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OMB APPROVAL |
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OMB Number:
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3235-0059 |
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Expires:
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February 28, 2006 |
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12.75 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant x |
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Filed by a Party other than the Registrant
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Check the appropriate box: |
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o Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
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x Definitive Proxy Statement |
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o Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
Applebees 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):
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x No fee required. |
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o
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11. |
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1) Title of each class of securities to which transaction applies: |
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2) Aggregate number of securities to which transaction applies: |
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
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4) Proposed maximum aggregate value of transaction: |
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o Fee paid previously with preliminary materials. |
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o 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. |
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1) Amount Previously Paid: |
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2) Form, Schedule or Registration Statement No.: |
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SEC 1913 (02-02) |
Persons who are to respond to the collection of information
contained in this form are not required to respond unless the form displays a currently valid
OMB control number. |
Applebees International, Inc.
4551 W. 107th Street
Overland Park, KS 66207
(913) 967-4000
April 12, 2005
Dear Stockholder:
The Applebees 2005 Annual Meeting of Stockholders will be
held on May 12, 2005, at 10:00 a.m., CDT, at the
Overland Park Marriott Hotel, which is located at 10800 Metcalf
Avenue, Overland Park, Kansas 66210. We look forward to your
attendance either in person or by proxy. The Notice of Annual
Meeting of Stockholders, Proxy Statement and proxy card from
Applebees Board of Directors are enclosed.
Details of the business to be conducted at the Annual Meeting
are given in the enclosed Notice of Annual Meeting of
Stockholders and Proxy Statement.
Your vote is more important than ever in 2005. Each share of
Applebees stock that you own represents one vote. If you
do not vote your shares, you will not have a say in the
important issues to be voted on at the Annual Meeting. I urge
you to promptly vote and submit your proxy by phone, via the
Internet, or by signing, dating and returning the enclosed proxy
card. If you decide to attend the Annual Meeting, you will be
able to vote in person, even if you have previously submitted
your proxy.
Mr. Mark Hansen is not a nominee for election and his term
on the board will end at the Annual Meeting. We are very
grateful to him for his many valuable contributions to the Board.
If you have any questions concerning the Annual Meeting or the
proposals, please contact Applebees Corporate Secretary at
(913) 967-4000. For questions regarding your stock
ownership, you may contact our transfer agent, Wells Fargo Bank,
N.A., by phone at (800) 468-9716.
Sincerely yours,
Lloyd L. Hill
Chairman of the Board and Chief Executive Officer
Applebees International, Inc.
APPLEBEES INTERNATIONAL, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 12, 2005
Dear Stockholder:
It is my pleasure to invite you to the 2005 Annual Meeting of
Stockholders for Applebees International, Inc. We will
hold the meeting on May 12, 2005, at 10:00 a.m., CDT,
at the Overland Park Marriott Hotel, which is located at 10800
Metcalf Avenue, Overland Park, Kansas 66210.
At the meeting, we will:
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1. |
Elect two directors; |
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2. |
Approve the amendment to the Applebees International, Inc.
Amended and Restated 1995 Equity Incentive Plan; |
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3. |
Approve the amendment to the Applebees International, Inc.
Employee Stock Purchase Plan; |
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4. |
Ratify the selection of Deloitte & Touche LLP as our
independent registered public accounting firm (the
Auditors) for the 2005 fiscal year; |
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5. |
Act on a shareholder proposal to require us to issue a report on
the feasibility of requiring our chicken suppliers to utilize an
alternative method of slaughter; and |
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6. |
Transact such other business as may properly come before the
meeting or any adjournment or postponement thereof. |
We have attached a Proxy Statement to this notice that more
fully describes each of these items of business.
The Board of Directors has chosen March 18, 2005, as the
date used to determine the stockholders who will be able to
attend and vote at the Annual Meeting. If you own stock in
Applebees International, Inc. at the close of business on
that date, you are cordially invited to attend the Annual
Meeting. Seating at the meeting will be limited to
Applebees stockholders, proxy holders, and invited guests
of the Company. If you are a stockholder of record in your own
name, please bring photo identification to the Annual Meeting.
If you hold shares through a bank, broker or other third party,
please bring photo identification and a current brokerage
statement.
Your vote is important. If you decide not to attend the Annual
Meeting in person, you may vote on these proposals by proxy. To
do so, please complete, date, sign, and return the enclosed
proxy card promptly. We have enclosed a postage-prepaid envelope
to expedite the return of your completed proxy card. You may
also vote by telephone or over the Internet as indicated on the
proxy card instructions. If you have voted by mail or by
telephone or over the Internet and later decide to attend the
Annual Meeting, you may come to the meeting and vote in person.
We look forward to seeing you at the meeting.
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By Order of the Board of Directors |
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Rebecca R. Tilden, Secretary |
Overland Park, Kansas
April 12, 2005
APPLEBEES INTERNATIONAL, INC.
PROXY STATEMENT
TABLE OF CONTENTS
APPLEBEES INTERNATIONAL, INC.
PROXY STATEMENT
QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING
Why did you send this Proxy Statement to me?
The Board of Directors of Applebees International, Inc.
(sometimes referred to herein as Applebees,
we, us, our, or the
Company) is soliciting the enclosed proxy to be used
at the Annual Meeting of Stockholders on May 12, 2005, at
10:00 a.m., CDT, and at any adjournment or postponement of
that meeting. The meeting will be held at the Overland Park
Marriott Hotel, which is located at 10800 Metcalf Avenue,
Overland Park, Kansas 66210. The purpose of the meeting is to:
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Elect two directors; |
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Approve an amendment to the Applebees International, Inc.
Amended and Restated 1995 Equity Incentive Plan; |
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Approve an amendment to the Applebees International, Inc.
Employee Stock Purchase Plan; |
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Ratify the selection of Deloitte & Touche LLP as our
Auditors for the 2005 fiscal year; |
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Act on a shareholder proposal to require us to issue a report on
the feasibility of requiring our chicken suppliers to utilize an
alternative method of slaughter; and |
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Transact such other business as may properly come before the
meeting or any adjournment or postponement thereof. |
We mailed this Proxy Statement and the accompanying proxy on or
about April 12, 2005 to all stockholders entitled to vote
at the Annual Meeting.
How many votes do I have?
If we had your name on record as owning stock in Applebees
International, Inc. at the close of business on March 18,
2005, then you are entitled to vote at the Annual Meeting. You
are entitled to one vote for each share of Applebees
common stock you own as of that date. At the close of business
on March 18, 2005, 81,074,761 shares of the
Companys common stock were outstanding and eligible to
vote.
How do I vote by proxy?
Whether you plan to attend the Annual Meeting or not, we
encourage you to complete, sign, date, and return the enclosed
proxy card. We have enclosed a postage-prepaid envelope for your
convenience. You may also vote by telephone or over the Internet
as indicated on the proxy card instructions. Voting your shares
by returning the enclosed proxy card, or by telephone or over
the Internet, will not affect your right to attend the Annual
Meeting and vote in person.
How do I attend the Annual Meeting in Person?
Seating at the Annual Meeting will be limited to Applebees
stockholders or their proxyholders and the Companys
invited guests. If you are a holder of record in your own name,
please bring photo identification to the Annual Meeting. If you
hold shares through a bank, broker or other third party, please
bring photo identification and a current brokerage statement.
Cameras, recording equipment and other electronic devices will
not be permitted at the meeting. The Annual Meeting will begin
promptly at 10:00 a.m., CDT, so please plan to arrive
accordingly.
1
May I revoke my proxy?
You may change your vote or revoke your proxy any time before
the Annual Meeting by:
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Returning another proxy card with a later date; |
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Sending written notification of revocation to the Secretary of
the Company at our principal executive offices; |
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Entering a later vote by telephone or over the Internet; or |
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Attending the Annual Meeting and voting in person. |
Who pays for the solicitation of proxies and how are they
solicited?
Applebees pays the entire cost of the solicitation of
proxies. This includes preparation, assembly, printing, and
mailing of this Proxy Statement and any other information we
send to stockholders. We may supplement our efforts to solicit
your proxy in the following ways:
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We may contact you using the telephone or electronic
communication; |
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Directors, officers, or other regular employees of
Applebees may contact you personally; or |
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We may hire agents for the sole purpose of contacting you
regarding your proxy. |
If the Company hires soliciting agents, we will pay them a
reasonable fee for their services. We will not pay directors,
officers, or other regular employees any additional compensation
for their efforts to supplement our proxy solicitation.
Can I vote if my shares are held in street
name?
If the shares you own are held in street name by a
bank or brokerage firm, your bank or brokerage firm, as the
record holder of your shares, is required to vote your shares
according to your instructions. In order to vote your shares,
you will need to follow the directions your bank or brokerage
firm provides you. If you do not give instructions to your bank
or brokerage firm, it will still be able to vote your shares
with respect to certain discretionary items, but
will not be allowed to vote your shares with respect to certain
non-discretionary items. Proposals I and IV are
discretionary and Proposals II, III and V are
nondiscretionary. In the case of non-discretionary items, the
shares will be treated as broker non-votes. To be
able to vote your shares held in street name at the meeting, you
will need to obtain a proxy from the holder of record.
What constitutes a quorum?
In order for business to be conducted at the meeting, a quorum
must be present. A quorum consists of the holders of a majority
of the shares of common stock issued, outstanding and entitled
to vote at the meeting, or at least 40,537,381 shares.
Shares of common stock represented in person or by proxy
(including broker non-votes and shares that abstain
or do not vote with respect to one or more of the matters to be
voted upon) will be counted for the purpose of determining
whether a quorum exists. If a quorum is not present, the meeting
will be adjourned until a quorum is obtained.
What vote is required to approve each proposal?
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Proposal I: Election of Directors |
The two nominees for director who receive the most votes will be
elected. Votes withheld will therefore have no effect on the
outcome of this proposal because only a plurality of votes
actually cast is needed to elect a director.
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Proposal II: Amendment to the Applebees
International, Inc. Amended and Restated 1995 Equity Incentive
Plan |
The affirmative vote of a majority of the shares of common stock
present or represented by proxy and voting at the meeting is
required to approve this proposal. Abstentions are counted as
votes cast and have the same effect as votes against the
proposal. Broker non-votes have no effect on the outcome of the
voting on this proposal.
2
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Proposal III: Amendment to the Applebees
International, Inc. Employee Stock Purchase Plan |
The affirmative vote of a majority of the shares of common stock
present or represented by proxy and voting at the meeting is
required to approve this proposal. Abstentions are counted as
votes cast and have the same effect as votes against this
proposal. Broker non-votes have no effect on the outcome of the
voting on this proposal.
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Proposal IV: Ratify Selection of Auditors |
The affirmative vote of a majority of the shares of common stock
present or represented by proxy and voting at the meeting is
required to approve this proposal. Abstentions are counted as
votes cast and have the same effect as votes against the
proposal. Broker non-votes have no effect on the outcome of the
voting on this proposal.
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Proposal V: Act on Shareholder Proposal |
The affirmative vote of a majority of the shares of common stock
present or represented by proxy and voting at the meeting is
required to approve this proposal. Abstentions are counted as
votes cast and have the same effect as votes against the
proposal. Broker non-votes have no effect on the outcome of the
voting on this proposal.
How will my proxy get voted?
If you properly fill in and return the enclosed proxy card, or
vote by telephone or over the Internet, the designated Proxies
(the individuals named on your proxy card) will vote your shares
as you have directed. If you sign the proxy card but do not make
specific choices, the designated Proxies will vote your shares
as recommended by the Board of Directors as follows:
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FOR the election of the two nominees for director; |
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FOR approval of the amendment to the Applebees
International, Inc. Amended and Restated 1995 Equity Incentive
Plan; |
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FOR approval of the amendment to the Applebees
International, Inc. Employee Stock Purchase Plan; |
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FOR ratification of Deloitte & Touche LLP
as our Auditors for the 2005 fiscal year; and |
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AGAINST approval of the shareholder proposal. |
If necessary, and unless you have indicated on your proxy card
that you wish to vote against any of the proposals, the
individuals named on your proxy card may vote in favor of a
proposal to adjourn the meeting to a later date in order to
solicit and obtain sufficient votes for any of the proposals.
How will voting on any other business be
conducted?
Although we do not know of any business to be considered at the
Annual Meeting other than the proposals described in this Proxy
Statement, if any additional business is presented at the Annual
Meeting, your signed or electronically transmitted proxy card
gives authority to the designated Proxies to vote on such
matters at their discretion.
How do I submit a proposal for next years Annual
Meeting?
If you have a proposal, other than a nomination for the Board of
Directors, that you would like us to consider at the 2006 Annual
Meeting of Stockholders, and you do not want the Companys
proxy holders to be allowed to use their discretionary voting
authority to vote against this stockholder proposal when and if
raised, you must submit your proposal to us no later than
February 26, 2006. If you would like your proposal to be
included in our Proxy Statement and proxy relating to that
meeting, it must comply with the Securities and Exchange
Commission (SEC) rules, and you must submit it to us
no later than December 13, 2005.
3
How do I submit a nomination for the Board of Directors?
If you wish to nominate an individual for a position on our
Board of Directors, our Bylaws require that you submit your
nomination, along with certain information about the candidate,
to the Companys Secretary between 60 and 75 days
before the date of the Annual Meeting (or other meeting at which
directors will be elected). This should be sent to our principal
executive offices at 4551 W. 107th Street, Overland
Park, Kansas 66207. If we first announce the date of the meeting
to stockholders during the 60-day period prior to the meeting,
however, you may submit nominations to us at any time before the
close of business of the 10th day following the day on which we
announced the meeting. The notice must include the information
required by the Bylaws.
PROPOSAL I
ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF
EACH NAMED NOMINEE
If you mail your proxy, it will be used to vote for the election
of the Nominees named below unless you withhold the authority to
do so when you send in your proxy. If any Nominee becomes
unavailable for election as a result of an unexpected
occurrence, we would use your shares to vote for a substitute
Nominee that we would propose. Each person nominated for
election has agreed to serve if elected, and we have no reason
to believe that any Nominee will be unavailable to serve. We
have included additional information concerning the following
Nominees in the section entitled Board Nominees and
Incumbents.
Our Board of Directors has three classes. Directors in each
class serve three-year terms. The Corporate Governance/
Nominating Committee has recommended to the Board of Directors,
and the Board of Directors has nominated for election by the
stockholders, the two individuals listed below. If elected, each
of the below Nominees would serve until the 2008 Annual Meeting
of Stockholders and until his or her successor is elected and
qualified. A directors term may end sooner due to death,
resignation or removal.
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Current Position |
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Director |
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With The Company |
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Class |
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Erline Belton
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61 |
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Director |
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1998 |
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Eric L. Hansen
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56 |
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Director |
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1991 |
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Mr. Mark Hansen is currently a Class I director. He is
not a nominee and is not standing for re-election. His term will
expire at the Annual Meeting and we will have one vacant seat
until filled by the Board of Directors. Any person named to fill
this vacancy will be brought before the stockholders for
election at the next annual meeting. Proxies cannot be voted for
a greater number of persons than the number of Nominees named.
INFORMATION ABOUT THE BOARD OF DIRECTORS
AND EXECUTIVE AND OTHER SENIOR OFFICERS
Board Structure
The Board of Directors is divided into three classes. Directors
in each class serve for three-year terms.
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Class I |
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There are currently three Class I directors. Their terms
expire at the 2005 Annual Meeting. Mr. Mark Hansen is not a
nominee and is not standing for re-election. |
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Class II |
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There are three Class II directors. Their terms expire at
the 2006 Annual Meeting. |
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Class III |
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There are four Class III directors. Their terms expire at
the 2007 Annual Meeting. |
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Board Nominees and Incumbents
Below, we have furnished information for each of the two persons
being nominated for election as a Class I director to a new
three-year term, to serve until the 2008 Annual Meeting. We have
also furnished information for each person who is continuing as
a Class II or Class III director of the Company
(Incumbents).
ERLINE BELTON, age 61 (Nominee Class I
term expiring in 2005). Ms. Belton became a director of the
Company in September 1998. Since November 1991, Ms. Belton
has served as President and Chief Executive Officer of The
Lyceum Group, a human resource consulting firm located in
Roxbury, Massachusetts. From April 1990 until September 1991,
Ms. Belton served as Senior Vice President of Human
Resources and Organizational Development for Progressive
Insurance Companies in Cleveland, Ohio. She also served as
International Human Relations Director, as well as several other
human resources positions, with Digital Equipment Corporation
from 1978 through April 1990. Ms. Belton serves as Chair of
a sub-committee of and as a member of the Executive Compensation
Committee and as a member of the Corporate Governance/
Nominating Committee.
DOUGLAS R. CONANT, age 53 (Incumbent
Class II term expiring in 2006). Mr. Conant became a
director of the Company in December 1999. In January 2001,
Mr. Conant joined Campbell Soup Company as President and
Chief Executive Officer and was elected to their Board of
Directors. He was President of Nabisco Foods Company, a
subsidiary of Nabisco Group Holdings Corp., from July 1995 until
January 2001. He had been with Nabisco since 1991, having served
in a number of other executive positions. Prior to joining
Nabisco, Mr. Conant spent more than 16 years with the
General Mills and Kraft Foods organizations in a variety of
senior strategic and marketing management positions.
Mr. Conant serves as a Chair of the Executive Compensation
Committee.
D. PATRICK CURRAN, age 60 (Incumbent
Class II term expiring in 2006). Mr. Curran became a
director of the Company in November 1992. He has served as Chief
Executive Officer of the Curran Companies in North Kansas City,
Missouri since August 1979, and as Chairman of Cook Composites
and Polymers, a joint venture with Total Petroleum Corp.
(France), since its formation in 1990. He also serves as a
member of the Board of Directors of Gold Banc Corporation, Inc.,
a publicly-traded company. Mr. Curran serves as a member of
the Audit Committee.
ERIC L. HANSEN, age 56 (Nominee Class I
term expiring in 2005). Mr. Hansen became a director of the
Company in January 1991. He is presently a shareholder in the
Kansas City law firm of Holman, Hansen &
Colville, P.C., a professional association. From September
1984 to December 1990, he served as a tax partner at
Deloitte & Touche LLP, and from September 1974 to
September 1984, he was a certified public accountant with
Deloitte & Touche LLP. Mr. Hansen serves as Chair
of the Audit Committee and as a member of the Corporate
Governance/ Nominating Committee. Mr. Eric Hansen and
Mr. Mark Hansen are not related.
JACK P. HELMS, age 52 (Incumbent Class III
term expiring in 2007). Mr. Helms became a director of the
Company in March 1994. He is presently a principal and
shareholder in the investment banking firm of Goldsmith, Agio,
Helms and Company in Minneapolis, Minnesota. From May 1978 to
January 1986, Mr. Helms was a partner in the law firm of
Fredrikson & Byron, P.A. in Minneapolis, Minnesota.
Mr. Helms serves as a member of the Executive Compensation
Committee and as Chair of the Corporate Governance/ Nominating
Committee.
LLOYD L. HILL, age 61 (Incumbent Class III
term expiring in 2007). Mr. Hill became a director of the
Company in August 1989 and was appointed Executive Vice
President and Chief Operating Officer of the Company in January
1994. In December 1994, he assumed the role of President in
addition to his role as Chief Operating Officer. Effective
January 1, 1997, Mr. Hill assumed the role of Co-Chief
Executive Officer. In January 1998, Mr. Hill assumed the
full duties of Chief Executive Officer. As part of
Applebees succession plan, Mr. Dave Goebel was named
President effective January 1, 2005. In May 2000,
Mr. Hill was elected Chairman of the Board. Prior to
joining Applebees, he served as President of Kimberly
Quality Care, a home health care and nurse personnel staffing
company, from December 1989 to December 1993, where he also
served as a director from 1988 to 1993, having joined that
organization in 1980.
STEVEN K. LUMPKIN, age 50 (Incumbent
Class II term expiring in 2006). Mr. Lumpkin became a
director of the Company in January 2004. He was employed by the
Company in May 1995 as Vice President of Administration. In
January 1996, he was promoted to Senior Vice President of
Administration. In November 1997, he assumed the position of
Senior Vice President of Strategic Development and in January
1998 was promoted to Executive Vice President of Strategic
Development. He was named Chief Development Officer in March
2001. In March 2002, Mr. Lumpkin assumed the position of
Chief Financial Officer and Treasurer. Prior to joining
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Applebees, Mr. Lumpkin was a Senior Vice President of
a division of the Olsten Corporation, Kimberly Quality Care,
from July 1993 until January 1995. From June 1990 until July
1993, Mr. Lumpkin was an Executive Vice President and a
member of the Board of Directors of Kimberly Quality Care. From
January 1978 until June 1990, Mr. Lumpkin was employed by
Price Waterhouse LLP, where he served as a management consulting
partner and certified public accountant.
BURTON M. SACK, age 67 (Incumbent
Class III term expiring in 2007). Mr. Sack became a
director and was appointed an Executive Vice President of the
Company in October 1994. He was the principal shareholder, a
director and the President of Pub Ventures of New England, Inc.,
a former franchisee that was acquired by the Company in October
1994. In January 1996, Mr. Sack was appointed Executive
Vice President of New Business Development with responsibility
for international franchising. Mr. Sack retired as an
officer of the Company at the end of the 1997 fiscal year, but
continues to serve as a director. Mr. Sack is a private
investor and serves as a director and Chairman of the National
Restaurant Association. Mr. Sack serves as a member of the
Corporate Governance/ Nominating Committee.
MICHAEL A. VOLKEMA, age 49 (Incumbent
Class III term expiring in 2007). Mr. Volkema has been
a director since 2004. Since 1995, he has been employed by
Herman Miller, Inc., a furniture manufacturer, in various
executive positions, including Chief Executive Officer and
Chairman of the Board. He currently serves as Chairman of the
Board. From 1994 to 1995, he was a consultant to Herman Miller,
Inc. and later served as President and Chief Executive Officer
of Coro, Inc. From 1993 to 1994, Mr. Volkema was Chairman
of the Board for Meridian, Inc. Both Meridian, Inc. and Coro,
Inc., are wholly-owned subsidiaries of Herman Miller, Inc.
Mr. Volkema serves as a member of the Audit Committee.
Board Committees and Meetings
During fiscal year 2004, the Board of Directors held four
meetings, the Audit Committee held six meetings, the Executive
Compensation Committee held five meetings, and the Corporate
Governance/ Nominating Committee held three meetings. During
fiscal year 2004, each director attended more than 75% of the
Board meetings and the meetings of the committees on which such
director served.
The Board has three standing committees: the Audit Committee,
the Executive Compensation Committee and the Corporate
Governance/ Nominating Committee. The Board has affirmatively
determined that each director who serves on these committees is
independent, as that term is defined by applicable Nasdaq
listing standards and SEC rules.
The Audit Committee, acting pursuant to its written charter,
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. It
engages the Companys independent registered public
accounting firm, reviews and approves services performed by such
accountants, reviews and evaluates the Companys accounting
system and its system of internal controls, and performs other
related duties delegated to such Committee by the Board of
Directors as set forth in its charter. The Audit Committee
Charter is attached hereto as Appendix A and is available
on our website at www.applebees.com under the Investors
section. The Audit Committee consists of the following
independent directors: Mr. Curran, Mr. Eric Hansen,
Chair, Mr. Mark Hansen and Mr.Volkema. Mr. Mark
Hansens term expires at the Annual Meeting and he is not
standing for re-election. The Board of Directors has determined
that Mr. Eric Hansen is an audit committee financial
expert as defined in Item 401(h) of
Regulation S-K.
The Executive Compensation Committee, acting pursuant to its
written charter, is responsible for setting executive
compensation levels, bonus plan participation and executive and
overall compensation policies. It also reviews and approves the
various executive benefit plans and makes awards under the
Companys equity plans. The Executive Compensation
Committee consists of the following independent directors:
Ms. Belton, Mr. Conant, Chair, Mr. Mark Hansen
and Mr. Helms. Mr. Mark Hansens term expires at
the Annual Meeting and he is not standing for re-election.
Ms. Belton is Chair of a sub-committee which evaluates the
CEO. The Executive Compensation Committee Charter is available
on our website at www.applebees.com under the Investors
section.
The Corporate Governance/ Nominating Committee, acting pursuant
to its written charter, reviews corporate and board governance
matters and evaluates and recommends candidates for nomination
to the Board of Directors. The Committee is also responsible for
reviewing any stockholder nominations of Board candidates. The
Corporate
6
Governance/ Nominating Committee consists of the following
independent directors: Ms. Belton, Mr. Eric Hansen,
Mr. Helms, Chair and Mr. Sack. The Corporate
Governance/ Nominating Committee Charter is available on our
website at www.applebees.com under the Investors section.
Corporate Governance
The Corporate Governance/ Nominating Committee has developed,
and the Board has adopted, certain corporate governance
principles designed to formalize several existing practices and
enhance governance efficiency and effectiveness. Among other
things, these principles address the following:
|
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|
prohibit Board members from serving on more than two other
boards of public companies, unless the Board determines this
service will not materially impact service to the Company; |
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prohibit director nomination for election after the age of 75; |
|
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|
direct periodic Board self-evaluation through the Corporate
Governance/ Nominating Committee; |
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require the CEO to review succession planning on an annual basis
with the Executive Compensation Committee and the Board; |
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authorize separate meeting time for independent directors at all
regularly scheduled Board meetings; |
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|
authorize the Board and all committees to hire their own
advisors; |
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|
require directors who change job responsibilities to offer to
resign from the Board, if the Board deems it
appropriate; and |
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|
set certain stock ownership guidelines for outside directors. |
Our corporate governance principles are available on our website
at www.applebees.com under the Investors section.
Annually, the Corporate Governance/ Nominating Committee follows
a process designed to consider the re-election of existing
directors and seek individuals qualified to become new board
members for recommendation to the Board for any vacancies. The
Corporate Governance/ Nominating Committee believes that having
directors with relevant experience in business and industry,
government, finance and other areas is beneficial to the Board
as a whole. Directors with such backgrounds can provide a useful
perspective on significant risks and competitive advantages and
an understanding of the challenges the Company faces. The
Corporate Governance/ Nominating Committee monitors the mix of
skills and experience of its directors and committee members in
order to assess whether the Board has the appropriate tools to
perform its oversight function effectively.
With respect to nominating existing directors, the Corporate
Governance/ Nominating Committee reviews relevant information
available to it, including the latest board evaluations for such
persons, and assesses their continued ability and willingness to
serve as a director. The Corporate Governance/ Nominating
Committee also assesses each persons contribution in light
of the mix of skills and experience the Corporate Governance/
Nominating Committee has deemed appropriate for the Board.
With respect to considering nominations of new directors when
the opportunity arises, the Corporate Governance/ Nominating
Committee conducts a thorough search to identify candidates
based upon criteria the Corporate Governance/ Nominating
Committee deems appropriate and considering the mix of skills
and experience necessary to complement existing Board members.
The Corporate Governance/ Nominating Committee then reviews
selected candidates and makes a recommendation to the Board. The
Corporate Governance/ Nominating Committee may seek input from
other Board members or senior management in identifying
candidates. The Corporate Governance/ Nominating Committee will
consider nominations for the Board by stockholders the same way
it evaluates other individuals for nomination as a new director.
Such nominations must be made in accordance with the
Companys Bylaws.
7
The Company publishes in its Annual Meeting materials and SEC
filings the names of its directors, any of whom may be contacted
in writing in care of the Company. Written communication
addressed to the Board in general is reviewed by the Chairman
for appropriate handling. Written communication addressed to an
individual Board member is forwarded to that person directly.
The Company expects its Board members to attend the Annual
Meeting of Stockholders and schedules Board and committee
meetings to coincide with the stockholder meeting to facilitate
this. All of the directors attended the 2004 Annual Meeting of
Stockholders.
The Board of Directors has affirmatively determined that, except
for Mr. Hill and Mr. Lumpkin, all other directors are
independent, as that term is defined by applicable Nasdaq
listing standards and SEC rules.
Director Compensation
For director compensation purposes, Ms. Belton,
Mr. Conant, Mr. Curran, Mr. Eric Hansen,
Mr. Mark Hansen, Mr. Helms, Mr. Sack and
Mr. Volkema were considered non-employee
directors throughout 2004. During 2004, Mr. Hill and
Mr. Lumpkin were employee directors. In 2004,
non-employee directors received an annual cash retainer of
$30,000 for service as a director, including participation on
the three standing committees. Committee and sub-committee
Chairs received an additional $10,000 annually. Compensation, if
any, for service on special committees is determined by the
Board at the time of establishment of the special committee.
Employee directors do not receive any compensation for their
service on the Board.
Additionally, prior to being amended at the 2004 Annual Meeting,
the Companys 1995 Equity Incentive Plan provided that
options to purchase 20,250 shares will be granted to
non-employee directors automatically on the first day in each
calendar year that our common stock trades on a United States
stock exchange or inter-dealer quotation system, as designated
by the Board. Accordingly, options to
purchase 20,250 shares were granted to each of the
non-employee directors on January 2, 2004. Beginning in
fiscal 2005, the Company has changed the non-employee director
equity compensation as described below.
The Amended and Restated 1995 Equity Incentive Plan also permits
non-employee directors to elect to have their annual cash
retainer paid by the grant of stock options. If, on or before
December 15th, a non-employee director elects to receive
stock options in lieu of all or a portion of his or her cash
retainer for the following year, the director will receive in
the following January an option to purchase the number of shares
equal to the cash amount foregone divided by three-tenths of the
exercise price, rounded to the next higher multiple of ten. For
example, a non-employee director electing to forego $30,000 of
retainer, assuming a share price of $30.00, would receive an
option to buy 3,340 shares at $30.00 per share. In
2003, Mr. Conant, Mr. Helms and Mr. Sack elected
to receive all or a portion of their cash retainer for 2004 in
stock options and accordingly, in January of 2004 received
3,885, 1,950 and 3,885 options, respectively.
Cash compensation paid and stock options granted to
Mr. Hill and Mr. Lumpkin for services rendered to the
Company as an employee in fiscal 2004 are shown in the Summary
Compensation Table.
In December 2004, the Board approved, pursuant to
Section 9.1(a) of the Amended and Restated 1995 Equity
Incentive Plan, the amount and mix of cash and equity
compensation to be paid to the Companys non-employee
directors for their services to the Company in fiscal 2005. The
total annual compensation is valued at $171,000, based on, as
set forth in Section 9.1(a), providing overall compensation
in the range of the 75th percentile of non-employee director
compensation paid by a selected peer group of public companies.
Each non-employee director will receive $35,000 in cash as an
annual retainer. Committee and sub-committee Chairs will
continue to receive an additional $10,000 retainer. As discussed
above, a director may elect to receive all or a portion of this
retainer in stock options. The remaining $136,000 in value of
annual compensation will be paid in a combination of stock
options and restricted stock.
8
Certain Information Concerning Executive and Other Senior
Officers
Information regarding the executive and other senior officers of
the Company, who are not also current directors, is as follows:
|
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|
|
|
Name |
|
Age | |
|
Position |
|
|
| |
|
|
David L. Goebel
|
|
|
54 |
|
|
President and Chief Operating Officer |
John C. Cywinski
|
|
|
42 |
|
|
Executive Vice President and Chief Marketing Officer |
Louis A. Kaucic
|
|
|
53 |
|
|
Executive Vice President and Chief People Officer |
Carin L. Stutz
|
|
|
48 |
|
|
Executive Vice President of Operations |
Rohan St. George
|
|
|
45 |
|
|
President of International Division |
Philip R. Crimmins
|
|
|
53 |
|
|
Senior Vice President of Development |
Michael Czinege
|
|
|
51 |
|
|
Senior Vice President and Chief Information Officer |
Miguel Fernandez
|
|
|
50 |
|
|
Senior Vice President of Company Operations |
Kurt Hankins
|
|
|
44 |
|
|
Senior Vice President of Menu Development and Innovation |
David R. Parsley
|
|
|
58 |
|
|
Senior Vice President of Supply Chain Management |
Carol A. DiRaimo
|
|
|
43 |
|
|
Vice President of Investor Relations |
Beverly O. Elving
|
|
|
51 |
|
|
Vice President and Controller |
Rebecca R. Tilden
|
|
|
49 |
|
|
Vice President, Secretary and General Counsel |
David L. Goebel was employed by Applebees in February 2001
as Senior Vice President of Franchise Operations and was
promoted to the position of Executive Vice President of
Operations in December 2002. In January 2004, Mr. Goebel
was promoted to Chief Operating Officer. In January 2005 he was
also named President. Prior to joining Applebees,
Mr. Goebel headed a management company that provided
consulting and strategic planning services to various businesses
from April 1998 to February 2001. Prior to 1998, he was a
franchise principal with an early developer group of the Boston
Market concept. Mr. Goebels business experience also
includes positions as Vice President of Business Development for
Rent-a-Center (a subsidiary of Thorn, EMI) and Vice President of
Operations for Ground Round restaurants.
John C. Cywinski was employed by Applebees in July 2001 as
Senior Vice President and Chief Marketing Officer and he was
promoted to Executive Vice President in January 2004. Prior to
joining Applebees, Mr. Cywinski was employed as Vice
President of Brand Strategy for McDonalds Corporation from
April 1999 to July 2001. From October 1996 to April 1999, he was
President of Buena Vista Pictures Marketing, the motion picture
division of The Walt Disney Company. Prior to The Walt Disney
Company, Mr. Cywinski was Vice President of
U.S. Marketing for Burger King Corporation, where he held
various positions of increasing responsibility from 1989 to
1996. He started his career with the Leo Burnett Advertising
Agency in 1984.
Louis A. Kaucic was employed by Applebees in October 1997
as Senior Vice President of Human Resources. He was named Chief
People Officer in March 2001 and Executive Vice President in
March 2003. Prior to joining Applebees, Mr. Kaucic
was Vice President of Human Resources and later promoted to
Senior Vice President of Human Resources with Unique Casual
Restaurants, Inc., which operated several restaurant concepts,
from July 1992 until October 1997. From 1982 to 1992, he was
employed by Pizza Hut, Inc. in a variety of positions, including
Director of Employee Relations. From 1978 to 1982,
Mr. Kaucic was employed by Kelloggs as an Industrial
Relations Manager.
Carin L. Stutz was employed by Applebees in November 1999
as Senior Vice President of Company Operations. In January 2005,
she was promoted to Executive Vice President of Operations.
Prior to joining Applebees, Ms. Stutz was Division
Vice President with Wendys International from July 1994 to
November 1999. From 1993 to 1994, she was Regional Operations
Vice President for Sodexho, USA. From 1990 to 1993,
Ms. Stutz was employed by NutriSystem, Inc. as Vice
President of Corporate Operations. Prior to 1990, Ms. Stutz
was employed for 12 years with Wendys International.
Rohan M. St. George was employed by Applebees in November
2004 as President of the International Division. Prior to
joining Applebees, Mr. St. George was a managing
director for Yum Restaurants International which included
responsibility for Puerto Rico, the U.S. Virgin Islands and
Venezuela. From 1998 to 2003, he was
9
Vice President of Global Operations for KFC, Pizza Hut and Taco
Bell. Prior to 1998, Mr. St. George had 14 years
operations experience with Pizza Hut and KFC in various
management positions.
Philip R. Crimmins was employed by Applebees in August
2002 as Vice President of Operations Excellence. In September
2003, Mr. Crimmins was promoted to Senior Vice President of
Development. Prior to joining Applebees, he was employed
by Pizza Hut, Inc. for 27 years, most recently as Vice
President of Service Strategies. While at Pizza Hut, Inc.,
Mr. Crimmins held several other positions of increasing
responsibility, including senior leadership positions in
research and development, concept development, customer
satisfaction, field training, and restaurant operations.
Mike Czinege was employed by Applebees in April 2004 as
Senior Vice President and Chief Information Officer. Prior to
joining Applebees, Mr. Czinege was Executive Vice
President of North American operations for Celerant Consulting.
From 1996 to 2004, he was a partner and later Vice President of
Cap Gemini Ernst & Young, one of the worlds
leading providers of consulting, technology and outsourcing
services. Mr. Czinege has nearly three decades of industry
and consulting experience in manufacturing and supply chain
management operations, business planning, sales and marketing,
and information systems.
Miguel Fernandez was employed by Applebees in January 1995
as Area Director in California before becoming Director of
Operations in 1996 for Pacific Gold, Inc., an Applebees
franchise. He rejoined Applebees in September 1998 as
Regional Vice President of Company Operations. Prior to joining
Applebees, Mr. Fernandez served as Vice President of
Operations for Ninfas Mexican Restaurants, Regional
Director of Operations for Acapulco Restaurants and Vice
President of Operations for Casa Vallarta Mexican Restaurants.
In January 2005, he was appointed Senior Vice President of
Company Operations.
Kurt Hankins was employed by Applebees in August 2001 as
Vice President of Research and Development. In December 2003,
Mr. Hankins was promoted to Senior Vice President of Menu
Development and Innovation. Prior to joining Applebees, he
served as Vice President of Food and Beverage for Darden
Restaurants, Inc. from July 1999 through July 2001. From August
1994 to July 1999, he served as Director of Food Research and
Development for Darden Restaurants, Inc. Prior to his employment
with Darden Restaurants, Inc., he held various positions in food
and beverage research and development within the restaurant
industry.
David R. Parsley was employed by Applebees in April 2000
as Senior Vice President of Purchasing and Distribution. In
January 2003, Mr. Parsley was named Senior Vice President
of Supply Chain Management. Prior to joining Applebees,
Mr. Parsley held several positions with Prandium, Inc.,
operator of El Torito, Chi-Chis and Koo Koo Roo, from
November 1996 to April 2000, most recently as Senior Vice
President of Quality and Supply Chain Management. He has also
held purchasing positions with The Panda Management Company,
Carl Karcher Enterprises, Proficient Food Company, Inc., and
Baxter Healthcare Corporation.
Carol A. DiRaimo was employed by Applebees in November
1993 as Associate Director of Financial Planning and Reporting
and was promoted to Director in 1995. She was named Director of
Treasury and Corporate Analysis in 1998 and Director of Investor
Relations and Corporate Analysis in April 2000. She was promoted
to Executive Director of Investor Relations in January 2003 and
Vice President of Investor Relations in February 2004. Prior to
joining Applebees, she was employed by Gilbert/ Robinson,
Inc. from May 1989 to November 1993. Ms. DiRaimo, a
certified public accountant, was also employed by Deloitte
Haskins & Sells for six years.
Beverly O. Elving was employed by Applebees in June 1998
as Director of Corporate Accounting. In September 2002,
Ms. Elving was promoted to Vice President of Accounting. In
February 2005, she was named Vice President and Controller.
Prior to joining Applebees, she was Chief Financial
Officer from 1996 to 1998 for Integrated Medical Resources, a
publicly-held management services company. From 1990 to 1996,
Ms. Elving was employed by the Federal Deposit Insurance
Corporation as Director of Financial Operations and was later
promoted to Vice President of Financial Operations &
Accounting. Ms. Elving, a certified public accountant, was
also employed by Arthur Andersen & Co for five years.
Rebecca R. Tilden was employed by Applebees in November
2003 and became Vice President and General Counsel in January
2004. Prior to joining Applebees, Ms. Tilden was an
independent consultant specializing in corporate compliance and
ethics issues. From 1987 to 2000, Ms. Tilden was employed
by Aventis Pharmaceuticals, Inc., in various positions of
increasing responsibility and served most recently as Vice
President, Assistant General Counsel and Secretary.
10
STOCK OWNERSHIP OF OFFICERS, DIRECTORS AND MAJOR
STOCKHOLDERS
The following table sets forth information, as of March 18,
2005, regarding the ownership of common stock, our only class of
outstanding securities, by (i) each person known by the
Company to own beneficially more than 5% of the outstanding
shares of common stock, (ii) each director and nominee for
director and each executive officer named in the Summary
Compensation Table, and (iii) all executive officers and
directors of the Company as a group. Unless otherwise indicated,
each of the stockholders has sole voting and investment power
with respect to the shares beneficially owned.
|
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|
Beneficial Ownership(1) |
|
|
|
|
|
Number |
|
Percent |
|
|
of Shares |
|
Held |
|
|
|
|
|
FMR Corp.
|
|
|
10,147,189 |
|
|
|
12.5 |
% |
|
82 Devonshire Street
|
|
|
|
|
|
|
|
|
|
Boston, MA 02109
|
|
|
|
|
|
|
|
|
American Century Investment Management, Inc.
|
|
|
4,263,450 |
|
|
|
5.3 |
% |
|
4500 Main Street
|
|
|
|
|
|
|
|
|
|
Kansas City, MO 64141
|
|
|
|
|
|
|
|
|
Burton M.
Sack (2)
|
|
|
2,583,474 |
|
|
|
3.2 |
% |
Louis A.
Kaucic (2)
|
|
|
402,492 |
|
|
|
0.5 |
% |
John C.
Cywinski (2)
|
|
|
371,776 |
|
|
|
0.5 |
% |
Lloyd L.
Hill (2)
|
|
|
334,316 |
|
|
|
0.4 |
% |
D. Patrick
Curran (2)
|
|
|
291,599 |
|
|
|
0.4 |
% |
Jack P.
Helms (2)
|
|
|
243,132 |
|
|
|
0.3 |
% |
David L.
Goebel (2)
|
|
|
157,983 |
|
|
|
0.2 |
% |
Douglas R.
Conant (2)
|
|
|
139,289 |
|
|
|
0.2 |
% |
Steven K. Lumpkin
|
|
|
106,404 |
|
|
|
0.1 |
% |
Erline
Belton (2)
|
|
|
82,675 |
|
|
|
0.1 |
% |
Eric L.
Hansen (2)
|
|
|
73,050 |
|
|
|
0.1 |
% |
Mark S.
Hansen (2)
|
|
|
29,800 |
|
|
|
|
|
Michael A.
Volkema (2)
|
|
|
23,050 |
|
|
|
|
|
All executive officers and directors as a group (20
persons) (2)
|
|
|
5,084,950 |
|
|
|
6.3 |
% |
|
|
(1) |
The mailing address of each individual is
4551 W. 107th Street, Overland Park, Kansas 66207,
unless otherwise shown. |
|
(2) |
Includes certain shares subject to options exercisable as of
March 18, 2005 or within 60 days thereafter:
359,062 shares for Mr. Sack, 305,063 shares for
Mr. Kaucic, 307,248 shares for Mr. Cywinski,
77,805 shares for Mr. Hill, 138,037 shares for
Mr. Curran, 203,144 shares for Mr. Helms,
73,125 shares for Mr. Goebel, 136,489 shares for
Mr. Conant, 77,625 shares for Ms. Belton,
55,750 shares for Eric L. Hansen, 20,250 shares for
Mark S. Hansen, 20,250 shares for Mr. Volkema and
1,894,219 shares for all executive officers and directors
as a group. |
11
PERFORMANCE GRAPH
The following graph compares the annual change in the
Companys cumulative total stockholder return for the five
fiscal years ended December 26, 2004 (December 26,
1999 to December 26, 2004) based upon the market price of
our common stock, compared with the cumulative total return on
the Nasdaq Market Index and the CoreData Group Index as indexed
by CoreData Group, formerly known as Media General. The Nasdaq
Market Index, formerly known as the Nasdaq Total Return Index,
includes both the Nasdaq NMS and Nasdaq Small-Cap Issuers
indices. The CoreData Group Index, formerly known as the Media
General Restaurant Industry Index, includes approximately 100
restaurant companies.
APPLEBEES INTERNATIONAL, INC.
Performance Graph
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG APPLEBEES INTERNATIONAL, INC.,
NASDAQ MARKET INDEX AND COREDATA GROUP INDEX
ASSUMES $100 INVESTED ON DEC. 26, 1999
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 26, 2004
Source: CoreData Group
|
|
|
|
|
|
|
|
|
|
|
|
|
Measurement Period |
|
|
|
|
|
|
(Fiscal Year Covered) |
|
Applebees |
|
Nasdaq |
|
CoreData |
Measurement Point |
|
International, Inc. |
|
Market Index |
|
Group Index |
|
|
|
|
|
|
|
December 26, 1999
|
|
$ |
100.00 |
|
|
$ |
100.00 |
|
|
$ |
100.00 |
|
December 31, 2000
|
|
$ |
112.68 |
|
|
$ |
62.85 |
|
|
$ |
95.04 |
|
December 30, 2001
|
|
$ |
184.19 |
|
|
$ |
50.10 |
|
|
$ |
96.38 |
|
December 29, 2002
|
|
$ |
191.04 |
|
|
$ |
34.95 |
|
|
$ |
76.94 |
|
December 28, 2003
|
|
$ |
312.78 |
|
|
$ |
52.55 |
|
|
$ |
105.93 |
|
December 26, 2004
|
|
$ |
309.30 |
|
|
$ |
56.97 |
|
|
$ |
129.37 |
|
12
EXECUTIVE COMPENSATION
Executive Compensation Committee Report
This report discusses how we determined the compensation for
Lloyd L. Hill, our Chairman and Chief Executive Officer
(Chairman & CEO) and the other executives
named in the Summary Compensation Table (the Named
Executives) for the 2004 fiscal year.
We believe that our growth and success is dependent, in large
part, on our ability to attract and retain highly qualified
senior executives. Toward that end, we have developed a
competitive executive compensation program. We designed the
program to reward senior executives over the short- and
long-term for achieving Company financial objectives and
increasing shareholder value.
Our executive compensation program has four primary components:
|
|
|
|
|
Base salary |
|
|
|
Annual cash incentive, which is earned by achieving annual
earnings per share (EPS) growth and other operating
targets |
|
|
|
Stock awards, which consist of annual stock option and
restricted stock grants |
|
|
|
Executive stock ownership guidelines |
We set executive compensation levels each year after reviewing
levels of compensation in other companies similar to ours. For
2004, we set compensation levels that are competitive with those
offered by a group of our peers in the restaurant business. To
do this, we reviewed publicly available compensation information
for a broad range of restaurant companies, selecting them based
on several criteria including revenue size, market
capitalization, revenue and earnings growth rates, and market
segment. The restaurant companies reviewed for compensation
comparisons overlap significantly, but not completely, with
those included in the CoreData Group Index, which we used to
measure our stock price performance in the Performance Graph
included in this Proxy Statement. In addition, we compared our
targeted compensation levels to those in a broad-based group of
companies with similar revenue size to ensure that our
compensation levels were also competitive with those of
companies outside the restaurant industry.
We used the following compensation philosophy to determine
target levels of executive compensation for 2004:
|
|
|
|
|
We set base salary midpoints at or near the median of the base
salaries for executives in the comparison groups. |
|
|
|
We set target annual cash incentive opportunities so that target
total cash (base salary midpoints plus target annual cash
incentive opportunities) would be at the third quartile of total
cash for executives in the comparison groups when the Company
and executives achieve the targeted performance levels. |
|
|
|
We set target stock award levels so that total direct
compensation (target total cash plus the target present value of
annual stock awards) would be at the third quartile of total
direct compensation for executives in the comparison groups when
the Company achieves target performance levels. To determine the
value of stock awards, we assigned a standardized present value
to our stock and the stock of companies in the comparison group. |
In developing executive compensation programs and setting target
compensation levels for 2004, the Committee also relied on the
advice of a nationally recognized independent compensation
consulting firm.
Throughout 2004, we had written employment agreements in effect
with Mr. Hill, Mr. Lumpkin and Mr. Kaucic. We did
not use these agreements to determine 2004 compensation levels
because they were entered into prior to 2003 and address only
first year base salary levels. The Committee establishes base
salary, target annual incentive opportunities, stock option and
restricted stock levels each year. In addition, for the fifth
consecutive year, the Committee specifically reviewed
Mr. Hills annual performance for 2004. In 2000,
Ms. Belton, as a member of the Committee and with its
concurrence, designed a review process which includes interviews
with Mr. Hill, other officers who report to Mr. Hill,
members of the Board of Directors, and a cross-section of
franchise principals and Company employees. The process also
includes a review of both internal and external information
regarding the
13
status and performance of the Company and Mr. Hill. With
the approval of the Committee, in early 2005, Ms. Belton
again performed this extensive review process regarding
Mr. Hills 2004 performance. The Committee considers
this review process to be beneficial to the Company, its
stockholders and Mr. Hill. Effective May 2004,
Ms. Belton is Chair of a sub-committee to evaluate the CEO.
Base Salary
The Committee considers several criteria to determine base
salary increases for the Chairman & CEO and Named
Executives. These criteria may include competitive practice,
growth in stockholder value, free cash flow, return on capital,
earnings per share, franchisee relations, restaurant openings
and performance, as well as group and individual achievement of
other strategic objectives. These criteria are not weighted by
any predetermined formula. The Committee considers them in light
of the overall achievement of our goals and also in light of
general industry and economic factors.
In late 2003, the Committee completed a review of the
Companys overall performance against its operating and
strategic goals, as a part of the annual performance review of
the Chairman & CEO. Based on Company performance in
2003 and a review of the compensation data, the 2004
Chairman & CEO base salary was set at $710,000.
Increases for other Named Executives in 2004 varied based on
individual contributions to the Companys performance in
2003 and on changes in individual accountabilities in 2004.
Annual Cash Incentive Compensation
1999 Management and Executive Incentive Plan. The
Committee believes that the awards under the annual incentive
plan for the Chairman & CEO and Named Executives should
be based on the achievement of annual operating and financial
goals that contribute to the Companys short- and long-term
EPS performance. The Committee bases awards under the annual
incentive plan on achievement of EPS growth and other operating
targets. Also, for each executive, the Committee takes into
consideration strategic goals that it believes will drive our
overall performance. Based on our performance in 2004, the
Committee approved awards for the Named Executives resulting in
the bonus payments shown in the accompanying Summary
Compensation Table.
2001 Senior Executive Officer Bonus Plan. In 2001, the
Committee approved the 2001 Senior Executive Bonus Plan. The
plan was approved by our stockholders in May 2001 in order to
qualify the compensation paid under section 162(m) of the
Internal Revenue Code. The Committee determined that only the
Chairman & CEO would participate in this plan for
fiscal year 2004. If an executive receives a bonus under this
plan, he or she does not receive a bonus under the 1999
Management and Executive Incentive Plan. The plan calls for cash
bonuses to be paid upon achieving certain performance goals. For
2004, the Committee set certain EPS and other operating
performance goals for payments of cash bonuses to Mr. Hill.
Actual 2004 performance resulted in a bonus to Mr. Hill of
$554,500.
FlexPerx Program. In 2004, the Committee approved the
FlexPerx Program for certain of the Companys officers to
promote health and foster a balanced lifestyle. FlexPerx is a
program whereby case benefit awards, in addition to other
compensation, are granted to certain Company officers on a
calendar year basis, based upon each such officers scope
of employment responsibility. FlexPerx benefits may be used for
any purpose, at the sole discretion of the officer receiving the
benefit. Examples include, but are not limited to, health
expenses, financial planning expenses, home security and
maintenance expenses, other prerequisites and charitable
donations.
FlexPerx benefits are paid directly to qualifying officers once
each year during the first full pay period of December, provided
however that the proposed recipient of such benefit must be
employed by the Company on the payment date (except in the case
of retirement described below) and must have previously
completed a FlexPerx compliant comprehensive medical examination
by November 30th of the year of the award. There are four
officer groups with varying benefit levels under FlexPerx:
(i) the Chief Executive Officer is eligible to receive a
benefit of $13,500; (ii) other Named Executives are
eligible to receive $8,500; (iii) Executive Vice Presidents
and Senior Vice Presidents are eligible to receive $6,000; and
(iv) Vice Presidents are eligible to receive $3,500. Any
FlexPerx benefits paid to an officer is taxable to such officer
and will be subject to any applicable withholding tax.
In any given year, if an officer becomes newly eligible to
receive a FlexPerx benefit or if a previously eligible officer
qualifies for a different benefit level, the applicable benefit
amount will be prorated for the remaining portion
14
of the calendar year to reflect such change. If an officer
retires in accordance with the Companys Executive
Retirement Plan, such officer will remain eligible to receive a
full FlexPerx benefit for the calendar year during which
retirement occurs.
Equity Compensation
The Committee believes that stock awards are an important
element of the Companys executive compensation program and
the primary means of rewarding executives for increasing
stockholder value over the short- and long-term. Prior to 2003,
the Company used a combination of stock options and performance
shares. Beginning in 2003, the Committee chose to use a
combination of stock options and restricted stock to comprise
the equity portion of the executive compensation program. This
provides a focus on both short-term stock price appreciation and
the achievement of goals designed to achieve continued stock
price growth over the long-term. Stock awards also serve as the
primary retention tool for the Chairman & CEO and Named
Executives.
The Committee has also focused on putting executives at
financial risk based on our stock performance. To accomplish
this goal, the Committee has, over the last five years,
implemented certain stock programs for executives. At the same
time, we have adopted stock ownership guidelines to ensure that
the stock programs result in significantly increased share
ownership by executives.
Stock Option Grants
In 2004, the Committee made annual stock option grants to the
Chairman & CEO and Named Executives. These stock option
grants were made at fair market value on the date of grant. The
executives can exercise the options (following a required
holding period) at any time over a 10-year period. The options
vest three years from the date of the grant.
Restricted Stock Grants
In 2004, the Committee made annual restricted stock grants to
the Chairman & CEO and Named Executive Officers. These
grants were subject to three-year restriction periods.
Executive Stock Ownership Guidelines
In 1998, we established stock ownership guidelines that became
effective for the Chairman & CEO through Senior Vice
President levels as of July 1, 1998 and for Vice Presidents
as of January 1, 1999.
The targeted stock ownership requirements for the executive
officer group were modified in 2004 and are as follows:
|
|
|
|
|
|
|
Chairman & CEO |
|
4 times base salary |
|
|
President & COO |
|
3.5 times base salary |
|
|
Other Named Executive Officers |
|
3 times base salary |
|
|
Executive Vice Presidents/Senior Vice
Presidents |
|
1.5 times base salary |
|
|
Vice Presidents |
|
1 times base salary |
An executive must achieve the applicable targeted ownership
level generally within five years in order to continue to
participate in our annual stock option and restricted stock
program after that date. If a participating executive achieves
the applicable targeted level within three years, he or she will
receive a share bonus of 50% of base salary up to $125,000. The
bonus is restricted until five years of participation have been
achieved. As of the end of 2004, the Chairman & CEO and
all other Named Executives who had participated in the share
ownership program for at least three years had exceeded his or
her required share ownership level and, as a result, qualified
for the restricted share bonus.
Deductibility of Compensation
Section 162(m) of the Internal Revenue Code places an
annual limitation of $1,000,000 on the compensation of certain
executive officers of publicly-held corporations that can be
deducted for federal income tax purposes unless
15
such compensation is based on performance. Generally, the
Committee believes that it is in the best interests of the
Companys stockholders to comply with such tax law, while
still maintaining the goals of the Companys executive
compensation program. However, where it is deemed necessary and
in the best interests of the Company to continue to attract and
retain the best possible executive talent, and to motivate such
executives to achieve the goals inherent in the Companys
business strategy, the Committee will approve compensation to
executive officers which may exceed the limits of deductibility.
No executive of the Company received non-performance based
compensation in excess of $1,000,000 in 2004.
|
|
|
EXECUTIVE COMPENSATION COMMITTEE
Douglas R. Conant, Chair
Erline Belton
Jack P. Helms
Mark S. Hansen |
16
Summary Compensation Table
The following Summary Compensation Table sets forth the
compensation of the Chief Executive Officer and each of the next
four most highly compensated executive officers in each of their
respective positions with the Company whose annual salary and
bonuses exceeded $100,000 for services in all capacities to the
Company during the last three fiscal years, and who were serving
at the end of the fiscal year.
SUMMARY COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long Term Compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Compensation |
|
Awards |
|
Payouts |
|
|
|
|
|
|
|
|
|
|
|
Restricted |
|
|
|
|
|
|
|
|
Other Annual |
|
Stock |
|
|
|
LTIP |
|
|
Fiscal |
|
Salary(1) |
|
Bonus(2) |
|
Compensation(3) |
|
Awards(4) |
|
Options(5) |
|
Payouts(6) |
Name and Principal Position |
|
Year |
|
($) |
|
($) |
|
($) |
|
($) |
|
(#) |
|
($) |
|
Lloyd L. Hill
|
|
|
2004 |
|
|
$ |
703,846 |
|
|
$ |
554,500 |
|
|
$ |
114,856 |
|
|
$ |
580,201 |
|
|
|
187,499 |
|
|
$ |
370,882 |
|
Chief Executive Officer and |
|
|
2003 |
|
|
|
686,154 |
|
|
|
950,730 |
|
|
|
115,275 |
|
|
|
586,125 |
|
|
|
187,499 |
|
|
|
1,294,313 |
|
|
President
|
|
|
2002 |
|
|
|
612,308 |
|
|
|
726,330 |
|
|
|
102,331 |
|
|
|
|
|
|
|
225,000 |
|
|
|
|
|
|
David L.
Goebel(7)
|
|
|
2004 |
|
|
$ |
393,789 |
|
|
$ |
271,269 |
|
|
$ |
18,076 |
|
|
$ |
359,383 |
|
|
|
67,499 |
|
|
|
|
|
Chief Operating Officer |
|
|
2003 |
|
|
|
310,077 |
|
|
|
263,655 |
|
|
|
13,610 |
|
|
|
130,250 |
|
|
|
48,750 |
|
|
$ |
345,150 |
|
|
|
|
2002 |
|
|
|
236,154 |
|
|
|
160,060 |
|
|
|
2,955 |
|
|
|
|
|
|
|
73,125 |
|
|
|
|
|
|
Steven K. Lumpkin
|
|
|
2004 |
|
|
$ |
370,385 |
|
|
$ |
280,341 |
|
|
$ |
21,431 |
|
|
$ |
232,080 |
|
|
|
67,499 |
|
|
$ |
123,618 |
|
Executive Vice President and |
|
|
2003 |
|
|
|
349,615 |
|
|
|
366,856 |
|
|
|
17,794 |
|
|
|
221,425 |
|
|
|
67,499 |
|
|
|
431,438 |
|
|
Chief Financial Officer
|
|
|
2002 |
|
|
|
299,062 |
|
|
|
197,690 |
|
|
|
|
|
|
|
|
|
|
|
146,250 |
|
|
|
|
|
|
John C. Cywinski
|
|
|
2004 |
|
|
$ |
374,769 |
|
|
$ |
201,416 |
|
|
$ |
9,614 |
|
|
$ |
232,080 |
|
|
|
67,499 |
|
|
$ |
98,900 |
|
Executive Vice President and |
|
|
2003 |
|
|
|
365,769 |
|
|
|
291,783 |
|
|
|
13,600 |
|
|
|
182,350 |
|
|
|
67,499 |
|
|
|
345,150 |
|
|
Chief Marketing Officer
|
|
|
2002 |
|
|
|
340,000 |
|
|
|
240,340 |
|
|
|
61,178 |
|
|
|
|
|
|
|
90,000 |
|
|
|
|
|
|
Louis A. Kaucic
|
|
|
2004 |
|
|
$ |
296,154 |
|
|
$ |
155,415 |
|
|
$ |
17,645 |
|
|
$ |
193,400 |
|
|
|
48,749 |
|
|
$ |
123,618 |
|
Executive Vice President and |
|
|
2003 |
|
|
|
277,702 |
|
|
|
213,436 |
|
|
|
14,707 |
|
|
|
195,375 |
|
|
|
48,750 |
|
|
|
431,438 |
|
|
Chief People Officer
|
|
|
2002 |
|
|
|
247,115 |
|
|
|
173,030 |
|
|
|
16,369 |
|
|
|
|
|
|
|
73,125 |
|
|
|
|
|
|
|
|
(1) |
Mr. Hill, Mr. Goebel, Mr. Lumpkin,
Mr. Cywinski and Mr. Kaucic deferred $147,500,
$13,677, $43,269, $26,154 and $59,519, respectively, of their
2002 salary under the Companys deferred compensation plan.
Mr. Hill, Mr. Goebel, Mr. Lumpkin and
Mr. Kaucic deferred $171,538, $24,086, $52,442 and $69,425,
respectively, of their 2003 salary under the Companys
deferred compensation plan. Mr. Hill, Mr. Goebel,
Mr. Lumpkin and Mr. Kaucic deferred $351,923, $31,503,
$74,077 and $94,718, respectively, of their 2004 salary under
the Companys deferred compensation plan. |
|
|
(2) |
Represents amounts earned under the Companys bonus plans.
Mr. Kaucic elected to receive a portion of his 2002 bonus
in stock and, accordingly, received 1,365 shares in March
2003. Mr. Kaucic elected to receive a portion of his 2003
bonus in stock and, accordingly, received 2,616 shares in
March 2004. Mr. Hill, Mr. Goebel, Mr. Cywinski
and Mr. Kaucic deferred $181,583, $12,805, $19,227 and
$43,258, respectively, of their 2002 bonus under the
Companys deferred compensation plan. Mr. Hill,
Mr. Goebel and Mr. Kaucic deferred $237,683, $21,092
and $53,359, respectively, of their 2003 bonus under the
Companys deferred compensation plan. Mr. Hill,
Mr. Goebel and Mr. Kaucic deferred $526,775, $21,702
and $124,332, respectively, of their 2004 bonus under the
Companys deferred compensation plan. |
|
(3) |
Amounts in 2002 include payments made in connection with the
Companys nonqualified retirement savings plan which was
replaced by the nonqualified deferred compensation plan. Amounts
in 2002 and 2003 include payments made in connection with the
Companys deferred compensation plan. Amounts applicable to
Mr. Hill in 2002, 2003 and 2004 include taxable travel
benefits of $64,140, $67,721 and $59,311, respectively. Amounts
applicable to Mr. Cywinski in 2002 represent moving and
relocation expense reimbursements. |
|
(4) |
Mr. Goebel met his share ownership guidelines in 2004 and
accordingly, received 5,431 shares which vest after two
years. Amounts for 2003 and 2004 represent restricted stock
awards grants aggregating 56,250 shares for Mr. Hill,
16,500 shares for Mr. Goebel, 21,750 shares for
Mr. Lumpkin, 19,500 shares for Mr. Cywinski and
18,750 shares for Mr. Kaucic issued to replace the
performance share plan which was discontinued. The aggregate
value of these shares granted in 2004 and 2003 based upon the
closing sale price of our common stock on December 23, 2004
(the last trading day of fiscal 2004) was $1,427,625 for
Mr. Hill, $418,770 for Mr. Goebel, $552,015 for
Mr. Lumpkin, $494,910 for Mr. Cywinski and $475,875
for Mr. Kaucic. Restricted stock awards receive any
dividends paid. |
|
(5) |
Represents options granted pursuant to the Companys
Amended and Restated 1995 Equity Incentive Plan. |
|
(6) |
Amounts applicable to 2003 represent the value of performance
shares earned and cash received under a three-year performance
cycle. Mr. Goebel and Mr. Cywinski elected to receive
a portion of their award in shares and accordingly received
9,052 shares each on February 17, 2004. The closing
price of our common stock on February 17, 2004 was
$25.57 per share. Mr. Hill, Mr. Goebel,
Mr. Lumpkin, |
17
|
|
|
Mr. Cywinski and
Mr. Kaucic received cash payments and accordingly were paid
$1,294,313, $113,708, $431,438, $113,708 and $431,438,
respectively, on February 19, 2004. Amounts applicable to
2004 represent cash received for the value of performance shares
earned under a three-year performance cycle.
|
|
|
(7) |
Mr. Goebel was promoted to President in January 2005. |
Stock Options Information
The following tables set forth information regarding options
granted and exercised during fiscal year 2004 with respect to
the Chief Executive Officer and the officers named in the
Summary Compensation Table:
OPTION GRANTS IN LAST FISCAL YEAR
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual Grants(1) |
|
Potential |
|
|
|
|
Realizable Value at |
|
|
Number of |
|
% of Total |
|
|
|
Assumed Annual |
|
|
Securities |
|
Options |
|
|
|
Rates of Stock Price |
|
|
Underlying |
|
Granted to |
|
Exercise |
|
|
|
Appreciation |
|
|
Options |
|
Employees |
|
or Base |
|
|
|
for Option
Term(2) |
|
|
Granted(3) |
|
in Fiscal |
|
Price |
|
Expiration |
|
5% |
|
10% |
Name |
|
(#) |
|
Year |
|
($/Share) |
|
Date |
|
($) |
|
($) |
|
Lloyd L. Hill
|
|
|
187,499 |
|
|
|
11.7 |
% |
|
$ |
25.79 |
|
|
|
01/02/14 |
|
|
$ |
3,040,693 |
|
|
$ |
7,707,714 |
|
|
David L. Goebel
|
|
|
67,499 |
|
|
|
4.2 |
|
|
|
25.79 |
|
|
|
01/02/14 |
|
|
|
1,094,639 |
|
|
|
2,774,031 |
|
|
Steven K. Lumpkin
|
|
|
67,499 |
|
|
|
4.2 |
|
|
|
25.79 |
|
|
|
01/02/14 |
|
|
|
1,094,639 |
|
|
|
2,774,031 |
|
|
John C. Cywinski
|
|
|
67,499 |
|
|
|
4.2 |
|
|
|
25.79 |
|
|
|
01/02/14 |
|
|
|
1,094,639 |
|
|
|
2,774,031 |
|
|
Louis A. Kaucic
|
|
|
48,749 |
|
|
|
3.1 |
|
|
|
25.79 |
|
|
|
01/02/14 |
|
|
|
790,568 |
|
|
|
2,003,455 |
|
|
|
|
(1) |
Options are granted at the fair market value on the date of
grant. |
|
(2) |
The assumed rates are compounded annually for the full terms of
the options. |
|
(3) |
Options vest three years after date of grant. The option
agreements have a provision that extends the cancellation date
of the options and allows for the continued vesting of any
unvested options under the terms of the Executive Retirement
Plan. These agreements, other than Mr. Hills, also
include a provision that would provide that the impact of a
change in control shall be as set forth in any change in control
or employment agreement with the Company. Mr. Hills
agreement includes a provision that would vest any unvested
options upon termination by the Company without cause (as
defined) or upon the occurrence of a triggering event (as
defined). |
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities |
|
Value of Unexercised |
|
|
|
|
|
|
Underlying |
|
In-The-Money |
|
|
|
|
|
|
Unexercised Options |
|
Options at |
|
|
Shares |
|
|
|
at 12/26/04 |
|
12/26/04(2) |
|
|
Acquired |
|
Value |
|
(#) |
|
($) |
|
|
at Exercise |
|
Realized(1) |
|
Exercisable/ |
|
Exercisable/ |
Name |
|
(#) |
|
($) |
|
Unexercisable |
|
Unexercisable |
|
Lloyd L. Hill
|
|
|
380,317 |
|
|
|
$5,911,083 |
|
|
|
/ 599,998 |
|
|
|
/ $4,110,760 |
|
|
David L. Goebel
|
|
|
84,375 |
|
|
|
1,353,860 |
|
|
|
/ 189,373 |
|
|
|
/ 1,201,134 |
|
|
Steven K. Lumpkin
|
|
|
242,812 |
|
|
|
3,423,869 |
|
|
|
/ 208,123 |
|
|
|
/ 1,395,885 |
|
|
John C. Cywinski
|
|
|
64,000 |
|
|
|
649,059 |
|
|
|
217,248/224,998 |
|
|
|
2,432,700 / 1,575,848 |
|
|
Louis A. Kaucic
|
|
|
89,877 |
|
|
|
1,701,083 |
|
|
|
231,938/170,623 |
|
|
|
3,804,842 / 1,224,759 |
|
|
|
|
(1) |
Market value less option price. |
|
(2) |
Based upon the closing sale price of our common stock on
December 23, 2004 (the last trading day in fiscal year
2004). |
18
Employment Agreements and Change in Control Arrangements
During 2004, we had written employment agreements with
Mr. Hill, Mr. Lumpkin and Mr. Kaucic. Each of the
employment agreements provides for periodic salary adjustments
as determined by the Executive Compensation Committee.
Mr. Hills agreement was for an original term of one
year, expiring in January 1995, and automatically renews for
successive one-year terms unless otherwise terminated as
provided in the agreement. The agreement provides for a base
salary which may be periodically increased by the Executive
Compensation Committee and participation in the Companys
executive bonus plan for vice presidents as well as additional
bonuses as determined by the Executive Compensation Committee.
Additionally, the agreement sets forth certain obligations with
regard to maintaining confidential information and ownership of
any discoveries. We also entered into a severance and
non-competition agreement with Mr. Hill which provides for
vesting of unvested options and restricted stock and a
continuation of salary, bonus and benefits for a period of three
years following certain triggering events, including
termination by the Company without cause or termination by
Mr. Hill if the Company substantially reduces his
compensation, benefits, or duties or requires a relocation from
the Kansas City area. If the three-year severance payments are
due, Mr. Hill will be bound by a three-year non-compete. If
the severance payments are not due, the Company can elect to
impose a one-year non-compete on Mr. Hill if it pays him
50% of his base salary.
Effective August 7, 2002, the Company and Mr. Lumpkin
entered into an employment agreement with an initial term of
18 months, a subsequent term of 30 months and
renewable thereafter for additional one-year terms. The
agreement allows periodic salary increases as determined by the
Executive Compensation Committee and provides for vesting of
unvested options and restricted stock and a 24-month severance
payment based on the current years salary and the greater
of the annualized current years bonus or the average of
the three prior years bonuses in the event of termination
by the Company without cause or by Mr. Lumpkin with reason.
If Mr. Lumpkin elects to receive the severance payment the
agreement imposes a non-competition and an employee
non-solicitation clause. The agreement also provides for vesting
of unvested options and restricted stock and for a lump sum
payment equal to 24 times his current years monthly salary
plus bonus, plus an amount equal to all bonuses paid or accrued
in the fiscal year of termination, without the imposition of a
non-competition or non-solicitation clause, in the event that
following a change in control, Mr. Lumpkin resigns or is
terminated.
In 2003, the Company and Mr. Kaucic entered into a
memorandum of understanding regarding Mr. Kaucics
employment and separation from the Company. Mr. Kaucic will
remain employed full-time as the Companys Chief People
Officer until such time as his successor is selected and in
place or until July 1, 2005. Mr. Kaucic will continue
to receive the salary, cash incentive compensation and equity
compensation applicable to the Chief People Officer position.
From July 1, 2005 through March 1, 2006,
Mr. Kaucic will be employed part-time to perform special
project work for the Company and will continue to receive the
base salary he received as Chief People Officer as well as an
hourly wage for hours worked. Mr. Kaucic will continue to
be eligible to receive payouts for earlier granted performance
share awards and a stock option grant of 10,000 shares in
January 2006 and will be eligible to participate in the
Companys benefit programs. Upon Mr. Kaucics
separation from the Company on April 30, 2006 he will
execute a separation agreement fully releasing and discharging
the Company. Mr. Kaucic also entered into a
confidentiality, non-solicitation and non-competition agreement
which includes a two-year noncompete agreement.
Mr. Kaucic is also a party to a change in control
agreement. The agreement has a three-year term at which time it
would automatically extend for additional terms of one year. In
the event of a change in control, if Mr. Kaucic is
terminated within 12 months for any reason, he would be
entitled to (i) a lump sum payment in cash of up to two
times his fiscal year annualized salary plus either the prior
years bonus, or accrued but unpaid amounts for each prior
fiscal quarter in the fiscal year in which the termination
becomes effective, (ii) continuation of coverage for twelve
months under Company benefit plans, and (iii) will be
immediately vested in any unvested stock options or restricted
stock.
Mr. Goebel is a party to a change in control and noncompete
agreement which has a three-year term at which time it would
automatically extend for additional terms of one year. In the
event of a change in control, if Mr. Goebel is terminated
within 18 months without cause or if he terminates for good
reason, he will be eligible for lump sum cash payments equal to
up to two times the sum of his base salary plus the greater of
the average of his bonus for the preceding fiscal year or his
target bonus for the current fiscal year, continued coverage
under Company
19
health plans and immediate vesting of any stock options and
restricted stock awards. If eligible, he will also receive
benefits under the Companys executive retirement plan. The
agreement also contains a one-year noncompete provision and a
confidentiality and no solicitation provision.
Mr. Cywinski is a party to a change in control and
noncompete agreement. The agreement has a term of two years and
shall automatically be extended thereafter for additional
one-year terms. If Mr. Cywinski is terminated within
18 months following a change in control, either without
cause or by Mr. Cywinski for good reason, he will receive a
lump sum cash payment equal to up to two times the base salary
in effect plus the greater of the average of the
executives bonus for the three preceding fiscal years and
the target bonus for the immediately preceding fiscal year, be
entitled to continuing health coverage, and have immediate
vesting of any unvested stock options and restricted stock. The
agreement also contains a confidentiality and nonsolicitation
provision and a 12-month noncompete provision.
We have change in control arrangements with other officers of
the Company (16 persons), which provide certain benefits in the
event the officer resigns or is terminated following a change in
control of the Company. The agreements have either two- or
three-year terms at which time they automatically extend for
additional terms of one year each. During the term of the
agreement, the officer is eligible for a lump sum payment in the
event the employee resigns or is terminated following a change
in control of the Company. To become eligible for the change in
control benefits, a change in control of the Company must occur
and the officers employment with the Company (or its
successor) must be terminated within a time period specified in
the respective agreement following the change in control either
by the Company without cause or by the officer for good reason.
Additionally, several of the agreements set forth certain
obligations with regard to non-competition, non-solicitation,
maintaining confidential information and ownership of any
discoveries. If all officers with change in control agreements
including Mr. Kaucic, Mr. Goebel and Mr. Cywinski
(19 persons) had been terminated as of December 26, 2004,
as a result of a change in control, we would have been required
to make payments under the change in control severance
provisions of the above agreements totaling approximately
$12,700,000.
Executive Retirement Plan
Effective April 1, 2004, the Board of Directors approved
the Applebees International, Inc. Executive Retirement
Plan, pursuant to which eligible officers of the Company who
enroll in this plan and who fulfill the obligations imposed by
the plan will receive certain benefits from the Company
following retirement. An officer is eligible to retire under the
Plan if his or her age is 50 or above, his or her age plus years
of service with the Company equal at least 60, the officer has
served as an officer of the Company for at least 60 full
consecutive months, and the officer has both enrolled in the
plan and signed either an employment agreement or an updated
Change in Control and NonCompete Agreement. This Change in
Control and NonCompete Agreement would supercede any previous
agreement and would provide for a lump sum payment in the event
the officer resigns with good reason (as defined) or is
terminated by the Company without cause (as defined) following a
change in control of the Company in amounts up to two times the
sum of the officers annual base salary plus the greater of
(i) the officers average bonus for the three
preceding fiscal years or (ii) the officers target
bonus for the fiscal year in which his or her employment
terminates. This agreement would also provide for (i) up to
two years continued participation in a Company health plan
at Company expense, (ii) immediate vesting of any unvested
options and restricted shares issued after January 1, 2004,
(iii) severance benefits if employment is terminated by the
Company without cause before a change in control equal to the
amount that the officer would have received under the
Companys severance policy if the officers position
had been eliminated, and (iv) impose confidentiality,
noncompetition, employee nonsolicitation and intellectual
property obligations. The officer must provide at least six
months prior written notice of his or her retirement and
execute both a release of claims against the Company and a
noncompete and nonsolicitation agreement.
An officer who retires under this plan is entitled to
(i) continued group health coverage under a plan sponsored
by the Company at the officers expense,
(ii) continued vesting of options and restricted stock and
continued exercisability of options with respect to options and
restricted stock issued after January 1, 2004,
(iii) payment of a prorated target bonus for the year of
retirement, (iv) the right to elect an extended payout for
deferred compensation, and (v) continued participation in
certain benefits of the Companys perquisites plan for
officers.
20
This Plan may not be amended or terminated until on or after
April 1, 2007. Also, this Plan may not be amended with
respect to a particular person after that person becomes
eligible (as defined) to retire (as defined), or during the
18-month period following a change in control (as defined).
Presently, two officers are retired under this Plan.
Executive Health Plan
Effective March 1, 2004, the Board of Directors approved
the Applebees International, Inc. Executive Health Plan,
pursuant to which the Company will provide eligible officers of
the Company and retired officers who elect to participate in the
Executive Retirement Plan with group health coverage. The terms
and cost of the coverage will be determined by the Company and
may vary from participant to participant.
Certain Indemnification Agreements
We have entered into Indemnification Agreements with each of our
directors and officers. Under the Indemnification Agreements, we
have agreed to hold harmless and indemnify each indemnitee
generally to the full extent permitted by the Delaware General
Corporation Law and against any and all liabilities, expenses,
judgments, fines, penalties and costs in connection with any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative to
which the indemnitee is made a party by reason of the fact that
the indemnitee has, is or at the time becomes a director or
officer of the Company or any other entity at our request. The
indemnity does not cover liability arising out of fraudulent
acts, deliberate dishonesty or knowing misconduct, violations of
certain securities laws, or if a court determines that such
indemnification is not lawful. In addition, our Bylaws provide
indemnification to all our officers and directors to essentially
the same extent as provided in the indemnification agreements.
We presently carry director and officer liability insurance to
insure our directors and officers against certain liabilities
they might incur in connection with performing their duties for
us. If we become obligated to indemnify an officer or director
for an act which is covered by that insurance, we would be able
to recover the amount of the indemnification from the insurance
proceeds up to the amount of coverage. The insurance, however,
does not cover all liabilities that could give rise to
indemnification by us.
Equity Compensation Plan Information
The following table gives information about our common stock
that may be issued upon the exercise of options, warrants and
rights as of December 26, 2004 under the Amended and
Restated 1995 Equity Incentive Plan and the 1999 Employee
Incentive Plan and that may be purchased under our Employee
Stock Purchase Plan and Executive Nonqualified Stock Purchase
Plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c) Number of | |
|
|
|
(a) Number of | |
|
|
|
|
securities remaining | |
|
|
|
securities to be | |
|
(b) Weighted | |
|
available for future | |
|
|
|
issued upon | |
|
average exercise | |
|
issuance under | |
|
|
|
exercise of | |
|
price of | |
|
equity compensation | |
|
|
|
outstanding | |
|
outstanding | |
|
plans (excluding | |
|
|
|
options, warrants | |
|
options, warrants | |
|
securities reflected | |
Plan Category |
|
|
and rights | |
|
and rights | |
|
in column (a)) | |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Compensation Plans Approved by Stockholders
|
|
|
|
5,067,808 |
(1) |
|
|
|
$17.48 |
|
|
|
|
2,598,584 |
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Compensation Plans Not Approved by Stockholders
|
|
|
|
1,129,610 |
(3) |
|
|
|
$13.80 |
|
|
|
|
317,097 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
6,197,418 |
|
|
|
|
|
|
|
|
|
2,915,681 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Issued under the Amended and Restated 1995 Equity Incentive
Plan. Adjusted for a three-for-two stock split in June 2004. |
(2) |
Includes 109,271 shares of common stock reserved for
issuance under the Employee Stock Purchase Plan and Executive
Nonqualified Stock Purchase Plan. Adjusted for a three-for-two
stock split in June 2004. |
(3) |
Issued under the 1999 Employee Incentive Plan. See the
description below of the 1999 Employee Incentive Plan. Adjusted
for a three-for-two stock split in June 2004. |
21
1999 Employee Incentive Plan
In May 1999, our Board of Directors approved the Applebees
International, Inc. 1999 Employee Incentive Plan, pursuant to
which nonqualified stock options have been granted to our
employees who are not officers or directors. As of
December 26, 2004, options to acquire 1,129,610 shares
were outstanding under this plan, out of the
2,473,875 shares reserved for issuance. The Company also
granted 50,436 shares of restricted stock awards under this
plan.
The purpose of this plan was to promote our success by linking
the personal interests of our non-executive employees to those
of our stockholders and by providing participants with an
incentive for outstanding performance. The plan is administered
by the Executive Compensation Committee. The plan authorized the
granting of nonqualified stock options, restricted stock, stock
appreciation rights and performance units or shares. The
exercise price of an option may not be less than the fair market
value of the underlying stock on the date of grant and no option
may have a term of more than ten years. The options that are
currently outstanding under the plan generally vest over a two-
or three-year period beginning on the grant date and expire ten
years from the date of grant.
The terms of any other awards under the plan are generally at
the discretion of the Executive Compensation Committee. In the
event of a change in control of the Company, all outstanding
awards vest and become immediately exercisable, unless otherwise
determined by the Board of Directors with respect to any
particular event which would constitute a change in control.
This plan is not required to be and has not been submitted to
our stockholders for approval and the Board of Directors may
amend or terminate the plan without stockholder approval, but no
amendment or termination of the plan or any award agreement may
adversely affect any award previously granted under the plan
without the written consent of the participant. No additional
options are being granted under this plan and the Board will not
approve an increase in the authorization of this Plan beyond the
current authorization.
Compensation Committee Interlocks and Insider
Participation
During fiscal 2004, none of our executive officers served on the
board of directors of any entities whose directors or officers
served on our Executive Compensation Committee. No current or
past executive officers or employees of the Company serve on our
Executive Compensation Committee. The following directors served
as members of the Executive Compensation Committee during 2004:
Ms. Belton, Mr. Conant, Mr. Mark Hansen and
Mr. Helms.
CERTAIN TRANSACTIONS
The Company had a loan outstanding with an interest rate of 5%
to Mr. Cywinski for moving related assistance in the amount
of $210,000 as of December 28, 2003. The remaining
principal of $210,000 as of December 28, 2003, as well as
accrued interest, was paid in October 2004.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires our officers, directors, and persons who own more than
10% of the common stock to file certain reports of ownership and
changes in ownership with the SEC and to furnish us with copies
of all such reports.
Based on our review of the copies of the reports we received and
other written communications we received from other reporting
people, we believe that our officers, directors, and
greater-than-10% beneficial owners complied with all filing
requirements during the fiscal year ended December 26, 2004.
AUDIT COMMITTEE REPORT
During fiscal 2004, in accordance with its written charter, the
Audit Committee of the Board of Directors was responsible for
the oversight of the accounting and financial reporting
processes of the Company and the audit of the Companys
financial statements. The Audit Committee charter has been
amended to comply with all applicable provisions of The Nasdaq
Stock Market listing standards. The amended charter is attached
as Appendix A hereto. Each of the members of the Audit
Committee meets the independence and experience requirements of
The Nasdaq
22
Stock Market and the independence requirements of the
Sarbanes-Oxley Act of 2002. During fiscal year 2004, the Audit
Committee met six times. In addition, the Audit Committee Chair,
as representative of the Audit Committee, and one or more of the
Audit Committee members, discussed the interim financial
information contained in each quarterly earnings announcement
with the Chief Financial Officer and the Auditors prior to
public release.
In discharging its oversight responsibility as to the audit
process, the Audit Committee obtained from the Auditors the
written disclosures and the letter describing all relationships
between the Auditors and the Company that might bear on the
Auditors independence consistent with Independence
Standards Board Standard No. 1, Independence
Discussions with Audit Committees, discussed with the
Auditors any relationships that may impact their objectivity and
independence and satisfied itself as to the Auditors
independence. The Audit Committee also discussed with
management, the internal auditors and the Auditors, with and
without management present, the quality and adequacy of the
Companys internal controls and the internal audit
functions organization, responsibilities and staffing. The
Audit Committee reviewed with both the Auditors and the internal
auditors their audit plans, audit scope and identification of
audit risks.
The Audit Committee discussed and reviewed with the Auditors all
communications required by generally accepted auditing
standards, including those described in Statement on Auditing
Standards No. 61, as amended, Communication with
Audit Committees and discussed and reviewed the results of
the Auditors examination of the financial statements. The
Audit Committee also discussed the results of the internal audit
examinations. In accordance with its charter, the Audit
Committee pre-approves all non-audit services.
The Audit Committee reviewed the audited financial statements
for the Company as of and for the fiscal year ended
December 26, 2004, with management and the Auditors.
Management has the responsibility for the preparation of the
Companys financial statements and the Auditors have the
responsibility for the examination of those statements.
Based on the above-mentioned review and discussion with
management and the Auditors, the Audit Committee recommended to
the Board of Directors that the Companys audited financial
statements be included in its Annual Report on Form 10-K
for the fiscal year ended December 26, 2004, for filing
with the Securities and Exchange Commission.
After reviewing the services provided by the Auditors, including
all non-audit services, the Audit Committee, in accordance with
its amended charter, authorized the reappointment, subject to
stockholder ratification, of the Auditors.
|
|
|
AUDIT COMMITTEE |
|
Eric L. Hansen, Chairman |
|
D. Patrick Curran |
|
Mark S. Hansen |
|
Michael A. Volkema |
FEES AND SERVICES OF DELOITTE & TOUCHE LLP
Aggregate fees billed to the Company during fiscal years 2004
and 2003 by the Companys principal accounting firm,
Deloitte & Touche LLP, the member firms of
Deloitte Touche Tohmatsu, and their respective affiliates, which
includes Deloitte Consulting (collectively
Deloitte & Touche) were as follows:
|
|
|
|
|
|
|
|
|
|
|
2004 | |
|
2003 | |
|
|
| |
|
| |
Audit Fees
|
|
$ |
976,000 |
|
|
$ |
339,000 |
|
Audit-Related Fees
|
|
|
19,000 |
|
|
|
62,000 |
|
|
|
|
|
|
|
|
Total Audit and Audit-Related Fees
|
|
|
995,000 |
|
|
|
401,000 |
|
Tax Fees
|
|
|
136,000 |
|
|
|
153,000 |
|
All Other Fees
|
|
|
3,000 |
|
|
|
150,000 |
|
|
|
|
|
|
|
|
Total Fees
|
|
$ |
1,133,000 |
|
|
$ |
704,000 |
|
|
|
|
|
|
|
|
23
Audit-related fees include fees for the audit of the
Companys benefit plans and other miscellaneous
audit-related fees. In 2004 and 2003, tax fees include services
for tax compliance and planning. In 2003, all other fees include
approximately $137,000 of fees for financial systems
implementation and credit card consulting services provided by
Deloitte Consulting and approximately $13,000 paid to
Deloitte & Touche for non-audit related accounting
services. All other fees in 2004 represent payments for
assistance in preparation of a management seminar. The Audit
Committee has considered whether the provision of these services
is compatible with maintaining the principal accountants
independence. The Audit Committee pre-approves all non-audit
services as presented and prior to any work being performed.
PROPOSAL II
AMENDMENT TO THE APPLEBEES INTERNATIONAL, INC.
AMENDED AND RESTATED 1995 EQUITY INCENTIVE PLAN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THIS
PROPOSAL
Proposed Amendment
The Company recently determined that the number of shares
remaining for Awards under the Amended and Restated 1995 Equity
Incentive Plan, as amended (the Equity Incentive
Plan), will not be sufficient for the Companys
intended compensation programs over the next several years.
Because the Company believes that its continued growth and
success is dependent in part on its ability to attract and
retain highly-qualified employees, and that equity-related
compensation programs are important to achieving that goal, the
Company needs to provide for additional shares to be available
for Awards under the Equity Incentive Plan.
Accordingly, the proposed amendment to Section 4.1 of the
Equity Incentive Plan, as set forth below, was adopted by the
Board of Directors and is being submitted to the stockholders
for approval. Section 4.1 would be amended as follows:
|
|
|
|
|
Section 4.1 of the Plan shall be amended so that the number
of authorized Shares under the
Plan is increased by 4,000,000 Shares. Section 4.1 of
the Plan shall then read as follows: |
|
|
|
Number of Shares. Subject to adjustment as provided
in Section 4.3, the total number of Shares available for
grant under this Plan shall not exceed 19,900,000. Shares
granted under this Plan may be either authorized but unissued
Shares or treasury Shares, or any combination thereof. |
Description of the Equity Incentive Plan
The following paragraphs provide a summary of the principal
features of the Equity Incentive Plan and its operation, other
than as related to the matters discussed above. The following
summary is qualified in its entirety by reference to the Equity
Incentive Plan, a copy of which may be obtained from the Company
upon written request. A copy is also available as an exhibit to
our Annual Report on Form 10-K filed with the Securities
and Exchange Commission.
The Equity Incentive Plan will be amended prior to
December 31, 2005, to comply with new Internal Revenue Code
Section 409A, which contains special tax rules regarding
the federal income tax treatment of deferred compensation. That
amendment is not expected to require shareholder approval as a
material amendment. Prior to that amendment, the Equity
Incentive Plan will be administered in compliance with
Section 409A notwithstanding any contrary language
currently in the Equity Incentive Plan.
Shares Subject to the Equity Incentive Plan
Currently the number of shares of common stock available for
grant under the Equity Incentive Plan is 15,900,000, as adjusted
for prior stock splits and stock dividends. The proposed
amendment would increase the number of shares available by
4,000,000 to 19,900,000 shares, subject to adjustment to
reflect stock splits, stock
24
dividends and similar events. The ending sales price of the
Companys common stock as of March 18, 2005 was $27.95.
Adjustments
In the event of any merger, reorganization, consolidation,
recapitalization, separation, liquidation, stock dividend, stock
split or other change in the corporate structure of the Company,
the Executive Compensation Committee shall adjust the number and
class of shares of common stock which may be delivered under the
Equity Incentive Plan, the number, class and price of shares
subject to outstanding awards and other numerical limits under
the Equity Incentive Plan in such manner as the Executive
Compensation Committee shall determine to be appropriate.
Administration of the Equity Incentive Plan
The Equity Incentive Plan is administered by the Executive
Compensation Committee. The members of the Executive
Compensation Committee must qualify as non-employee
directors under Rule 16b-3 of the Securities Exchange
Act of 1934, and as outside directors under
section 162(m) of the Internal Revenue Code, as amended
(for purposes of qualifying amounts received under the Equity
Incentive Plan as performance-based compensation
under section 162(m)).
Subject to the terms of the Equity Incentive Plan, the Executive
Compensation Committee has the sole discretion to determine the
employees and consultants who shall be granted Awards, the size
and types of such Awards, and the terms and conditions of such
Awards. The Executive Compensation Committee may delegate its
authority to grant and administer Awards to a separate committee
appointed by the Executive Compensation Committee, but only the
Executive Compensation Committee may make Awards to participants
who are executive officers of the Company. The director option
and restricted stock portion of the Equity Incentive Plan is
administered by the full Board of Directors, rather than the
Executive Compensation Committee.
Eligibility to Receive Awards
Employees, non-employee directors and consultants of the Company
and its affiliates (i.e. any corporation or other entity
controlling, controlled by or under common control with the
Company) are eligible to receive Awards. We currently have
approximately 27,000 employees and eight non-employee
directors.
Options
The Executive Compensation Committee may grant nonqualified
stock options, incentive stock options (ISOs, which
are entitled to favorable tax treatment), or any combination
thereof. The number of shares covered by each option will be
determined by the Executive Compensation Committee, but during
any fiscal year of the Company, no participant may be granted
options for more than 225,000 shares.
The exercise price of each option is set by the Executive
Compensation Committee, but generally cannot be less than 100%
of the fair market value of the Companys common stock on
the date of grant. Thus, an option will have value only if the
Companys common stock appreciates in value after the date
of grant. Substitute options granted in connection with certain
acquisitions may have an exercise price less than 100% of the
fair market value. The exercise price of an ISO must be at least
110% of the fair market value if the participant, on the grant
date, owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company and any of
its subsidiaries. Also, the aggregate fair market value of the
shares (determined on the grant date) covered by ISOs which
first become exercisable by any participant during any calendar
year may not exceed $100,000.
The exercise price of each option must be paid in full at the
time of exercise. The Executive Compensation Committee also may
permit payment through the tender of shares of the
Companys common stock then owned by the participant, or by
any other means that the Executive Compensation Committee
determines to be consistent with the Equity Incentive
Plans purpose. Any taxes required to be withheld must be
paid by the participant at the time of exercise.
Options become exercisable at the times and on the terms
established by the Executive Compensation Committee. Options
expire at the times established by the Executive Compensation
Committee, but generally not
25
later than ten years after the date of grant. The Executive
Compensation Committee may extend the maximum term of any option
granted under the Equity Incentive Plan, subject to the
preceding limits.
The Company may not reprice, replace or regrant an outstanding
option either in connection with the cancellation of such option
or by amending an Award Agreement to lower the exercise price.
Non-Employee Director Stock Options and Restricted Stock
As a part of their total compensation for Board service,
directors receive annual grants of stock options and/or
restricted stock automatically on the first day in each calendar
year that the Companys common stock trades on a United
States stock exchange or inter-dealer quotation system. In
addition, newly-appointed or elected directors receive an equity
grant at the time they first join the Board equal to the grant
made to incumbent directors in the prior January. The options
vest if the individual continues to be a director on the
one-year anniversary of the grant date and will have an exercise
price equal to the fair market value of the common stock on the
grant date. The restricted stock is subject to a one-year period
of restriction in which the individual must remain a director to
be entitled to the shares. The number of options and restricted
shares is determined each year by the Board based on providing
overall compensation (cash and equity) in the range of the 75th
percentile of non-employee director compensation paid by a
selected peer group of public companies.
In addition, non-employee directors may elect to have their
annual cash retainer paid by the grant of director options. If,
on or before December 15, a non-employee director elects to
forego all or a portion of his or her cash retainer for the
following year in lieu of stock options, the director will
receive in the following January an option to purchase the
number of shares equal to the cash amount foregone divided by
three-tenths of the exercise price, rounded to the next higher
multiple of ten. For example, a non-employee director electing
to forego $30,000 of retainer, assuming a share price of $30.00,
would receive an option to buy 3,340 shares at
$30.00 per share. These options are also granted on, and
will have an exercise price equal to the closing price on, the
first day in each calendar year that the Companys common
stock trades on a United States stock exchange or inter-dealer
quotation system, as designated by the Board. These options will
vest one-twelfth each month for 12 months, so long as the
individual continues to be a director throughout such month.
Stock Appreciation Rights (SARs)
The Executive Compensation Committee determines the terms and
conditions of each SAR. SARs may be granted in conjunction with
an option, or may be granted on an independent basis. The number
of shares covered by each SAR will be determined by the
Executive Compensation Committee, but during any fiscal year of
the Company, no participant may be granted SARs for more than
225,000 shares.
Upon exercise of a SAR, the participant will receive payment
from the Company in an amount determined by multiplying
(1) the positive difference between (a) the fair
market value of a share of Company common stock on the date of
exercise, and (b) the exercise price, by (2) the
number of shares with respect to which the SAR is exercised.
Thus, a SAR will have value only if the Companys common
stock appreciates in value after the date of grant.
SARs are exercisable at the times and on the terms established
by the Executive Compensation Committee. Proceeds from SAR
exercises may be paid in cash or shares of the Companys
common stock, as determined by the Executive Compensation
Committee. SARs expire at the times established by the Executive
Compensation Committee, but are subject to the same maximum time
limits as are applicable to employee options granted under the
Equity Incentive Plan.
Restricted Stock Awards
Restricted stock awards are shares of the Companys common
stock that vest in accordance with terms established by the
Executive Compensation Committee. The number of shares of
restricted stock (if any) granted to a participant will be
determined by the Executive Compensation Committee, but during
any fiscal year of the Company, no participant may be granted
more than 225,000 shares.
In determining the vesting schedule for each Award of restricted
stock, the Executive Compensation Committee may impose whatever
conditions to vesting as it determines to be appropriate. For
example, the Executive Compensation Committee may (but is not
required to) provide that restricted stock will vest only if one
or more
26
performance goals are satisfied. In order for the Award to
qualify as performance-based compensation under
section 162(m) of the Internal Revenue Code, as amended,
the Executive Compensation Committee must use one or more
specified measures set forth in the Equity Incentive Plan. The
Executive Compensation Committee may apply the performance
measures on a corporate or business unit basis, as deemed
appropriate in light of the participants specific
responsibilities. The Executive Compensation Committee may, in
its sole discretion, accelerate the time at which any
restrictions lapse or remove any restrictions.
Performance Unit Awards and Performance Share Awards
Performance unit awards and performance share awards are amounts
credited to a bookkeeping account established for the
participant. A performance unit has an initial value that is
established by the Executive Compensation Committee at the time
of its grant. A performance share has an initial value equal to
the fair market value of a share of the Companys common
stock on the date of grant. The number of performance units or
performance shares (if any) granted to a participant will be
determined by the Executive Compensation Committee, but during
any fiscal year of the Company, no participant may be granted
more than 225,000 performance shares or performance units having
an initial value greater than $250,000.
Whether a performance unit or performance share actually will
result in a payment to a participant will depend upon the extent
to which performance goals established by the Executive
Compensation Committee are satisfied. The applicable performance
goals will be determined by the Executive Compensation Committee
as specified in the Equity Incentive Plan. The Executive
Compensation Committee may, in its sole discretion, waive any
performance goal requirement.
After a performance unit or performance share award has vested
(that is, after the applicable performance goal or goals have
been achieved), the participant will be entitled to receive a
payout of cash, common stock, or any combination thereof, as
determined by the Executive Compensation Committee. Unvested
performance units and performance shares will be forfeited upon
the earlier of the recipients termination of employment or
the date set forth in the Award Agreement.
Other Equity-Based Awards
The Executive Compensation Committee may grant other types of
equity-based Awards, in such amounts and subject to such terms
and conditions as the Executive Compensation Committee shall
determine.
Equity Incentive Plan Benefits
The Executive Compensation Committee has the sole discretion to
determine who shall be granted Awards, as well as the size and
types of such awards under the Equity Incentive Plan. For this
reason, the Company cannot determine the number of options,
SARs, restricted stock awards, performance unit awards or
performance share awards that might be received by participants
under the Equity Incentive Plan.
27
The following table sets forth, as of December 26, 2004,
the total number of options and other awards granted to each of
the following persons and groups under the Equity Incentive Plan
since its inception in 1995.
|
|
|
|
|
|
|
Options and Awards |
|
|
Granted under the |
|
|
Equity Incentive Plan |
Option and Award Recipients |
|
1995 2004(1) |
|
|
|
Lloyd Hill
|
|
|
2,080,910 |
|
David L. Goebel
|
|
|
318,231 |
|
Steven K. Lumpkin
|
|
|
975,045 |
|
John C. Cywinski
|
|
|
541,548 |
|
Louis A. Kaucic
|
|
|
703,789 |
|
Executive Group
|
|
|
5,280,207 |
|
Non-Executive Director Group
|
|
|
1,624,860 |
|
Non-Executive Employee Group
|
|
|
11,402,924 |
|
|
|
(1) |
The executive group total includes options and awards granted to
Messrs. Hill, Goebel, Lumpkin, Cywinski and Kaucic as well
as all other current executives of the Company. The
non-executive director group total includes only the
Companys current non-employee directors and excludes
current employee directors. The non-executive employee group
total includes all other grants and awards to employees
including amounts granted and awarded to employees that are no
longer employed by the Company. The Company has not issued any
SARs or performance unit awards under the Equity Incentive Plan. |
Transferability of Awards
Except as otherwise set forth in an Award Agreement, Awards
granted under the Equity Incentive Plan may not be sold,
transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the applicable laws of
descent and distribution.
Change in Control
Except as described below, in the event of a change in control
not approved by the Continuing Directors (as defined below),
Awards granted under the Equity Incentive Plan then outstanding
but not then exercisable (or subject to restrictions) become
immediately exercisable, unless otherwise provided in the
applicable Award Agreement. In general, for Awards granted prior
to the 2004 Annual Meeting of Stockholders, a change in control
occurs if (1) a person (other than the Company and its
affiliates) directly or indirectly owns 30% of the common stock,
(2) the composition of the Board changes during any
two-year period whereby directors at the beginning of the period
(including new directors approved by a vote of at least
two-thirds of the directors then in office) (Continuing
Directors) cease to constitute a majority of the Board, or
(3) the stockholders of the Company approve a merger,
consolidation or plan of complete liquidation of the Company or
approve an agreement for the sale of all or substantially all of
the Companys assets.
For Awards granted after the 2004 Annual Meeting of
Stockholders, and for prior Awards if consented to by the
participant, unless approved by the Continuing Directors
(defined for this purpose as Directors at the time of the 2004
Annual Meeting and Directors designated at the time of their
election as Continuing Directors by a majority of the then
Continuing Directors), a change in control occurs (1) if
Continuing Directors no longer constitute two-thirds of the
Board, (2) when a person and its affiliates becomes the
owner, directly or indirectly of 30% of the common stock,
(3) upon the merger or consolidation of the Company, the
sale of substantially all the assets of the Company or the
liquidation of the Company, unless Continuing Directors
constitute two-thirds of the directors of the surviving
corporation or (4) if at least two-thirds of the Continuing
Directors determine that any other action would constitute a
change of control. In such case, the Board may provide for the
assumption of Awards, accelerate vesting or provide for
cancellation of Awards and a cash payment to participants.
Amendment and Termination of the Equity Incentive Plan
The Board generally may amend or terminate the Equity Incentive
Plan at any time and for any reason in accordance with
applicable rules and regulations. The Board will obtain
stockholder approval for any amendment which would require
approval pursuant to the listing standards of The Nasdaq Stock
Market.
28
Tax Aspects
The following discussion is intended to provide an overview
of the U.S. federal income tax laws which are generally
applicable to Awards granted under the Equity Incentive Plan as
of the date of this Proxy Statement. People or entities in
differing circumstances may have different tax consequences, and
the tax laws may change in the future. This discussion is not to
be construed as tax advice.
A recipient of a stock option or SAR will not have taxable
income on the date of grant. Upon the exercise of nonqualified
options and SARs, the participant will recognize ordinary income
equal to the difference between the fair market value of the
shares on the date of exercise and the exercise price. Any gain
or loss recognized upon any later disposition of the shares
generally will be capital gain or loss.
Purchase of shares upon exercise of an ISO will not result in
any taxable income to the participant, except for purposes of
the alternative minimum tax. Gain or loss recognized by the
participant on a later sale or other disposition either will be
long-term capital gain or loss or ordinary income, depending
upon how long the participant holds the shares. Any ordinary
income recognized will be in the amount, if any, by which the
lesser of (1) the fair market value of such shares on the
date of exercise, or (2) the amount realized from the sale,
exceeds the exercise price.
Upon receipt of restricted stock, a performance unit or a
performance share, the participant will not have taxable income
unless he or she elects to be taxed at receipt. Absent such
election, upon vesting the participant will recognize ordinary
income equal to the fair market value of the shares or units at
such time. Any gain or loss recognized upon any later
disposition of shares generally will be capital gain or loss.
The Executive Compensation Committee may permit participants to
satisfy tax withholding requirements in connection with the
exercise or receipt of an Award by (1) electing to have the
Company withhold otherwise deliverable shares, or
(2) delivering to the Company then owned shares having a
value equal to the amount required to be withheld.
The Company will be entitled to a tax deduction for an Award in
an amount equal to the ordinary income realized by the
participant, if any, at the time the participant recognizes such
income. In addition, Internal Revenue Code section 162(m)
contains special rules regarding the federal income tax
deductibility of compensation paid to the Companys Chief
Executive Officer and to each of the other four most highly
compensated executive officers. The general rule is that annual
compensation paid to any of these specified executives will be
deductible only to the extent that it does not exceed
$1 million. The Company can preserve the deductibility of
certain compensation in excess of $1 million, however, if
the Company complies with conditions imposed by
section 162(m). The Equity Incentive Plan has been designed
to permit the Executive Compensation Committee to grant Awards
which satisfy the requirements of section 162(m).
PROPOSAL III
AMENDMENT TO THE APPLEBEES INTERNATIONAL, INC.
EMPLOYEE STOCK PURCHASE PLAN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THIS
PROPOSAL
Proposed Amendment
The Board of Directors has adopted, subject to stockholder
approval, Amendment No. 5 to the Applebees
International, Inc. Employee Stock Purchase Plan (the
Purchase Plan) and directed that the amendment be
submitted to a vote of the stockholders at the Annual Meeting.
The amendment provides that an additional 500,000 shares of
the Companys common stock be available for distribution
under the Purchase Plan. The Purchase Plan would be amended as
follows:
|
|
|
The first sentence of Section 7.2 is replaced with the
following two sentences: |
|
|
The aggregate number of Shares originally available for
offer under the Plan was two hundred thousand (200,000), which
has been adjusted from time to time pursuant to
Section 15.3 and increased from time to |
29
|
|
|
time by amendments to the Plan. The maximum, aggregate number of
Shares available for offer under the Plan prior to
January 1, 2005 is 1,350,000. Effective January 1,
2005, 500,000 additional shares shall be available for offer
under this Plan so that the maximum, aggregate number of Shares
available for offer under the Plan is 1,850,000. |
Description of the Employee Stock Purchase Plan
The following paragraphs provide a summary of the principal
features of the Purchase Plan and its operation. The following
summary is qualified in its entirety by reference to the
Purchase Plan, a copy of which may be obtained from the Company
upon written request. A copy is also available as an exhibit to
our Annual Report on Form 10-K filed with the Securities
and Exchange Commission.
Purpose
The purpose of the Purchase Plan is to provide eligible
employees with an opportunity to acquire a proprietary interest
in the Company through the purchase of our common stock and,
thus, to develop a stronger incentive to work for the continued
success of the Company. The Purchase Plan is an employee stock
purchase plan under Section 423 of the Internal Revenue
Code of 1986, as amended (the Code).
Administration
The Purchase Plan is administered by a Committee appointed by
the Board of Directors (the Committee). Subject to
the provisions of the Purchase Plan, the Committee is authorized
to determine any questions arising in the administration,
interpretation and application of the Purchase Plan, and to make
such uniform rules as may be necessary to carry out its
provisions.
Eligibility and Number of Shares
Up to 1,850,000 shares of the Companys common stock
(as adjusted for prior stock splits and stock dividends and
including the 500,000 shares authorized by the proposed
amendment) are available for distribution under the Purchase
Plan, subject to appropriate adjustments by the Committee in the
event of certain changes in the outstanding shares of common
stock by reason of stock dividends, stock splits, corporate
separations, recapitalizations, mergers, consolidations,
combinations, exchanges of shares or similar transactions.
Shares delivered pursuant to the Purchase Plan may be acquired
by purchase for the accounts of participants on the open market
or in privately negotiated transactions by a registered
securities broker/ dealer selected by the Company (the
Agent), by direct issuance from the Company (whether
newly issued or treasury shares) or by any combination thereof.
Any employee of the Company or a parent or subsidiary
corporation of the Company (including officers and any directors
who are also employees) will be eligible to participate in the
Purchase Plan for any Purchase Period (as defined below).
Purchase Period means each calendar quarter of the
year.
Any eligible employee may elect to become a participant in the
Purchase Plan for any Purchase Period by filing an enrollment
form in advance of the Purchase Period to which it relates. The
enrollment form will authorize payroll deductions beginning with
the first payday in such Purchase Period and continuing until
the employee modifies his or her authorization, withdraws from
the Purchase Plan or ceases to be eligible to participate.
No employee may participate in the Purchase Plan if such
employee would be deemed for purposes of the Code to own stock
possessing 5% or more of the total combined voting power or
value of all classes of our stock. We currently have
approximately 27,000 employees who are eligible to participate
in the Purchase Plan.
Participation
An eligible employee who elects to participate in the Purchase
Plan will authorize the Company to make payroll deductions of a
specified fixed dollar amount or whole percentage from 1% to 15%
of the employees pay as defined in the Purchase Plan. A
participant may, on January 1, April 1, July 1 or
October 1, direct the Company to increase or decrease the
amount of deductions (within those limits) or make no further
deductions, as set forth in greater detail in the Purchase Plan.
A participant may also elect to withdraw from the Purchase Plan
at any time before the end of a Purchase Period. In the event of
a withdrawal, all future payroll deductions will cease and the
amounts
30
withheld will be paid to the participant in cash as soon as
practicable. Any participant who stops payroll deductions may
not thereafter resume payroll deductions for that Purchase
Period, and any participant who withdraws from the Purchase Plan
will not be eligible to reenter the Purchase Plan until the next
succeeding Purchase Period.
Amounts withheld under the Purchase Plan will be held by us as
part of our general assets until the end of the Purchase Period
and then applied to the purchase of common stock as described
below. No interest will be credited to a participant for amounts
withheld.
Purchase of Stock
As of the last day of each Purchase Period, the amounts withheld
for a participant in the Purchase Plan will be used to purchase
shares of common stock. The purchase price of each share will be
equal to 85% of the lesser of the Fair Market Value (as defined
in the Purchase Plan) of a share of common stock on either the
first or last day of the Purchase Period. All amounts so
withheld will be used to purchase the number of shares of common
stock (including fractional shares) that can be purchased with
such amounts at such price, unless the participant has properly
notified us that he or she elects to receive the entire amount
in cash. If some or all of such shares are acquired for the
accounts of participants on the open market or in privately
negotiated transactions, we will provide to the Agent such
funds, in addition to the funds available from
participants payroll deductions, as may be necessary to
permit the Agent to purchase that number of shares (including
brokerage fees and expenses).
No more than $25,000 in Fair Market Value (determined on the
last day of the respective Purchase Periods) of shares of common
stock may be purchased under the Purchase Plan and all other
employee stock purchase plans, if any, of the Company and any
parent or subsidiary corporation of the Company by any
participant for each calendar year.
If purchases by all participants would exceed the number of
shares of common stock available for purchase under the Purchase
Plan, each participant will be allocated a ratable portion of
such available shares. Any amount not used to purchase shares of
common stock will be refunded to the participant in cash.
Shares of common stock acquired by each participant will be held
in a general securities brokerage account maintained by the
Agent for the benefit of all participants, with the Agent
maintaining individual subaccounts for each participant (showing
fractional share ownership to four decimal places). Each
participant will be entitled to vote all shares held for the
benefit of such participant in the general securities brokerage
account. Certificates for the number of whole shares of common
stock purchased by a participant will be issued and delivered to
him or her only upon the request of such participant or his or
her representative. No certificates for fractional shares will
be issued and participants will instead receive cash
representing any fractional shares.
Dividends on a participants shares held in the general
securities brokerage account will automatically be reinvested in
additional shares of common stock. If a participant desires to
receive dividends in cash, he must request that a certificate
for such shares be issued.
Death, Disability, Retirement or Other Termination of
Employment
If the employment of a participant terminates for any reason,
including death, disability or retirement, the amounts
previously withheld will be returned to the participant or
beneficiary, as the case may be, and the participants
interest in the securities brokerage account will be liquidated
as described in the Purchase Plan.
Rights Not Transferable
The rights of a participant under the Purchase Plan are
exercisable only by the participant during his or her lifetime.
No right or interest of any participant in the Purchase Plan may
be sold, pledged, assigned or transferred in any manner other
than by will or the laws of descent and distribution.
Amendment or Modification
The Board of Directors may at any time amend the Purchase Plan
in any respect which shall not adversely affect the rights of
participants pursuant to shares previously acquired under the
Purchase Plan, provided that approval by the stockholders of the
Company is required to increase the number of shares to be
reserved under the
31
Purchase Plan if the Board determines that the Purchase Plan
shall continue to be qualified under Section 423 of the
Code, (except for adjustments by reason of stock dividends,
stock splits, corporate separations, recapitalizations, mergers,
consolidations, combinations, exchanges of shares and similar
transactions).
Termination
All rights of participants in any offering under the Purchase
Plan will terminate at the earlier of (i) the day that all
shares available for purchase under the Purchase Plan have been
purchased or (ii) the day the Purchase Plan is terminated
by the Board of Directors. Upon termination of the Purchase
Plan, shares of common stock will be purchased for participants
in accordance with the terms of the Purchase Plan, and cash, if
any, previously withheld and not used to purchase common stock
will be refunded to the participants.
Federal Tax Considerations
The following discussion is intended to provide an overview
of the U.S. federal income tax laws which are generally
applicable to the Purchase Plan as of the date of this Proxy
Statement. People or entities in differing circumstances may
have different tax consequences, and the tax laws may change in
the future. This discussion is not to be construed as tax
advice.
Payroll deductions under the Purchase Plan will be made on an
after-tax basis. Participants will not recognize any additional
income as a result of participation in the Purchase Plan until
the disposal of shares acquired under the Purchase Plan.
Participants who hold their shares for more than 24 months
after the beginning of the Purchase Period or who die while
holding their shares will recognize ordinary income in the year
of disposition equal to the lesser of (i) the excess of the
fair market value of the shares on the date of disposition over
the purchase price paid by the participant or (ii) the
excess of the fair market value of the shares on the first day
of the Purchase Period over the purchase price paid by the
participant. If the 24-month holding period has been satisfied
when the participant sells the shares or if the participant dies
while holding the shares, the Company will not be entitled to
any deduction in connection with the transfer of such shares to
the participant.
Participants who dispose of their shares within 24 months
after the beginning of the purchase period have realized
ordinary income in the year of disposition in an amount equal to
the excess of the fair market value of the shares on the date
they were purchased by the participant over the purchase price
paid by the participant. If such dispositions occur, the Company
generally will be entitled to a deduction at the same time and
in the same amount as the participants who make those
dispositions are deemed to have realized ordinary income.
Participants will have a basis in their shares equal to the
purchase price of their shares plus any amount that must be
treated as ordinary income at the time of disposition of the
shares. Any additional gain or loss realized on the disposition
of shares acquired under the Purchase Plan will be capital gain
or loss.
PROPOSAL IV
RATIFICATION OF DELOITTE & TOUCHE LLP AS OUR
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR THE 2005 FISCAL YEAR
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THIS
PROPOSAL
The Audit Committee has selected the accounting firm of
Deloitte & Touche LLP to serve as our independent
registered public accounting firm for the 2005 fiscal year. This
proposal asks you to ratify this selection. Representatives of
Deloitte & Touche LLP are expected to be present at the
Annual Meeting. They will have the opportunity to make a
statement at the Annual Meeting if they wish, and they will be
available to answer any questions you may have.
32
PROPOSAL V
SHAREHOLDER PROPOSAL
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS
PROPOSAL
People for the Ethical Treatment of Animals (PETA),
501 Front St., Norfolk, Va., 23510, beneficial owner of
142 shares of Common Stock, has notified the Company that
it intends to present a resolution at the Annual Meeting. As
required by the Securities and Exchange Commission, the
resolution is included below exactly as submitted. The Board of
Directors and the Company accept no responsibility for the
proposed resolution and supporting statement.
For the reasons stated in the Statement of Opposition below, the
Board of Directors recommends that you vote AGAINST this
Shareholder Proposal.
Shareholders Resolution
This proposal is submitted by People for the Ethical Treatment
of Animals (PETA), which owns 142 shares of Applebees
stock.
Our company has shown its commitment to the important consumer
issue of animal welfare by adopting the animal welfare
guidelines of the Food Marketing Institute (FMI) and by
publicly stating its commitment to animal welfare.
Applebees should be commended for these steps. However,
the facilities that supply our restaurants with animal products
are still home to abuses that most decent people would deem
unacceptable. Our company has taken some laudable first steps to
address these issues, but there is much work left to be done.
One area in which much improvement is needed is that of chicken
slaughter. Currently, chickens raised for Applebees are
hung upside-down by their often-injured legs in painful metal
shackles and run through an electrified stun bath that often
gives them painful shocks without rendering them insensible to
pain. Many are still fully conscious when their throats are slit
or when they are dunked into tanks of scalding-hot water for
feather removal. Clearly, there are major animal welfare
concerns with this outdated process.
Other companies are starting to explore a new slaughter
technology known as controlled-atmosphere killing (CAK), which
eliminates most if not all of these
concerns. When using CAK, chickens are placed into a controlled
environment where the oxygen they are breathing is slowly
replaced with an inert gas, such as argon or nitrogen, putting
the birds to sleep quickly and painlessly. CAK is a
USDA-approved method of slaughtering chickens and has been
described by animal welfare experts as the most
stress-free, humane method of killing poultry ever
developed. The technology also has positive worker and
food safety implications, and it has been shown that the
resulting savings would recoup the initial investment in a year
and a half or less.
CAK is perhaps the single most important scientific advance in
the field of chicken slaughter, and since our company has
acknowledged its commitment to animal welfare, it has a
responsibility to fully explore any such advances.
Resolved:
Shareholders request that the board of directors issue a report
to shareholders by October 2005, prepared at reasonable cost and
omitting proprietary information, on the feasibility of
Applebees requiring its chicken suppliers to phase in
controlled-atmosphere killing within a reasonable timeframe,
with a focus on the animal welfare and economic benefits that
this technology could eventually bring to all our companys
slaughter facilities.
Board of Directors Statement in Opposition of the
Proposal
Your Company is committed to the proper and humane handling of
all animals in its supply chain. We require all of the
companys protein suppliers to adhere strictly to the
USDAs Humane Methods of Slaughter Act. The Company also
has employed the consultative services of Dr. Temple
Grandin, one of the nations most recognized leaders in
animal welfare to assist the Company in strengthening its animal
welfare program. The Company supports
33
the enhanced animal welfare guidelines developed by
Dr. Grandin, and those developed by the Food Marketing
Institute and the National Council of Chain Restaurants,
whichever are more stringent. Additionally, in the past two
years, Applebees has more than doubled the size of its
Quality Assurance team to improve the Companys food
quality and safety program and to increase the Companys
ability to monitor its suppliers adherence to its animal
welfare standards.
Your Company is constantly evaluating new and emerging
technologies related to improving animal welfare, including but
not limited to, controlled-atmosphere killing. At this time,
there is extremely limited domestic use of CAK technology and
even more limited study as to its technological feasibility. We
believe CAK and other emerging technologies are worthy of
continued study and review. We are encouraged that
McDonalds Corporation has agreed to undertake a study on
CAK and we look forward to reviewing its results. Therefore,
your Company believes the type of study requested in this
proposal would be expensive, time-consuming and duplicative.
That said, your Company is committed to continuing to monitor
new technologies and, where and when appropriate, taking action
to further the humane treatment of all animals in our supply
chain.
FOR THE FOREGOING REASONS, YOUR BOARD OF DIRECTORS BELIEVES THAT
THIS PROPOSAL IS NOT IN THE BEST INTEREST OF THE COMPANY
AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE
AGAINST THIS PROPOSAL.
OTHER MATTERS
Incorporation by Reference
In our filings with the SEC, information is sometimes
incorporated by reference. This means that we are
referring you to information that has previously been filed with
the SEC, so the information should be considered as part of the
filing you are reading. Based on SEC regulations, the
Performance Graph of this Proxy Statement, the Audit
Committee Report and the Executive Compensation
Committee Report specifically are not incorporated by
reference into any other filings with the SEC.
Additional Meeting Information
We know of no other matters for stockholders to consider at the
Annual Meeting. If a stockholder properly presents any other
matter at the meeting, the persons named in the accompanying
proxy to vote on behalf of your shares will vote on that matter
in accordance with their best judgment.
We encourage each stockholder to attend the Annual Meeting.
Whether or not you plan to attend, we urge you to complete, sign
and return the enclosed proxy in the accompanying envelope. If
you would respond promptly, it would greatly assist us in making
arrangements for the meeting. We appreciate your cooperation. If
you attend the meeting, you may vote your shares in person even
if you sent in your proxy.
|
|
|
By Order of the Board of Directors |
|
|
|
|
|
Rebecca R. Tilden, Secretary |
|
Applebees International, Inc. |
|
4551 W. 107th Street |
|
Overland Park, Kansas 66207 |
Overland Park, Kansas
April 12, 2005
34
APPENDIX A
Applebees International, Inc.
Audit Committee Charter
Organization
There shall be a committee of the Board of Directors known as
the Audit Committee. The Audit Committee shall be composed of
three or more directors who meet all applicable independence
requirements of The Nasdaq Stock Market and the Sarbanes-Oxley
Act of 2002 and the rules promulgated thereunder (the
Act). No Audit Committee member may be an officer or
employee of the Company or any of its divisions or subsidiaries
and may not have participated in the preparation of the
financial statements of the Company or any current subsidiary of
the Company at any time during the past three years.
All members of the Audit Committee shall be able to read and
understand fundamental financial statements and at least one
member of the Audit Committee shall have past or current
employment experience in finance or accounting, requisite
professional certification in accounting, or any other
comparable experience or background which results in the
individuals financial sophistication, including having
been a chief executive officer, chief financial officer or other
senior officer with financial oversight responsibilities. In the
determination of the Board of Directors, at least one individual
shall meet the definition of audit committee financial
expert as set forth in the Act.
Statement of Policy
The purpose of the Audit Committee is to oversee the accounting
and financial reporting process of the Company and the audits of
the Companys financial statements. In so doing, it is the
responsibility of the Audit Committee to maintain free and open
means of communication between the directors, the independent
auditors, the Chief Financial Officer, the internal auditors,
and other members of management of the Company.
The Audit Committee has the authority to engage independent
counsel and other advisors it deems necessary to carry out its
duties. The Company shall provide any necessary funds to serve
this purpose.
Election
The members of the Audit Committee shall be elected by the Board
of Directors at the annual meeting of the Board of Directors to
serve a term of one (1) year or until their successors
shall be duly elected and qualified. The Board of Directors will
appoint a Chair to preside at the Audit Committee meetings and
schedule meetings as appropriate.
Responsibilities
In carrying out its responsibilities and serving its purpose,
the Audit Committee believes its policies and procedures should
remain flexible, in order to best react to changing conditions.
The Audit Committee has the ultimate authority and
responsibility to select, evaluate and, where appropriate,
replace the independent auditors (or to nominate the independent
auditors to be proposed for stockholder approval in any proxy
statement). To effect the foregoing, the Audit Committee shall
review the independence and effectiveness of the independent
auditors and annually approve the appointment of the independent
auditors to audit the financial statements of the Company and
its divisions and subsidiaries or approve any discharge of
independent auditors, if necessary. The independent auditors
shall report directly to the Audit Committee.
In addition, as necessary and appropriate, the Audit Committee
will:
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Be directly responsible for approving all audit services and the
compensation paid to the independent auditors and for oversight
of their work. |
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2. |
Implement procedures, separate or in conjunction with other
procedures and policies of the Company, for the receipt,
retention and treatment of complaints regarding accounting,
internal accounting |
A-1
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controls and auditing matters and the confidential, anonymous
submission by employees of concerns regarding questionable
accounting or auditing matters. |
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3. |
Review and reassess, at least on an annual basis, the adequacy
of this Audit Committee Charter. |
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4. |
Ensure receipt from the independent auditors of a formal written
statement delineating all relationships between the independent
auditors and the Company, consistent with Independence Standards
Board No. 1. |
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5. |
Actively engage in a dialogue with the independent auditors with
respect to any disclosed relationships or services that may
impact the objectivity and independence of the independent
auditors. In considering independence, receive confirmation that
the independent auditors are independent pursuant to
Rule 2-01 of Regulation S-X and pursuant to any
requirements of the Act. |
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6. |
Take appropriate action to oversee the independence of the
independent auditors. |
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7. |
Review the Companys earnings release prior to the release
of year-end earnings and audited financial statements prior to
filing the Companys Annual Report on Form 10-K. |
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8. |
In connection with the Companys year-end financials,
discuss with financial management and independent auditors
significant issues regarding accounting principles, practices,
and judgments and any items required to be communicated by the
independent auditors in accordance with Statement on Accounting
Standards No. 61. Review all reports required to be
delivered by the independent auditors under the Act. Discuss
policies with respect to risk assessment and risk management.
Review separately with the independent auditors any audit
problems or difficulties in managements response to issues. |
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9. |
Review, as appropriate, other material financial information
submitted to any governmental or public body, including any
certification, report, opinion, or review rendered by the
independent auditors. |
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10. |
Review the Companys quarterly financial results prior to
the release of quarterly earnings and prior to filing the
Companys Quarterly Report on Form 10-Q. In connection
with the Companys interim financials, discuss with
financial management and independent auditors any significant
changes to the Companys accounting principals and any
items required to be communicated by the independent auditors in
accordance with Statement of Accounting Standards No. 71.
The Chair of the Audit Committee may represent the entire Audit
Committee for purposes of the quarterly review and communication. |
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11. |
Following each audit by the independent auditors, obtain from
the independent auditors assurance that Section 10A of the
Private Securities Litigation Reform Act of 1995 has not been
implicated. |
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12. |
Approve the report of the Audit Committee required by the rules
of the SEC to be included in the Companys annual proxy
statement. |
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13. |
Oversee the publication of this Audit Committee Charter at least
every three years in the Companys annual proxy statement
in accordance with SEC regulations. |
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14. |
Meet with the independent auditors, the CFO and the senior
financial management of the Company to review the scope of the
proposed audit for the current year and the audit procedures to
be utilized, and at the conclusion thereof review such audit,
including any comments or recommendations of the independent
auditors. |
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15. |
Review with the independent auditors, the Companys
internal auditor, and the CFO and other financial and accounting
personnel, the adequacy and effectiveness of the accounting and
financial controls of the Company, and elicit any
recommendations for the improvement of such internal control
procedures or particular areas where new or more detailed
controls or procedures are desirable. Further, the Audit
Committee periodically should review Company policy statements
relating to its code of conduct. |
A-2
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16. |
Review the internal audit function of the Company including the
independence and authority of its reporting obligations, the
proposed audit plans for the coming year, and the coordination
of such plans with the independent auditors. |
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17. |
Receive when appropriate, a summary of findings from completed
internal audits and a progress report on the proposed internal
audit plan, with explanations for any deviations from the
original plan. |
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18. |
Provide sufficient opportunity for the internal and independent
auditors to meet with the members of the Audit Committee without
members of management present. Among the items to be discussed
in these meetings are the independent auditors evaluation
of the Companys financial, accounting, and auditing
personnel, and the cooperation that the independent auditors
received during the course of the audit. |
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19. |
Submit the minutes of all meetings of the Audit Committee to, or
discuss the matters discussed at each committee meeting with,
the Board of Directors. |
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20. |
Oversee the investigation of any matter brought to its attention
within the scope of its duties, with the power to retain outside
counsel for this purpose if, in its judgment, that is
appropriate. |
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21. |
Review the Companys policies concerning the hiring of
employees of the Companys independent auditors. Evaluate
compliance with the Act with respect to any such hiring. |
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22. |
Assess, along with the Board of Directors, the performance of
the independent auditors and whether it is in the best interest
of the Company to regularly rotate its independent auditors.
Evaluate and ensure compliance with the Act with respect to
rotation of auditor personnel in charge of or participating in
the audit. |
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23. |
Consider whether the engagement of the independent auditors for
non-audit services is compatible with maintaining the
independent auditors independence and review the fees for
such services. If appropriate, approve in advance such
engagement and the payment of such fees. Such services will only
be those permissible by the Act and any Nasdaq Stock Market
requirements. |
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24. |
Review the experience and credentials of the senior individuals
working for the independent auditors on the Companys
account. |
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25. |
Review the policies and procedures of the independent auditors
with respect to quality control. |
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26. |
Review any opinions of the independent auditors that management
received on the application of accounting principles to a
completed, proposed or hypothetical transaction pursuant to
Statement of Auditing Standards No. 50, and discuss with
financial management and the independent auditors how the
election of alternative methods permitted under GAAP would
impact the financial statements. |
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27. |
Discuss and review with management and the independent auditors
any off-balance sheet arrangements, as well as their effect and
the effect of emerging issues arising out of accounting and
regulatory proposals on the financial statements of the Company. |
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28. |
Discuss and review with management and the independent auditors
any complaints by employees involving material concerns related
to the financial statements, audits or accounting policies of
the Company. |
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29. |
To do all other things and perform such tasks and functions as
are designated by the Board of Directors. |
A-3
While the Audit Committee has the responsibilities and powers
set forth in this Audit Committee Charter, it is not the duty of
the Audit Committee to plan or conduct audits or to determine
that the Companys financial statements are complete and
accurate and are in accordance with generally accepted
accounting principals. This is the responsibility of management
and the independent auditors. Nor is it the duty of the Audit
Committee to conduct investigations, to resolve disagreements,
if any, between management and the independent auditors or to
assure compliance with laws and regulations and the
Companys code of conduct.
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Revised as of December 11, 2003 |
A-4
APPLEBEES INTERNATIONAL, INC.
PROXY FOR
ANNUAL MEETING OF STOCKHOLDERS
Tuesday, May 12, 2005
10:00 a.m. (Local Time)
Overland Park Marriott Hotel
10800 Metcalf Avenue
Overland Park, KS 66210
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APPLEBEES INTERNATIONAL, INC.
4551 W.
107th Street
Overland Park, KS 66207
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proxy |
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This proxy is solicited by the Board of Directors for use at the Annual Meeting on May 12, 2005.
The undersigned hereby appoints Lloyd L. Hill and Rebecca R.
Tilden, and either of them proxies with full power of substitution to vote all
shares of Common Stock of Applebees International, Inc. which the undersigned
is entitled to vote at the Annual Meeting of Stockholders of Applebees
International, Inc. to be held on May 12, 2005, or at any adjournment or
postponement thereof. This proxy will be voted as directed herein. If no
direction is given, this proxy will be voted FOR Proposals I through IV, and
AGAINST Proposal V. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting or any adjournment
or postponement thereof.
See reverse for voting instructions.
There are three ways to vote your Proxy
Your telephone or Internet vote authorizes the Named Proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card.
VOTE BY PHONE TOLL
FREE 1-800-560-1965 QUICK ««« EASY ««« IMMEDIATE
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Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week, until
12:00 p.m. (CT) on May 11, 2005. |
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Please have your proxy card and the last four digits of your Social Security Number
or Tax Identification Number available. Follow the simple instructions the voice provides you. |
VOTE BY INTERNET
http://www.eproxy.com/appb/ QUICK ««« EASY ««« IMMEDIATE
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Use the Internet to vote your proxy 24 hours a day, 7 days a week until 12:00 p.m.
(CT) on May 11, 2005. |
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Please have your proxy card and the last four digits of your Social Security Number
or Tax Identification Number available. Follow the simple instructions to obtain your records
and create an electronic ballot. |
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope weve provided or
return it to Applebees International, Inc., c/o Shareowner ServicesSM, P.O. Box 64873,
St. Paul, MN 55164-0873.
If you vote by Phone or Internet, please do not mail your Proxy Card
òPlease detach here ò
The
Board of Directors Recommends a Vote FOR Proposals 1 through 4 and
AGAINST Proposal 5.
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1.
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Election of directors:
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01 Erline Belton
02 Eric L. Hansen
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Vote FOR
all nominees
(except as marked)
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Vote WITHHELD
from all nominees |
(Instructions: To withhold authority to vote for any
indicated nominee, write the number(s) of the nominee(s) in
the box provided to the right.)
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2.
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Approve the amendment to the Applebees International, Inc. Amended and Restated 1995 Equity
Incentive Plan.
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For
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Against
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Abstain |
3.
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Approve the amendment to the Applebees International, Inc. Employee Stock Purchase Plan.
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For
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Against
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Abstain |
4.
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Ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm for
the 2005 fiscal year.
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For
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Against
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Abstain |
5.
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Act on a shareholder proposal to require us to issue a report on the feasibility of requiring our
chicken suppliers to utilize an alternative method of slaughter.
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For
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Against
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Abstain |
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE
VOTED FOR PROPOSALS 1 THROUGH 4 AND AGAINST PROPOSAL 5.
Address Change? Mark Box o Indicate changes below:
Signature(s) in Box
Please sign name(s) exactly as shown at
left. When signing as executor,
administrator, trustee, guardian or
corporate officer, give full title as such;
when shares have been issued in names of
two or more persons, all should sign.