BRINKER INTERNATIONAL
LOGO
6820 LBJ Freeway
Dallas, Texas 75240
(972) 980-9917
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held November 15, 2001
September 25, 2001
Dear Shareholder:
You are cordially invited to attend the annual meeting of
shareholders of Brinker International, Inc. (the "Company") to be
held at 10:00 a.m., on Thursday, November 15, 2001, at the
Cinemark 17 Theater, located at 11819 Webb Chapel Road, Dallas,
Texas. At the meeting, shareholders will elect ten (10)
directors for one-year terms and vote on such other matters,
including a shareholder proposal, as may properly come before the
meeting. Our agenda for the meeting will also include a
strategic overview of the Company.
Shareholders of record at the close of business on September 17,
2001, are entitled to vote at the annual meeting or any
adjournment thereof.
Whether or not you plan to be present at the meeting, please take
the time to vote, either by telephone or by mailing in your
proxy. The giving of such proxy will not affect your right to
vote in person, should you later decide to attend the meeting.
Very truly yours,
Ronald A. McDougall
Chairman of the Board and
Chief Executive Officer
BRINKER INTERNATIONAL, INC.
6820 LBJ Freeway
Dallas, Texas 75240
(972) 980-9917
==============
PROXY STATEMENT
For
ANNUAL MEETING OF SHAREHOLDERS
To Be Held November 15, 2001
==============
The Board of Directors of Brinker International, Inc., a
Delaware corporation (the "Company" or "Brinker International")
requests your proxy for the annual meeting of shareholders to be
held on November 15, 2001. If you sign and return the enclosed
proxy, or vote by telephone, you authorize the persons named in
the proxy to represent you and vote your shares for the purposes
we mentioned in the notice of annual meeting. This proxy
statement and related proxy are being distributed on or about
September 25, 2001. The record date for shareholders entitled to
vote at the annual meeting is September 17, 2001. At the close
of business on September 10, 2001, the Company had 98,575,550
shares of common stock, $0.10 par value ("Common Stock"), issued
and outstanding and entitled to vote at the meeting. At the
annual meeting, shareholders will (a) elect ten directors of the
Company for one-year terms and (b) vote on such other matters,
including a shareholder proposal, as may properly come before the
meeting. The Board of Directors asks you to vote FOR the
director nominees and to vote AGAINST the shareholder proposal.
This Proxy Statement provides you with detailed information about
each of these matters.
If you come to the meeting, you will be able to vote in
person. If you are unable to come to the meeting, your shares
can be voted only if you have returned a properly executed proxy
or followed the telephone voting instructions. You may revoke
your authorization at any time before the shares are voted at the
meeting by giving written notice or subsequently dated proxy
(either by mail or by telephone), to the Secretary of the
Company, or by voting in person.
A quorum of shareholders is necessary to hold a valid
meeting. If at least a majority of the shares of Common Stock
issued and outstanding and eligible to vote are present in person
or by proxy, a quorum will exist. Abstentions and broker non-
votes are counted for purposes of determining the presence or
absence of a quorum. However, only the number of shares voted in
person or by proxy and abstentions are counted for purposes of
determining the presence or absence of a quorum for a specific
proposal. The total number of votes cast FOR each proposal will
be counted for purposes of determining whether sufficient
affirmative votes have been cast. If you grant a proxy, the
person named in the proxy will have the discretion to vote your
shares on any additional matters properly presented for a vote at
the meeting. The Company does not expect any matters to be
presented for a vote at the annual meeting other than those
matters described in this proxy statement.
Certain shareholders who hold their shares in street name
and live in the same household may receive only one copy of this
Proxy Statement and Annual Report. This practice is known as
"householding." If you hold your shares in street name and would
like additional copies of these materials, please contact your
broker. If you receive multiple copies and would prefer to
receive only one, please contact your broker as well. Brinker
International does not currently use householding for record
holders and will send notice to record holders before using
householding, giving record holders the opportunity to continue
to receive multiple copies in the same household.
PROPOSAL 1
ELECTION OF DIRECTORS
Ten directors are to be elected at the meeting. Each
nominee will be elected to hold office until the next annual
meeting of shareholders. All nominees are currently serving as
directors of the Company and were elected by the shareholders at
the annual meeting of shareholders held on November 9, 2000. To
be elected a director, each nominee must receive a plurality of
all of the votes cast at the meeting for the election of
directors. Should any nominee become unable or unwilling to
accept nomination or election, the Board of Directors can name a
substitute nominee and the proxies will be voted for such
substitute nominee unless an instruction to the contrary is
written on the proxy card.
Information About Nominees
Information about the ten persons nominated as directors is
provided below. The shares represented by proxy cards returned
to us will be voted FOR these persons unless you specify
otherwise.
Ronald A. McDougall, 59, was elected Chairman of the Board
and Chief Executive Officer in December 2000, having served as
Vice Chairman and Chief Executive Officer since January 1999, and
President and Chief Executive Officer of the Company from June
1995 until January 1999. Mr. McDougall joined the Company in 1983
and served as Executive Vice President - Marketing and Strategic
Development until his promotion to President and Chief Operating
Officer in 1986, a position he held until 1995. Mr. McDougall has
served as a member of the Board of Directors of the Company since
1983 and is a member of the Executive Committee of the Company.
Mr. McDougall also serves on the Board of Trustees of the Cooper
Institute for Aerobics Research and Southern Methodist
University's Edwin L. Cox School of Business.
Douglas H. Brooks, 49, became President and Chief Operating
Officer of the Company in January 1999. Previously, Mr. Brooks
served as Chili's Grill & Bar ("Chili's") President from June
1994 to May 1998 and Executive Vice President and Chief Operating
Officer from May 1998 until January 1999. Mr. Brooks joined the
Company as an Assistant Manager in 1978 and was promoted to
General Manager later that year. He was named Area Supervisor in
1979, Regional Director in 1982, Senior Vice President - Central
Region Operations in 1987, and Senior Vice President - Chili's
Operations in 1992. He held this position until becoming
President of Chili's in 1994. Mr. Brooks serves on the Board of
Directors of Limbs for Life and is a member of the Professional
Advisory Board for St. Jude Children's Research Hospital.
Donald J. Carty, 55, was named Chairman, President and Chief
Executive Officer of AMR Corporation and American Airlines, Inc.
in May 1998, after serving as its President from March 1995 until
May 1998. From 1989 to 1995, he served American Airlines, Inc.
and AMR Corp. as Executive Vice President - Finance and Planning.
Mr. Carty joined American in 1978 and held numerous finance and
planning positions, with the exception of a two-year hiatus as
President and Chief Executive Officer of CP Air in Canada. He
serves on the Board of Directors of Dell Computer Corporation and
Sears, Roebuck and Co. and he is a member of the Dallas Citizens
Council and the Board of Trustees of Southern Methodist
University. Mr. Carty has served on the Board of Directors since
June 1998 and is a member of the Executive Committee of the
Company.
Dan W. Cook, III, 66, is a Retired Partner of Goldman Sachs,
an investment banking firm. Mr. Cook joined Goldman Sachs Group
in 1961, was a general partner when he retired in 1992, and
served as a Senior Director from 1992 until becoming a Retired
Partner in December 2000. Mr. Cook is a member of the Executive
and Compensation Committees of the Company and has served as a
member of the Board of Directors since October 1997. Mr. Cook
also serves on the Board of Directors of Centex Corporation and
GreatLodge.Com and is an Advisory Director of MHT Partners and
Deep Nines. Mr. Cook is a member of the Board of Trustees of
Southern Methodist University as well as Director of the Edwin L.
Cox School of Business Executive Board.
Marvin J. Girouard, 62, is the Chairman and Chief Executive
Officer of Pier 1 Imports, Inc., having been elected to the
position of Chairman in February 1999 and Chief Executive Officer
in June 1998. Mr. Girouard previously served as Chief Operating
Officer from 1988 to 1998 and as President from 1988 until
February 1999. Mr. Girouard joined Pier 1 Imports in 1975 and
has served on its Board of Directors since 1988. He serves as a
Director for Tandy Brands Accessories, Inc. and Neptune Orient
Lines, Ltd. and is a member of the Executive Committee for the
United States Committee for UNICEF - The United Nations
Children's Emergency Fund. Mr. Girouard has served as a member
of the Board of Directors since September 1998 and is a member of
the Audit, Compensation and Executive Committees of the Company.
Frederick S. Humphries, 65, is the President of Florida A&M
University in Tallahassee, Florida, having held this position
since 1985. Dr. Humphries serves as a member of the USDA Task
Force of 1890 Land-Grant Institutions in addition to being
involved in various civic and community activities.
Dr. Humphries has served on the Board of Directors of the Company
since May 1994 and is a member of the Audit Committee of the
Company. He is also a member of the Board of Directors of
WalMart, Inc.
Ronald Kirk, 47, is currently Mayor of the City of Dallas
and a partner in the law firm of Gardere Wynne Sewell, L.L.P. He
was elected Mayor in 1995, and previously served as Secretary of
State of the State of Texas from 1994 to 1995. Mayor Kirk has
served on the Board of Directors since January 1997 and is a
member of the Nominating Committee of the Company.
Jeffrey A. Marcus, 54, is a private investor. Mr. Marcus
previously served as Chairman and Chief Executive Officer of Novo
Networks, Inc., a broadband telecommunications company, from
April 2000 until June 2001, Partner of Marcus & Partners, a
private equity investment firm, from March 1999 until April 2000
and President and Chief Executive Officer of AMFM, Inc. (formerly
Chancellor Media Corporation), from May 1998 until March 1999.
Previously, Mr. Marcus was Chairman, President and Chief
Executive Officer of Marcus Cable Company, a company he formed in
1990. Mr. Marcus is active in several civic and charitable
organizations. Mr. Marcus has served on the Board of Directors
since January 1997 and is a member of the Executive and
Nominating Committees of the Company.
James E. Oesterreicher, 60, is the Retired Chairman of the
Board of J.C. Penney Company, Inc., having served as Chairman of
the Board and Chief Executive Officer from January 1997 until
September 2000 and Vice Chairman and Chief Executive Officer from
January 1995 until January 1997. Mr. Oesterreicher served as
President of JCPenney Stores and Catalog from 1992 to 1995 and as
Director of JCPenney Stores from 1988 to 1992. Mr. Oesterreicher
has been with the J.C. Penney Company since 1964 where he started
as a management trainee. He serves as a Director for various
entities, including The Dial Corporation, TXU Corp., Texas Health
Resources, Circle Ten Council - Boy Scouts of America, March of
Dimes, Spina Bifida Birth Defects Foundation, Aspen Institute
Domestic Strategy Group, and American Society of Corporate
Executives. Mr. Oesterreicher has served as a member of the Board
of Directors of the Company since May 1994 and is a member of the
Audit and Compensation Committees of the Company.
Roger T. Staubach, 59, has been Chairman of the Board and
Chief Executive Officer of The Staubach Company, a national real
estate company specializing in tenant representation, since 1982.
Mr. Staubach played professional football for the Dallas Cowboys
and was elected to the National Football League Hall of Fame in
1985. He currently serves on the Board of Directors of AMR
Corporation and is active in numerous civic, charity and
professional organizations. He has served as a member of the
Board of Directors of the Company since 1993 and is a member of
the Nominating Committee of the Company.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES FOR
DIRECTOR.
Stock Ownership Of Directors
Number of Shares of Number Attributable
Common Stock to Options
Name Beneficially Owned Exercisable Within
as of September 10, 60 Days of September
2001 (1) (2) (3) 10, 2001
Ronald A. McDougall 1,397,169 1,297,151
Douglas H. Brooks 820,215 677,252
Donald J. Carty 41,561 24,660
Dan W. Cook, III 25,199 25,199
Marvin J. Girouard 12,026 10,302
Frederick S. Humphries 41,431 40,104
Ronald Kirk 22,181 21,032
Jeffrey A. Marcus 27,279 12,279
James E. Oesterreicher 8,151 5,302
Roger T. Staubach 15,348 12,298
(1) Beneficial ownership has been determined in accordance with
the rules of the Securities and Exchange Commission. Except as
noted, and except for any community property interests owned by
spouses, the listed individuals have sole investment power and
sole voting power as to all shares of stock of which they are
identified as being the beneficial owners.
(2) Includes shares of Common Stock which may be acquired by
exercise of options vested, or vesting within 60 days of
September 10, 2001, under the Company's 1983 Incentive Stock
Option Plan, 1991 Stock Option Plan for Non-Employee Directors
and Consultants, 1992 Incentive Stock Option Plan, Stock Option
and Incentive Plan, and 1999 Stock Option and Incentive Plan for
Non-Employee Directors and Consultants, as applicable.
(3) With the exception of Mr. McDougall who owns 1.40% of the
Company's Common Stock, each director owns less than 1% of the
Company's Common Stock.
PROPOSAL 2
SHAREHOLDER PROPOSAL
The Adrian Dominican Sisters, 1257 East Siena Heights Drive,
Adrian, Michigan 49221-17193, beneficial owner of 45,300 shares
of Common Stock of the Company has notified the Company that it
intends to present the following resolution at the annual
meeting. The Board of Directors and the Company accept no
responsibility for the proposed resolution and supporting
statement. The Board of Directors recommends a vote AGAINST this
Shareholder Proposal. As required by federal regulations, the
resolution and supporting statement are printed below.
RESOLVED: Shareholders request that the Board of Directors
review our Company's sales of food products containing
genetically engineered (GE) ingredients and report to
shareholders by August 2002 (at reasonable cost and omitting
proprietary information). This report would identify the risks,
financial costs and benefits, and impacts of the continued use of
genetically engineered crops, organisms, or products thereof from
all food products sold under the Company's brand names or private
labels.
Shareholder Supporting Statement
International markets for genetically engineered (GE) foods
are threatened by extensive resistance:
Europe's larger food retailers have committed to removing GE
ingredients from their store-brand products, as have some
U.S. retailers;
In the UK, McDonald's, Burger King, and Kentucky Fried
Chicken exclude GE soy and corn ingredients from their
menus;
McCain Foods of Canada announced it would no longer accept
genetically engineered Bt potatoes for their brand-name
products (11/99);
Gerber Products announced it would not allow GE corn or
soybeans in any of their baby foods(7/99);
PepsiCo's Frito Lay asked farmers that supply corn for their
chips to supply only non-GE corn (1/2000);
Since 2000, hundreds of millions of dollars have been spent
by food companies in recalling food containing GE corn not
approved for human consumption;
Once in effect, the Biosafety Protocol, approved by
representatives of over 130 countries (1/2000), will require
that genetically engineered organisms (GEOs) intended for
food, feed and processing must be labeled "may contain
GEOs", and countries can decide whether to import those
commodities based on a scientific risk assessment.
There is scientific concern that genetically engineered
agricultural products may be harmful to humans, animals, or the
environment:
Some GE crops have been engineered to have higher levels of
toxins, such as Bacillus thuringiensis (Bt), to make them
insect-resistant;
Research has shown the Bt crops are building up Bt toxins in
the soil, thereby disturbing soil ecology and impacting
beneficial organisms and insects (12/1999, 5/2000);
The National Academy of Sciences report, Genetically Modified
Pest-Protected Plants, recommends development of improved
methods for identifying potential allergens in GE pest-
protected plants. The report found potential gaps in
regulatory coverage (4/2000);
Uncertainty about the ecological risks of genetically
engineered crops persists. (Science 12/15/2000).
Furthermore, labeling of GE foods is required in the
European Union and Japan, proposed in other countries, and
favored by between 70% and 94% of people surveyed in over a dozen
opinion polls in the U.S.
We urge that this report:
1) identify the scope of the Company's products that are
derived from GE ingredients;
2) identify sources of alternative non-GE food ingredients;
3) outline a contingency plan for sourcing non-GE ingredients
should circumstances so require; and
4) cite evidence of long-term safety testing that demonstrates
that GE crops, organisms, or products thereof are actually
safe for humans, animals, and the environment.
We believe that in undertaking this critical study, our
Company addresses issues of financial, legal and reputational
risk, competitive advantage, and brand name loyalty in the
marketplace.
Board Of Directors' Statement In Opposition
Your Board of Directors recommends a vote AGAINST this
Shareholder Proposal for the following reasons:
The Company cares and actively supports its customers'
interest in food safety. We firmly believe that all of our food
products, including those which may contain ingredients developed
through biotechnology or genetic engineering, are safe. However,
we believe that the United States Food & Drug Administration
("FDA") and other regulatory authorities who are charged with
protecting the health and safety of the public and the
environment are the proper entities, rather than a restaurant
company like Brinker International, to evaluate and make
judgments about the use of biotechnology-derived ingredients.
Brinker International takes its lead from national food safety
and regulatory authorities and we support their efforts to take
whatever steps are necessary to assure that any new food
technology is safe for consumers and the environment. Brinker
International complies, and will continue in the future to
comply, with all governmental regulations applicable to food
safety.
Your Board of Directors believe that this proposal is not
practical because the Company would have serious difficulty in
determining what constitutes "genetically engineered crops,
organisms, or products thereof." Brinker International
understands that certain biotechnology-derived ingredients are so
similar to their unmodified counterparts that they are virtually
undetectable with current testing techniques. Consequently, it
would be impracticable for quality assurance operations at
Brinker International to identify all biotechnology-derived raw
materials in the Company's food products.
We understand that the use of genetic engineering with
respect to certain staple foods is widespread in the United
States. Even when these foods are produced in an unmodified
form, under current practices they are combined with other
biotechnology-derived foods during storage and distribution,
making it extremely difficult, if not impossible, to obtain the
staple foods in an unmodified or uncombined form in sufficient
quantities for use in our system of restaurants. Therefore, your
Board of Directors does not believe it would be possible to
either identify the scope of the Company's products that are
derived from biotechnology-derived ingredients nor identify
sources of alternative food ingredients that are not
biotechnology-derived.
Requiring the Company to review its sale of food products
containing biotechnology-derived ingredients and provide the
requested report to shareholders would involve unnecessary
expenditures of time and resources. We firmly believe that all
products sold at our restaurants, including those which may
contain ingredients developed through biotechnology, are safe.
Furthermore, the reduction of the use of pesticides, the creation
of more nutritious foods, and the possibility of finding new ways
to help feed the world are several benefits that biotechnology in
foods may bring. However, we respect the views of those who
question the value of biotechnology in foods. Your Board of
Directors believes that Brinker International's shareholders will
be better served if governmental agencies monitor farmers and
scientists to determine the safety of biotechnology-derived food
ingredients while the Company keeps its focus on offering tasty
and desirable restaurant meals for our customers that comply with
applicable food safety regulations.
We will continue to support the efforts of regulatory
authorities to take whatever steps are necessary to assure that
any new food technology is safe for consumers and the
environment. Our shareholders and consumers can count on our
compliance with all such regulations.
FOR THE FOREGOING REASONS, YOUR BOARD OF DIRECTORS BELIEVES THAT
THIS PROPOSAL IS NOT IN THE BEST INTEREST OF THE COMPANY AND
UNANIMOUSLY RECOMMENDS THAT YOU VOTE AGAINST PROPOSAL 2.
BOARD ORGANIZATION
Classes of Directors
Each director serves for a one year term and is subject to
re-election by the shareholders of the Company each year.
However, the Nominating Committee has divided the non-employee
directors into four classes. The classes are staggered so that
each year the members of one of the classes shall have served on
the Board of Directors for four consecutive years. At such time,
the members of such class are considered "Retiring Directors" and
will, as determined by the Nominating Committee, either leave the
Board of Directors or serve an additional four year term on the
Board of Directors (subject to annual re-election by the
shareholders of the Company). All decisions of the Nominating
Committee are made after considering the appropriateness of
keeping existing members on the Board of Directors or nominating
new candidates for election to the Board of Directors. Each of
Messrs. Carty, Cook and Staubach are Retiring Directors who have
been renominated by the Nominating Committee. The four classes
of non-employee directors are as follows: Messrs. Girouard,
Humphries and Oesterreicher comprise Class 1 and will be
considered Retiring Directors as of the annual meeting of
shareholders following the end of the 2002 fiscal year. There
are no members of Class 2. Messrs. Kirk and Marcus comprise
Class 3 and will be considered Retiring Directors as of the
annual meeting of shareholders following the end of the 2004
fiscal year. Messrs. Carty, Cook and Staubach comprise Class 4
and will be considered Retiring Directors as of the annual
meeting of shareholders following the end of the 2005 fiscal
year.
Committees of the Board of Directors
The Board of Directors of the Company has established an
Executive Committee, Audit Committee, Compensation Committee, and
Nominating Committee.
The Executive Committee (currently comprised of Messrs.
McDougall, Carty, Cook, Girouard, and Marcus) met one time during
the fiscal year. The Executive Committee reviews material
matters between Board meetings, provides advice and counsel to
Company management, and has the authority to act for the Board on
most matters between Board meetings. In addition, the Executive
Committee is also charged with assuring that the Company has a
satisfactory succession management plan for all key management
positions.
All of the members of the Audit, Compensation and Nominating
Committees are directors independent of management who are not
and never have been officers or employees of the Company.
The Audit Committee is currently comprised of
Messrs. Girouard, Humphries, and Oesterreicher, and it met eight
times during the fiscal year. A discussion of the role of the
Audit Committee is provided under "Report of the Audit Committee"
below.
The Compensation Committee is currently comprised of
Messrs. Cook, Girouard, and Oesterreicher, and met two times
during the fiscal year. Functions performed by the Compensation
Committee include: reviewing the performance of the Chief
Executive Officer, approving key executive promotions, ensuring
the reasonableness and appropriateness of senior management
compensation arrangements and levels, the adoption, amendment and
administration of compensation and stock-based incentive plans
(subject to shareholder approval where required), management of
the various stock option plans of the Company, and approval of
the total number of available shares to be used each year in
stock-based plans. The specific nature of the Committee's
responsibilities as they relate to executive officers is set
forth below under "Report of the Compensation Committee."
The purposes of the Nominating Committee are to recommend to
the Board of Directors potential members to be added as new or
replacement members to the Board of Directors, to review the
compensation paid to non-management Board members, and to
recommend corporate governance guidelines to the full Board of
Directors. The Nominating Committee will consider a shareholder-
recommended nomination for director to be voted upon at the 2002
annual meeting of shareholders provided that the recommendation
must be in writing, set forth the name and address of the
nominee, contain the consent of the nominee to serve, and be
submitted on or before May 28, 2002. The Nominating Committee is
composed of Messrs. Kirk, Marcus, and Staubach and it met three
times during the fiscal year.
During the fiscal year ended June 27, 2001, the Board of
Directors held five meetings; each director attended at least 75%
of the aggregate total of meetings of the Board of Directors and
Committees on which he served.
Directors' Compensation
Directors who are not employees of the Company receive
$1,000 for each meeting of the Board of Directors attended and
$1,000 for each meeting of any committee of the Board of
Directors attended. The Company also reimburses directors for
costs incurred by them in attending meetings of the Board.
Directors who are not employees of the Company receive
grants of stock options or restricted stock under the Company's
1999 Stock Option and Incentive Plan for Non-Employee Directors
and Consultants. A new director who is not an employee of the
Company will receive (a) 20,000 stock options at the beginning of
such director's term, and (b) an annual payment of $36,000, at
least 25% of which must be taken in the form of stock options or
restricted stock. If a director elects to receive cash, the first
payment will be made at the Board of Directors' meeting held
contemporaneous with the next annual meeting of shareholders.
The stock options and restricted stock will be granted as of the
sixtieth day following such meeting (or if the sixtieth day is
not a business day, on the first business day thereafter) at the
fair market value of the underlying Common Stock on the date of
grant. One-third of the stock options will vest on each of the
second, third and fourth anniversaries of the date of grant. All
of the restricted stock will vest on the fourth anniversary of
the date of grant. A Retiring Director who is being nominated
for an additional term on the Board of Directors will receive an
additional grant of 10,000 stock options at the beginning of such
director's new term.
EXECUTIVE OFFICERS
The Board of Directors elects executive officers annually at
its first meeting following the annual meeting of shareholders.
Certain information about the Company's executive officers is set
forth below. Information about Mr. McDougall and Mr. Brooks is
included under the caption "Election of Directors - Information
About Nominees."
Wilson L. Craft, 48, was elected Big Bowl President in
November 2000, having previously served as Senior Vice President
and Chief Operating Officer of Chili's since May 1998. Mr. Craft
joined the Company in May 1984 as a Chili's Manager Trainee and
was promoted to General Manager in 1985, Area Director and then
Regional Director in 1987, and Regional Vice President of
Operations in 1991, a position he held until May 1998.
Kenneth D. Dennis, 48, has served as On The Border Mexican
Grill & Cantina President since October 1999. Between October
1999 and July 2001, Mr. Dennis also served as Cozymel's Coastal
Mexican Grill ("Cozymel's") President. Previously, Mr. Dennis was
Senior Vice President and Chief Operating Officer of Cozymel's
from February 1997 until October 1999. Mr. Dennis joined the
Company as a Manager in 1976 and was named General Manager in
1978, Director of Internal Systems in 1979, and Director of
Marketing in 1983. Mr. Dennis was promoted to Vice President of
Marketing in 1986 and to Senior Vice President of Marketing in
1993, a position he held until February 1997.
Todd E. Diener, 44, was elected Chili's President in May
1998, having previously served as Chili's Senior Vice President
and Chief Operating Officer since July 1996. Mr. Diener joined
the Company as a Chili's Manager Trainee in 1981 and was promoted
to General Manager in 1983, Area Director in 1985, and Regional
Director in 1987. Mr. Diener became Regional Vice President in
1989, a position he held until July 1996.
Starlette Johnson, 38, was elected Executive Vice President
and Chief Strategic Officer in June 2001. Mrs. Johnson joined
the Company in 1995 as Director of Planning. She was promoted to
Vice President of Strategic Development in May 1996 and was named
Senior Vice President of Human Resources in June 2000.
John C. Miller, 46, has served as Romano's Macaroni Grill
President since April 1997. Mr. Miller joined the Company as
Vice President-Special Concepts in 1987. In 1988, he was elected
Vice President - Joint Venture/Franchise and served in this
capacity until 1993 when he was promoted to Senior Vice President
- New Concept Development. Mr. Miller was named Senior Vice
President - Mexican Concepts in September 1994 and was
subsequently elected Senior Vice President and Mexican Concepts
President in October 1995, a position he held until April 1997.
David C. Schmille, 41, was elected Cozymel's President in
July 2001. Mr. Schmille joined the Company as a Chili's Manager
Trainee in 1985, was promoted to General Manager in 1986, and to
Area Director in 1987. In 1995, Mr. Schmille became Vice
President of Operations for Sydran Chili's Franchise Group, a
franchisee of the Company. He was promoted to Senior Vice
President in June 2000 and served in that capacity until
rejoining the Company in July 2001.
Charles M. Sonsteby, 48, was elected Executive Vice
President and Chief Financial Officer in May 2001. Mr. Sonsteby
joined the Company as Director of the Company's Tax, Treasury and
Risk Management departments in March 1990. In May 1994 he was
named Vice President and Treasurer and was promoted to Senior
Vice President of Finance in March 1997, a position he held until
May 2001.
Roger F. Thomson, 52, has served as Executive Vice
President, Chief Administrative Officer, General Counsel and
Secretary since June 1996. Mr. Thomson joined the Company as
Senior Vice President, General Counsel and Secretary in 1993 and
was promoted to Executive Vice President, General Counsel and
Secretary in 1994. Mr. Thomson served as a Director of the
Company from 1993 until 1995.
Mark F. Tormey, 48, has served as Maggiano's Little Italy
President since November 1997, having joined the Company as
Senior Vice President and Chief Operating Officer of Maggiano's
Little Italy in 1995. Prior to joining the Company, Mr. Tormey
worked for Lettuce Entertain You Enterprises, Inc. since 1979. In
1991, Mr. Tormey opened the first Maggiano's Little Italy
restaurant and worked with the Maggiano's Little Italy group at
Lettuce Entertain You Enterprises, Inc. until Maggiano's Little
Italy was acquired by the Company in 1995.
David Wolfgram, 43, has served as Corner Bakery Cafe
("Corner Bakery") President since November 1997, having joined
the Company as Senior Vice President and Chief Operating Officer
of Corner Bakery in August 1995. Mr. Wolfgram joined Lettuce
Entertain You Enterprises, Inc. in 1980 and became Vice President
and Managing Partner in 1989. Mr. Wolfgram worked with the Corner
Bakery group at Lettuce Entertain You Enterprises, Inc. until
Corner Bakery was acquired by the Company in 1995.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following summary compensation table sets forth the
annual compensation for the Company's five highest compensated
executive officers, including the Chief Executive Officer, whose
salary and bonus exceeded $100,000 in fiscal 2001.
Long-Term Compensation
Annual Compensation Awards Payouts
Name and Principal Restricted Securities Long-Term All Other
Position Year Salary Bonus Stock Underlying Incentive Compensation
Awards (1) Options Payouts (2)
Ronald A. McDougall 2001 $ 999,385 $1,149,354 $ 201,595 180,001 $ 352,054 $ 42,783
Chairman and 2000 $ 978,462 $1,357,616 $ 973,204 180,000 $ 174,187 $ 29,112
Chief Executive 1999 $ 929,154 $1,080,142 $ 0 300,000 $ 106,100 $ 20,652
Officer
Douglas H. Brooks 2001 $ 674,154 $ 566,290 $ 127,344 112,501 $ 222,425 $ 29,777
President and 2000 $ 624,231 $ 866,121 $ 605,398 112,500 $ 110,050 $ 19,803
Chief Operating 1999 $ 541,154 $ 555,515 $ 0 187,500 $ 69,505 $ 17,491
Officer
Todd E. Diener 2001 $ 407,539 $ 272,296 $ 124,238 37,501 $ 219,458 $ 22,942
Chili's Grill & 2000 $ 355,962 $ 293,354 $ 200,731 37,500 $ 107,346 $ 57,531
Bar President 1999 $ 330,673 $ 259,929 $ 0 90,000 $ 0 $ 16,840
Russell G. Owens 2001 $ 412,307 $ 324,692 $ 76,972 75,001 $ 134,412 $ 15,284
Executive Vice 2000 $ 398,462 $ 368,578 $ 435,337 75,000 $ 66,504 $ 16,124
President and Chief 1999 $ 350,000 $ 271,251 $ 0 112,500 $ 62,898 $ 14,220
Financial Officer (3)
John C. Miller 2001 $ 399,847 $ 251,904 $ 115,629 37,501 $ 195,243 $ 24,480
Romano's Grill 2000 $ 349,385 $ 234,088 $ 265,556 37,500 $ 99,910 $ 16,552
President 1999 $ 329,792 $ 204,472 $ 0 90,000 $ 63,660 $ 14,883
Roger F. Thomson 2001 $ 399,231 $ 251,516 $ 53,135 46,501 $ 92,797 $ 20,022
Executive Vice 2000 $ 374,231 $ 346,164 $ 320,804 46,500 $ 45,914 $ 33,886
President, Chief 1999 $ 349,885 $ 271,161 $ 0 75,000 $ 79,575 $ 13,909
Administrative Officer,
General Counsel and
Secretary
(1) Restricted stock is valued at the closing price of the
Company Common Stock on the grant dates. Mr. McDougall was
awarded 9,413 shares of restricted stock during the last fiscal
year, 3,138 shares of which vested on August 13, 2001, 3,138
shares of which will vest on August 13, 2002, and 3,137 shares of
which will vest on August 13, 2003. Mr. Brooks was awarded 5,946
shares of restricted stock during the last fiscal year, 1,982
shares vested on August 13, 2001, 1,982 shares of which will vest
on August 13, 2002, and 1,982 shares of which will vest on August
13, 2003. Mr. Diener was awarded 5,801 shares of restricted stock
during the last fiscal year, 1,934 shares of which vested on
August 13, 2001, 1,933 shares of which will vest on August 13,
2002, and 1,934 shares of which will vest on August 13, 2003. Mr.
Owens was awarded 3,594 shares of restricted stock during the
last fiscal year, all of which were forfeited upon his
resignation from the Company on April 27, 2001. Mr. Miller was
awarded 5,399 shares of restricted stock during the last fiscal
year, 1,800 shares of which vested on August 13, 2001, 1,800
shares of which will vest on August 13, 2002, and 1,799 shares of
which will vest on August 13, 2003. Mr. Thomson was awarded 2,481
shares of restricted stock during the last fiscal year, 827
shares of which vested on August 13, 2001, 827 shares of which
will vest on August 13, 2002, and 827 shares of which will vest
on August 13, 2003. The dollar value of the restricted stock held
by each of the named executive officers at the end of the last
fiscal year (at $24.86 per share, the closing price of the
Company's Common Stock on June 27, 2001) is as follows:
Executive Shares of Value of
Restricted Shares Restricted Stock
Ronald A. McDougall 59,649 $1,482,874
Douglas H. Brooks 37,288 $ 926,980
Todd E. Diener 15,969 $ 396,989
Russell G. Owens 0 0
John C. Miller 16,843 $ 418,717
Roger F. Thomson 17,343 $ 431,147
If dividends are paid by the Company on its Common Stock, the owners of
restricted stock will be entitled to receive dividends on shares of
restricted stock owned by them. For those named officers who have
compensation in excess of $1,000,000 in any year in which shares of
restricted stock are granted, the vesting of such restricted stock
shall occur on the designated vesting dates only if performance
objectives are attained.
(2) All other compensation represents Company match on deferred
compensation and various fringe benefits including car allowance
and reimbursement of tax preparation, financial planning, health
club expenses and, in the case of Mr. Diener for fiscal 2000,
reimbursement of relocation expenses.
(3) Mr. Owens resigned from his employment with the Company on
April 27, 2001.
Option Grants During 2001 Fiscal Year
The following table contains certain information concerning
the grant of stock options pursuant to the Company's Stock Option
and Incentive Plan to the executive officers named in the above
compensation table during the Company's last fiscal year.
% of Realizable Value of
Total Assumed Annual Rates of
Options Stock Price Appreciation
Name Options Granted to Exercise or Expiration for Option Term (1)
Granted Employees in Base Price Date 5% 10%
Fiscal Year
Ronald A. McDougall 180,001 6.41% $26.9583 11/08/10 $3,051,724 $7,733,669
Douglas H. Brooks 112,501 4.01% $26.9583 11/08/10 $1,907,334 $4,833,559
Todd E. Diener 37,501 1.34% $26.9583 11/08/10 $ 635,789 $1,611,215
Russell G. Owens 75,001 2.67% $26.9583 11/08/10 $ 0 (2) $ 0 (2)
John C. Miller 37,501 1.34% $26.9583 11/08/10 $ 635,789 $1,611,215
Roger F. Thomson 46,501 1.66% $26.9583 11/08/10 $ 788,375 $1,997,896
(1) The dollar amounts under these columns are the result of
calculations at the 5% and 10% rates set by the Securities and
Exchange Commission and, therefore, are not intended to forecast
possible future appreciation, if any, of the Company's stock
price.
(2) These stock options were terminated upon the resignation of
Mr. Owens from the Company on April 27, 2001.
Stock Option Exercises and Fiscal Year End Value Table
The following table shows stock option exercises by the
named officers during the last fiscal year, including the
aggregate value of gains on the date of exercise. In addition,
this table includes the number of shares covered by both
exercisable and non-exercisable stock options at fiscal year end.
Also reported are the values for "in-the-money" options which
represent the positive spread between the exercise price of any
such existing options and the $24.86 fiscal year end price of the
Company's Common Stock.
Shares Number of Unexercised Value of Unexercised
Acquired Value Options at Fiscal In-the-Money Options
Name on Exercise Realized Year End at Fiscal Year End at
Exercisable Unexercible Exercisable Unexercisable
Ronald A. McDougall 375,000 $6,381,585 1,278,751 510,001 $15,744,512 $2,626,305
Douglas H. Brooks 86,063 $1,602,430 621,002 318,751 $ 8,473,469 $1,641,441
Todd E. Diener 50,174 $ 853,316 94,443 120,001 $ 1,074,531 $ 643,765
Russell G. Owens 235,103 $4,019,996 137,213 0 $ 1,571,077 $ 0 0
John C. Miller 0 $ 0 346,332 120,001 $ 5,042,760 $ 643,765
Roger F. Thomson 120,000 $1,778,737 0 130,501 $ 0 $ 669,679
REPORT OF THE COMPENSATION COMMITTEE
Compensation Philosophy
The executive compensation program is designed as a tool to
reinforce the Company's strategic principles - to be a premiere
and progressive growth company with a balanced approach towards
people, quality and profitability and to enhance long-term
shareholder value. To this end, the following principles have
guided the development of the executive compensation program:
Provide competitive levels of compensation to attract and
retain the best qualified executive talent. The
Compensation Committee strongly believes that the caliber of
the Company's management group makes a significant
difference in the Company's sustained success over the long
term.
Embrace a pay-for-performance philosophy by placing
significant amounts of compensation "at risk" - that is,
compensation payouts to executives will vary according to
the overall performance of the Company.
Directly link executives' interests with those of
shareholders by providing opportunities for long-term
incentive compensation based on changes in shareholder
value.
The executive compensation program is intended to
appropriately balance the Company's short-term operating goals
with its long-term strategy through a careful mix of base salary,
annual cash incentives and long-term performance compensation
including cash incentives, stock options and shares of restricted
stock.
Base Salaries
Executives' base salaries and total compensation are
targeted to be competitive between the 75th and 90th percentiles
of the market for positions of similar responsibility and scope
to reflect the exceptionally high level of executive talent
required to execute the growth plans of the Company. Positioning
executives' base salaries at these levels is necessary for
attracting, retaining and motivating executives with the
essential qualifications for managing the Company's growth. The
Company defines the relevant labor market for such executive
talent through the use of third-party executive salary surveys
that reflect both the chain restaurant industry as well as a
broader cross-section of companies from many industries.
Individual base salary levels are determined by considering
market data for each officer's position, level of responsibility,
performance, and experience. The overall amount of base salary
increases awarded to executives reflects the financial
performance of the Company, individual performance and potential,
and/or changes in an officer's duties and responsibilities.
Annual Incentives
The Company's Profit Sharing Plan is a non-qualified annual
incentive arrangement in which all corporate employees, including
executives, participate. The program is designed to reflect
employees' contribution to the growth of the Company's Common
Stock value by increasing the earnings of the Company. The plan
reinforces a strong teamwork ethic by making the basis for
payouts to non-restaurant concept executives the same as for all
other non-restaurant concept corporate employees and by making
the basis for payouts to executives of one of the Company's
restaurant concepts the same as for all other members of such
restaurant concept's corporate team.
At the beginning of a fiscal year, each executive is
assigned an Individual Participation Percentage ("IPP") of the
base salary for such executive that targets overall total cash
compensation for executives between the 75th and 90th percentiles
of the market. The IPPs reflect the Compensation Committee's
desire that a significant percentage of executives' total
compensation be derived from variable pay programs.
401(k) Savings Plan and Savings Plan II
The Company's 401(k) Savings Plan ("Plan I") and Savings
Plan II ("Plan II") are designed to provide the Company's
employees with a tax-deferred long-term savings vehicle. All
amounts of a salaried participant's contribution up to a maximum
of 5% of such participant's base compensation are matched by the
Company in an amount equal to twenty-five percent of such
salaried participant's contribution.
Plan I is a qualified 401(k) plan. Participants in Plan I
elect the percentage of pay they wish to contribute (in an amount
not to exceed the greater of (a) 20% of base salary and 100% of
eligible bonus or (b) $10,500) as well as the investment
alternatives in which their contributions are to be invested.
The Company's matching contribution for all Plan I participants
is made in Company Common Stock. All participants in Plan I are
considered non-highly compensated employees as defined by the
Internal Revenue Service. A participant's contributions vest
immediately while Company contributions vest twenty-five percent
annually, beginning in the participant's second year of
eligibility.
Plan II is a non-qualified deferred compensation plan.
Plan II participants elect the percentage of pay they wish to
defer into their Plan II account (in an amount not to exceed 20%
of base salary and 100% of eligible bonus). They also elect the
percentage of their deferral account to be allocated among
various investment options. The Company's matching contribution
for all non-officer Plan II participants is made in Company
Common Stock, with corporate officers receiving a Company match
in cash. Participants in Plan II are considered a select group
of management and highly compensated employees according to the
Department of Labor. A participant's contributions vest
immediately while Company contributions vest twenty-five percent
annually, beginning in the participant's second year of
eligibility.
Long-Term Incentives
All salaried employees of the Company, including executives,
are eligible for annual grants of tax-qualified and non-qualified
stock options. By tying a significant portion of executives'
total opportunity for financial gain to increases in shareholder
wealth as reflected by the market price of the Company's Common
Stock, executives' interests are closely aligned with
shareholders' long-term interests. In addition, because the
Company does not maintain any qualified retirement programs for
executives, the stock option plan is intended to provide
executives with opportunities to accumulate wealth for later
retirement.
Stock options are rights to purchase shares of the Company's
Common Stock at the fair market value of the underlying Common
Stock as of the date of grant. Grantees do not receive a benefit
from stock options unless and until the market price of the
Company's Common Stock increases. Fifty percent of a stock option
grant becomes exercisable two years after the grant date; the
remaining fifty percent of a grant becomes exercisable three
years after the grant date. Stock options are typically granted
annually in November as part of a fixed grant, based on a target
value approved by the Compensation Committee. The Compensation
Committee has the authority to substitute shares of restricted
stock for stock options as part of this fixed grant.
The Executive Long-Term Incentive Plan is a performance-
related plan using overlapping three-year cycles paid annually.
For corporate officers, the criterion for payment is the
Company's cumulative earnings per share over a three-year period
relative to a target established by the Compensation Committee.
For a restaurant concept officer, the criterion is the three-year
cumulative profit before taxes for such restaurant concept
relative to the target established by the Compensation Committee.
Each participant will be assigned a specific dollar target
to be paid in a combination of cash and restricted stock at the
end of the designated three-year performance period. These three-
year targets are established/revised as part of the annual
planning process. Once established and approved, targets are
fixed for the upcoming three-year cycle. The actual cash payment
and number of shares granted of restricted stock will vary based
on the achievement to plan of earnings per share for corporate
officers, and profit before taxes for restaurant concept
officers. The participant will receive the target payment if the
target performance is achieved for the three-year cycle; an above
or below target payout will be made based on actual performance
compared to planned performance for the ending three-year cycle.
Any payouts made under the Executive Long-Term Incentive Plan
shall be made one-half in cash and one-half in restricted stock,
which restricted stock will vest one-third per year over the next
three years. The Executive Long-Term Incentive Plan is being
phased in over a three-year period beginning in the 2000 fiscal
year. Full target payouts will become effective after the
completion of the 2002 fiscal year when the cumulative
performance results for the full 2000, 2001, and 2002 three-year
cycle are known.
All payouts under the Executive Long-Term Incentive Plan
will have a 150% payout cap, subject to override by the Chief
Executive Officer of the Company (except for payouts to the Chief
Executive Officer, which shall be subject to override by the
Compensation Committee). No participant in the Executive Long-
Term Incentive Plan may receive a payout of more than 100,000
shares of restricted stock and $1,500,000 in cash in any fiscal
year.
Pay/Performance Nexus
The Company's executive compensation program has resulted in
a direct relationship between the compensation paid to executive
officers and the Company's performance. See "Five-Year Total
Shareholder Return Comparison" below.
CEO Compensation
The Compensation Committee made decisions regarding Mr.
McDougall's compensation package according to the guidelines
discussed in the preceding sections. Mr. McDougall was not
awarded a salary increase for fiscal 2002 but was awarded a
discretionary bonus of $100,000 to recognize the Company's
performance during fiscal 2001 under his leadership and his
significant contributions to the Company's continued success.
Mr. McDougall was granted 180,001 stock options and 9,413 shares
of restricted stock under the Company's Stock Option and
Incentive Plan. Approximately 49% of Mr. McDougall's cash
compensation for fiscal 2001 was incentive pay pursuant to the
Company's Profit Sharing Plan. Like all Company executives,
Mr. McDougall's compensation is significantly affected by the
Company's performance. In the 2001 fiscal year, Mr. McDougall's
total cash compensation decreased 8% from its level in the 2000
fiscal year.
Federal Income Tax Considerations
The Compensation Committee has considered the impact of
Section 162(m) of the Internal Revenue Code adopted under the
Omnibus Budget Reconciliation Act of 1993. This section
disallows a tax deduction for any publicly-held corporation for
individual compensation to certain executives of such corporation
exceeding $1,000,000 in any taxable year, unless compensation is
performance-based. It is the intent of the Company and the
Compensation Committee to qualify to the maximum extent possible
its executives' compensation for deductibility under applicable
tax laws. The Compensation Committee believes that the Company's
compensation programs provide the necessary incentives and
flexibility to promote the Company's performance-based
compensation philosophy while being consistent with Company
objectives.
The Compensation Committee's administration of the executive
compensation program is in accordance with the principles
outlined at the beginning of this report. The Company's financial
performance supports the compensation practices employed during
the past year. No member of the Compensation Committee serves or
previously served as an employee or officer of the Company.
Respectfully submitted,
COMPENSATION COMMITTEE
DAN W. COOK, III (Chair)
MARVIN J. GIROUARD
JAMES E. OESTERREICHER
REPORT OF THE AUDIT COMMITTEE
In accordance with its written charter adopted by the Board
of Directors, a copy of which is attached to this Proxy Statement
as Appendix A, the Audit Committee assists the Board of Directors
in fulfilling its responsibility for oversight of the quality and
integrity of the accounting, auditing and financial reporting
practices of the Company. Company management is responsible for
the Company's internal controls and the financial reporting
process. KPMG LLP, the Company's independent auditors, is
responsible for performing an independent audit of the Company's
financial statements in accordance with generally accepted
auditing standards and for issuing a report thereon. The Audit
Committee's responsibility is to monitor and oversee these
processes. The Audit Committee also recommends to the Board of
Directors the selection of the Company's independent auditors,
subject to shareholder approval. The Audit Committee is composed
solely of independent directors who are qualified for service
under the New York Stock Exchange listing standards.
In this context, the Audit Committee held discussions with
management of the Company, who represented to the Audit Committee
that the Company's audited financial statements were prepared in
accordance with generally accepted accounting principals. Such
discussions also involved an evaluation of the independence of
KPMG LLP. The Audit Committee has reviewed and discussed the
audited financial statements with both management and the
independent auditors. The Audit Committee also discussed with the
independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication with Audit
Committees). The Audit Committee has received the written
disclosures and the letter from the independent auditors required
by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees) and have discussed with the
independent auditors its independence in connection with its
audit of the Company's financial statements.
Based on the discussions with KPMG LLP concerning the audit,
the independence discussions, and the financial statement review,
and such other matters deemed relevant and appropriate by the
Audit Committee, the Audit Committee recommends to the Board that
the financial statements be included in the Company's Annual
Report on Form 10-K for the fiscal year ended June 27, 2001 for
filing with the Securities and Exchange Commission. The Audit
Committee also recommended that KPMG LLP be reappointed as the
Company's independent auditors for the 2002 fiscal year.
Respectfully submitted,
AUDIT COMMITTEE
JAMES E. OESTERREICHER (chair)
MARVIN J. GIROUARD
FREDERICK S. HUMPHRIES
Audit Fees
The following table sets forth the aggregate fees billed to
the Company for the fiscal year ended June 27, 2001 by the
Company's principal accounting firm, KPMG LLP:
Annual Audit Fees Financial Information All Other Fees
Systems Design and
Implementation Fees
$ 115,000 $ 0 $ 373,900(1)(2)
(1) The Audit Committee has considered whether the provision of
these non-audit services by KPMG LLP is compatible with
maintaining the independence of such principal accountant.
(2) Includes fees for tax consulting ($226,100), audits
performed for benefit plans and international affiliates
($30,000), franchise-related services ($19,900), outsourcing of
internal audit-related information technology services ($66,900),
and accounting advisory services ($31,000).
STOCK OWNERSHIP OF CERTAIN PERSONS
The following table shows (a) certain information as to all
persons known by the Company to beneficially own more than 5% of
the Common Stock of the Company and (b) the ownership of the
Company's Common Stock by the named executive officers, and all
executive officers and directors as a group.
Number Attributable
Number of Shares of to Options
Common Stock Exercisable Within
Name Beneficially Owned as 60 Days of
of September 10, 2001 September 10, 2001 Percent
FMR Corp.
82 Devonshire 6,488,130 (1) (2) 6.58%
Street
Boston, MA 02109
Capital Research
and Management 6,375,000 (3) (2) 6.47%
Company
222 South Hope
Street
Los Angeles, CA
90071
Ronald A. McDougall 1,397,169 (4) (5) 1,297,151 1.40%
Douglas H. Brooks 820,215 (4) (5) 677,252 *
Todd E. Diener 138,034 (4) (5) 113,193 *
John C. Miller 397,141 (4) (5) 365,082 *
Russell G. Owens (6) 156,181 (4) (5) 137,213 *
Roger F. Thomson 52,732 (4) (5) 23,250 *
All Executive
Officers and 3,712,328 (4) (5) 3,009,117 3.65%
Directors as a
Group (21 persons)
* Less than 1%.
(1) Based on information contained in Schedule 13G dated as of
September 10, 2001.
(2) Not Applicable
(3) Based on information contained in Schedule 13G dated as of
February 9, 2001.
(4) Beneficial ownership has been determined in accordance with
the rules of the Securities and Exchange Commission. Except as
noted, and except for any community property interests owned by
spouses, the listed individuals have sole investment power and
sole voting power as to all shares of stock of which they are
identified as being the beneficial owners.
(5) Includes shares of Common Stock which may be acquired by
exercise of options vested, or vesting within 60 days of
September 10, 2001, under the Company's 1983 Inventive Stock
Option Plan, 1992 Incentive Stock Option Plan, and Stock Option
and Incentive Plan, as applicable.
(6) Mr. Owens resigned from his employment with the Company on
April 27, 2001.
The Company has established a guideline that all senior
officers of the Company own stock in the Company, believing that
it is important to further encourage and support an ownership
mentality among the senior officers that will continue to align
their personal financial interests with the long-term interests
of the Company's shareholders. Pursuant to the guideline, the
minimum amount of Company Common Stock that a senior officer will
be encouraged to own will be determined by such officer's
position within the Company as well as annual compensation. The
Company has established a program with a third-party lender
pursuant to which the senior officers will be able to obtain
financing for purposes of attaining the stock ownership levels
referred to above. Any loans obtained by such senior officers to
finance such stock acquisitions are facilitated by the Company
pursuant to an agreement in which the senior officer pledges the
underlying stock and future incentive payments which may be
receivable from the Company as security for the loan.
FIVE-YEAR TOTAL SHAREHOLDER RETURN COMPARISON
The following is a line graph presentation comparing
cumulative, five-year total shareholder return on an investment
in the Common Stock of the Company against the returns of the S&P
500 Index and the S&P Restaurant Industry Index. A list of the
returns follows the graph.
The graph assumes a $100 initial investment and the
reinvestment of dividends. The Common Stock prices shown are
neither indicative nor determinative of future performance.
1996 1997 1998 1999 2000 2001
Brinker 100.00 90.32 127.42 177.43 190.73 240.59
International
S&P 500 100.00 134.70 175.33 215.22 230.83 196.59
S&P Restaurants 100.00 104.58 141.68 177.62 136.64 133.35
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's
directors and executive officers, and persons who own more than
ten percent of the Company's Common Stock are required to report
their initial ownership of the Company's Common Stock and any
subsequent changes in that ownership to the Securities and
Exchange Commission. Except for one late filing during the fiscal
year by each of Messrs. Staubach, Diener, Miller and Wolfgram,
the Company believes that all filing requirements were satisfied.
In making these disclosures and filing the reports, the Company
has relied solely on written representations from certain
reporting persons.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The policy of the Company is, to the extent practicable, to
avoid transactions (except those which are employment related)
with officers, directors, and affiliates. In any event, any such
transactions will be entered into on terms no less favorable to
the Company than could be obtained from third parties, and such
transactions will be approved by a majority of the disinterested
directors of the Company. There were no transactions required to
be reported.
SHAREHOLDERS' PROPOSALS
Any proposals that shareholders of the Company desire to
have presented at the 2002 annual meeting of shareholders must be
received by the Company at its principal executive offices no
later than May 28, 2002.
INDEPENDENT AUDITORS
Representatives of KPMG LLP, independent certified public
accountants and auditors of the Company's financial statements,
are expected to be present at the meeting with the opportunity to
make a statement if they so desire and to be available to respond
to appropriate questions.
MISCELLANEOUS
The accompanying proxy is being solicited on behalf of the
Board of Directors of the Company. The expense of preparing,
printing and mailing the form of proxy and the material used in
the solicitation thereof will be borne by the Company. In
addition to the use of the mails, proxies may be solicited by
personal interview, telephone and telegram by directors,
officers, and employees of the Company. Arrangements may also be
made with brokerage houses and other custodians, nominees and
fiduciaries for the forwarding of solicitation material to the
beneficial owners of stock held of record by such persons, and
the Company may reimburse them for reasonable out-of-pocket
expenses incurred by them in connection therewith.
The Annual Report to Shareholders of the Company, including
financial statements for the fiscal year ended June 27, 2001,
accompanying this Proxy Statement is not deemed to be a part of
the Proxy Statement.
By Order of the Board of Directors,
ROGER F. THOMSON
Secretary
Dallas, Texas
September 25, 2001
APPENDIX A
AUDIT COMMITTEE CHARTER
I. AUDIT COMMITTEE PURPOSE
A. The Audit Committee (the "Committee") is appointed by the
Board of Directors (the "Board") to assist the Board in
fulfilling its oversight responsibilities. The Committee's
primary duties and responsibilities are to:
1. Monitor the integrity of the Company's financial reporting
process and systems of internal controls regarding finance,
accounting, and legal compliance.
2. Monitor the independence and performance of the Company's
independent auditors and internal auditing department
("Corporate Review").
3. Provide an avenue of communication among the independent
auditors, management, Corporate Review, and the Board.
B. The Committee has the authority to conduct or authorize
investigations into any matters within the Committee's scope of
responsibilities, as defined by this Charter. The Committee has
the ability to retain, at the Company's expense, special legal,
accounting, or other consultants or experts it deems necessary in
the performance of its duties.
C. The Committee is governed by this charter and has the
authority to carry out the duties enumerated herein.
II. AUDIT COMMITTEE COMPOSITION AND MEETINGS
A. Committee members, including the chair of the Committee,
shall be appointed by the Board. Appropriate consideration shall
be given to the continuity of the Committee's membership in
determining its composition from year to year. The Board shall
also evaluate the membership of the Committee on an annual basis
for compliance with the requirements indicated within this
Charter.
B. As required by the New York Stock Exchange and the
Securities and Exchange Commission ("SEC"):
1. The Committee shall be comprised of three or more directors,
as determined by the Board, each of whom shall be independent
non-employee directors, free from any relationship that would
interfere with the exercise of his or her independent judgment.
2. All members of the Committee shall have a basic
understanding of finance and accounting and be able to read and
understand fundamental financial statements, and at least one
member of the Committee shall have accounting or related
financial management expertise.
C. The Committee shall meet as often as deemed necessary to
fulfill its duties. The Chair may convene a meeting of the
Committee at his/her option and discretion. In addition,
the Committee shall confer privately and separately with the
independent public accountants, Corporate Review, or
management, at least annually and as otherwise deemed
appropriate. The Committee should report its findings to
the Board after each Committee Meeting.
III. AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
A. Review Procedures:
1. In consultation with management, Corporate Review and the
independent auditors, consider the integrity of the Company's
financial reporting processes and controls. The Committee shall
inquire of management, Corporate Review, and the independent
auditors about significant risks or exposures and assess the
steps management has taken to minimize such risks or exposures to
the Company.
2. Review the Company's annual audited financial statements
prior to filing or distribution. The review should include
discussion with management, Corporate Review and the independent
auditors and should address significant matters regarding
accounting principles, practices, and judgments. The discussion
with the independent auditors should address the results of the
audit, including the responsibilities of the auditors under
Generally Accepted Auditing Standards, the significant accounting
policies and their application as well as management's judgments
and accounting estimates. The discussion should consider the
independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied
in its financial reporting. Additionally, the independent
auditors should discuss with the Committee any significant audit
adjustments, any difficulties encountered in performing the
audit, other information that is included in documents containing
audited financial statements, any disagreements with management
during the course of the audit, any consultation they may have
made with other accountants, and any major issues discussed with
management prior to retention.
3. Review with management and the independent auditors the
Company's quarterly financial results prior to the filing or
distribution of the Company's quarterly financial statements.
Discuss any significant changes to the Company's accounting
principles and any items required to be communicated by the
independent auditors as set forth in A.2 above. The Chair of the
Committee may represent the entire Committee for purposes of this
review.
4. Review and reassess the adequacy of this Charter at least
annually. Submit the charter to the Board for approval and have
the document published at least every three years in accordance
with SEC regulations.
B. Independent Auditors
1. The independent auditors are accountable to the Committee
and the Board. The Committee shall review the independence
and performance of the independent auditors and annually
recommend to the Board the appointment of the independent
auditors or approve any discharge of auditors when
circumstances warrant.
2. Discuss all significant projects and services to be provided
by the appointed independent auditor during the year. Approve,
based on management's recommendations, the following proposed
services by the independent auditors: (a) all information
technology services relating to financial information systems
design and implementation; (b) all internal audit services; and
(c) other, non-audit services with proposed fees in excess of 50%
of the annual audit fees. Annually, approve the fees to be paid
to the independent auditors for the annual audit and quarterly
reviews and review the results of services provided by the
independent auditors.
3. On an annual basis, the Committee should review and discuss
with the independent auditors all significant relationships the
auditors have with the Company that could impair their
independence. The auditors should disclose in writing to the
Committee any relationships with the Company which could impact
their independence and that they are independent of the Company
within the meaning of the rules administered by the SEC.
4. On an annual basis, the Committee shall review the audit
plan and general audit approach with the independent auditors,
discussing the scope, staffing, and reliance upon management and
Corporate Review. The Committee should be informed about
significant changes in the auditor's audit plan.
C. Internal Audit Department and Legal Compliance
1. On an annual basis, the Committee shall discuss with
Corporate Review:
a. Internal audit scope and audit plan and changes to scope or
planned approach.
b. Adequacy of the Company's internal controls.
c. Any related significant findings and recommendations
together with management's responses thereto.
d. Organizational structure for the Corporate Review
department.
2. The Committee shall confer with management and the
independent public accountants on the adequacy and effectiveness
and overall performance of the Corporate Review function and make
appropriate recommendations for improvement.
3. Annually review the Company's Code of Ethical Conduct (the
"Code") and ensure that management has established a system to
enforce this Code. The Committee shall confer with appropriate
management concerning any significant actions taken with respect
to the Code.
D. Other Audit Committee Responsibilities
1. The Committee shall make recommendations to the Board with
respect to matters brought to the Committee's attention by
management, Corporate Review, or the independent public
accountants or otherwise arising in the course of the performance
of the Committee's duties.
2. Annually prepare a report to shareholders as required by the
SEC. The report should be included in the Company's annual proxy
statement.
3. Perform such other functions as assigned by law or as deemed
necessary by the Committee or the Board.
4. Maintain minutes of meetings and periodically report to the
Board on significant results of the foregoing activities.
