sec document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 27, 2005
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 0-19907
LONE STAR STEAKHOUSE & SALOON, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 48-1109495
----------------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
224 East Douglas, Suite 700
Wichita, Kansas 67202
----------------------------------------------------
(Address of principal executive offices) (Zip code)
(316) 264-8899
----------------------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes / / No /X/
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act. Yes / / No /X/
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (ss. 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. /X/
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange
Act. (Check one):
Large accelerated filer / / Accelerated filer /X/ Non-accelerated filer / /
Indicate by check mark whether the Registrant is a shell company (as
defined in Rule 12-b-2 of the Exchange Act). Yes / / No /X/
As of June 14, 2005, the aggregate market value of the Registrant's
Common Stock held by non-affiliates of the Registrant was $559,730,900. Solely
for the purpose of this calculation, shares held by directors and officers of
the Registrant have been excluded. Such exclusion should not be deemed a
determination by or an admission by the Registrant that such individuals are, in
fact, affiliates of the Registrant.
As of April 18, 2006, there were 20,887,234 shares outstanding of the
Registrant's Common Stock.
2
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names and ages of the Directors of
the Company:
Name Age
---- ---
Fred B. Chaney 69
Anthony Bergamo 59
William B. Greene, Jr. 68
Thomas C. Lasorda 78
Michael A. Ledeen 64
Clark R. Mandigo 62
Mark G. Saltzgaber 38
John D. White 58
Fred B. Chaney, Ph.D., has been Chairman of the Board since June 21,
2005 and a Director of the Company since May 1995. Dr. Chaney was President and
Chief Executive Officer of TEC's parent company, Vedax Sciences Corporation,
until March 1998 when he sold his interest. Dr. Chaney, through the TEC program,
formed a worldwide network of CEO's and key executives serving over 8,000
mid-sized growth companies. Dr. Chaney's early business career was with the
Boeing Company and Rockwell, where he implemented management systems and quality
motivational programs. In 1968, he co-authored the book HUMAN FACTORS IN QUALITY
ASSURANCE with Dr. D. H. Harris. Dr. Chaney has been a guest lecturer on
customer service at UCLA, Loyola, University of Southern California and
University of Colorado Business Schools. Dr. Chaney previously served as a
Director of Rusty Pelican Seafood, Inc. Dr. Chaney earned his Bachelors (1959),
Masters (1960), and Ph.D. (1962) in managerial psychology at Purdue University.
He also completed a National Science Foundation Post-Doctorial Fellowship at
University of London in 1964.
Anthony Bergamo has been a Director of the Company since May 29, 2002.
Mr. Bergamo has served in a variety of capacities with Milstein Hotel Group
since April 1996, most recently as Vice Chairman and has been Chief Executive
Officer of Niagara Falls Redevelopment, Ltd. since August 1998. Mr. Bergamo has
held various positions with MB Real Estate, a property management company based
in New York City and Chicago since April 1996, including the position of Vice
Chairman since May 2003. Mr. Bergamo has also been a Director since 1995, a
Trustee since 1986 and currently is Chairman of the Audit Committee of Dime
Community Bancshares, Inc. Mr. Bergamo is also the Founder and Chairman of the
Federal Law Enforcement Foundation since 1988, a foundation that provides
economic assistance to both federal and local law enforcement officers suffering
from serious illness and to communities recovering from natural disasters. Mr.
Bergamo earned a B.S. in History from Temple University in 1968 and a J.D. from
New York Law School in 1973.
William B. Greene, Jr. served as Chairman of the Board from July 2003
through June 21, 2005, and has been a Director of the Company since August 1999.
Mr. Greene has been Chairman, Chief Executive Officer and President of BancTenn
Corp since 1974 and Chairman, Chief Executive Officer and President of Carter
County BancCorp since 1972. At the age of 26, Mr. Greene was the youngest bank
President and CEO in the United States and formed the first statewide banking
organization in the history of Tennessee, United Tennessee Bancshares
Corporation. Mr. Greene is the immediate past Chairman of the Wake Forest
University Board of Trustees and Chairman of the Wake Forest University Trustee
Investment Policy Committee for the last nine years, which oversees the
University's billion-dollar endowment. Mr. Greene is also a member of the Board
3
of Trustees of Milligan College where he recently received his Honorary Doctor
of Economics. Mr. Greene was a member of the Young Presidents' Organization for
eighteen years and in 1998 served as International President of the World
Presidents' Organization, the graduate school of YPO. Mr. Greene is a graduate
of Wake Forest University with a B.S. Degree in Philosophy, Psychology and
History. Mr. Greene did post graduate work at Wake Forest University and the
University of Illinois. He is a graduate of the Bank Marketing and Public
Relations School at Northwestern University, and a graduate of the Stonier
Graduate School of Banking at Rutgers University.
Thomas C. Lasorda has been a Director of the Company since November
2001. Mr. Lasorda, a member of the Baseball Hall of Fame, was recently appointed
as Special Advisor to the Chairman of the Los Angeles Dodgers and was previously
a Senior Vice President of the Los Angeles Dodgers since February 1998 and prior
thereto was a Vice President of such team since July 1996. Mr. Lasorda is also
an internationally renowned motivational speaker. He was the manager of the gold
medal winning United States Baseball Team for the 2000 Summer Olympic Games in
Sydney, Australia and was the manager of the Los Angeles Dodgers for 20 years.
Michael A. Ledeen, Ph.D., has been a Director of the Company since
November 2001. Dr. Ledeen has been a resident scholar in the Freedom Chair at
the American Enterprise Institute since 1989 and was the Vice Chairman of the
U.S.- China Security Review Commission from 2001 to 2004. An expert in
contemporary history and international affairs, Dr. Ledeen is a frequent
contributor to the Wall Street Journal, the Weekly Standard, National Review,
and Commentary and serves as a contributing editor to the National Review
Online. During the Reagan administration, from 1981 to 1987, Dr. Ledeen held
numerous positions including a consultant to the National Security Adviser, the
Office of the Secretary of Defense, and the State Department and was a special
adviser to the Secretary of State. Dr. Ledeen is the author of eighteen books,
including most recently "The War Against the Terror Masters" (St. Martin's
Press, 2003).
Clark R. Mandigo served as the Chairman of the Board of the Company
from July 2001 through July 2003 and has been a Director of the Company since
March 1992. Mr. Mandigo has been a Papa John's Pizza franchisee since 1995. From
1986 to 1991, he was President, Chief Executive Officer and Director of
Intelogic Trace, Inc., a corporation engaged in the sale, lease and support of
computer and communications systems and equipment. From 1985 to 1997, Mr.
Mandigo served on the Board of Directors of Physician Corporation of America, a
managed health care company, from 1993 to 1997, Mr. Mandigo served on the Board
of Palmer Wireless, Inc., a cellular telephone system operator, and from 1995 to
February 2004, Mr. Mandigo served on the Board of Horizon Organic Holdings
Corporation. Mr. Mandigo currently serves as a Trustee of Accolade Funds and
U.S. Global Investors Funds. Mr. Mandigo is a graduate of the University of
Kansas where he also received his Juris Doctorate degree.
Mark G. Saltzgaber has been a Director of the Company since November
2001. Mr. Saltzgaber is an experienced investment banker, consultant and private
equity investor in the restaurant industry. He is currently an independent
consultant to emerging restaurant chains and private equity firms. Mr.
Saltzgaber was previously a Venture Partner until March 2004 of Dorset Capital
Management, LLC ("Dorset Capital"), a consumer-focused private equity firm he
co-founded in 1999. Prior to Dorset Capital, Mr. Saltzgaber was a Managing
Director in the Equity Capital Markets Department at Montgomery Securities where
he was responsible for advising consumer growth companies. Prior to that, Mr.
Saltzgaber was also a Principal and Co-Director of the restaurant investment
banking practice at Montgomery Securities. Mr. Saltzgaber is currently a
director of Pasta Pomodoro, Inc.
John D. White is Executive Vice President, Treasurer and a Director of
the Company, and has been the Chief Financial Officer of the Company since
September 2004. Mr. White was also Chief Financial Officer of the Company from
4
1992 to 1999. Prior to joining the Company, Mr. White was employed as Senior
Vice President of Finance for Coulter Enterprises, Inc. Prior to that, Mr. White
was a principal of Arthur Young & Company and taught management development and
computer auditing seminars in their National Training Program. Mr. White earned
a BBA in accounting from Wichita State University in 1970 and is a graduate of
the Stanford Executive Program.
In addition to Mr. White, the other Executive Officers of the Company
are as follows:
Jamie B. Coulter, 65, has served as Chief Executive Officer of the
Company since January 1992, served as President of the Company from January,
1992 to June, 1995 and served as Chairman from January 1992 to July 2001. In
1993, Mr. Coulter was inducted into the Pizza Hut Hall of Fame and was named
INC. Magazine's Midwest Region Master Entrepreneur of the year. Mr. Coulter
received the Nation's Restaurant News Golden Chain Award in 1995 and was
Restaurants & Institutions CEO of the year in 1996. In 1997, Mr. Coulter
received the Nation's Restaurant News Hot Concept Award. Mr. Coulter has
previously served as Chairman of the Board of Directors of the Young Presidents'
Organization. Mr. Coulter received a BS degree in Business from Wichita State
University in 1963 and is a graduate of the Stanford University Executive
Program.
Mark Mednansky, 48, has been Chief Operating Officer of the Company
since October 2005. Mr. Mednansky joined the Company in 1998 and was a regional
manager from 1991 to 2001 and then became Vice President of Upscale Restaurants.
He also became President of the Texas Land & Cattle Steak House concept in
January 2004. Prior to joining the Company, Mr. Mednansky was Director of
Operations for Big Four Restaurants in Phoenix, Arizona from 1997 to 1998 and
Director of Restaurant Services for VIAD Corp. from 1992 to 1997.
Gerald T. Aaron, 65, has been Senior Vice President -- Counsel and
Secretary of the Company since January 1994. From November 1991 to January 1994,
Mr. Aaron was employed as General Counsel for Coulter Enterprises, Inc. From
March 1989 to November 1991, Mr. Aaron operated a franchise consultant practice.
From 1969 to 1984 Mr. Aaron was Vice President -- Counsel for Pizza Hut, Inc.
and from 1984 to 1989, Mr. Aaron was President of International Pizza Hut
Franchise Holders Association.
Deidra Lincoln, 46, has been Vice President of Del Frisco's since
January 2000. Ms. Lincoln is the co-founder of Del Frisco's Double Eagle Steak
House ("Del Frisco's"), which was acquired by the Company in 1995. Since 1995,
Ms. Lincoln has served in various managerial capacities and is responsible for
all of the Company's Del Frisco's operations.
Jon W. Howie, 38, has been the Company's Chief Accounting Officer since
June 2005. Mr. Howie has been Controller of the Company since March 2000. Mr.
Howie is a Certified Public Accountant and prior to joining the Company was
employed as an Audit Senior Manager with Grant Thornton, LLP from 1999 to 2000.
Prior to joining Grant Thornton, LLP, Mr. Howie was employed by Ernst & Young,
LLP from 1989 to 1999. While employed at Ernst & Young, LLP he served in many
different professional capacities, including three years of service as an Audit
Senior Manager. Mr. Howie served as an accounting and business advisor to
clients in both the private and public sectors, which included numerous initial
public offerings, as well as secondary offerings and other Securities Exchange
Commission (the "SEC") filings.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
All directors, officers and beneficial owners of more than 10 percent
of the Company's beneficial securities timely filed their Forms 3, 4 and 5.
5
AUDIT COMMITTEE
The Company has an Audit Committee consisting of Messrs. Bergamo,
Greene and Mandigo. The Company has determined that all the members of the Audit
Committee are "financial experts" as defined by the rules promulgated under the
Sarbanes-Oxley Act of 2002.
CODE OF ETHICS
The Company has adopted a code of ethics (the "Code") that applies to
all directors and officers. The Code is reasonably designed to deter wrongdoing
and promote (i) honest and ethical conduct, including the ethical handling of
actual or apparent conflicts of interest between personal and professional
relationships, (ii) full, fair, accurate, timely and understandable disclosure
in reports and documents filed with, or submitted to, the SEC and in other
public communications made by the Company, (iii) compliance with applicable
governmental laws, rules and regulations, (iv) the prompt internal reporting of
violations of the Code to appropriate persons identified in the Code, and (v)
accountability for adherence to the Code. Amendments to the Code and any grant
of a waiver from a provision of the Code requiring disclosure under applicable
SEC rules will be disclosed on the Company's website at
www.lonestarsteakhouse.com. The Code was filed as an exhibit to the Company's
Form 10-KA for the fiscal year ended December 30, 2003 and is also available on
the Company's website referenced above.
6
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal years indicated, all
compensation awarded to, earned by or paid to the chief executive officer
("CEO") and the four most highly compensated executive officers of the Company
who were serving as executive officers at the end of the fiscal year ended
December 27, 2005 (collectively with the CEO the "Named Executive Officers")
other than the CEO whose salary and bonus exceeded $100,000 with respect to the
fiscal year ended December 27, 2005. In addition, Named Executive Officers
include one other executive officer who was no longer employed by the Company at
the end of the fiscal year ended December 27, 2005.
Annual Compensation Long Term Compensation
------------------------------------------- ----------------------
Number of
Securities
Other Annual Underlying
Compensation Options (# of All Other
Name and Principal Position Year Salary Bonus ($) (1) Shares) Compensation (2)
------------------------------------- ---------- -------------- --------------- --------------- -------------- ------------------
Jamie B. Coulter.................... 2005 $ 865,910 $ 1,500 $ 145,791(4) -- $ 102,991
Chief Executive Officer 2004 $ 856,731 $ 414,000(3) $ 148,162(4) 65,000 $ 110,823
2003 $ 823,558 $ 145,493 $ 110,104(4) -- $ 95,318
John D. White....................... 2005 $ 674,382 $ 1,500 $ 112,181(5) -- $ 67,588
Chief Financial Officer, 2004 $ 623,077 $ 176,500 $ 93,878(5) 60,000 $ 79,958
Executive Vice President and 2003 $ 600,000 $ 158,583 $ 61,047(5) -- $ 74,704
Treasurer
Mark Mednansky...................... 2005 $ 249,588 $ 151,500 $ -- 75,000 $ 40,109
Chief Operating Officer 2004 $ 207,692 $ 101,500 $ -- 35,000 $ 30,919
2003 $ 199,038 $ 53,861 $ -- -- $ --
Deidra Lincoln...................... 2005 $ 260,000 $ 55,105 $ -- -- $ 31,511
Vice President of Del Frisco's 2004 $ 270,000 $ 42,500 $ -- 20,000 $ 31,250
2003 $ 260,000 $ 34,035 $ -- -- $ 28,904
Gerald T. Aaron..................... 2005 $ 274,794 $ 45,213 $ -- -- $ 32,001
Senior Vice President, Counsel & 2004 $ 259,615 $ 74,000 $ -- 35,000 $ 33,362
Secretary 2003 $ 250,000 $ 66,951 $ -- -- $ 31,214
Tomlinson D. O'Connell(6)........... 2005 $ 338,050 $ 269 $ 38,860(6) -- $ 33,832
Former President and Chief 2004 $ 363,462 $ 176,500 $ 68,361(6) 100,000 $ 53,996
Operating 2003 $ 347,115 $ 151,500 $ -- -- $ 49,189
Officer of Lone Star Restaurants
-----------------
(1) As to Named Executive Officers, except as set forth herein perquisites
and other personal benefits, securities or property received by each
Named Executive Officer did not exceed the lesser of $50,000 or 10% of
such Named Executive Officer's annual salary and bonus.
(2) Represents fifty percent matching contributions by the Company pursuant
to the Company's Deferred Compensation Plan which became effective
October 7, 1999.
(3) Of such bonus $162,500 was paid in 2005 for services performed in 2004.
(4) During the fiscal years ended December 27, 2005, December 28, 2004 and
December 30, 2003, Mr. Coulter received benefits primarily relating to
tax, accounting and administrative services provided by Company
personnel, $87,468, $80,136 and $87,038, respectively. The balance was
primarily for reimbursement for certain medical insurance premiums and
expenses.
7
(5) During the fiscal years ended December 27, 2005, December 28, 2004 and
December 30, 2003, Mr. White received benefits primarily relating to
personal use of the Company's airplane of $54,750, $28,962 and $38,209,
respectively. The balance was primarily for reimbursement for certain
medical insurance premiums and expenses.
(6) On October 13, 2005, Mr. O'Connell resigned from all positions held
with the Company, including President and Chief Operating Officer of
Lone Star Restaurants. During the fiscal year ended December 27, 2005,
Mr. O'Connell received benefits primarily relating to the personal use
of the Company's airplane of $16,974. The balance was primarily
reimbursement for country club memberships. During the fiscal year
ended December 28, 2004, Mr. O'Connell received benefits primarily
relating to the personal use of the Company's airplane of $37,230. The
balance was primarily for reimbursement for certain medical insurance
premiums and expenses.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding stock
option grants made to the CEO and other Named Executive Officers for services
performed during the fiscal year ended December 27, 2005.
OPTION GRANT TABLE
Option Grants In Last Fiscal Year
--------------------------------------------------------------------------------------------------------------------------
Individual Grants
-------------------------------------------------------------- Potential Realizable Value at
Number of % of Total assumed annual rates of Stock Price
Securities Options Appreciations for Option Term
Underlying Granted to Exercise of ----------------------------------
Options (# of Employees in Base Price Expiration
Name Shares)(1) Fiscal Year ($/SH) Date 5% 10%
--------------------- ---------------- -------------- -------------- ------------- --------------- ----------------
Jamie B. Coulter -- -- -- -- $ -- $ --
John D. White -- -- -- -- $ -- $ --
Mark Mednansky 75,000(1) 23% $ 23.11 12/28/15 $1,090,032 $ 2,762,354
Deidra Lincoln -- -- -- -- $ -- $ --
Gerald T. Aaron -- -- -- -- $ -- $ --
Tomlinson D. O'Connell -- -- -- -- $ -- $ --
--------------------------------------------------------------------------------------------------------------------------
(1) The options indicated were granted on December 28, 2005, and related to
services provided for the fiscal year ended December 27, 2005, and vest
ratably over a four-year period. Such options were granted pursuant to
the Company's 2004 Stock Option Plan which was approved by the
Company's stockholders in December 2004 (the "2004 Plan").
(2) The potential realizable value portion of the foregoing table
illustrates value that might be realized upon exercise of options
immediately prior to the expiration of their term, assuming the
specified compounded rates of appreciation on the Company's Common
Stock over the term of the options. These numbers do not take into
account provisions of certain options providing for termination of the
option following termination of employment, nontransferability or
differences in vesting periods. Regardless of the theoretical value of
an option, its ultimate value will depend on the market value of the
Common Stock at a future date, and that value will depend on a variety
of factors, including the overall condition of the stock market and the
Company's results of operations and financial condition. There can be
no assurance that the values reflected in this table will be achieved.
8
OPTION EXERCISE TABLE
The following table provides information with respect to the exercise
of stock options by Named Executive Officers during the fiscal year ended
December 27, 2005, and also sets forth certain information concerning
unexercised options held as of December 27, 2005 by the CEO and the other Named
Executive Officers. At December 27, 2005, the closing price of the Company's
Common Stock, as reported by the Nasdaq National Market, was $23.30.
Fiscal Year-End Option Values
-------------------------------------------------------------
Shares Number of Securities
Acquired Underlying Unexercised Value of Unexercised In-The-
on Value Options at December 27, Money Options at
Name Exercise Realized(1) 2005 December 27, 2005(2)
------------------------- ------------ --------------- ---------------------------- -------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Jamie B. Coulter -- -- 1,162,389 65,000 12,590,126 --
John D. White -- -- 515,000 60,000 7,638,094 --
Mark Mednansky(3) 10,000 216,250 -- 35,000 -- --
Deidra Lincoln -- -- 79,576 20,000 1,170,055 --
Gerald T. Aaron 17,500 260,422 357,500 35,000 5,302,172 --
Tomlinson D. O'Connell 24,293 516,204 64,156 -- 925,450 --
---------------------
(1) Based on the difference between the exercise price of the options and
the fair market value of a share of Common Stock at the date of
exercise, as reported on the Nasdaq National Market.
(2) All of the unexercisable options held by the CEO and the other Named
Executive Officers were granted on December 28, 2004 and have an
exercise price equal to $27.80, the closing price of the Company's
Common Stock on such date.
(3) Does not include options granted to Mr. Mednansky on December 28, 2005
for services provided for the fiscal year ended December 27, 2005.
DIRECTORS COMPENSATION
Directors who are not employees receive an annual fee of $20,000; each
Chairman of a Committee receives an additional annual fee of $5,000; each member
of the Audit Committee receives an additional annual fee of $5,000; directors
who are not employees also receive $1,000 for each telephonic meeting, $2,000
for each Committee Meeting attended (if no Board of Directors Meeting is being
held on the same day) and $2,500 for attending Board and Committee Meetings held
on the same day. In addition, the Chairman of the Board is paid a Chairman's fee
of $100,000 per year. The Company revised the directors' fees as a result of the
additional time and effort required from the directors to ensure that they are
fulfilling their increased obligations under the Sarbanes-Oxley Act. The Company
previously granted options to non-employee directors under the Company's 1992
Directors Stock Option Plan (the "Directors Plan") and the 2004 Plan. Currently,
options to purchase an aggregate of 438,700 shares of Common Stock are
outstanding and granted to Directors under the Directors Plan and the 2004 Plan
at exercise prices ranging from $7.438 per share to $27.59 per share.
EMPLOYMENT AGREEMENTS
The Company entered into separate employment agreements, with each of
Messrs. White, Mednansky and Aaron, dated on April 29, 2003, providing for the
employment of these individuals as Executive Vice President, Director of Upscale
Restaurants, and Senior Vice President -- Counsel and Secretary, respectively.
Each employment agreement provides that the officer shall devote their entire
9
business time to the business of the Company. The Employment Agreements provide
base salaries in the amounts of $600,000, $200,000 (subsequently increased to
$250,000) and $250,000, respectively, for Messrs. White, Mednansky and Aaron,
subject to increases as determined by the Compensation/ Stock Option Committee
and ratified by the Board of Directors. Each agreement initially terminates on
April 29, 2006, and is extended automatically for successive terms of one year
each, unless either the Company or the respective employee gives written notice
to the other not later than 90 days prior to the termination date. No notice was
given with respect to any of the agreements and accordingly the termination date
has now been extended to April 29, 2007. However, in connection with his
appointment as the Company's Chief Operating Officer, the Company is in the
process of negotiating a new employment contract with Mr. Mednansky. Each
agreement contains non-competition and non-solicitation provisions which apply
for twenty-four months after cessation of employment and confidentiality
provisions which apply for ten years after cessation of employment. Mr. Coulter
does not have an employment, non-competition or non-solicitation agreement with
the Company. Mr. Coulter's non-competition and non-solicitation agreement
expired in 2001. In 2001, Mr. Coulter was not re-elected to the Board of
Directors of the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
The following table sets forth information concerning ownership of the
Company's Common Stock, as of April 18, 2006, by each person known by the
Company to be the beneficial owner of more than five percent of the Common
Stock, each director, each executive officer as defined in Item 402(a)(3) of
Regulation S-K and by all directors and executive officers of the Company as a
group. Unless otherwise indicated, the address for five percent stockholders,
directors and executive officers of the Company is 224 East Douglas, Suite 700,
Wichita, Kansas 67202-3414. The percentage of shares owned is based on
20,887,234 shares outstanding as of April 18, 2006.
Shares
Beneficially Percentage
Name and Addresses of Beneficial Owner Held of Class
Jamie B. Coulter.................................................. 3,574,032(1) 16.2%
John D. White..................................................... 630,000(2) 3.0%
Gerald T. Aaron................................................... 421,457(3) 2.0%
Deidra Lincoln.................................................... 89,576(4) *
Mark Mednansky.................................................... 8,750(5) *
Fred B. Chaney.................................................... 7,625(6) *
William B. Greene, Jr............................................. 69,925(7) *
Clark R. Mandigo.................................................. 49,225(7) *
Mark Saltzgaber................................................... 44,925(8) *
Thomas Lasorda.................................................... 43,839(9) *
Michael Ledeen.................................................... 52,925(10) *
Anthony Bergamo................................................... 20,161(11) *
Tomlinson D. O'Connell............................................ 65,156(12) *
Dimensional Fund Advisors Inc..................................... 1,859,807(13) 8.9%
Pioneer Global Asset Management................................... 1,318,000(14) 6.3%
Wachovia Corporation.............................................. 1,430,695(15) 6.8%
All directors and executive officers as........................... 5,025,690(16) 21.7%
a group (16) persons (1-10)
---------------------
* Less than 1%
10
(1) Based on a 13G filed in February 2006. Includes presently exercisable
options to purchase 1,178,639 shares of Common Stock. Does not include
177,145 shares held by Intrust Bank as Trustee of a Rabbi Trust for the
Company. Under the terms of a Deferred Compensation Agreement, Mr.
Coulter defers receipt of the value of his deferred compensation
account until 30 days after the termination of his employment with the
Company.
(2) Includes presently exercisable options to purchase 465,000 shares of
Common Stock.
(3) Includes presently exercisable options to purchase 308,750 shares of
Common Stock.
(4) Includes presently exercisable options to purchase 84,576 shares of
Common Stock.
(5) Consists of presently exercisable options to purchase 8,750 shares of
Common Stock.
(6) Includes presently exercisable options to purchase 5,625 shares of
Common Stock.
(7) Includes presently exercisable options to purchase 19,225 shares of
Common Stock.
(8) Includes presently exercisable options to purchase 37,425 shares of
Common Stock.
(9) Includes presently exercisable option to purchase 42,425 shares of
Common Stock.
(10) Includes or consists of presently exercisable options to purchase
52,425 shares of Common Stock.
(11) Includes presently exerciseable options to purchase 16,875 shares of
Common Stock.
(12) Based on the information available to the Company, includes presently
exercisable options to purchase 64,156 shares of Common Stock.
(13) Based on a Schedule 13G filed in February 2006, Dimensional Fund
Advisors Inc. beneficially holds 1,859,807 shares of the Company's
Common Stock. Dimensional Fund Advisors Inc. disclaims beneficial
ownership to the 1,859,807 shares of the Company's Common Stock due to
its role as an investment advisor or manager to numerous funds. The
address of Dimensional Fund Advisors Inc. is 1299 Ocean Avenue, 11th
Floor, Santa Monica, CA 90401.
(14) Based on a Schedule 13G filed in December 2001, Pioneer Global Asset
Management beneficially holds 1,318,000 shares of the Company's Common
Stock. The address of Pioneer Global Asset Management is Galleria San
Carlo 6, 20122 Milan, Italy.
(15) Based on a Schedule 13G filed in February 2006, Wachovia Corporation
beneficially holds sole voting power over 1,417,633 shares and sole
dispositive power over 1,430,695 shares of the Company's Common Stock.
Wachovia Corporation filed the Schedule 13G as a parent holding company
and its relevant subsidiaries are Evergreen Investment Management
Company, Wachovia Securities, LLC and Wachovia Bank, N.A. The address
of Wachovia Corporation is One Wachovia Center, Charlotte, North
Carolina 28288-0137.
(16) Does not include shares beneficially owned by the Company's former
President of Lone Star Restaurants and Chief Operating Officer,
Tomlinson D. O'Connell. Includes presently exercisable options to
purchase 2,251,690 shares of Common Stock, which includes presently
exercisable options to purchase 12,750 shares of Common Stock held by
any executive officer, who is not specifically identified in the
Security Ownership Table above. The executive officer who is not
11
specifically identified in the Security Ownership Table also owns an
additional 500 shares of Common Stock.
EQUITY COMPENSATION PLAN INFORMATION
The Company previously issued options under the Directors Plan and the
Company's 1992 Incentive and Non-Qualified Stock Option Plan (the "Plan"). The
ability to issue options under both plans has expired. In December 2004, the
Company's stockholders approved the adoption of the 2004 Plan. The following
table gives information about stock option awards under the Directors Plan, the
Plan and the 2004 Plan as of December 27, 2005. The plans are discussed further
in Note 6 to the Company's Consolidated Financial Statements included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 27,
2005.
Number of
Securities
Remaining
Number of Available for
Securities to be Future Issuance
Issued Upon Weighted-average Under Equity
Exercise of Exercise Price of Compensation Plans
Outstanding Outstanding (Excluding
Options, Warrants Options, Warrants Securities Reflected
and Rights and Rights in Column (A))
Plan Category (A) (B) (C)
---------------------------------------- ------------------- ------------------ --------------------
Equity compensation plans approved
by security holders 4,428,672 $16.61 1,452,500
Equity compensation plans not
approved by security holders -- -- --
------------------- ------------------ --------------------
Total 4,428,672 $16.61 1,452,500
=================== ================== ====================
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not Applicable.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Aggregate fees for professional services rendered to the Company by
Ernst & Young LLP for the years ended December 27, 2005 and December 28, 2004,
were:
2005 2004
---------------- --------------
Audit....................................... $ 959,742 $ 951,807
Audit Related............................... 41,950 120,790
Tax......................................... 169,934 316,437
Other....................................... -- --
---------------- --------------
Total.................................. 1,171,626 1,389,034
================ ==============
12
AUDIT FEES
Audit fees for 2005 and 2004 were for professional services rendered
for the integrated audits of the consolidated financial statements of the
Company, statutory audits, timely reviews of quarterly financial statements,
consents and assistance with review of documents filed with the Securities
Exchange Commission.
AUDIT RELATED FEES
Audit related fees for 2005 were primarily consultations regarding
accounting related issues. Audit related fees for 2004 were primarily for
matters related to Sarbanes-Oxley Act advisory services.
TAX FEES
Tax fees for 2005 and 2004 were for services related to tax compliance
($169,934 for the fiscal year ended December 27, 2005 and $221,425 for the
fiscal year ended December 28, 2004), including the preparation of tax returns.
In addition, with respect to the fiscal year ended December 28, 2004, tax fees
include tax planning and tax advice related primarily to the Company's 2004
acquisition of Texas Land and Cattle Steakhouse.
ALL OTHER FEES
There were no other fees paid to Ernst & Young LLP for the fiscal
years ended December 27, 2005 and December 28, 2004.
The Audit Committee reviews audit and non-audit services performed by
Ernst & Young LLP as well as the fees charged by Ernst & Young LLP for such
services. In its review of non-audit service fees, the Audit Committee
considers, among other things, the possible effect of the performance of such
services on the auditor's independence.
PRE-APPROVAL POLICIES AND PROCEDURES
All audit and non-audit services to be performed by the Company's
independent accountant must be approved in advance by the Audit Committee.
Consistent with applicable law, limited amounts of services, other than audit,
review or attest services, may be approved by one or more members of the Audit
Committee pursuant to authority delegated by the Audit Committee, provided each
such approved service is reported to the full Audit Committee at its next
meeting.
All of the engagements and fees for the Company's fiscal year ended
December 27, 2005 were approved by the Audit Committee. In connection with the
audit of the Company's Financial Statements for the Fiscal Years ended December
27, 2005 and December 28, 2004, Ernst & Young LLP only used full-time, permanent
employees.
The Audit Committee of the Board of Directors considered whether the
provision of non-audit services by Ernst & Young LLP was compatible with its
ability to maintain independence from an audit standpoint and concluded that
Ernst & Young LLP's independence was not compromised.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The required Financial Statements were previously filed on
this Form 10-K.
13
Exhibits
INDEX TO EXHIBITS
Exhibit
Number Exhibit
------ -------
**3.1 Company's Certificate of Incorporation as amended
***3.3 Company's Amended and Restated By-Laws
******10.2 1992 Lone Star Steakhouse & Saloon, Inc. Directors' Stock
Option Plan as amended the ("Director's Plan")
****10.3 1992 Lone Star Steakhouse & Saloon, Inc. Incentive and
Non-qualified Stock Option Plan (the "Plan") as amended
**10.4 Form of Indemnification Agreement for officers and
directors of the Company
*****10.7 Employment Agreement between the Company and Gerald T.
Aaron, dated April 29, 2003
***********10.9 Employment Agreement between the Company and Mark
Mednansky, dated April 29, 2003
*****10.11 Employment Agreement between the Company and John D.
White, dated April 29, 2003
******10.20 Non-Qualified Deferred Compensation Plan
********10.23 Lone Star Steakhouse & Saloon, Inc. Stock Option Deferred
Compensation Plan dated September 30, 2002
********10.24 Deferred Compensation Agreement dated October 4, 2002
between LS Management, Inc. and Jamie B. Coulter
*******10.26 Amendment to the Director's Plan
*******10.27 Amendment to the Plan
*********10.28 Revolver Credit Loan Agreement dated October 8, 2004
between the Company and Suntrust Bank
***********10.29 2004 Stock Option Plan
***********21.1 Subsidiaries of the Company
*23.1 Independent Auditors' consent to the incorporation by
reference in the Company's Registration Statement on Form
S-8 the independent auditors' report included herein
*31.1 Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act
*31.2 Certificate of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act
*32.1 Certification of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act
*32.2 Certificate of Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act
----------
* Filed herewith.
** Incorporated by reference to the Company's
Registration Statement on Form S-1, filed with the
Commission on January 31, 1992 (Commission File
No. 33-45399), as amended.
*** Incorporated by reference to the Company Quarterly
Reported on Form 10-Q for the quarter ended June
12, 2001.
**** Incorporated by reference to the Company's
Registration Statement on Form S-8, filed with the
Commission on January 12, 1996 (Commission File
No. 33-00280), as amended.
14
***** Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter
ended June 17, 2003.
****** Incorporated by reference to the Company's
Registration Statement on Form S-8, filed with the
Commission on March 31, 2000 (Commission File No.
333-33762).
******* Incorporated by Reference to the Company's
Registration Statement on Form S-8, filed with the
Commission on July 24, 2002 (Commission File No.
333-97271).
******** Incorporated by Reference to the Company's Annual
Report on Form 10-K for the year ended December
31, 2002.
********* Incorporated by Reference to the Company's
Periodic Report on Form 8-K, filed with the
Commission on October 14, 2004.
********** Incorporated by Reference to the Company's
Periodic Report on Form 8-K, filed with the
Commission on December 20, 2004.
*********** Incorporated by Reference to the Company's Annual
Report on Form 10-K, filed with the Commission on
March 13, 2006.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
LONE STAR STEAKHOUSE & SALOON, INC.
By: /s/ John D. White
------------------------------------
John D. White, Chief Financial Officer
Dated: April 26, 2006
15