as may be
selected by the Committee. The Committee shall have the complete discretion to
determine the number of Performance Shares granted to each Participant. All
Awards of Performance Shares shall be evidenced by an Award Agreement.
9.2. RIGHT TO PAYMENT. A grant of Performance Shares gives the
Participant rights, valued as determined by the Committee, and payable to, or
exercisable by, the Participant to whom the Performance Shares are granted, in
whole or in part, as the Committee shall establish at grant or thereafter. The
Committee shall set performance goals and other terms or conditions to payment
of the Performance Shares in its discretion which, depending on the extent to
which they are met, will determine the number and value of Performance Shares
that will be paid to the Participant.
9.3. OTHER TERMS. Performance Shares may be payable in cash, Stock, or
other property, and have such other terms and conditions as determined by the
Committee and reflected in the Award Agreement.
ARTICLE 10
RESTRICTED STOCK AWARDS
10.1. GRANT OF RESTRICTED STOCK. The Committee is authorized to make
Awards of Restricted Stock to Participants in such amounts and subject to such
terms and conditions as may be selected by the Committee. All Awards of
Restricted Stock shall be evidenced by a Restricted Stock Award Agreement.
10.2. ISSUANCE AND RESTRICTIONS. Restricted Stock shall be subject to
such restrictions on transferability and other restrictions as the Committee may
impose (including, without limitation, limitations on the right to vote
Restricted Stock or the right to receive dividends on the Restricted Stock).
These restrictions may lapse separately or in combination at such times, under
such circumstances, in such installments, upon the satisfaction of performance
goals or otherwise, as the Committee determines at the time of the grant of the
Award or thereafter.
10.3. FORFEITURE. Except as otherwise determined by the Committee at
the time of the grant of the Award or thereafter, upon termination of employment
during the applicable restriction period or upon failure to satisfy a
performance goal during the applicable restriction period, Restricted Stock that
is at that time subject to restrictions shall be forfeited and reacquired by the
Corporation; provided, however, that the Committee may provide in any Award
Agreement that restrictions or forfeiture conditions relating to Restricted
Stock will be waived in whole or in part in the event of terminations resulting
from specified causes, and the Committee may in other cases waive in whole or in
part restrictions or forfeiture conditions relating to Restricted Stock.
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10.4. CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock granted under
the Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing shares of Restricted Stock are registered in the name
of the Participant, certificates must bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Restricted Stock.
ARTICLE 11 DIVIDEND EQUIVALENTS
11.1 GRANT OF DIVIDEND EQUIVALENTS. The Committee is authorized to
grant Dividend Equivalents to Participants subject to such terms and conditions
as may be selected by the Committee. Dividend Equivalents shall entitle the
Participant to receive payments equal to dividends with respect to all or a
portion of the number of shares of Stock subject to an Option Award or SAR
Award, as determined by the Committee. The Committee may provide that Dividend
Equivalents be paid or distributed when accrued or be deemed to have been
reinvested in additional shares of Stock, or otherwise reinvested.
ARTICLE 12
OTHER STOCK-BASED AWARDS
12.1. GRANT OF OTHER STOCK-BASED AWARDS. The Committee is authorized,
subject to limitations under applicable law, to grant to Participants such other
Awards that are payable in, valued in whole or in part by reference to, or
otherwise based on or related to shares of Stock, as deemed by the Committee to
be consistent with the purposes of the Plan, including without limitation shares
of Stock awarded purely as a "bonus" and not subject to any restrictions or
conditions, convertible or exchangeable debt securities, other rights
convertible or exchangeable into shares of Stock, and Awards valued by reference
to book value of shares of Stock or the value of securities of or the
performance of specified Parents or Subsidiaries. The Committee shall determine
the terms and conditions of such Awards.
ARTICLE 13
PROVISIONS APPLICABLE TO AWARDS
13.1. STAND-ALONE, TANDEM, AND SUBSTITUTE AWARDS. Awards granted under
the Plan may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution for, any other Award granted
under the Plan. If an Award is granted in substitution for another Award, the
Committee may require the surrender of such other Award in consideration of the
grant of the new Award. Awards granted in addition to or in tandem with other
Awards may be granted either at the same time as or at a different time from the
grant of such other Awards.
13.2. EXCHANGE PROVISIONS. The Committee may at any time offer to
exchange or buy out any previously granted Award for a payment in cash, Stock,
or another Award (subject to Section 14.1), based on the terms and conditions
the Committee determines and communicates to the Participant at the time the
offer is made.
13.3. TERM OF AWARD. The term of each Award shall be for the period as
determined by the Committee, provided that in no event shall the term of any
Incentive Stock Option or a Stock Appreciation Right granted in tandem with the
Incentive Stock Option exceed a period of ten years from the date of its grant
(or, if Section 7.2(e) applies, five years from the date of its grant).
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13.4. FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan and
any applicable law or Award Agreement, payments or transfers to be made by the
Corporation or a Parent or Subsidiary on the grant or exercise of an Award may
be made in such form as the Committee determines at or after the time of grant,
including without limitation, cash, Stock, other Awards, or other property, or
any combination, and may be made in a single payment or transfer, in
installments, or on a deferred basis, in each case determined in accordance with
rules adopted by, and at the discretion of, the Committee.
13.5. LIMITS ON TRANSFER. No right or interest of a Participant in any
unexercised or restricted Award may be pledged, encumbered, or hypothecated to
or in favor of any party other than the Corporation or a Parent or Subsidiary,
or shall be subject to any lien, obligation, or liability of such Participant to
any other party other than the Corporation or a Parent or Subsidiary. No
unexercised or restricted Award shall be assignable or transferable by a
Participant other than by will or the laws of descent and distribution or,
except in the case of an Incentive Stock Option, pursuant to a domestic
relations order that would satisfy Section 414(p)(1)(A) of the Code if such
Section applied to an Award under the Plan; provided, however, that the
Committee may (but need not) permit other transfers where the Committee
concludes that such transferability (i) does not result in accelerated taxation,
(ii) does not cause any Option intended to be an incentive stock option to fail
to be described in Code Section 422(b), and (iii) is otherwise appropriate and
desirable, taking into account any state or federal tax or securities laws
applicable to transferable Awards.
13.6 BENEFICIARIES. Notwithstanding Section 13.5, a Participant may, in
the manner determined by the Committee, designate a beneficiary to exercise the
rights of the Participant and to receive any distribution with respect to any
Award upon the Participant's death. A beneficiary, legal guardian, legal
representative, or other person claiming any rights under the Plan is subject to
all terms and conditions of the Plan and any Award Agreement applicable to the
Participant, except to the extent the Plan and Award Agreement otherwise
provide, and to any additional restrictions deemed necessary or appropriate by
the Committee. If no beneficiary has been designated or survives the
Participant, payment shall be made to the Participant's estate. Subject to the
foregoing, a beneficiary designation may be changed or revoked by a Participant
at any time provided the change or revocation is filed with the Committee.
13.7. STOCK CERTIFICATES. All Stock certificates delivered under the
Plan are subject to any stop-transfer orders and other restrictions as the
Committee deems necessary or advisable to comply with federal or state
securities laws, rules and regulations and the rules of any national securities
exchange or automated quotation system on which the Stock is listed, quoted, or
traded. The Committee may place legends on any Stock certificate to reference
restrictions applicable to the Stock.
13.8. ACCELERATION UPON CERTAIN EVENTS. Upon the occurrence of a Change
in Control or in the event of the occurrence of any circumstance, transaction or
event not constituting a Change in Control but which the Board of Directors
deems to be, or to be reasonably likely to lead to, an effective change in
control of the Corporation of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of the 1934 Act, the Committee may in its
sole discretion declare all outstanding Options, Stock Appreciation Rights, and
other Awards in the nature of rights that may be exercised to be fully
exercisable, and/or all restrictions on all outstanding Awards to have lapsed,
in each case as of such date as the Committee may, in its sole discretion,
declare, which may be on or before the consummation of such transaction or
event. To the extent that this provision causes Incentive Stock Options to
exceed the dollar limitation set forth in Section 7.2(d), the excess Options
shall be deemed to be Non-Qualified Stock Options.
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13.9. ACCELERATION FOR ANY OTHER REASON. Regardless of whether an
event has occurred as described in Section 13.8 above, the Committee may in its
sole discretion at any time determine that all or a portion of a Participant's
Options, Stock Appreciation Rights, and other Awards in the nature of rights
that may be exercised shall become fully or partially exercisable, and/or that
all or a part of the restrictions on all or a portion of the outstanding Awards
shall lapse, in each case as of such date as the Committee may, in its sole
discretion, declare. The Committee may discriminate among Participants and among
Awards granted to a Participant in exercising its discretion pursuant to this
Section 13.9.
13.10 EFFECT OF ACCELERATION. If an Award is accelerated under Section
13.8, the Committee may, in its sole discretion, provide (i) that the Award will
expire after a designated period of time after such acceleration to the extent
not then exercised, (ii) that the Award will be settled in cash rather than
Stock, (iii) that the Award will be assumed by another party to the transaction
giving rise to the acceleration or otherwise be equitably converted in
connection with such transaction, or (iv) any combination of the foregoing. The
Committee's determination need not be uniform and may be different for different
Participants whether or not such Participants are similarly situated.
13.11. PERFORMANCE GOALS. The Committee may determine that any Award
granted pursuant to this Plan to a Participant (including, but not limited to,
Participants who are Covered Employees) shall be determined solely on the basis
of (a) the achievement by the Corporation or a Parent or Subsidiary of a
specified target return, or target growth in return, on equity or assets, (b)
the Corporation's, Parent's or Subsidiary's stock price, (c) the achievement by
a business unit of the Corporation, Parent or Subsidiary of a specified target,
or target growth in, net income or earnings per share, or (d) any combination of
the goals set forth in (a) through (c) above. Furthermore, the Committee
reserves the right for any reason to reduce (but not increase) any Award,
notwithstanding the achievement of a specified goal. If an Award is made on such
basis, the Committee shall establish goals prior to the beginning of the period
for which such performance goal relates (or such later date as may be permitted
under Code Section 162(m) or the regulations thereunder). Any payment of an
Award granted with performance goals shall be conditioned on the written
certification of the Committee in each case that the performance goals and any
other material conditions were satisfied.
13.12. TERMINATION OF EMPLOYMENT OR SERVICE. Whether military,
government or other service or other leave of absence shall constitute a
termination of employment or service in any other capacity shall be determined
in each case by the Committee at its discretion, and any determination by the
Committee shall be final and conclusive. A termination of employment or service
in any other capacity shall not occur in a circumstance in which a Participant
transfers from the Corporation to one of its Parents or Subsidiaries, transfers
from a Parent or Subsidiary to the Corporation, or transfers from one Parent or
Subsidiary to another Parent or Subsidiary.
13.13. LOAN PROVISIONS. With the consent of the Committee, the
Corporation may make, guarantee or arrange for a loan or loans to a Participant
with respect to the exercise of any Option granted under this Plan and/or with
respect to the payment of the purchase price, if any, of any Award granted
hereunder and/or with respect to the payment by the Participant of any or all
federal and/or state income taxes due on account of the granting or exercise of
any Award hereunder. The Committee shall have full authority to decide whether
to make a loan or loans hereunder and to determine the amount, terms and
provisions of any such loan or loans, including the interest rate to be charged
in respect of any such loan or loans, whether the loan or loans are to be made
with or without recourse against the borrower, the terms on which the loan is to
be repaid and the conditions, if any, under which the loan or loans may be
forgiven.
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ARTICLE 14
CHANGES IN CAPITAL STRUCTURE
14.1. GENERAL. In the event a share dividend is declared upon the
Stock, the shares of Stock then subject to each Award shall be increased
proportionately without any change in the aggregate purchase price therefor. In
the event the Stock shall be changed into or exchanged for a different number or
class of shares of stock or securities of the Corporation or of another
corporation or other entity, whether through reorganization, recapitalization,
stock split-up, combination of shares, merger or consolidation, there shall be
substituted for each such share of Stock then subject to each Award the number
and class of shares or other securities into which each outstanding share of
Stock shall be so changed or for which it shall be so exchanged, all without any
change in the aggregate purchase price for the shares or other securities then
subject to each Award.
ARTICLE 15
AMENDMENT, MODIFICATION AND TERMINATION
15.1. AMENDMENT, MODIFICATION AND TERMINATION. The Board or the
Committee may, at any time and from time to time, amend, modify or terminate the
Plan without stockholder approval; provided, however, that the Board or
Committee may condition any amendment or modification on the approval of
shareholders of the Corporation if such approval is necessary or deemed
advisable with respect to tax, securities or other applicable laws, policies or
regulations.
15.2 AWARDS PREVIOUSLY GRANTED. At any time and from time to time, the
Committee may amend, modify or terminate any outstanding Award without approval
of the Participant; provided, however, that such amendment, modification or
termination shall not, without the Participant's consent, reduce or diminish the
value of such Award determined as if the Award had been exercised, vested,
cashed in or otherwise settled on the date of such amendment or termination. No
termination, amendment, or modification of the Plan shall adversely affect any
Award previously granted under the Plan, without the written consent of the
Participant.
ARTICLE 16
GENERAL PROVISIONS
16.1. NO RIGHTS TO AWARDS. No Participant or employee, officer,
director, consultant or advisor shall have any claim to be granted any Award
under the Plan, and neither the Corporation nor the Committee is obligated to
treat Participants and employees, officers, directors, consultants or advisors
uniformly.
16.2. NO STOCKHOLDER RIGHTS. No Award gives the Participant any of the
rights of a stockholder of the Corporation unless and until shares of Stock are
in fact issued to such person in connection with such Award.
16.3. WITHHOLDING. The Corporation or any Parent or Subsidiary shall
have the authority and the right to deduct or withhold, or require a Participant
to remit to the Corporation, an amount sufficient to satisfy federal, state, and
local taxes (including the Participant's FICA obligation) required by law to be
withheld with respect to any taxable event arising as a result of the Plan. With
respect to withholding required upon any taxable event under the Plan, the
Committee may, at the time the Award is granted or thereafter, require that any
such withholding requirement be satisfied, in whole or in part, by withholding
shares of Stock having a Fair Market Value on the date of withholding equal to
the amount to be withheld for tax purposes, all in accordance with such
procedures as the Committee establishes.
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16.4. NO RIGHT TO EMPLOYMENT, DIRECTORSHIP OR SERVICE IN OTHER
CAPACITY. Nothing in the Plan or any Award Agreement shall interfere with or
limit in any way the right of the Corporation or any Parent or Subsidiary to
terminate any Participant's employment or status as an officer, director,
consultant or advisor at any time, nor confer upon any Participant any right to
continue as an employee, officer, director, consultant or advisor of the
Corporation or any Parent or Subsidiary.
l6.5. UNFUNDED STATUS OF AWARDS. The Plan is intended to be an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing contained
in the Plan or any Award Agreement shall give the Participant any rights that
are greater than those of a general creditor of the Corporation or any Parent or
Subsidiary.
16.6. RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall
be taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or benefit plan of the
Corporation or any Parent or Subsidiary unless provided otherwise in such other
plan.
16.7. EXPENSES. The expenses of administering the Plan shall be borne
by the Corporation and its Parents or Subsidiaries.
16.8. TITLES AND HEADINGS. The titles and headings of the Sections in
the Plan are for convenience of reference only, and in the event of any
conflict, the text of the Plan, rather than such titles or headings, shall
control.
16.9. GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular and the singular shall include the plural.
16.10. FRACTIONAL SHARES. No fractional shares of Stock shall be issued
and the Committee shall determine, in its discretion, whether cash shall be
given in lieu of fractional shares or whether such fractional shares shall be
eliminated by rounding up.
16.11. GOVERNMENT AND OTHER REGULATIONS. The obligation of the
Corporation to make payment of awards in Stock or otherwise shall be subject to
all applicable laws, rules, and regulations, and to such approvals by government
agencies as may be required. The Corporation shall be under no obligation to
register under the 1933 Act, any of the shares of Stock paid under the Plan. If
the shares paid under the Plan may in certain circumstances be exempt from
registration under the 1933 Act, the Corporation may restrict the transfer of
such shares in such manner as it deems advisable to ensure the availability of
any such exemption.
16.12. GOVERNING LAW. To the extent not governed by federal law, the
Plan and all Award Agreements shall be construed in accordance with and governed
by the laws of the State of Georgia.
16.13 ADDITIONAL PROVISIONS. Each Award Agreement may contain such
other terms and conditions as the Committee may determine; provided that such
other terms and conditions are not inconsistent with the provisions of this
Plan.
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<PAGE> 47
The foregoing is hereby acknowledged as being the RARE Hospitality
International, Inc. 1997 Long-Term Incentive Plan as adopted by the Board of
Directors of the Corporation on October 13, 1997.
RARE HOSPITALITY INTERNATIONAL, INC.
By: /s/ George W. McKerrow, Jr.
-----------------------------------------
George W. McKerrow, Jr.
Chairman and Chief Executive Officer
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<PAGE> 48
AMENDMENT NO. 1 TO THE
RARE HOSPITALITY INTERNATIONAL, INC.
1997 LONG-TERM INCENTIVE PLAN
THIS AMENDMENT NO. 1 (this "Amendment") to the RARE Hospitality
International, Inc. 1997 Long-Term Incentive Plan (the "Plan") is made this 20th
day of March, 1998.
The Board of Directors of RARE Hospitality International, Inc. (the
"Company") has determined that it is in the best interests of the Company and
its shareholders to increase the number of shares of the Company's common stock
subject to the Plan to a total of 750,000 shares.
The Board of Directors intends that the amendment to the Plan provided
in this Amendment No. 1 shall be submitted to the shareholders of the Company
for approval within one year from the date of adoption of this Amendment by the
Board of Directors.
1.
Section 5.1 of the Plan is hereby amended by deleting Section
5.1 in its entirety and substituting in lieu thereof a new Section 5.1 to read
as follows:
"5.1. NUMBER OF SHARES. Subject to adjustment as provided in
Section 14.1, the aggregate number of shares of Stock reserved
and available for Awards or which may be used to provide a
basis of measurement for or to determine the value of an Award
(such as with a Stock Appreciation Right or Performance Share
Award) shall be 750,000, no more than 20% of which shall be
Restricted Stock Awards."
2.
Except as expressly amended hereby, the terms of the Plan shall be and
remain unamended and the Plan as amended shall remain in full force and effect.
IN WITNESS WHEREOF, the Company has caused this Amendment to be
executed by its duly authorized representative on the day and year first above
written.
RARE HOSPITALITY INTERNATIONAL, INC.
By: /s/ Philip J. Hickey, Jr.
--------------------------------------------
Its: President and Chief Operating Officer
-------------------------------------------
<PAGE> 49
APPENDIX
PROXY FOR RARE HOSPITALITY INTERNATIONAL, INC. ANNUAL MEETING OF SHAREHOLDERS
ATLANTA, GEORGIA
The undersigned shareholder of RARE Hospitality International, Inc.
(the "Company"), Atlanta, Georgia, hereby constitutes and appoints Philip J.
Hickey, Jr. and W. Douglas Benn, or either one of them, each with full power of
substitution, to vote the number of shares of Company common stock which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Shareholders to be held at the Swissotel Atlanta, 3391 Peachtree Road
NE, Atlanta, Georgia, on Wednesday, May 20, 1998, at 2:00 p.m. local time, or at
any adjournments thereof (the "Meeting"), upon the proposals described in the
Notice of Annual Meeting of Shareholders and Proxy Statement, both dated April
15, 1998, the receipt of which is acknowledged, in the manner specified below.
The proxies, in their discretion, are further authorized to vote for the
election of a person to the Board of Directors if any nominee named herein
becomes unable to serve or for good cause will not serve, are further authorized
to vote on matters which the Board of Directors does not know a reasonable time
before making the proxy solicitation will be presented at the Meeting, and are
further authorized to vote on other matters which may properly come before the
Meeting and any adjournments thereof. The Board of Directors recommends a vote
FOR Proposals 1, 2 and 3.
1. ELECTION OF DIRECTORS: To elect Ronald W. San Martin and John G.
Pawly to serve as Class III directors until the 2001 Annual Meeting of
Shareholders of the Company and until their successors are elected and
qualified, and Philip J. Hickey, Jr. to serve as a Class II director until the
2000 Annual Meeting of Shareholders of the Company and until his successor is
elected and qualified:
FOR [ ] WITHHOLD AUTHORITY [ ]
To withhold authority for any individual nominee(s), write the name of the
nominee(s) in the space provided:
- --------------------------------------------------------------------------------
2. APPROVAL OF THE 1997 LONG-TERM INCENTIVE PLAN, AS AMENDED: To
approve the 1997 Long-Term Incentive Plan, as amended:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. RATIFICATION OF AUDITORS: To ratify the selection of KPMG Peat
Marwick LLP to serve as the independent auditors of the Company for the fiscal
year ending December 27, 1998:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1, 2 AND 3, AND WITH DISCRETIONARY AUTHORITY ON ALL
OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT
THEREOF.
Please sign exactly as your name appears on your stock certificate and
date. Where shares are held jointly, each shareholder should sign. When signing
as executor, administrator, trustee, or guardian, please give full title as
such. If a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
________________________________________________
Signature of Shareholder
________________________________________________
Signature of Other Shareholder (if held jointly)
Dated: __________________________, 1998
THIS PROXY IS SOLICITED ON BEHALF OF RARE HOSPITALITY INTERNATIONAL, INC.'S
BOARD OF DIRECTORS AND MAY BE REVOKED BY THE SHAREHOLDER PRIOR TO ITS EXERCISE.
